#
Whenever you learn something new, my advice would be before you learn to do it, learn
#
I used to be a chess player in my teens, but I left playing serious chess at 19 because
#
I figured out wisely that I wasn't good enough to make it beyond a certain point.
#
Now I am almost addicted to online chess today and looking back at the younger me from 25
#
years ago, I can see clearly what he did not.
#
The younger me was good at tactics and bad at strategy.
#
I could pull off awesome combinations and sacrifices.
#
I could see a mate in 6, but I didn't have good positional understanding of things like
#
how to create a little space advantage now, so I'll have a killer edge 40 moves later.
#
And indeed, one thing that all great chess prodigies have in common is this sort of positional
#
Related to this, some people think that the depth of opening theory means that anyone
#
can mix it up with grandmasters if they learn enough moves, master the opening theory.
#
But this is simply not true.
#
You can learn all the moves you want, but there will always be unfamiliar situations
#
where you have to apply principles instead of remembering moves.
#
How well you do that is what impacts how good you are.
#
This is the reason top players today like Magnus Carlsen will often play slightly off
#
beat lines against lesser players, not because those lines are better, but because they lead
#
to more playable positions.
#
Playable means you need to apply your own brain to the problem and the better player
#
I played poker professionally for a few years and the same applies there.
#
The pedagogy for many young players who go pro is often a version of Indian rote learning.
#
They'll become part of stables and they'll be staked and coached by pros who will teach
#
them what to do in many common situations.
#
For example, at so many big blinds, this is your shoving range, this is your reshow range
#
They can learn this to an adequate level of granularity to have an edge against recreational
#
But when faced with unusual situations, can they think on their feet?
#
Can they apply principles, do the math themselves in their minds and figure out the right answers?
#
I have often found that they can't.
#
They have been taught how to play the game, but they haven't been taught how to think
#
How you play chess and how you play poker has a limited impact on the world.
#
Other fields matter far more, public policy for example.
#
If you are a framer of public policy, you are dealing with a world far more complex
#
than what chess players or poker players encounter.
#
That's all the more reason to have intellectual humility, to realize the limits of your knowledge
#
and especially not to fall back reflexively on a bag of tricks you have been taught that
#
may work elsewhere, but may not necessarily work here.
#
This takes hard work and deep thought.
#
It demands hard work and deep thought because every time you get policy wrong in a country
#
like India, millions of people are affected.
#
Welcome to The Seen and the Unseen, our weekly podcast on economics, politics and behavioral
#
Please welcome your host, Amit Verma.
#
Welcome to The Seen and the Unseen.
#
I have often done episodes begged around books by authors, but this episode is based on a
#
fantastic paper written by Shruti Rajgopalan and Alex Tabarrok, premature imitation and
#
India's flailing state.
#
Shruti and Alex are not just my friends, but two of my favorite thinkers.
#
Shruti has been on The Seen and the Unseen many, many times, helping me sharpen and refine
#
my thinking about the world.
#
And Alex co-writes Marginal Revolution, which in my opinion is the best blog of all time
#
I've been honored to have Alex on my show before, but that was in the early days when
#
episodes were only 20 minutes long, if you can imagine such a pitiful condition.
#
So I'm looking forward to getting a chance to unwind with him today, just sitting back
#
and talking about matters other than the subject of this episode, which I have forgotten already.
#
So much have I rambled.
#
Let me take a quick commercial break to compose my scattered thoughts.
#
If you enjoy listening to The Seen and the Unseen, you can play a part in keeping the
#
The Seen and the Unseen has been a labor of love for me.
#
I've enjoyed putting together many stimulating conversations, expanding my brain and my universe,
#
and hopefully yours as well.
#
But while the work has been its own reward, I don't actually make much money off the show.
#
Although The Seen and the Unseen has great numbers, advertisers haven't really woken
#
up to the insane engagement level of podcasts, and I do many, many hours of deep research
#
for each episode, besides all the logistics of producing the show myself.
#
Scheduling guests, booking studios, paying technicians, the travel and so on.
#
So well, I'm trying a new way of keeping this thing going, and that involves you.
#
My proposition for you is this.
#
For every episode of The Seen and the Unseen that you enjoy, buy me a cup of coffee, or
#
even a lavish lunch, whatever you feel is worth.
#
You can do this by heading over to sceneunseen.in slash support, and contributing an amount
#
This is not a subscription.
#
The Seen and the Unseen will continue to be free on all podcast apps and at sceneunseen.in.
#
This is just a gesture of appreciation.
#
Help keep this thing going, sceneunseen.in slash support.
#
Shruti and Alex, welcome to The Seen and the Unseen.
#
It's great to be here, Amit.
#
So Alex, you know, I've done a lot of episodes with Shruti where we've spoken about how
#
she's gotten into economics, what influenced her, what books she liked, and so on and so
#
We know everything about her.
#
But, you know, when you and I did episodes back in the past, you know, we didn't discuss
#
I'm very curious to know what your journey has been like.
#
How did you become an economist?
#
Who were your big influences and so on?
#
Well, I think you'll like this because, as you probably know, the drummer from Rush,
#
Neil Peart died recently, and it was Rush which got me into libertarianism and economics.
#
You know, they had cited Ayn Rand on one of their albums.
#
And my mother had said, this had come up, and my mother had said, oh, you'd probably
#
And I think my mother regrets saying that.
#
Those are the worst things you possibly could say.
#
Since then, I started to read some Ayn Rand.
#
So it was from Rush and from Neil Peart.
#
So I've been thinking a lot about that lately.
#
And how did you kind of get into economics?
#
Was it always sort of an interest of yours or you stumbled into it?
#
So I got into free market economics to begin with.
#
And Ayn Rand recommended Ludwig von Mises as the greatest economist.
#
And then that brought me to Rothbard.
#
I read a lot of Murray Rothbard's economics works, which were great.
#
This was before university.
#
I went to university with the idea of doing PPE, politics, philosophy, and economics.
#
And in my first year, I did very, very well in economics and not so good in politics and
#
So that kind of set my path.
#
And tell me a little bit about marginal revolution, because I was an early blogger myself.
#
And for anyone who's been into blogging, it is actually sort of the lodestar out there
#
of what a great blog should be.
#
And it's interesting how the age of blogs says, essentially, it's over.
#
Social media took over all the utilities and the functions that a blog had.
#
But marginal revolution is still culturally very significant as well.
#
Yeah, so this was an interesting experiment.
#
I actually said to Tyler, we should write a textbook.
#
This is more than 15 years ago now.
#
And he said, yes, you're right.
#
But first, we should write a blog.
#
And I think Tyler, as usual, had the ordering correct, because we began the blog.
#
And it's an interesting experiment.
#
And within the first day or two of having posted something, no, this is before Twitter,
#
no, not even emailing people, people started to respond to it.
#
And I said, oh, maybe there's something to this.
#
So we began writing the blog.
#
And the constraint of having to write concisely, having to get to the point, I think this really
#
makes you a much better writer writing for a blog.
#
On the blog, when you write, your audience is one click away from leaving you.
#
So you have to give them something valuable.
#
And I think all of these techniques, which we learned in writing the blog, then put it
#
over into writing our textbook, Modern Principles of Economics.
#
And Shruti, one of the things I realized when I read your paper and even the papers you've
#
done earlier with Alex and others is that this was a fun paper to read.
#
It was written in such a way that someone like me who was not used to reading academic
#
papers, and Shruti is pointing at Alex here, it was written in such a way that someone
#
like me who was not used to reading academic papers could, you know, just breeze through
#
Is that something that you've consciously put thought towards?
#
I mean, I assume you would say that doing marginal revolution and having to write crispy
#
and concisely helped with that.
#
What was your process of consciously thinking about how should we write papers?
#
And B, is it a feature or a bug given that isn't it true that academics are almost expected
#
to write in a certain kind of language as if for other academics?
#
Yeah, there's a dangerous line that one doesn't want to cross.
#
But especially when you're writing pieces which have some relevance to the real world,
#
pieces which you want to influence people, have some policy, it really pays to write
#
So Shruti and I did work on that aspect of the paper quite a bit to make it readable
#
for a general audience as well as for, you know, policymakers and academics.
#
And sort of a final question for you before we start talking about the paper itself, which
#
is that, you know, having lived in India all my life, there are a lot of things which for
#
Like I say that all of us tend to normalize the extreme coercion of the state and we don't
#
think it unusual in any way.
#
Now with an outsider's perspective, when you look at India with the economic lens, with
#
the policy lens and so on, what are the things that strike you as being very different from
#
what you've otherwise seen, which you're amazed that, you know, people here don't see it as
#
I'm amazed that Indians do seem to put up with a lot from the state.
#
You know, when I first came, it was just after demonetization.
#
And despite the huge costs which demonetization imposed, as you well know, on shopkeepers
#
and sellers in the street and so forth, a lot of people just accepted it.
#
You know, they lined up for hours and hours but did not protest in the streets.
#
That was amazing to me that there were not more people up in arms, that this stupid policy,
#
which was so costly to people, especially poorer people, that this did not create a
#
uproar and revolution even.
#
You know, the way that you treat poor people diminished the value of their time, you know,
#
making them wait in line at the ATMs.
#
And even today, it's amazing to me that you still can't get change, right?
#
So you have even a 500 rupee note and still that's a problem, if not to speak of a 2000
#
So even today, the state cannot find its way to supply the right denominations in the right
#
quantities to what people want.
#
So that to me is amazing, very similar to this.
#
I am amazed that people put up with so much pollution.
#
You know, everyone knows about it, but it just seems to be, well, there's nothing we
#
It's just like climate, you know, which is not climate.
#
You know, this is manmade.
#
This is not what we're talking.
#
I'm not talking about, you know, increasing the temperature of the earth, you know, 1.5
#
degrees over the next 100 years.
#
I'm talking about today in Delhi, you know, the AQI, the pollution level is over 500 and
#
it burns your eyes and it gets into your throat and it makes it harder to do a podcast.
#
And all of these things, and yet people, they're not up in arms about it as far as I can tell.
#
Maybe they are behind the scenes, but Indians do seem to take a lot from the state and not
#
In fact, we are recording this in Delhi on Feb 10 and you've been here for a couple of
#
weeks and have been complaining among other things of the pollution and I hear paper straws.
#
Shruti, why does Alex not like paper straws?
#
You don't like paper straws either.
#
So one is a question of preference, right?
#
That paper straws get soggy and so on and so forth.
#
Now if you don't want to use single use plastic in the sense that we don't want to use a plastic
#
straw, then you could do with no straw at all.
#
There are many substitutes for that, but the thing with paper straws is we see them at
#
all the posh restaurants and cafes in Delhi and to me it seems like one of the best examples
#
of elite imitation and virtue signaling because the posh people in Delhi are up in arms about
#
plastic straws, but not about air pollution, right?
#
Which is literally killing their children, like infant morbidity and mortality is up
#
in the winter in Delhi simply because we have no handle on the pollution.
#
But for the elites, the priority is not the pollution or the priority is not one of these
#
big ticket items, but it's something like let's get rid of single use plastic straws
#
because that's going to do something to seals in Alaska or whatever the logic behind that
#
It's even more puzzling that we do this in India relative to the United States because
#
India has a huge plastic recycling industry.
#
We recycle garbage for the rest of the world, right?
#
There are shipments that come from America and China and it's processed here.
#
So I would think we also have some kind of a comparative advantage in recycling plastic
#
single use or otherwise.
#
So the whole thing is baffling to me, not because I don't like the idea of saving the
#
planet one plastic straw at a time.
#
That's a lovely thing to do, but because that is simply it cannot be even the top 500 priorities,
#
let alone the top priority.
#
And yet that's the one thing that the elites have managed to lobby change for and every
#
single cafe in India seems to have a paper straw instead of plastic straw.
#
Like it's just a symptom of what is wrong with this kind of elite imitation and virtue
#
signaling where we're just not paying attention to the big problems.
#
And I guess one way of looking at this is that look, here's a problem that has an easy
#
It's easy to find a solution which allows you to posture and, you know, appear concerned
#
about the world and all of that.
#
Now if we might digress for a while and go to the pollution problem, because that's clearly
#
something you guys have also thought about, I've done episodes on it where Delhi's air
#
pollution it seems to me is a ludicrously difficult problem to solve where none of the
#
intuitive solutions such as, you know, Arvind Kejriwal's odd even work at any level.
#
And the problem is like, you know, one of the things that exacerbates it in the winter
#
months is of course farmers in Punjab burning rice stubble.
#
And there's such a cascade of bad incentives at play there because first of all rice should
#
not be grown in Punjab because it's water intensive, Punjab is arid, but you have free
#
electricity for farmers so therefore they use tube wells.
#
You have, you know, the government giving fixed prices for rice and therefore incentivizing
#
farmers in Punjab also to grow rice.
#
All of those come together and the way the politics plays out is no one's yet given me
#
a satisfactory answer to how do we sort this out.
#
The people in Delhi may want cleaner air, but how do you put pressure on the politicians
#
of Punjab who have to cater to the vote bank that they have?
#
Yes, so I think part of the problem is to think that this is an issue of Punjab versus
#
Delhi and the people in Punjab of course are rightly going to say, you know, why should
#
we sacrifice, you know, to make their air better?
#
But in fact the fumes and the smoke which is caused by the stubble burning in the Punjab
#
is also killing the children of the Punjab.
#
It's making the infants sick, it's making them stunted, it's making the elderly people
#
have more cancer and heart disease and emphysema, it's making them harder to breathe as well.
#
So the people in Punjab really need to understand, I think, that the pollution is affecting them.
#
It's not about saving other people, it's about saving their own children and elderly.
#
And I think moreover, as you point out, the policy, there's a lot of low-hanging fruit
#
in fact because stubble burning is not a hugely profitable activity.
#
It's not a big value creator for India or even for the Punjab.
#
So there's a lot of ways in which there are win-win solutions here in which because the
#
pollution is so bad, because the costs are so high and the benefits of something like
#
stubble burning is so low, there ought to be many, many ways in which everybody can
#
There's an additional aspect to this, I've lived in Delhi most of my childhood years.
#
They were always burning crops stubble in Punjab, right, but it was never so bad for
#
Delhi because the base level air pollution in Delhi was never so bad that the additional
#
pollution from the stubble burning just pushed it beyond the limit.
#
And here, Delhi government and its policies are to blame too.
#
Basically, the Supreme Court, through a series of verdicts on the Delhi vehicular pollution,
#
they tried to get rid of the worst kind of pollution, which was diesel, right.
#
So they banned bus fleet of about 10,000 buses and they did it in such a weird way because
#
this was done through the Supreme Court, it was done by issuing grids.
#
They basically told the Sheila Dixit government at the time that these buses can't run from
#
So for a few years, just like demonetization, we had this tremendous shock to the transportation
#
system and a shortage, which meant that to go anywhere from point A to point B in Delhi,
#
and this is all before metro, and you know how large distances are in Delhi.
#
People felt that the only way to actually travel is in a car.
#
So even public transport in Delhi, if you notice, is that Inovas, right, they will pick
#
up six or eight people and drive them to school, right.
#
It used to be Maruti Omnis, which is kind of like a minivan.
#
So they completely decimated the public transport system and we have 20 Inovas where you could
#
have one bus and we have 200 cars where you could have one bus, right.
#
So Delhi needs to really think about its public transportation system and the metro is not
#
going to do it because the metro only takes you to certain like really important major
#
Everywhere else, Delhi is either too hot or too cold.
#
It's not paved streets.
#
They've put road dividers everywhere.
#
It makes it very pedestrian unfriendly.
#
So the only way people can get from point A to point B effectively is in a car, right.
#
So either they share the car services or they have individual cars, but that's not a sensible
#
And the other bizarre thing is in Delhi, you don't see any buses or you don't see the number
#
of buses per capita one would expect to see in a city like Delhi.
#
You go to Bombay, everywhere you can see best buses.
#
You just ask a random person who's been in Delhi for a few weeks, what is the public
#
transportation flagship bus look or bus color?
#
Alex, do you have any idea how a Delhi bus looks?
#
But you know how the Delhi Metro looks and you know how the cars look and you know you've
#
You've taken an e-rickshaw.
#
So it's one of those bizarre things that in Delhi, we just don't have enough buses.
#
And this is all thanks to the Supreme Court and the Delhi High Court, right.
#
So we've managed to completely destroy any kind of public transportation policy and we
#
So what Alex said for Punjabis saving themselves by not burning crop stubble because of a low
#
value activity, I would say the same thing to people living in Delhi about using cars,
#
We need to lobby and we need to agitate for better public transportation system.
#
So today, as Alex pointed out on Feb 10th, the air quality is 500 or higher.
#
And as far as I know, no crop stubble is being burnt in Punjab and Haryana today or last
#
week and it won't be burnt next week.
#
So we can't just blame Punjab and Haryana.
#
Now, they're the worst 10 days of the year, but we have pretty bad air pollution in Delhi
#
where Delhi needs its own set of policies, right, to cope with vehicular pollution.
#
Delhi is completely de-industrialized again, thanks to the Supreme Court, so we hardly
#
have any industrial pollution.
#
So this is just about road construction, metro construction, vehicular pollution that is
#
causing these levels of pollution in Delhi.
#
And these are all, you know, transportation, Delhi, these are all great separate episodes.
#
And we shall now get back to the subject at hand, which I was also reminded of when you
#
mentioned metros, because, you know, I was at this Lit Fest yesterday in Nagpur and they
#
also have a metro there.
#
And one of my friends made the interesting point that, you know, it's almost become
#
fashionable for Indian cities, ki chalo metro laga do.
#
But the thing is that while it's great in Delhi and Bombay and cities that really need
#
it, in some cities, it is just not being used.
#
Like in Nagpur, I think for a while it was like eight hours a day or something and people
#
would just come and, you know, look around.
#
So which gets us to the subject of your paper and the basic premise of your paper, if I
#
can quickly state it briefly before we move on, is that what we tend to do in India is
#
that elite policy makers who are trained abroad and, you know, who are trained in the policies
#
of other countries, or at least even if they are, you know, trained in India, they follow
#
those intellectual fashions, tend to transplant policies that have worked in the West to India
#
without considering local conditions or local state capacity.
#
And I'd sort of like to begin by asking you a bit about the flailing state.
#
What is a flailing state and is India a flailing state?
#
Yeah, a flailing state is one which cannot execute its own orders.
#
It's one where the head is not connected to the body.
#
So in talking with people in India, with the policy makers, I'm always extremely impressed.
#
The policy makers here are superb, they understand, they read all the journals, they're very familiar
#
with everything, the latest techniques and so forth.
#
But in India, the policy makers cannot control what happens in the driver's license bureau.
#
So India, Delhi wants, I'm sure, to have people pass the driver's license.
#
And yet we know that 30% of the people with a driver's license, it's fake.
#
It's a fake license, either they bribe somebody or something like that, or they're not even
#
driving without a license.
#
So India has, it knows where it wants to go.
#
The head knows where it wants to do, but it can't get the body to do that.
#
And the problem is, is that most of the experts in India and in the West, they don't understand
#
that and they don't make policy, in particular, they don't make policy with a recognition
#
that what you want may not be what you get.
#
If you want to make policy in India, you have to begin with the fact that you can only do
#
a limited number of things.
#
And what happens instead is that policy makers in India, they want to have everything that
#
They want to have everything the United States has, including the regulation.
#
So when I look at regulation in India, there's no regulation in the United States that is
#
not also here in India, right?
#
And the plastic straw thing is an example of that.
#
Whatever it is in the United States, whatever we're regulating in the US, you also regulate
#
But India does not have the wealth nor the number of government employees.
#
India has far fewer government employees than does the United States.
#
In fact, India today is spending on government about what the United States spent in like
#
1920, but they're trying to do much more than the United States did in 1920.
#
So this is, I think, the main problem, is that they're using 1920 resources to try and
#
And I think what we need, what India probably needs to do, is to think, what can we do in
#
We should probably do 1920 regulation.
#
And it would be a lot better if India stuck to what it can do, you know, the basics, you
#
know, clean water, clean air, law and order.
#
These are things which the state can accomplish.
#
When it tries to do everything else, actually these three things it can't do.
#
My favorite quote on this is from Ed Glazer.
#
I think we say this in the paper too.
#
So a country that cannot provide clean water for its citizens should not be in the business
#
of regulating film dialogue, right?
#
And that's my favorite quote.
#
I mean, I think the government should not be in the business of regulating film dialogue
#
anyway, lest the libertarians of the world agitate against the three of us after hearing
#
So I'm not in the business of that anyway.
#
But even if you were to believe it should be regulated, the Indian state should not
#
be doing it because it simply can't, right?
#
So you get a whole bunch of strange things going on because the state tries to do everything.
#
In the process, it ends up doing nothing, right, or very little.
#
So the government cannot enforce its own traffic regulations.
#
You will see all sorts of weird things.
#
I've noticed this in Delhi.
#
They start blocking off traffic signals because people don't obey the signals.
#
And they cannot afford a cop to come and monitor the situation and hand out chalons to actually
#
make people obey traffic rules.
#
So in Delhi, people are in such a hurry that they just stop obeying traffic rules.
#
So now what's the solution?
#
The signal is blocked off.
#
Important signals all over Delhi have been barricaded because we can't get people to
#
use them the right way.
#
So a city that can't get people to follow traffic rules, right, that can't enforce contracts,
#
that cannot register the number of FIRs that come in every day, it simply should not try
#
to do anything related to anything else.
#
So while, forget the plastic straw thing with the paper straw, that just, it's a pet peeve.
#
But even if, let's say, banning single use plastic is a great idea, right, and I think
#
the idea has some merit, and we need to think about that a little bit more deeply.
#
Even if it's a great idea, the Indian state cannot enforce it, right?
#
And so our logic is we shouldn't do it not because it's a bad idea, it's because it can't
#
And you will slowly slip into a scenario where you don't enforce the plastic ban, then you
#
don't enforce the next regulation, you don't enforce traffic regulation.
#
And before you know it, it's a city full of criminals behaving lawlessly because you don't
#
expect the state to enforce its own rules.
#
Let me just underline one point there and maybe differ a little bit from Trudy.
#
I think the paper straw thing actually does tell us something because this is an example
#
Now this virtue signaling, the problem is in the US, well, it's just stupid, right?
#
It's just virtue signaling, but you can live with it, whatever.
#
But here in India, virtue signaling detracts and takes away resources from things which
#
So the more resources you spend on banning plastic straws and plastic bags and things
#
of that nature, the less resources you have to actually providing clean water and traffic
#
So here, virtue signaling is a true vice because it takes away from things which are really
#
Yeah, it has a huge opportunity cost, which is also, in fact, just thinking a lot through
#
of the public discourse, like so much of the virtue signaling that happens on social media
#
is fine in and of itself, but it takes away so much attentional capacity of people that
#
people just then switch off social media and we could be discussing more important things.
#
But virtue signaling is a little bit bizarre, so as you know, the occupational hazard of
#
being a professional academic is that you get invited a lot of conferences and panels
#
I feel like the Indian elite are much more concerned with the kind of diversity standards
#
we have in America as opposed to the kind of diversity standards we actually need in
#
There is a lot of agitation against what they're calling manels.
#
I am sure I've been invited to a whole bunch of panels just to make sure they're not manels,
#
I come from a lot of privilege.
#
We have no similar agitation to get Dalit voices on panels, for instance, right?
#
Or diversity of thought, right?
#
The rural urban divide.
#
We won't pay money to get someone who lives in a village to actually come to Bombay or
#
Delhi and be on a panel and hear their voice, but we will make sure that we get LGBTQ representation
#
and female representation.
#
But in very large part, that's also, it's not that that's not important.
#
It's just it's elite imitation of what's happening in the West.
#
Because in the West, those are the really pressing problems in terms of within the academy,
#
we don't have enough female voices and LGBTQ voices, right?
#
In India, the problem is very different, right?
#
Depending on which social strata you come from, you could be a very privileged female
#
or LGBTQ voice and our sort of oppressed groups are quite different.
#
There's no such thing going on in America.
#
Doesn't have Dalit affirmative action yet, right?
#
So we're not copying that for India yet.
#
So there is also a slightly more like myopic and if you know, this can take some sinister
#
forms, but it's quite where we are looking and who we are listening to is corrupted by
#
this kind of elite imitation.
#
And it also strikes me that this kind of mimicry, elite imitation, whatever you call it, is
#
something that happens.
#
I mean, we'll of course discuss the policy aspects of this, but it happens in all our
#
And even ideologically, what we tend to have done and what you'll find common among political
#
commentators who write in English and not so much in the other languages is using that
#
whole ideological frame of left and right to talk about Indian politics.
#
And it makes absolutely no sense here.
#
I mean, if you are to use that frame, then all parties are essentially statist and therefore
#
left of center when it comes to economics and kind of right to center because most of
#
them pander to majoritarian sentiments anyway.
#
So the left right framework makes absolutely no sense and there have been attempts by
#
some thinkers such as Rahul Verma, who I had on the show, Pradeep Chibbar and Rahul Verma,
#
they wrote an excellent book, excellent book about trying to sort of, you know, find a
#
new frame to look at what's actually happening here.
#
But otherwise so much of our ideological constructs and ways of thinking about the world and especially
#
when you talk about the posturing on Twitter, so much of the posturing on Twitter is actually
#
just replicating attitudes of the West, which may not really be sort of relevant in an Indian
#
I would completely agree.
#
So let's get back to sort of the subject of the paper and what seems to sort of hit the
#
And again, I'll quote from your paper here, quote, the Indian state fails because it is
#
simultaneously too large and too small, too large because the Indian government attempts
#
to legislate and regulate every aspect of citizens lives and too small because it lacks
#
the resources and personnel to rule according to its ambitions.
#
And you know, as you were saying, Alex, just I'll quote some figures from your paper to
#
demonstrate what this differences in state capacity are where you say, quote, India has
#
surprisingly few government workers, about one fifth as many per capita as the United
#
The number of police per capita, for example, is only 135 per 100,000, one of the lowest
#
rates in the world and far below the median, which is 318 or mean 333 of police officers
#
per 100,000 capita in the rest of the world.
#
Moreover, a significant number of the police are assigned to VIPs rather than to protecting
#
The number of judges per capita, 12 per million, is far below the US rate, 108 per million,
#
which helps to explain India's enormous backlog of 32 million cases, millions of which have
#
been in process for more than a decade.
#
There was an episode with Alok Prasanna Kumar where he mentioned some case that has been
#
going on for 300, 400 years or whatever.
#
Yeah, there are cases like that.
#
So picking up on the judges thing, that's a good example.
#
So judges have to enforce the rules, right?
#
Whatever the state has managed to legislate.
#
And if you think about it, the state is the biggest litigant before the courts, right?
#
Because both for disputes between different levels of government and also all the criminal
#
justice system, one of the parties is the state.
#
So the state is one of the largest litigants, right?
#
So in a sense, if we don't have enough judges, right, we're going to have long pendency
#
of cases, but that gets exacerbated by the fact that you also have a lot of regulation.
#
So let's say we have the capacity to deal with a hundred cases a day and there's some
#
pendency related to that.
#
You can make 80 of them on private contract enforcement, right?
#
And 20 of them about some kind of regulation that wasn't followed.
#
In India, the proportion's totally off because the more things you regulate, the more it
#
is going to clog up that capacity of a hundred cases that you can do in a day.
#
So our pendency problems are only going to get worse, not better, even if we appointed
#
more judges, unless we significantly roll back the regulatory state in India.
#
And that just is not a priority for anyone, right?
#
So when you look at civil servants, state capacity is now very fashionable.
#
I've been talking to a lot of people.
#
Look at the major books on state capacity in India.
#
All of them are talking about personnel problems, right?
#
So that is one half of the equation.
#
We need more police, right?
#
The other half of the equation is in some sense, no matter how many judges and police
#
we get, if we, unless we roll back the regulation, it's not going to do the job, right?
#
If you continue regulating the way you have the last 70 years, all of India could be a
#
cop and a judge and it's still won't do the trick.
#
So we need to really think about the problem as one of what is clogging the system and
#
what is addressing the clogs in the system.
#
And the personnel and the money is just a small part of the problem.
#
And these issues really matter.
#
So I have a paper with Vaidehi Tandel and Sahil Gandhi and Shamika Ravi, where we're
#
looking at building construction in Mumbai.
#
And what we find is that construction on average is delayed by 30%, the time to construct increases
#
by about 30%, which is huge because of litigation.
#
And so litigation has become so easy with PILs and things like that, that you don't
#
even have to win your case, right?
#
If you want to hold up a construction project, you just sue and then it goes to the courts
#
and then it's just delayed.
#
And so this gives actually a way of creating leverage.
#
So the pendency itself is actually what is doing the work because if the courts were
#
quick, the suit wouldn't work.
#
They wouldn't file a suit if they didn't know there would be a delay.
#
The delay actually has become the threat point.
#
So it's this combination then when you have all of this regulation, all of these reasons
#
which you might possibly sue, then you have delay, then that actually becomes powerful
#
and it becomes a way of extracting resources from people who are trying to build apartment
#
buildings and things like that, which obviously Mumbai desperately needs.
#
And both sides are exploiting the delay.
#
Very often even the developers exploit the delay because they know that if there is a
#
genuine case that the other party has, they won't have the power to litigate for 15 years,
#
They won't be able to afford the legal fees.
#
So let's say it's a dispute with a single homeowner who's the next door neighbor or
#
something like that, that poor guy cannot afford legal fees for 15 years.
#
They can't have their life put on hold for 15 years, but the developer probably has an
#
So it doesn't matter if you're right or wrong, the process is a punishment.
#
So depending on which side you're on, either side can exploit.
#
I don't want to make it seem like only the poor developers get delayed.
#
They also use the same system to exploit little guys when they try to take over land or illegally
#
construct or all of those things.
#
So this is a problem no matter whose side you're on in some sense, right?
#
In the case of Bombay, the side we must all be on is how to quickly increase housing supply.
#
So in this case, it really matters that the developers get delayed by 30% time because
#
I mean that is going to determine the delivery dates for the additional housing in Mumbai.
#
It's also going to take up the cost of additional housing in Mumbai, right?
#
So this is going to have all these cascading effects further downstream.
#
We have to really think about capacity from that point of view.
#
And we'll talk about housing regulations a little bit later in the episode is one of
#
the case studies that you've sort of taken on.
#
The phrase that struck me from your paper, which really sums all of this up is regulatory
#
overload, where, you know, the government keeps adding regulations and state capacity
#
and personnel and all of them sort of remain the same or grow really slowly if at all.
#
And so my question there is that is it therefore rational for a government servant finding
#
There are too many regulations that he has to impose on too many people.
#
Is it rational for him to therefore become a rent seeker?
#
Because rent seeking it strike me then is both more lucrative and easier than actual
#
I have two ways to address this question.
#
First is who is the government actor we're talking about, right?
#
So if you think about the highest level bureaucracy, which is framing these rules, which is, you
#
know, the Indian civil service, secretaries, joint secretaries in the Ministry of Environment
#
and so on and so forth, they are not the guys who are on the ground taking the small bribes,
#
So to some extent, it's not like their pockets directly get through.
#
If there's any corruption happening at that level, it's a completely different game of,
#
you know, thousands of crores going to Swiss bank accounts.
#
Exactly, coal licenses.
#
But our Indian civil service, you know, the one that's in Delhi, the people we've been
#
talking to, they're actually remarkably corruption free, you know, relative to other state actors.
#
And they are the people who are forming most of these rules, right?
#
So to some extent, the guy who benefits from it, okay, downstream, the traffic cop who
#
benefits from the stupid regulation, he's not the guy in charge of making the regulation.
#
So I want to disconnect those two levels.
#
My hunch is, if he asked a traffic cop, do you think we should have more regulation,
#
he would say no, even though it benefits him in terms of higher, you know, some kind of
#
rents or bribes or something like that.
#
Because on a day to day basis, they realize the kind of chaos it creates.
#
They realize how little control they have over their own jobs.
#
And they really don't make the rules that they are supposed to enforce and no one has
#
ever asked them on the input of their lived experience at their job on how we frame these
#
Similarly, a lot of the Delhi regulation that we just talked about in terms of transportation
#
or de-industrialization, it's all made by Supreme Court judges, right?
#
They live in Lachhan's Delhi, they drive around India Gate Circle, which is now functioning
#
really well, thanks to so many judges, you know, navigating that space.
#
They go to Bhagwandas Road, anything that's a problem between these two ends, they're
#
But they simply do not engage with regular folks, the guy at the licensing office, the
#
guy who's a traffic cop, the guy who is going to enforce the Essential Commodities Act,
#
who's the price controls inspector, labor inspector.
#
No one seems to ask these people what to do, right?
#
So I'd agree with you that rent seeking has led to this whole thing if the price controls
#
inspector was the guy writing the Essential Commodities Act, but that's simply not the
#
No, I'm arguing the other way.
#
I'm not saying rent seeking has led to this.
#
I'm saying this has led to rent seeking as a natural and inevitable consequence of very
#
low state capacity, having to deal with too many regulations.
#
Like an example of this came in Delhi where there was news a few days ago that it takes
#
something like 40 to 45 documents, not licenses, 40 to 45 documents here to open a business
#
and 19 to get a gun, which means if you want to start an assassination agency and have
#
20 documents, you'll get a legal gun, but you'll be in the informal sector.
#
Kindly forgive, bad joke.
#
And another sort of instance of over-regulation is I had done an episode on restaurant regulations
#
a while back with Madhu Menon a couple of years back where he pointed out that when
#
he was running a restaurant, the excise department had a regulation that he could only have one
#
entrance to the restaurant so they could monitor the inflow and outflow of liquor.
#
But the fire safety department quite correctly mandated that there should be multiple entrances.
#
So no matter what the guy does, he is breaking the law and there will be bribes and there
#
will be rent seeking all across.
#
But like you pointed out, we have to disconnect the people who are benefiting from taking
#
the bribes and inspectors on the ground from the policy makers.
#
Why do the policy makers then, is it just the easiest thing to do, put one more regulation
#
I think that's what they're familiar with, right?
#
So again, they go to all of the international conferences and they talk about best practices
#
and the way to do things and they come up with a list of things to do.
#
And we need public education, we need this, we need that, we need this.
#
And then they pass these laws and then they can say to their friends in the liberal sort
#
of community, look at what we've done, we passed this law, equal rights for women, the
#
same wages for women, all of these kinds of things.
#
Even though this has no bearing whatsoever on the actual situation in India, they can
#
point to a law and say, see, we're just as advanced as you, we have the same law as you
#
So I think that's part of it.
#
Going back to what you said earlier, I'd also like to point out that perhaps the worst
#
combination is to have honest bureaucrats and over regulation, right?
#
These are the two things which go worse together.
#
It may actually be the case and sometimes it is the case that when you have all of this
#
excess regulation, which cannot possibly be implemented for some of the reasons that you
#
said, some of it is contradictory and some of it, it just takes too many resources.
#
It may actually the bribes, the petty bribes, which is the oil, which makes the system flow.
#
You know, unfortunately, what that means is that it is very difficult to get out of the
#
system because people do benefit from the bribes.
#
But the bribes, at least in some cases, have some positive aspects in that they let business
#
If every business had to go through those 42 regulations, India would have far fewer
#
jobs and businesses than they do today.
#
So thank God for end seeking in a sense, because...
#
Well, thank God for good corruption that greases the wheels and helps us overcome the problem
#
So it's a problem, in a sense, you would say created by the state and solved by society
#
through the mechanism of bribing.
#
Yes, but that also makes criminals out of everybody.
#
And it also gives state actors high moral ground when they want to put in more draconian
#
regulation and stupid things like demonetization.
#
Going back to the head of our conversation, demonetization, I have a feeling people tolerated
#
it because they were so tired of the corruption, right?
#
And people hoarding black money and rich people exploiting the system in a particular way.
#
So they bought the rhetoric that this will end.
#
So they bought the rhetoric that, you know, it's true that we are suffering, but the rich
#
must be suffering so much more than us, right?
#
And they really need to be punished for this kind of tax evasion and starving the state
#
of funds and things like that.
#
But that's also because the regular person doesn't understand political economy the same
#
way we do once we read economics textbooks and we read case studies of how these things
#
And they're not expected to know these things, right?
#
They're regular people, they're businessmen and farmers and, you know, housewives, they're
#
just going about their daily lives.
#
So they can't even be expected to know this in some sense.
#
But it's because we have made criminals of everyone that it gives people the high moral
#
ground to make worse regulation, which just keeps adding to this problem in a bizarre
#
So if you've been made a criminal, then when it comes to laws, which you actually do want,
#
you know, like traffic laws, like driver's licenses, like preventing pollution and low-cost
#
double burning and things like that, then the state can't do what is actually its job.
#
So it's, again, this virtue signaling, this premature imitation, this over-regulation,
#
which makes it difficult to do the things which actually need to be done.
#
So low state capacity means that the state can't even do the night watchman jobs, which
#
even most libertarians would think that the state should do.
#
I mean, what, you know, all of us keep arguing is that India needs a strong state that does
#
a few things well, rather than a weak state which gets in the way of everyone.
#
And, you know, the only way that can happen is if each cop and, you know, sort of licensing
#
inspector thought to themselves and said, oh, I have 10 tasks, I should prioritize the
#
most important, which is the night watchman state.
#
I think that is a very tall ask of any state actor.
#
You have to reduce his job to what is essential.
#
And actually, you've got to get rid of most of those jobs.
#
I don't know why we have an essential commodities act.
#
I don't know why we have a labor inspection system, right?
#
These things simply shouldn't exist.
#
And the second bizarre thing about the elite imitation part is not that Americans or people
#
in Europe, those academics don't care about transportation, vehicular pollution.
#
It's that they've solved the problem, right?
#
So when you go to one of those conferences, they're only talking about single use plastic
#
ban because that's the problem they haven't solved yet.
#
They've already solved the problem of congestion pricing.
#
They already have an excellent bus fleet, right?
#
They already have the highest level of regulation that you need on diesel vehicles or any kind
#
of vehicle and the particulate matter that comes out of it.
#
So they're not talking about those problems, not because they're not important.
#
It's just they fixed it.
#
We are not talking about those problems because they have fixed it, right?
#
That's the nature of the elite imitation, which makes the whole thing very strange.
#
So we need to have a conversation just about transportation policy, right?
#
And then maybe 50 years later, we can talk about single use plastic ban once we fix that
#
We'll talk more about our current big problem of elite imitation after we take a quick commercial
#
Are you one of those people who loves to be surrounded by beauty?
#
Let's say you like contemporary fine art, you want more of it in your life, but you
#
don't have the time to visit galleries and buying art to hang on your balls can be expensive.
#
Well, there is a way out.
#
Head on over to indiancolours.com Indian Colours licenses works of art from some
#
of the finest modern Indian artists and adapts them into objects of everyday use like dresses,
#
shirts, store bags, pouches, home decor items and much more.
#
This makes art accessible to many more people and artists get royalties on every item you
#
Indian Colours now has a new range of products out there, elegant summer dresses and men's
#
evening shirts with unique motifs by artists like Tanvai, Samanta, Manish, Shagir, Abbas,
#
Vani, Shruti, Nelson, Pradeep, Mishra, Harain, Bakil and Jaideep Mehrotra.
#
Why should you not look classy even if you are stuck at home during the lockdown?
#
There is also a new range of those iconic Indian Colours stoles as well as home decor
#
accessories like tissue paper holders, cushion covers, coasters and more.
#
And if you are missing your friends in these lockdown days, worry not.
#
You can show them your thinking of them by buying gifts for them from Indian Colours.
#
Corporate gifting is also available.
#
So head on over to Indiancolours.com that's colours with an OU and make art a part of
#
Welcome back to the Scene in the Unseen.
#
I'm chatting with my elite policy maker friend Shruti Rajgopalan and Alex Tabarrok about
#
what is wrong with the elites.
#
Now it's commonly said by a lot of people with some justification that it is finally
#
the elites who drive policy and this is not necessarily a bad thing because the elites
#
do have the training and the understanding and the commitment to actually drive policy
#
because normal people because of rational ignorance because they need to get on with
#
their daily lives are not incentivized to actually learn economics and understand how
#
So eventually all nations at the level of policy and at the level of their founding
#
principles are going to be driven by elites.
#
In a sense even our constitution was made by elites and I shall come back to that question
#
later of whether that was an example of elite imitation.
#
But in your paper you point out that there is a grave danger to this as well.
#
Can you elaborate on that a little bit?
#
Let me give you an example.
#
I was in Bangalore and I needed some medicine and so there was a sort of a hospital nearby
#
with a pharmacy and I went to the pharmacy and I was quite amazed because I mean it looked
#
just like Kaiser, it looked just like at home, okay.
#
I was very comfortable because I walked in and yet and I was comfortable because all
#
of the signs were in English and I got the medicine and the explanation for how to use
#
It's all in English and this is not because of me personally, you know, the white guy.
#
This is just the way the hospital works and I can guarantee you, I mean I'm sure this
#
was an elite hospital in some sense but I can guarantee you just by listening to the
#
people there that not all of the patients spoke English.
#
So this was something which was amazing to me in that the elites, you know, I don't want
#
to criticize the doctors.
#
I'm sure the doctors spend time communicating in their native tongue to some of the patients
#
But the system itself was totally geared to English speaking, not to speaking in native
#
tongue and that to me was an example of premature and elite imitation which I think has very
#
Yeah, and English is the 44th most fluent language spoken in India.
#
So there are 43 languages which have higher fluency levels.
#
Measured, measured how like?
#
I think this is the IHDS survey, I think we cite this in the paper, I can look it up and
#
But this is basically how many people speak a language in India like in terms of population
#
and then how fluent they say they are in the survey questions, right?
#
So I'm a native level English speaker, right?
#
I am a native level Hindi speaker but my reading skills in Hindi are a little bit rusty because
#
it's been a while since I've been exposed to reading books in Hindi, right?
#
Simply by virtue of living in the United States for so long.
#
Now if you can speak English but your fluency levels are really in Hindi and now I'm talking
#
only about the literate population of India which is also not the entire population.
#
You can't understand medical terminology.
#
It's actually an effort to read a sign in English, you have to decide for it.
#
And you know, signs are easy because you get used to them, you go to the same places over
#
Medicines, as Alex points out, is a really big problem.
#
You're usually taking medicines when you're not feeling too well, someone else might be
#
administering them to you, right?
#
At that point in time, if you don't understand what the directions are to take the medicine
#
unless they're explained to you or they're texted to you in another language, it's a
#
So in a sense, the Indian elites have colonized their own people using a language that the
#
elites are comfortable with that most of India is simply not comfortable with, right?
#
You were saying about your grandmother?
#
Yeah, my grandmother, I mean, she knew a few words in English, right?
#
But she was not anywhere close to her, even a fluent English speaker, forget native English
#
speaker, she couldn't go to the doctor alone.
#
And this is not unique to my grandmother, right?
#
One has to take most grandmothers to the doctor, not because they're loving and polite, but
#
because there's a very high chance that they won't understand the instructions unless the
#
doctor makes an effort to explain it to them in their native tongue, right?
#
Which is not always the case, right?
#
Now imagine this at higher and higher levels.
#
Now this may be just a question of, you know, some written material on an antibiotics box
#
or something like that, and you can get a neighbor to help you with it.
#
What about information like surgery, right?
#
You go to a hospital, doctors give you a whole lot of information, right?
#
The doctors are not using their native tongue because they're part of the elite.
#
And the people who are receiving that information may simply not be able to process it, not
#
because they're stupid, not because they're not smart or they can't run their own lives,
#
but because we have imposed this bizarre language on them.
#
It's the same thing with forms, right?
#
You go anywhere in India and you fill any form.
#
It's English and now increasingly Hindi, there's a big push for Hindi, but we don't see too
#
many forms in native languages.
#
And if it's in a native language, it's usually only the one language, right?
#
The dominant language of the state.
#
But in India, as we know, even the minority language in any state is like 12 million people
#
speak that language, right?
#
So we effectively exclude 12 million people from being able to successfully fill a form
#
So this just happens over and over again wherever you go.
#
The legal system is entirely in English, right?
#
The higher level courts are in English.
#
So this has some really big problems in terms of access, right?
#
Access to pretty much anything.
#
That's why learning English has such a big premium in India.
#
We always thought it's about jobs, right?
#
And I'm sure that's a very large part of it, but it's also about just navigating sophisticated
#
systems which you need in terms of medical care, you need in terms of being able to fill
#
out a form effectively for all the paperwork.
#
We are not able to do it in India without additional human interface, right?
#
I want to make the point, I mean, it's great that lots of Indians speak English.
#
I mean, it is a strength of the country that so many people are willing to learn multiple
#
I mean, this is a positive thing and it's a powerful thing that enables Indians to reach
#
out and get the best scientific literature and so forth.
#
But you know, it's often been said that India is more like, you should think about India
#
like Europe, right, as a collection of countries.
#
And yet in Europe, you know, there would be no situation in which in Germany, you know,
#
you would find all of the instructions in French, right, or, you know, in Italy, you
#
would find everything, you know, written in German.
#
This just does not happen, right?
#
And so this is another example of a situation where the elites operate in a different world
#
and make assumptions which are imposed over all of India.
#
So if India truly is like Europe, and it is, then the state ought to be paying much more
#
attention to speaking to the populace in the language which they understand.
#
This is, it seems to me to be kind of a muddy problem in the sense that, yeah, obviously
#
I completely agree with you and by your point that, you know, much as in Indian homes you
#
will find the kitchen is often the grottiest room because the men are making the decisions
#
and they don't spend too much time in the kitchen.
#
So similarly, elites are comfortable in English, so they are imposing English on the country.
#
But at the same time, there is also that imperative after independence that we are a country with
#
so many linguistic divides.
#
And you know, you would have started a civil war if you tried to impose Hindi on Tamil
#
Nadu and English was a functional language everywhere.
#
And it strikes me that is different from the analogy of Europe, because in Europe, they
#
are all independent nation states, while here you've got to, and obviously our elites also
#
did have a vision where, you know, they paid tribute to federalism only in name.
#
It was, they were basically governing from the center.
#
And therefore as a functional language, it would seem to me that English was, you know,
#
just the obvious rational choice, which then leads to what is both a vicious circle and
#
It's a virtuous circle in the sense that if you learn English, you get ahead in life and
#
It's a vicious circle for those left out of it, that you're deepening social and economic
#
inequalities to those who do not have access to English and to English education.
#
And I don't know what's the way out of this because it seems to me that if you regulate
#
it, you know, if you regulate local governance in multiple languages, you run into the same
#
problems of state capacity, which we've been speaking about.
#
So I would say two things.
#
One, I love the linguistic diversity of India.
#
I also like that the official language is English, if for no other reason than self-serving,
#
because it helps me navigate everything.
#
So I understand the problems that, you know, India had this high degree of linguistic fractionalization.
#
So you needed some common language that no one would dispute and English ended up being
#
My issue is more in terms of lack of user sensitivity, right?
#
We're not thinking about who is actually using these documents.
#
If we mandate ISI standards and a written set of instructions for how to use an iron,
#
we are not thinking about can the person buying the iron actually read the instructions, right?
#
Anytime we buy any of these Chinese electronic gadgets that I use in America, it's like a
#
really long piece of paper that's folded in.
#
It's got a tiny set of instructions, but it's in at least 16 different languages because
#
the Chinese are making and exporting to the world.
#
They're cognizant of that because they think like an entrepreneur and they care that the
#
user can actually read the instructions and they're responding to incentives which, you
#
So what I mean by we've colonized our own people in a foreign language is not that I
#
think English is bad medium.
#
It's simply that we haven't made any effort to understand if it helps the people it's
#
supposed to help, right?
#
We have all this staggering amount of information that we want to give on medical boxes and
#
medical forms and we don't think for a second about who's actually going to read those medical
#
We don't think about do we have translation services.
#
Now every pharmacist, every hospital compound or doctor we know acts as a mini translation
#
So you and I who've navigated the system, we know that the kind doctors immediately
#
switch to another language and things like that.
#
So what I mean is the state has not put in any effort on how we design a system keeping
#
We design systems keeping in mind bureaucrats, right?
#
So that's kind of my problem with English as the official language.
#
It is not that costly especially given current technology levels to have all court cases
#
and judgments translations made available in multiple languages.
#
I don't know why, right?
#
Only if you know English you can get access to all the Supreme Court important judgments,
#
some of the most important things that govern state and citizen relations.
#
The same thing for the budget, right?
#
Only in the last two or three years have we had the budget speech in Hindi.
#
We don't translate to other languages.
#
What we do is the local regional language news channel will do a translation of some
#
sort of what the finance minister said in parliament and that's how they inform speakers
#
But we don't have language translation easily available.
#
I'm just saying government should make documents at the very least available in languages that
#
And I'm not talking about languages that you know small minority speaks.
#
I'm talking about languages that 30, 40, 50 million people speak.
#
So it will eventually pay for itself.
#
But it also is a symptom of how the state thinks about its people as subjects and not
#
as citizens or like users of public services.
#
And that to me is the most disturbing thing about this entire language issue.
#
You say in your paper quote, we identify three characteristics of the Indian elite, especially
#
of those formulating policy, language, caste and education at institutions outside of India.
#
And the reason you point this out is obviously because all of these are factors in the kind
#
of elite imitation that eventually gets us into a spot.
#
So can you elaborate a bit on this?
#
Let me take the least controversial one and I'll let Shruti do the more controversial
#
But the education of the elites outside of India.
#
Now in part this is a, to me as an outsider, is a remarkably positive element in that it's
#
amazing that someone like Raghuram Rajan could come into India, become the head of the RBI
#
and then leave and go back, you know, to teach at Chicago or Harvard or wherever he is now.
#
And so many people, Arvind Panagari, Arvind Subramanian, blah, blah, blah.
#
There's many, many examples of this.
#
So in one sense, it's remarkably positive that it shows something about the confidence
#
of India that they could accept as someone, as Indian could come in for a few years and
#
That is something which you would never see, I think, in the United States, right?
#
You have somebody who lives somewhere else to come into the United, it just wouldn't
#
I mean, I do applaud Indians for that because I think it's positive.
#
On the other hand, it's clearly also the case that this biases policy in ways where the
#
head policy makers are thinking about an audience back home.
#
They know they're not going to be here that long.
#
This is not a permanent position.
#
They do not live in the country.
#
They don't even live in, you know, a colony in Delhi like some of the Supreme Court judges
#
They at least live in, see the country where some of the policy makers who helicopter in
#
for a few years, they're not even that close.
#
So I do think that it biases policy and that's important.
#
And it's reflected throughout a lot of the Indian elite.
#
I would add a few things to this.
#
So one is, again, every system is going to produce a particular type of elite, right?
#
And every system has structural reasons why very similar looking people end up in the
#
So in America, we have this huge debate going on about how white men have a particular kind
#
If you have multi generations of college education in your family, you have a particular kind
#
A huge row all over the US with Ivy League schools is how if your parents have been to
#
that school, you get some preferential treatment to go to those Ivy League schools and so on
#
So every country, every society is going to have some structure of privilege.
#
The kind of privilege that has taken place in India, right, is that typically upper caste
#
people manage to capture really important areas, virtually in any sector of society,
#
So whether you talk about business, whether you talk about academics, whether you talk
#
about teaching at the school, whatever it is, it is, I mean, blindingly obvious.
#
No one has to make big arguments to make the case that it is, you know, upper caste.
#
Unless someone misunderstands what you obviously mean is that it is a structure which has these
#
Is it necessary that there is some person at the top who is discriminating and out of,
#
you know, all the candidates choosing only the upper caste guys?
#
The problem is that out of all the candidates he will get, there will mainly be upper caste
#
Yes, and all the people doing the choosing will be upper caste.
#
All the people applying will be upper caste.
#
What you get is a panel full of upper caste.
#
That's kind of what's happening in India.
#
And this perpetuates itself.
#
It has perpetuated itself.
#
It's appalling in India that we have, we pay very little attention to diversity in every
#
area of life other than reservation of government jobs.
#
That's the only area where, you know, there is a constitutional mandate.
#
We've paid some attention to it.
#
Every other area, the moment you talk about any kind of structural inequality, the moment
#
you talk about taking representation seriously, you encourage private companies to have, you
#
know, affirmative action to have greater representation.
#
They'll say, no, those people can go get government jobs.
#
So it's become a very strange system where we don't have representation across the board.
#
Now, so in India, we know what the elite looks like.
#
The elite typically is upper caste, more often than not Brahmin, but certainly upper caste.
#
The elite also speak English, right?
#
Probably multi-generationally, they speak English, not just their own generation.
#
And third, they have access to highest quality education, right?
#
Sometimes it's the highest quality education in India, like IITs and or IIMs, you know,
#
And very often, if they come from a particular kind of privilege, they're able to go abroad
#
and get, you know, a PhD or a business degree or whatever it is abroad.
#
Now, this has been going on for more than 100 years, right?
#
The last set of local elites we produced, who were just purely local, were people like
#
Dadabhai Naoroji, who were completely educated in India.
#
So everyone, starting with Nehru, a lot of the people who wrote the constitution, they
#
Now, speaking of the elite problem, why is this an issue?
#
So Ambedkar famously said that only people who haven't lived in villages, romanticize
#
Because the people who romanticize villages and don't want urbanization and want rural
#
development are all these upper caste people who like the idea of farming and all these
#
lovely things and a village community life, which is slower and not polluted.
#
They don't know village politics at all.
#
They don't know how bad the caste oppression is in villages.
#
In fact, I'd say that this part of Gandhi's ideology was also isomorphic mimicry.
#
He got it from Raskin and Tolstoy, all of those foreign thinkers who idealized villages.
#
And Ambedkar pointed out that Gandhi had never lived in a village.
#
You know, he was born and raised in Porbandar, which was a really important port city.
#
Born in an important family, went abroad, did all of that.
#
But romanticized villages, right?
#
And this is not because Gandhi is a bad person or ill-intentioned.
#
This is just simply not having the experience of being in a village and going through caste
#
Ambedkar, on the other hand, is not allowed to sit inside the classroom because he's
#
He's not given water that that the other students can get access to because so Ambedkar is very
#
well versed with what actually happens in a village, especially if you're lower caste
#
and how structural inequity in a village can cannot go away easily, right?
#
So in that sense, if you think about who is making policy, it suddenly becomes very important
#
what their experience is, right?
#
The farther away they are from the median Indian, right, is a really big problem.
#
And the kind of elites we're talking about are really far away from the median Indian.
#
A second level problem is now if we say that the most important mandate of government,
#
if you take things like Gandhi's talisman seriously, is the oppressed Indian.
#
They are not in the same universe as the oppressed Indian.
#
They've probably never met people from villages.
#
They've never seriously interacted with them, not because they're not good people.
#
It just simply hasn't happened, right?
#
So to some extent, the Indian elite are caste blind, not because caste doesn't exist in
#
India, but because they haven't encountered it.
#
Well, they haven't encountered it viscerally in a lived way.
#
They might, you know, be intellectually able to sort of talk about it.
#
So Akhil Katyal, who's one of our favorite poets, both Amit and mine, has a lovely poem.
#
Again, I won't dare to quote it exactly, but he talks about how a little boy about eight
#
years old goes and asks his mother, mama, what's our caste?
#
And she says, if you don't know at age eight, it must be upper caste.
#
So we're caste blind because it never came up, because we're at the top of the pyramid,
#
so it doesn't come up, right?
#
So it really, I don't want to make caste a big issue in terms of how it informs your
#
I'm sure any one of any caste could make excellent economic policy, but...
#
Or bad economic policy.
#
Or bad economic policy, right?
#
As so many upper castes do.
#
So the identity matters because the experience matters and it matters who you're having the
#
Now we have the most number of elites in finance and economics because it requires a particular
#
kind of technical training, right?
#
And we have some of the best schools.
#
It used to be everyone came back from the LSC and Oxford and Cambridge, you know, this
#
sort of like Manmohan Singh's generation, IG Patel, you know, that group of chief economic
#
advisors and finance ministers.
#
We know there's been a shift to American universities for Indians.
#
You know, the latest crop of advisors, whether it is Arvind Subramaniam, Arvind Panagariya,
#
Raghuram Rajan, they're all trained in America.
#
Well, I mean, the current local crop is trained in India and defenders of demonetization and
#
frankly bad economists, which is why they are in the positions they are.
#
But let's not go there.
#
There is this element of people who have had a particular kind of privilege their whole
#
life and they tend to make policies of a particular kind, right?
#
Now I'm not saying that the governor of RBI is not thinking about interest rates the right
#
way because they're elite, right?
#
That's not the argument.
#
It is that we may not think about demonetization, ATMs, how people use cash in an economy, what
#
kind of denominations we need to make change when we go to take an auto rickshaw.
#
Those things don't seem to be a priority for the highest level of the RBI, right?
#
And that part, we need a lot of people at the RBI who are cognizant of how people are
#
actually using cash in an economy.
#
One of the biggest reasons for the cash crunch post-demonetization was that the new currency
#
that the government introduced was a different size than the old currency.
#
So the ATMs wouldn't recognize it, right?
#
Classic example of that.
#
This is a classic example.
#
I mean, this is complete state failure.
#
I mean, I can't believe that people who are so highly educated actually did execute this
#
But this is also because at some level, the people at the RBI are not the people who are
#
standing in line and trying to get cash and trying to make change.
#
They're the 1% in India who are doing credit cards and they're more worried about cybersecurity
#
and can we get OTPs rather than can we get change?
#
So that is where this kind of elitism and privilege really starts mattering, even with
#
Now you go beyond that, right?
#
Now you talk about regulation.
#
Now you talk about provision of public goods and services, right?
#
Raghuram Rajan's latest book has a huge section on how we need to think of the community,
#
So this is the third pillar, right?
#
So we need to bring back the focus on the community.
#
There's a lot of focus on markets and a lot of focus on the state.
#
We need to think about community seriously and preserving the great things about community.
#
But there are also some terrible things about Indian community, right?
#
They never forget who you are, who your grandfather was, who married whom, what caste you are.
#
Did anyone marry out of caste in that particular village?
#
So I think we need more urbanization in India.
#
If you ask any person who lives in a village, they would want more urbanization in India.
#
But if you asked elites who are thinking about an American problem where we need to bring
#
the focus back to the community because there are entire communities which are in crisis
#
because of opioid addiction or something like that, it's not clear to me that that applies
#
And this is not to criticize Raghuram Rajan.
#
He's a fantastic thinker.
#
He's the one who predicted the financial crisis before pretty much anyone else did.
#
But on some of these margins, if someone read Raghuram Rajan's book and just imported it
#
to India, it would not work at all.
#
So Raghuram, you've kind of described how Indian elites are likely to be English speakers.
#
Even if they haven't been trained abroad, though many of them have, the formative influences
#
are likely to be from abroad, not as much lived experiences within the Indian.
#
And you've given four examples, and I'll ask you to briefly take us through them.
#
Four examples of recent policies or recent packages of policies which sort of indicate
#
this sort of transplantation of ideas that have worked in the West, but bound to fail
#
in India for reasons of local conditions.
#
Shall we start with maternity leave?
#
Well, India has one of the best maternity leave policies anywhere in the world, right?
#
I think we're almost as good as Sweden and Denmark in terms of how generous the leave
#
Now there are a few things.
#
This obviously only applies to the formal sector, right?
#
The second is Indian female labor force participation is at an all-time low, right?
#
It is particularly low right now for a whole number of reasons.
#
You have a couple of great episodes on why so few women...
#
With Namita Bhandari and again with multiple guests.
#
And this has something to do with both the current jobs crisis, where preference is given
#
for the male member of the family to take the job as opposed to the female member.
#
Even in India, for a very large part of India, working women is an inferior good in the sense
#
that as income levels go up, you drop out of the labor force, right?
#
This is for most of the country.
#
So I am again one of a very small minority of privileged people that would consider that
#
women should work because women are equal and so on and so forth.
#
For most of India, right, men and the families think that the women should work only if it's
#
a dire economic situation.
#
So as soon as the family or household income starts going up, you know, the women are asked
#
Which is one of the explanations for the bizarre fact that as India has grown, our participation
#
of women in the workforce has gone down.
#
So female labor force participation is fairly low.
#
Now the second part of female labor force participation is a lot of it is in the informal
#
Most of India operates in the informal sector.
#
We don't have precise numbers, but estimates put it anywhere like 50 to 70% of the labor
#
force is engaged in the informal sector, even if they are not themselves vulnerable as informal
#
So that's the second level problem.
#
So we've passed the law, which is first world and first trade, absolutely, right?
#
And as a young woman myself and everyone I know who has had children and I understand
#
the struggles of very little maternity leave and what a luxury that is, it seems like a
#
But it's going to benefit maybe a few thousand women at best, right?
#
But it's also going to take up state resources in terms of thinking about the law, drafting
#
the law, enforcing the law, right?
#
Who are the kinds of firms who are likely to give this kind of maternity leave?
#
They're going to be the top end firms, right?
#
Businesses like the law firms or the top end businesses who are likely to just through
#
social change and peer pressure, very likely to adopt good maternity leave policies because
#
otherwise they would lose these women who are so gifted operating at the highest level
#
of the Indian economy, right?
#
Any firm lower than that, either the law doesn't apply to or it won't be enforced, which means
#
it doesn't matter, right?
#
To the extent that it is enforced, it just raises costs, raises the cost of hiring women,
#
can even backfire and make it more costly to hire women so you hire fewer women.
#
In fact, when I was editing Prakriti, I had published a paper, I think by Devika Kher,
#
I don't remember who, an article about how this has actually affected the employment
#
of women because firms are now incentivized to hire men instead of women when there are
#
So the incentives are terrible, which is what the coercive power of the state can sometimes
#
do with these unintended consequences.
#
And you quoted Anthony Allard's great phrase, phantom legislation.
#
I mean, it's a phantom legislation and again, it's another example of virtue signaling.
#
And phantom legislation, just to define it being the passing of laws which do not have
#
and most probably cannot have the desired effect.
#
Yeah, it's laws which are on the books and which you can point to your friends.
#
And so when this law was passed, the labor minister very proudly said, you know, we have
#
a maternity leave law, you know, as good as that in Sweden.
#
And yet when you think about that, that's a bizarre, that's a bizarre thing to be proud
#
You know, India does not need and probably should not have the same laws as Sweden does.
#
I mean, that is, if India adopted all the laws of Sweden, it would be a complete disaster.
#
So this is kind of a bizarre thing to be proud of.
#
And as Shruti points out, it doesn't apply to most women and most women have problems
#
which are far, far greater than maternity leave.
#
I mean, you know, let's talk about, you know, violence against women or let's talk about,
#
you know, getting basic health care.
#
How about how far you have to walk to get water?
#
That's an issue which affects women.
#
How far do you have to walk to get water?
#
I mean, the idea that this is something which one should broadcast to the world when a millions
#
of people are walking huge distances in unbearable heat to get water for their families.
#
There's such a huge disconnect between the law that you pass and are proud of and tell
#
your friends in the liberal community, in the international community, and the reality
#
on the ground is just bizarre.
#
So this probably came about, I mean, if I were to hazard a guess, because elite policymakers
#
saw their friends who are probably women like me, right?
#
In my age, they're working at law firms, they're working at the top blue chip firms in India,
#
and they got, you know, very little maternity leave and they didn't have much negotiating
#
power and they said, we must fix this with the law.
#
That's probably what happened.
#
But the reality is in India, one of two things happen.
#
If the family is of a certain income level, the moment a woman is pregnant, there is no
#
question that she would work at all, right?
#
It's just out of question.
#
And if a woman is of a certain income level where she can't afford this luxury of taking
#
time off when she's pregnant, she's pretty much working till the day the baby is born.
#
And you can just see this if you look at all the domestic help, right?
#
Most domestic help in India works until maybe the last week or so before the baby is delivered,
#
And domestic work is not easy work.
#
I hope that the people employing them go easy on them in the last few months.
#
And I'm sure there's some social system that looks after, you know, pregnant women in its
#
own bizarre way, but it simply doesn't apply to those women, right?
#
So we're not helping anyone except a few thousand women who already have a lot of privilege
#
and a fair amount of leverage in terms of being able to negotiate great amounts of leave
#
And that's not a bad aim in itself.
#
I'm not saying we should help no women.
#
It's just that it does clog up state capacity, right?
#
Those are the women who will file suit in a court and were this rule not to be followed
#
or not to be enforced, right?
#
This took up time in terms of drafting the policy, framing the policy, passing it in
#
parliament, having debate and discussion on how to enforce it, creating like an enforcement
#
All of this took up state capacity.
#
And the argument is not that it's not a good thing to have.
#
It's that we have far greater problems, right, to solve for most of our women.
#
And I think those are the things like every government needs to prioritize and this screws
#
up the priority scheme.
#
And again, I'd like to sort of emphasize, you know, people often give this common response
#
that, you know, we should do everything.
#
It's not either or we should do them all.
#
And the point is wake up.
#
Our state capacity is incredibly limited.
#
Everything you do is at the cost of something else.
#
And therefore, like you said, Shruti, we have to prioritize on whether we want to do things
#
which the elites feel good about or whether we want to actually go down and examine the
#
real problems of the country and do something about that.
#
Yeah, you have to prioritize.
#
And not only that, but I think you have to learn.
#
State capacity is not something which you simply have or don't have.
#
It's something which builds, which develops over time.
#
So when people see that the state is successful, then the state could be more successful in
#
So when you have that the state is failing or flailing on all grounds, then people don't
#
And it becomes very difficult for the state to be successful even at the few things it
#
So state capacity is something which needs to build over time.
#
And the way you do that is you start with the most important things and you actually
#
do those things and enforce those things and do those things seriously, as India can.
#
I mean, India has done this with its voting system, its democratic system.
#
Where India decides this is important, this is a priority, it can and it does.
#
We're talking about the Delhi Metro, which by the way is great.
#
I mean, the Delhi Metro actually, it does work.
#
But there are limited resources.
#
There are always tradeoffs.
#
You can't do everything.
#
So you need to prioritize and then people begin to respect the state and then the state
#
can grow and do these other things.
#
And this is where one reason we talk so much about the characteristics of elites is that
#
their priorities are determined by where they are looking to, which tends to be the West.
#
And this is where representation matters, not because you and I as savaranas can speak
#
The only thing we are saying about caste is we need more representation of all castes
#
while we are making this kind of policy.
#
We need more representation of people who speak languages that are different from English
#
while we are making these policies.
#
I don't think anyone asked any survey of the median women in India.
#
A maternity leave is a big problem.
#
And they would have said maternity leave what, right?
#
So that's what we mean by the elites look outwards, not because they're bad people,
#
because that's the world they inhibit.
#
And that world that they inhibit is fantasy as far as most of India is concerned.
#
Most of India just lives in a completely different space.
#
And we have had made no effort to get greater representation of what it means to live in
#
So we have only about 40 minutes left.
#
So I suspect I am the only podcaster who will say only about 40 minutes left, but we have
#
only about 40 minutes left.
#
So what I will sort of try to do here is let's go over your three other case studies in about
#
five to seven minutes each so we can then discuss the larger sort of questions at hand
#
and kind of wrap it up.
#
Now, housing regulation is something you speak about in your paper.
#
We've all had multiple episodes on this.
#
It was from you, Alex, that when we did an episode on FSI together that I learned that
#
great phrase that where you said that Bombay should stop reclaiming the sea, we should
#
reclaim the sky and built upwards, which was very eloquent.
#
And from Shruti, I got sort of that amazing TIL moment in the episode on 12 dream reforms
#
where you pointed out that one of the most powerful forms of mass transport is the elevator.
#
I got that from Tim Harford.
#
I can't take credit for that.
#
So Tim Harford, Basia Prize winners for the win.
#
So tell me a little bit about how so many of our housing regulations, you know, designed
#
in an earlier colonial era where people as pro elites are sprawling bungalows around
#
So the regulations date to the colonial era where the British wanted to recreate New England,
#
that is the old England, you know, and have these bungalows.
#
And in the bungalow, you have a nice garden and you have, you know, a big distance between
#
the driveway and the street and the front door and so forth.
#
And space for your car, right?
#
It's important to have space for car.
#
But when you think about what India really needs, most Indians don't have cars.
#
They have motorcycles or they have bikes or something like that.
#
So every use of space, which you put to cars, which you put to lawns, which you put to having
#
a big distance between the front door of the house and the street, all that means is you're
#
raising the cost of housing.
#
That land is expensive.
#
If you use land for a lawn, that is land which is not being used to actually house people.
#
So all of these regulations which were designed to create a English bungalow style living
#
don't apply to the way that Indians actually live.
#
And this means raises the cost of providing housing for real Indians and means that, ironically,
#
the only truly free market in housing in India is the slums.
#
And the slums in that sense actually work quite well.
#
The slums are not ideal, but they are an amazing response to terrible regulation.
#
So the government, you know, can go and provide housing, so-called affordable housing.
#
But where do they put it?
#
They put it where land is cheap outside the city and where it's very difficult to get
#
So people respond and say, no, I'd actually prefer to live in the slums which are closer
#
So the slums are actually responsive to people's real needs.
#
The problem is that they're not provided with government services like water and electricity
#
So this is another case where we have premature imitation.
#
We have regulations in order to create British style bungalow living.
#
And at the same time, the state fails on its primary duties.
#
You know, as I said, sewage, electricity, and water.
#
So this is the big disconnect.
#
No, and it also strikes me that, you know, slums are an excellent example of society's
#
solution to a problem created by the state.
#
You know, and they are demonized.
#
And for example, you know, the informal sector is demonized.
#
The informal sector is also society's solution to a problem created by the state, and they're
#
I had an episode on slums a long time back with Pawan Srinath where he pointed out that
#
slums are so essential to cities because they allow a cheap entry point for migration into
#
cities, which people often forget.
#
And you know, the second aspect of the kind of housing regulation we have and Alain Bertaud's
#
Order Without Design is a great book, doesn't just talk about this happening in India, but
#
all over the world, everywhere regulators from New York City, you know, further down,
#
the regulators tend to be elite and they think about how people should live and not how
#
So they think in terms of, you know, any civilized person should have so many square meters of
#
living space, which means the smallest size one bedroom you can make is X number of square
#
The smallest two bedroom you make for a family is X number of square meters.
#
Most Indian families don't give a separate, you know, set of bedrooms to their kids, right?
#
Most Indian families at particular income groups, there's one room and everything happens
#
in that one room and in the evening when all sort of your living room activities are done,
#
you pull out the gada, you spread it and now it's the bedroom for the night, right?
#
This is how a lot of us grew up.
#
This is how most of Bombay functions, right?
#
Even at higher levels of income.
#
So a regulator coming in and telling people how they should live and how they should use
#
their space is really bizarre as opposed to asking how do people actually use their space,
#
How do you use that extra space outside, which is the gap between the building and the road
#
and in Bombay, they've lent it out to Panwala's, they've lent it out to people who do the ironing
#
right inside the society gate.
#
This is because that space is valuable.
#
We put it there as empty space only because of bad regulation, right?
#
So these are things to consider in terms of regulators thinking about how people actually
#
live as opposed to how we want them to live.
#
Now nobody wants to live in a slum, but if we go to a slum, it will tell us a lot about
#
what people prioritize.
#
They prioritize distance from work, even over having sewage, right?
#
They prioritize that their kids can go to a good school nearby and that the mother can
#
drop the kids off at school, go do her work, pick up the kids from school and come back
#
Same problems mothers have in Arlington and Fairfax where Alex and I live, right?
#
Same kind of issues that mothers have in slums.
#
That's why distance really matters.
#
So they're willing to give up piped water delivery in exchange for that.
#
And the only reason those poor people are forced to make that trade off is because we
#
haven't provided for regulation which will allow for really tiny, small living spaces
#
which are, you know, regulated, right?
#
Formal sector spaces because we think that's too small for a human to inhabit.
#
You know, my listeners often ask me for book recommendations and you know, what you just
#
said reminds me of two masterpieces I'll recommend.
#
One is a book called The Power Broker by Robert Caro about Robert Moses, a man who built New
#
York which is a magnificent biography, not just of a man but of the corrosive influence
#
of power on individuals and also of a city.
#
And Moses did everything exactly wrong, you know, top down planning, coercive state power
#
And the other book is a lady who opposed him, Jane Jacobs, who wrote this incredible book
#
called The Death and Life of Great American Cities, which argues for and makes a case
#
for allowing cities to organically evolve and, you know, within their own local constraints
#
and expressing its own local character, which are both masterpieces.
#
Speaking of Jane Jacobs, I think Alain Bertaud's book is perfect to complete that trilogy.
#
He's an actual masterpiece as well, all linked from the show notes.
#
One of the things he talks about in the book specifically about Mumbai is about how we
#
haven't created circumstances where you can easily change land use from one kind of use
#
to another kind of use, which is critical to a city, right?
#
So we have had mill land in the center of the city, right?
#
Thousands of acres of mill land completely tied up.
#
And now what do you have in those mill lands?
#
You have, you know, posh cafes with paper straws is what you have on mill land these
#
days because we simply did not convert the land use from industrial to commercial and
#
then commercial to residential or some form of that, which means now the center of Mumbai
#
is no longer valuable, right?
#
All the business hubs are either in the south end of Mumbai or a little bit further north
#
near, you know, BKC because, and this is a direct consequence of not allowing, right,
#
Verli and those neighboring areas, which had lots of mills to properly change land use
#
when the mill shut down.
#
So this is a really big problem when the government says we must have industrial use in the middle
#
of Bombay, which is the most valuable real estate perhaps anywhere in the world.
#
So we have bad regulation, right?
#
And we have bad regulation because they've once again read books by people like Robert
#
Moses on, you know, stratifying cities the way Moses think they're supposed to look as
#
opposed to how cities actually operate.
#
And of course, there's an engineering mindset at play as well where you want to design everything,
#
not realizing some things are too complex to be designed.
#
The next example is one last thing, speaking of elite imitation, the person one we must
#
really read on Indian housing regulation is Bimal Patel, right?
#
In the typical elite imitation format, we've talked about Jane Jacobs and we've talked
#
about Elianne Bertaud, but the person who actually dissects Indian housing policy, what
#
are the rules, the way they actually are written in India and the way they actually work and
#
the unintended consequences of that, that is Bimal Patel and, you know, all his fantastic
#
We cite a bunch of it in the paper.
#
This is making win-win solutions actually work in Aminabad.
#
So he is an extremely important person in the Indian context who is finding ways, bringing
#
the farmers in, bringing the industrialists, the developers in and making sure that everybody
#
gets a piece of the pie.
#
And that is actually the way for India to develop because another, you know, very closely
#
related problem is the ridiculous difficulty it is for farmers to sell their land to non-farm
#
So we perhaps do this in order to, quote, protect the farmers, right?
#
Another example of the elites thinking that they must protect the farmers.
#
But in fact, the land is some of the farmers' most valuable assets.
#
And if you can't turn it into a developable land, you are destroying the value of that
#
It's what Hernan Drozde sort of called debt capital, though again, I'm showing elite imitation
#
by even citing the thought, but yeah, conceptually, that's extremely useful.
#
Let's kind of move on to open defecation, which is a third case study, which of course
#
we have, you know, Shruti and I have done a long episode on Swajh Bharat and I'd encourage
#
Do you want to quickly sum up in just a couple of lines what?
#
Yeah, we need to focus on waste management solutions and not on toilets, right?
#
Toilet is just one step.
#
It's the last mile step in how we think about waste management in India.
#
Now because of the way we are culturally and in particular because of caste relations and
#
ritual purity, most Indian caste groups, the Savarnas and even a large number of the Dalit
#
groups refuse to have anything to do with human excreta and faeces, right?
#
So if you create a system where people have to use toilets and then manually empty them
#
or empty them using a vacuum or in any way have to deal with it, it is going to have
#
a very big consequence on caste.
#
Most upper caste people simply won't adopt it and the more number of people that adopt
#
it, there's a huge aspect of oppression because it re-enables or, you know, revitalizes this
#
awful practice of manual scavenging and things like that that we outlawed a long time ago.
#
So we have created a Swajh Bharat Abhiyan, which translates to cleaner India, right?
#
We want a cleaner India, but we're only talking about cleaner India in terms of toilet, right?
#
So what we did was the entire focus was on building toilets and delivering toilets to
#
every household without understanding how they actually go about their business, right?
#
So do they want to use...
#
The elites sort of naturally think that the problem of open defecation is that there aren't
#
enough toilets because who would possibly want to defecate in the open if they had a
#
But in fact, that's not the case.
#
Because elites, for elites, toilets come in a great package deal included with excellent
#
sewage solution and piped water, right?
#
So when I think of a toilet, I'm thinking of a package deal.
#
The kind of toilet that Swajh Bharat Abhiyan is giving out is just the toilet.
#
It doesn't come with piped water and it doesn't come with sewage.
#
That's why I think of it as an excellent illustration of, you know, how some governments focus more
#
on optics than actual governance.
#
So the toilet is great optics.
#
That's what you see, but you need a drainage system below that.
#
And what you pointed out in your paper and in the episode that we did is that if you
#
don't have that drainage system, then people either have to clean it themselves, which
#
they consider a quote unquote Dalit activity and they don't want to do it, or they have
#
to actually get a Dalit into the house to do it.
#
And therefore, even beyond this issue of caste and ritual cleansing, there are all kinds
#
of cultural issues for why people prefer open defecation.
#
And therefore, it, you know, this is a classic example of what sounds like a great policy
#
to the elites, but hey, think a little deeper literally.
#
So I will say that even though the policy might not have been, you know, exactly perfect
#
for the problem, it was a very good thing that Modi pointed attention to this problem,
#
because it's a serious problem.
#
It's one which in another country might have been hidden away, right?
#
Nobody wants to talk about it.
#
Nobody wants to talk about it.
#
But he talked about it.
#
So I got to give him credit for talking about defecation.
#
I mean, this is something which is not comfortable to bring up, but he made it a priority.
#
And I think overall, it's probably done some good because we have to also remember that
#
open defecation kills people because it creates a huge amount of bacteria in the environment.
#
It creates, you know, the possibilities for cholera and things of that nature.
#
So I do think that even though the solution was not exactly pointing to the right issues,
#
just talking about it was a very big deal.
#
Just to sort of drive that home, I had the Congress politician, the very fine economist
#
Salman Swaz on my show.
#
And at the end, I threw him what I thought was a googly, that why don't you say something
#
And he said precisely this.
#
He said that a man in a position of that much influence can really change the minds of a
#
lot of people on issues.
#
So just by talking about Swachh Bharat, even if you don't actually make that kind of difference
#
on the ground because of implementation issues or your policy is badly designed, can make
#
a difference to the culture.
#
And of course, that has to be granted.
#
I want to point out one thing which is related to the elite imitation.
#
They tied up the outcome of Swachh Bharat to delivering toilets, right?
#
So on October 2nd, on the 150th birth anniversary of Gandhi, Modi had set a target that, you
#
know, by 2019, India will be open defecation free, and they declared India open defecation
#
free when in fact India is nowhere close to open defecation free.
#
It's definitely improved, as Alex pointed out.
#
But the reason that the government has declared it so, it's because they met the target of
#
how many toilets needed to be given to how many households.
#
And they said, oh, we've solved the problem, right?
#
Mission accomplished would be the US version.
#
So now it's a bizarre thing where we have conflated input with outcomes, right?
#
And this is another virtue of, you know, in other places, had we given people toilets,
#
they would have used them, right, either because the sewage and the water exists or because
#
none of this caste and ritual purity nonsense, you know, none of that exists, right?
#
But here we have those problems.
#
So if you conflate the input with the outcome, then you are going to get a lot of shit.
#
In fact, conflating input with outcome is exactly what, you know, ails our education
#
And your fourth case was, you know, about the Right to Education Act, which was a massive
#
I've had episodes on that.
#
And you've written about it very well in your paper, which I will encourage all my listeners
#
to go and read because we are moving on from that.
#
And I'd rather like to sort of come to your conclusion, which is that limited state capacity
#
calls for presumptive laissez-faire.
#
And I'll quote from your paper.
#
Imagine, for example, that US government spending had to be cut by a factor of 10.
#
Would it make sense to cut all programs by 90%?
#
Some programs and policies are of great value, but others should be undertaken only when
#
state capacity and GDP per capita are higher.
#
And then he gives Edward Lazer a quote, which you gave earlier.
#
And then you guys say, a US government funded at one-tenth the current level would optimally
#
So why doesn't the Indian government do many fewer things?
#
A lot of people will instinctively react to this, saying that, hey, we need the government
#
because the market doesn't do all of these things properly.
#
But the issue there is that usually, A, the government is creating problems in which then
#
society comes and find its own solutions to the market, like slums, like informal markets.
#
And B, people are very keen to spot market failure, not realizing that government failure
#
is actually ubiquitous and in India inevitable because of the problems you pointed out, right?
#
So our argument towards a presumptive laissez-faire is very much in the Indian context, right?
#
Because we regulate everything to death.
#
So this is not saying that the government should not provide clean water, clean air,
#
should not have traffic signals or not solve air pollution.
#
Those are the things that matter.
#
So, you know, air pollution is a classic market externality, it is difficult to bring about
#
So we need some good regulation to address that problem, right?
#
So we're not saying that the government should not do any of that.
#
In fact, we're saying the exact reverse.
#
We're saying that for the government to be able to do that successfully, it should stop
#
doing a lot of other things that it does because of one of two reasons, either because that
#
regulation is stupid and useless, which is most of our paternalist, you know, sort of
#
redistributive regulation, which is anyway not followed.
#
Or two, even if it's a good idea to have that regulation, it is too soon and we cannot execute
#
So why not wait until India gets richer and has better state capacity and then do those
#
So our focus on the night watchman state, right, with the presumptive laissez-faire
#
is not for an ideological reason, though that might also be true.
#
But it's for a different reason, which is that we can't do more than the night watchman
#
state with the current levels of Indian capacity.
#
So we should really stop doing everything else and prioritize and at least get that
#
So in a sense, we are libertarian by circumstance, not by belief, we should be by necessity.
#
Yes, this is Kaushik Basu, right?
#
India is full of libertarians by necessity, not libertarians by choice.
#
I think there's a different problem with that, but we'll talk about that another time.
#
And it's presumptive laissez-faire, it's not necessarily laissez-faire.
#
You have to think about what we have now, which is presumptive statism.
#
You know, the presumption among Indian policy elites is that they should have everything
#
which the United States have.
#
And there's two problems with that.
#
One is the United States should have more laissez-faire.
#
That's problem number one.
#
We're far too regulated in the US, including many of the same problems, the housing regulation
#
So that's problem number one.
#
Problem number two is even if the US had perfect regulation for a country of its GDP per capita,
#
that does not translate into India, which has much lower GDP per capita.
#
And it's not about, you know, the US is great and India is not or something like that, because
#
if the US had lower GDP per capita, it should regulate less too.
#
And in fact, when the US had lower GDP per capita, it did regulate a lot less.
#
You could even argue that some of that, you know, regulating less led to that higher GDP
#
There may be a development path.
#
And I think part of the problem is that people look around and they think, oh, we can skip
#
the laissez-faire period.
#
We don't have to do what every other country did to become rich.
#
So the countries which became rich all had kind of this laissez-faire period, you know,
#
Great Britain and the United States and Canada and so forth.
#
And if you look around and you say, oh, well, we could just skip that and go straight to
#
having, you know, middle of the road, mixed economy regulation, that I think is a mistake.
#
There's a learning period and laissez-faire is part of the learning.
#
You know, you need to get your police officers to be able to enforce a 50 rupee fine before
#
they're able to enforce a 500 rupee fine.
#
That may be much better.
#
And if you try and do the 500 rupee fine right away, then it's going to be subject to bribery.
#
It's not going to work.
#
Then the police officer is going to say, do you want the 500 rupee fine or do you want
#
And I'll forget about it.
#
So that's the type of thing which when you entice the police officer with a possibility
#
of having the income much higher than their wages, then you're naturally going to create
#
a system of corruption.
#
If instead you keep the fines low and just for, you know, the worst offenses, then the
#
police officer is not tempted into corruption.
#
So you need the whole laissez-faire process is a learning process in which you develop
#
And the 500 rupee fine is also symptomatic of weak state capacity.
#
What we've done is, as we know, right, there is a, for any kind of punishment or any activity
#
that one, that the state wants one to avoid, there's the question of the probability of
#
getting caught and the penalty of that particular action, right?
#
Now in India, we keep increasing the penalties because the probability of getting caught
#
and prosecuted is very low, right?
#
And why is the probability of getting caught and prosecuted very low?
#
Because we have very low state capacity.
#
So we keep increasing the number of years of punishment, pretty much every activity
#
from pulling the chain in a train, the emergency chain, right?
#
Everything has six months or more of imprisonment as a penalty.
#
Everything has really high fines.
#
So we are actually incentivizing all our state actors at the lower levels of governance to
#
turn criminal because we haven't appropriately thought about how we optimize limited state
#
And then when we substitute limited or weak state capacity with these other big fines,
#
we have this huge problem, which is skipping the development step when it comes to state
#
enforcement of, you know, basic things.
#
And when you have a 50 rupee fine or a 10 rupee fine, that can be enforced pretty equally.
#
When you have a 500 rupee fine, that is never going to be enforced equally at this stage
#
Forget a 500 rupee fine where I live in Mumbai, in the seven bungalows area, there is now
#
a new local fine that has come up, which is 20,000 rupees for cars which are parked wrongly.
#
The result, of course, is that no one, I guarantee you, will ever pay that fine.
#
But you know, but the rent seeking is great.
#
20,000 rupees is the down payment for some of these cars, what are they talking about?
#
Some mad figure like that, I forget the exact number.
#
It happened to a friend and I was like, and she was like, oh, I paid a thousand buck bribe
#
It would have been a 200 buck bribe for her, you know, the only thing we're doing is we
#
are making the system more corrupt and more geared towards rent seeking.
#
And you're also incentivizing cops, look at these lucrative rent seeking opportunity instead
#
of doing the kind of policing you would actually like them to do.
#
So I have a couple of questions here.
#
One is that I'm trying to imagine myself in a policymaker's position where I have limited
#
resources and even my own intellectual bandwidth is limited.
#
Now given the complexity of the actual world, isn't this kind of elite imitation rational
#
as designing something new from scratch will always A, it will require me to absorb a lot
#
of local knowledge, two, it will bring its own set of unintended consequences.
#
And I can simply cover my ass by using a policy that allows me to posture successfully that
#
I'm doing something about the problem.
#
I mean, it is rational in the sense that we respond to incentives and as an academic or
#
as an elite policymaker with the IAS, my best incentives might be to think about single
#
use plastic ban because that'll get me invited to a nice conference, speaking to other environmentalists
#
who share my ideas and things like that.
#
So in that sense, it's rational that the means and ends are pretty tight and it makes sense
#
It is irrational in that they are expecting completely different results which have nothing
#
to do with the logic of their actions.
#
So expecting India to be open, defecation free because we distributed a bunch of toilets,
#
that is completely irrational because you can do it for your own personal reasons, but
#
then don't expect the policy outcome.
#
So that's what I would say about the...
#
But often there's a mismatch between the rewards that policymakers get and the actual policy
#
Because a policy outcome may happen years down the line, they've moved on to some other
#
Yesterday's education secretary will be tomorrow's transport secretary.
#
So why not just do the safe thing, not do anything drastic, take the least effort possible
#
and you can posture and get invited to conferences?
#
When I meet IAS officers, they also tend to deeply care.
#
Now we have to remember these are career civil servants, right?
#
They've gone from department to department looking at different kinds of problems.
#
They've served at the district magistrate level.
#
They've seen some of the ground reality, even though a very, very long time ago, it might
#
not be the relevant reality of today, but they really seem to care that policies that
#
they work on do have the intended result.
#
And I also see a lot of frustration among elite Indian policy makers when the policies
#
that they do care about don't have the intended outcome, right?
#
So I would ascribe the best of public spirited intentions to them and say that we still have
#
this problem of elite imitation.
#
No, and actually our government service is filled with talented, really smart, well-meaning
#
I have to tell you this.
#
We are recording this on February 10th.
#
I was at the Vidarbha Lit Fest yesterday in Nagpur and there's an income tax training
#
academy there and a couple of students from that academy came and they asked me some great
#
questions quoting from my episodes.
#
And then finally they said they were big fans and they made me sign on a piece of paper
#
the words taxation is theft.
#
Yeah, please don't name them and get them fired.
#
Don't terminate the deep state.
#
Now my final question actually moves away.
#
Let me just answer a brief point on that issue and that is this, you know, in many places
#
in the world, in the US and places in particular, we have a not invented here mindset, which
#
means that if it wasn't invented here, it must be no good.
#
But actually India often has my experiences if it was not invented here, if it was invented
#
here, it's no good, right?
#
And often I think India tries to import too much.
#
A little bit of a invented here is good would be, I think, a pro mindset.
#
Well, there's a little bit of like, for example, the free rider effect there in the sense that
#
why do all the hard work and research, why not free ride on the sort of findings of others?
#
Oh yeah, free riding reminds me of something fantastic I read in Ajay Shah's book and Vijay
#
Kilkar's book and we had a chat about it.
#
And one of the points that they discuss is to relieve certain areas of Indian state capacity
#
to do other things better.
#
India should just free ride on the regulatory capacity of other countries.
#
So if something is FDA approved, India should just adopt it.
#
No other questions asked.
#
Because they overregulate madly.
#
So if they approved it, it's fine.
#
So they overregulate, you know, maybe it's not optimal or, you know, efficient in the
#
market sense, but it's efficient for India to adopt it because it frees up an enormous
#
amount of food safety regulation in terms of how much of the budget goes towards it,
#
in terms of how many officers are employed towards it.
#
So according to me, and even I wrote about this, I think state capacity freed is state
#
So in that sense, any area where we can free ride on state capacity of first world, Alex
#
has made a similar argument on visas where he says that, you know, if 182 countries can
#
go to Germany without a visa, it should be good enough for India, right?
#
So you just let them come to India.
#
Now, you can have additional visa requirements if someone needs a work permit or longer stays
#
and things like that, or, you know, to move towards permanent residency and so on and
#
But just to visit India, the kind of requirements you have, you must fulfill to get the visa
#
And the typical first world rich elite traveler couldn't be bothered with filling forms in
#
triplicate and providing the birthplace of mother and father, you know, bank statements
#
and all of those things.
#
If they have an American or Canadian or German or, you know, any one of those 180 passports
#
And that would really boost tourism.
#
So in the in this sense, we could actually free up a lot of Indian state capacity by
#
And you have five minutes left because you have to take a metro to Noida before you catch
#
a flight later in the evening.
#
Not so elite after all.
#
But however, catching a flight later in the evening to back to the U.S. So very, very,
#
I mean, two hours is like way too short for a podcast.
#
I almost feel like what it's only good for soundbites.
#
But there was one thing I would have asked you to elaborate on a little longer.
#
And I will quickly ask your comments on that, which is since you're an expert on it on that
#
subject got the Constitution that you know, what's the Constitution and example of elite
#
To some extent it is because until then, all the constitutions were not written for context
#
So India is not a country.
#
It's subcontinent, had enormous amount of ethnic, caste and linguistic fractionalization.
#
But we try to bring it under one umbrella and we try to as far as possible create systems,
#
right, like a parliamentary system, separation of powers, you know, judicial review.
#
These are just systems that were in some sense alien to India, right.
#
So we created, you know, the idea of checks and balances of three different branches of
#
government, Westminster procedure when it comes to parliamentary procedure, all of this
#
in some sense is a colonial heritage or elite imitation.
#
But the constitutional framers were not just elites, right.
#
They represented pretty much every aspect of Indian life, though not in the proportions
#
that I think were ideal, right.
#
They weren't a perfect representation in terms of the census.
#
But they had all kinds of representation in terms of different ideologies.
#
Like you had people from Hindu Mahasabha.
#
You also had people who were, you know, atheist communists, right.
#
So Indian, if you look at the oath to take office in India, an atheist can also take
#
the oath of office to any government position because you don't have to take the oath to
#
whatever God you believe in, right.
#
That's a really odd thing about Indian constitutional framing.
#
This is music to my ears as an atheist, but also I don't believe in the false religion
#
So I don't think I would be taking that oath.
#
Some elite imitation can be good and what I admire most about, you know, the Indian
#
founders and Nehru and Bekar and Gandhi is they did imitate, you know, free speech issues,
#
the secularism, openness to all religions and so forth.
#
It's very, very, very impressive and that is something which I think they got right.
#
I mean, you could even argue that in some cases elite imitation is required because
#
the argument would be that we were and are in many ways a very illiberal society.
#
And the constitution by imposing that kind of liberalism paradoxically might also play
#
a part in, ironically, in allowing that illiberalism to gain political dominance, but that's a
#
I have something to add here.
#
It was elite imitation, but the elites of the time did not sound and look like the elites
#
All the people were talking about Gandhi, Nehru, Ambedkar, they spoke multiple languages.
#
They read and wrote in their regional language.
#
In fact, the Constituent Assembly debates are mind blowing in the sort of diversity.
#
So Ambedkar might have made fantastic speeches in English, but he also spoke Gujarati and
#
he could also convey everything he wanted to convey in Gujarati pretty much at the same,
#
if not a higher standard of eloquence.
#
Nehru was excellent in Hindi.
#
So this is not today's Indian elite.
#
So today's Indian elite is not speaking and communicating in three different languages.
#
They don't go back to their ancestral village, you know, so on and so forth.
#
So I do want to say that even though there was elite imitation, the Indian constitutional
#
framers were deeply rooted in Indian culture.
#
They had been through the beats of the Indian system.
#
Now yes, Gandhi didn't live in a village and, you know, he grew up in cities, Ambedkar had
#
more village experience.
#
So you might have diversity like that.
#
You also had princes and kings, right, who had spent their summers, you know, hanging
#
out in London and who had been to Eton and, you know, well versed with the British liberal
#
tradition and the Magna Carta.
#
So you have all sorts of people, but you also have people from backward castes, right.
#
You also have tribal representation, though as not in as many like not the numbers that
#
So the Indian constitutional framers might have been the elites of their time, but the
#
elites of our time are not a patch on them.
#
So just in terms of lived experience, language and how rooted they were in Indian culture.
#
So they only borrowed the very best and they knew how to distinguish that.
#
But at the same time, I mean, everyone does what they can do.
#
The only thing I would say to the Indian elites of today and I would include myself in this
#
category is we need to pay more attention to who the median Indian is.
#
And we need in general more intellectual humility, I think.
#
Alex, let me end by asking you the last question, which is that you're someone who has spent
#
a fair amount of time in India now, you know, you spent a few months in Mumbai when we last
#
recorded the episodes we did.
#
Now you've been here for a while teaching a course on public choice theory.
#
What is it about the Indian policy environment or the Indian economic environment that sort
#
of excites you, which is, you know, what is exciting about it?
#
What is scary about it?
#
Looking from the outside and also from the inside in a sense that what has been happening
#
over the last few years, what gives you hope and what gives you despair?
#
So I think what's interesting and exciting about India is that many decisions are being
#
made today which are going to influence future generations.
#
India has, you know, multiple paths and which path is taken today.
#
Think about urbanization.
#
When you lay down the bones of a city, those byways, they will remain there for the next
#
hundreds, hundreds of years.
#
You know, like London today, you can still see London from hundreds of years ago.
#
So these decisions, you only urbanize once, okay, a country only urbanizes once.
#
And we're seeing that in India today.
#
We're seeing lots and lots of policy decisions which can have a tremendous influence on millions
#
and millions of people's lives.
#
So I think India is an amazing place to think about policy because there are so many possibilities
#
The United States in contrast is fixed.
#
It's like the Titanic or like an oil tanker.
#
Maybe it's the Titanic.
#
But whether it's an oil tanker or the Titanic, it's hard to move.
#
Well, so many more possibilities seem open to India.
#
India can be so much different, so much more.
#
And that this is happening now, I think, makes India very exciting to a person interested
#
You just lifted my mood up with that note of hope.
#
Guys, thanks so much for coming on the show.
#
If you enjoyed listening to this episode, the paper that I mentioned here written by
#
Shruti and Alex, Premature Imitation and India's Trailing State, will be linked from the show
#
notes along with many other great links.
#
You can follow Shruti on Twitter at S Rajgopalan.
#
You can follow Alex at A Tabarok.
#
You can follow me on Twitter at Amit Verma, A-M-I-T-B-A-R-M-A.
#
You can browse past episodes of The Scene and the Unseen at sceneunseen.in and thinkpragati.com.
#
Thank you for listening.
#
Did you enjoy this episode of The Scene and the Unseen?
#
If so, would you like to support the production of the show?
#
You can go over to sceneunseen.in slash support and contribute any amount you like to keep
#
this podcast alive and kicking.
