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Most of us have an intention, we want to make the world a better place and that is why we
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are so often correctly outraged at the state of the world, at the state of the state, at
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our politicians who just don't seem to be doing the right things.
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But when it comes to acting as citizens to demand good governance, I see two problems
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The first one is that apathy is rational.
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Time is money and the cost of protest or the cost of educating ourselves on what is good
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governance can be too costly for us.
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So we just go on with our lives, sometimes ranting on Twitter, sometimes hoping and assuming
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that other citizens will do the job on our behalf.
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This is rational, right?
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The difference we can make to the Indian state is tiny, the difference we can make in our
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own lives is huge, might as well focus on that.
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Now the second problem is that even if we care about good governance, subjects like
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economics and public policy are so complex and contain so many counterintuitive truths
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that it requires a lot of hard work to even understand.
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It's easy to look at first order effects or the scene effects of public policy.
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Looking at unseen second order effects can be harder and too often we make the mistake
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of assuming that a policy announced with a good intent should lead to a good outcome.
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Nearth is not enough, neti is what matters.
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And so governance continues to be bad while our intentions are the best.
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Welcome to The Scene and The Unseen, our weekly podcast on economics, politics and behavioral
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Please welcome your host, Amit Verma.
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Welcome to The Scene and The Unseen.
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My guests today are Pranay Kota Sanay and Raghu Sanjay Lal Jaitley, who have just released
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a book called Missing in Action, Why You Should Care About Public Policy.
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Pranay and Raghu write the world's best policy newsletter called Anticipating the Unintended
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and Pranay helps run the Takshashila Institution, where he has taught public policy to I think
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must be thousands of people.
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The idea with this book, Missing in Action, was to explain the basics of public policy
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in an Indian context, in language that every interested layperson would understand.
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And indeed the book is, in my opinion, essential reading, along with Vijay K. Elkar and Ajay
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Shah's superb book, In Service of the Republic.
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This is a book I will now recommend to anyone who wants to understand the subject.
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And if you are an Indian citizen, I will argue that it is almost your duty to understand
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This book isn't just about public policy in a narrow sense, by the way.
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It's also about the Indian state, Indian society.
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It even has nuggets on Indian cinema.
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I've done many episodes before with Pranay and one memorable one with Raghu and I will
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link them from the show notes.
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On that note, let's take a quick commercial break and then let's get to the conversation.
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Pranay and Raghu, welcome to The Scene on The Unseen.
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So, you know, finally, I have both of you together, Raghu, of course, I've done this
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memorable episode with you about your father's scooter, among many other things.
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And Pranay, we've done a number of episodes and the last one, you know, went into I think
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the most detail and mentioned your college with the beach, which not many people have.
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And I'm sure you sort of recognize your privilege there.
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So I want to start by asking a question fundamentally about the two of you that Pranay, earlier
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when we got home and we were waiting for Raghu, you pointed out that this is the third time
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So can you tell me about how you guys got to know each other and so on and so forth?
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So Amit, the way we got to know each other was through Takshashila.
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So I work at Takshashila and we have a course on GCPP and we met through both of us as students
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at Takshashila at some point of time.
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So that's how we met each other.
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And that's how we started this journey.
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And you were teaching, I guess, at that point.
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So Raghu, what brought you towards public policy given that you are not per se, you
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know, a policy won't, you're not a full-time policy person as such.
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You do other things which shall remain unmentioned.
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But what drew you to doing this course in the first place?
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And you know, where did you see it taking you?
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Was it just intellectual curiosity that let me find out how this whole thing works?
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Or did you think that, yeah, things are messed up.
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Not only do I need to understand it, but I need to be, I would like to offer some kind
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I think there are two things, Amit.
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One, there is a level of intellectual curiosity, which I think I've mentioned in the past also.
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I believe my sort of that quotient of curiosity is very, very high.
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And what was happening was, increasingly, I was finding when I was looking at things
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around me, I was not able to frame, you know, whether there were a certain kind of problems
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or there were certain, you know, steps that either the state would take or I would see
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things around me which were not working.
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And I was not able to truly, fully articulate as to why we are the way we are and why things
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And I thought maybe some amount of formal grounding in understanding policy might help.
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One of the great quests of my life, Amit, has been this question which came to me about
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20 years back when I was sort of traveling through Europe, partly work, partly sort of
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enjoying myself, was, you know, just going through old European towns, looking at their
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libraries, looking at their institutions, looking at, you know, what they had built,
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was why did they do all of this and we couldn't.
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And maybe we did some time in the past, there are all kinds of theories about how great
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we were, you know, once upon a time in the past.
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But leave that aside, there's always this question on what did enlightenment truly bring
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to Europe because I somewhat zeroed in on the fact that there was a period when they
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sort of, you know, went through a phase of intellectual ferment which has seen them through,
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you know, even today in terms of progress and prosperity.
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And that question is still there.
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And that question, you know, every time you visit and then you fly back into India, you
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I mean, and that question is actually fundamentally a very deep question on just the welfare of
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And why shouldn't our people have the same quality of life?
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Why shouldn't we aspire for the same level of, you know, health and, you know, well-being
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And what is it that they did well and we missed out on?
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And it's not that we need to copy all of it, but we should understand what worked and therefore
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and then ask ourselves how to apply similar things in our context.
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And this is a question, in my mind, it's a perpetual quest as to why certain societies
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have done better in the longer arc of time and what can we do in order to make sure that
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all our people get to, you know, that level of happiness and prosperity.
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So that's also something that's always been there in my mind.
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A lot of what Pranay and I discussed and a lot of things that we write often comes back
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You know, what is it that can improve, increase the welfare of our people?
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In that sense, it's a very selfish, in the sense of the star nation.
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And in some sense, you might even call it very patriotic slash nationalistic work, which
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brought intent, which drew me into this, which I found when I got to know Pranay a little
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I mean, a lot of it, a lot of our conversations happen on phone.
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We rarely meet largely because when we got together, there was, you know, pandemic immediately
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And therefore for two years, there was no real opportunity to meet.
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But then somewhere as we got talking over WhatsApp, over calls, et cetera, I realized
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that, you know, his sort of core driving philosophy is also the same thing, you know, how to make
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sure that, you know, there is Yogikshim, I mean, the entire welfare of the people is
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maximized or optimized.
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So yeah, so I think that's really where the coming together of the minds is on writing
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this newsletter and therefore, you know, the natural progression of writing this book.
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I'd actually argue that, I'd actually argue against your characterization of, you know,
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this desire to see India do better as either patriotic slash nationalistic.
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I mean, I think in a sense, and I think I share it with both of you, I think in a sense,
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it's just humanistic that you see poverty around you and it is offensive.
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And obviously the only poverty you can affect is what is in, what is proximate to you, what
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So that is India and apart from the attachment that all of us obviously feel to this land.
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So I have a question at a broader ideas level, that when you spoke about how you would get
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Europe and you would wonder how the enlightenment contributed to where it is, I mean, when I
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think of economic progress, there is of course that famous chart, I think by Angus Madison,
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which really shows GDP through the ages and you basically see it pretty much flat to the
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18th century, 19th century, and then skyrocket with the industrial revolution.
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So that's what I would attribute it to, but it is also, I think the case that the values
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that were expressed in the industrial revolution were in a sense, those enlightenment values
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of putting the individual at the center of things of sort of privileging individual freedom
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and rights and initiative and autonomy and all of those things and also reason over religion
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and reason over religion.
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And when, and all of it plays beautifully into, into what became the industrial revolution,
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into that whole kind of laissez-faire thinking, into that sense that markets need to be free,
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not because markets are some magical thing, but because people need to be free and markets
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are just a mechanism through which they express themselves, one of many mechanisms.
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So one, would you say that that link is a correct characterization and two, would you
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say that then the problem with India is not merely that history of having gone through
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colonialism and blah, blah, blah, that we couldn't partake of the advantages of the
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industrial revolution when it happened and we kind of missed the bus on that, but also
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a deeper one of fundamental cultural values.
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Yeah, so, you know, and that, that's why I say this is a ongoing quest and in some sense
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it's a perpetual quest because what you say is largely right, but is it the whole truth
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Because say for instance, Japan didn't go through an enlightenment phase in that sense,
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but you know, they did well for themselves later.
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And therefore, you know, it need not always apply that if you've not gone through that
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level of, you know, getting that enlightenment values in one way or the other, would you
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have done well for yourself?
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So yes, there is this thing that happened for about 200 years where they could separate
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inquiry from religion without making either one of them sort of, you know, completely
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non-paramount in their lives and they did it reasonably well.
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And so you could have a situation where Newton was professor of theology and people often
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forget while also being professor of mathematics and physics and an experimenter in alchemy
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and he could see his work as explaining God's creation.
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So he was seeing himself as someone who was answering truths in order to explain what
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So they could manage that and I think a lot of that then, you know, prior to Newton there
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was Bacon who sort of first put together the scientific method, you know, and then of course
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it was between Bacon, Galileo and then Newton and some of that, you know, that rupture and
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it was a rupture which was of a kind that didn't really create social revolution.
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That rupture which took people away from religion and kept religion in one sphere while the
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everyday work, everyday, you know, sort of economic sphere and in fact even the social
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sphere they could, you know, continue with reason.
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It was an important distinction which helped them but is that the only one, I'm not sure.
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Like I said, there are counters to this where others have not gone through it but even when
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you dive deeper into this, there are other arguments against this when people often say
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that did they truly separate reason from religion or some might say that whether genuinely in
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some sense did they privilege individual liberty, I mean, what explains the kind of things they
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did as part of slave trade and colonialism and a whole lot of their prosperity is dependent
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on the imperialistic sort of moves that they made during most of 18th and 19th century
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and then there are others who might even argue that a lot of this was built on making sure
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that a particular class did very well and then others didn't do very well.
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So was there truly individual liberty, US didn't have universal suffrage till 1960s.
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So, you know, many of these things can be questioned and therefore I'm not very sure
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if that's the only answer but that definitely there is a strong element of truth there.
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See, at the end, a lot of what we do and maybe Pranay will add to this is this old Keynes
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question and where he said that, you know, the political problem that we have is how
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to find a common ground between economic efficiency, social justice and individual liberty.
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What is the coming, how do these three things come together, economic efficiency, social
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justice and individual liberty and somewhere I feel this is a constant quest.
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I think Western Europe to some extent and Western world to some extent has got something
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which is largely right in this, at least based on the evidence of the last 150 years.
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They've had bad wars, they've killed many people and so on and so forth but if you look
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at the graph, graph looks good and therefore we should constantly ask ourselves that our
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political problem given our context, our people, our society, our ethnic groups, ethnicity,
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all of it, also our endowments, how do we bring these three things together, you know,
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economic efficiency, social justice and individual liberty and everything that you see in India
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is really fault lines on these three.
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Some people privilege individual liberty, maybe you were once upon a time a strong proponent
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I guess you still are but maybe you've sort of, you know, you continue to learn and update
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You know, I was listening to Chandrabhan's episode and you know that he has a very different
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view which is largely led by social justice and then you have had, you know, strong economists
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of a certain bent of mind with very strong belief on free markets who have the economic
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efficiency in their thinking.
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I think both Pranay and I, our view is, you have to bring all of these three things together
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to see what answers can we get because the political problem is not so easy that you
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can take one and just solve for it to the exclusion of others.
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I just wanted to come back to one point that you discussed earlier about this being a humanist
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So that I'll start from there.
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So yeah, it is about humanism, but I think that the nation state and the nation has a
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disproportionate impact on what it can do in order to achieve prosperity.
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So in that sense, the idea of nation and the nation state becomes important because just
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because it can have disproportionate impact on both sides, it can lead you on the wrong
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path and it can also lead you on the right path.
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So that's why even though the main objective is out of humanism, but the instrument is
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through the nation state and that's why it is important.
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On this point that you were discussing, I agree with what RSJ said that there can be
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multiple pathways to that objective of prosperity and peaceful enjoyment of prosperity, which
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So Europe offers one idea and we should learn from whatever great things are there from
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But yeah, there are examples from China, etc. in terms of at least you have economic growth,
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Or Japan, South Korea, Taiwan, there are different models.
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And the key thing that you see in all that is the pathways were different, but they have
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taken ideas from everywhere across the world, right?
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So whether it is technology, whether it is just the ferment of ideas.
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So that, I think, is one key element.
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And in the Indian realm also, I think there have been different eras and different times,
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like there was one time when the state was not very powerful in the realm of daily life,
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Rabindranath Tagore talks about it a lot in his writings where the state had a marginal
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Yeah, some king was there, they changed, didn't matter.
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But and then you had this period of colonial phase.
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And then we've turned to this period where actually we now think of the state as many
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people would think of the Maibab Sarkar, right?
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So all those things have changed.
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So there are different pathways.
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It's not as if we have to first become like Europe in many ways or individual liberty
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has to be first achieved to achieve prosperity.
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I'm not saying it is important.
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It is perhaps the most important thing.
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But for achieving prosperity, there are multiple paths and there are examples all the way from
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Singapore to others, which show us other paths.
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I mean, see, there is always a danger to your first question that wo ramble me jata hai.
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So we might go into all kinds of ramble right now.
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You should change your name to Ramble Sanjay Lal Jet Li.
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Why did he call you Harish Jwai?
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Why didn't he just call you Raghu?
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So one of the points that Pranav made, which is we should pick ideas from everywhere and
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not be beholden to one idea.
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In fact, the greatest symbol or sign of intellectual integrity is your ability to change your position
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based on data that's changing around you.
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Consistency is the virtue of an ass.
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So now, which reminds me actually, this is a strong Indian tradition of being willing
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to listen to all kinds of multiple points of view.
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So you know, during the Bhakti movement in India, this is where the ramble is coming.
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Since we spoke enlightenment, we should talk Bhakti also at the same time.
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Monkey balancing toh nahi hai, but there is something here.
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So in a way, the Bhakti movement and I have heard Pratap in your Pratabanu Mehta in one
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of his episodes talk about the idea that the Bhakti movement was the first real rupture
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in the Indian society in terms of what it meant because it allowed people of very different
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non-brahmin castes to actually, you know, not read the Vedas, but get the concepts of
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Veda of Nirguna or Saguna in their own ways and then, you know, talk about it and, you
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know, sing about it and, you know, truly understand the meaning of it.
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But the reason why I'm bringing Bhakti movement is yeah, I mean, in some sense, it was part
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enlightenment if you could call it that.
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And maybe if we had continued that in a different way, it would have led to social reform.
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It would have led to social justice as one of the pillars.
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And possibly from there, we might have then got individual liberty as well.
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And who knows from there then in economic efficiency could follow.
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And the reason I brought Bhakti movement is for that point that, you know, there is this
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Now, Nabhadas, who is he?
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He's a guy who wrote a book called Bhagatmal.
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Now, if you want to read about anything in Indian Bhakti movement, you should read Bhagatmal
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because Bhagatmal is the anthology of all Bhakti saints and what they have, you know,
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And this is the guy who did that compilation.
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It's almost like that Vasari of Italian Vanessa who listed out the lives of all Italians.
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So as an economist would say, it's a meta-analysis of Bhakti studies.
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Yes, of all Bhakti studies.
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And I didn't know till some months back that there used to be this very famous Doha kind
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of a thing which used to start as Jat na puchho sadhu ki and I used to hear it but never.
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Then I realized that Nabhadasa actually first coined that in the context of this Bhagatmal
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because in Bhagatmal, he has all kinds of Bhakti saints, Brahmins, non-Brahmins, North
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Indian, East Indian, South Indian, all kinds of people and he's mostly hagiographical
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accounts of their lives because when they were kids, you know, some cobra was there
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on top of the baby and gave the baby shade from the sun and all those kind of stories.
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But the Doha is very important.
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The Doha is Jat na puchho sadhu ki, pucha kijiye gyan, jat na puchho sadhu ki, pucha
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kijiye gyan, mol karo kripaan ka, rehne do mayan.
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Which means don't ask the antecedents of the sadhu, of the person who is giving you
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knowledge or the country that is giving you knowledge, whatever, the religion, the ethnicity.
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Just ask for the knowledge.
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In the same way, you know, actually appreciate the sword or the knife and not the sheath
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because the sheath is just there as an external thing.
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So truly understand what the person from within is trying to say and I think that's a fantastic
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way to start that book that, you know, therefore lead with no sort of bias of who's saying
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it and just gain that knowledge.
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I mean, he's sort of started that book by saying, please follow this principle as you
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And in some ways, I think if we had to rewrite the book or something, maybe we should have
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Because don't privilege any source of wisdom as better or worse than the other.
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And you know, somewhere a little bit of our bias does tend to be somewhat towards Western
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But I think somewhere we've tried to be as, you know, ecumenical about the ideas and thoughts
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that are coming and let them come and we'll continue to update our both our existing beliefs
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as well as, you know, how we look at the future based on everything that's coming, which is
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why a lot of times, you know, some of our own columns sometimes contradict a point which
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we might have made nine months back.
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Nine months back, I thought maybe India was not in a great place just after Covid.
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Nine months later, with the cards have fallen, I think India is in a fantastic place in terms
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of just a window of opportunity that's available for us.
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So I'm quickly going to respond to, I mean, this is already such a rich conversation thanks
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to these sort of rambles as you unkindly called it.
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You know, while you were speaking, I quickly googled if there is a term called trichotomy,
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because I know there's dichotomy, lekin agar teen hai is a trichotomy and there is, so I'm
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going to just point to the three factors you mentioned as being a false trichotomy, in
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the sense economic efficiency, social justice and individual liberty, in the sense that
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I think all of them kind of go together, like even Chandrabhanji in his episode where he
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spoke so movingly about caste and so on, his conviction for the last couple of decades
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has been that social justice can only be achieved through individual liberty and through economic
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efficiency as represented by markets.
#
And he was of a different belief in the 70s and 80s where he was an axilite person, he
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took up arms and so on and so forth.
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And that changed when he saw the enormous empowerment brought to tens of millions of
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people of all castes, by, you know, by growth.
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And in your book also you've spoken eloquently about, you know, the importance of growth
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before you think about redistribution.
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And Chandrabhanji also is fond of saying that he has two heroes, Ambedkar and Adam Smith,
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you know, and the two must go together because if you consider social justice as an end,
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the only means that really get you there I think is, you know, individual freedom.
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And where, and I also agree with you that there are different paths to achieve this
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beautiful end state where all three of these happen and the reason there are different
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paths is that the state is distorted and perverted in different ways all across the world and
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And you know, that is a beast and human nature is a beast simultaneously and these two forces
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need to be tackled in different ways depending on context, you know, as you also point out
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in your book that context is important.
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So that is sort of my take on the false trichotomy which also sort of leads me immediately to
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almost contradict myself by citing Arnold Kling's book The Three Languages of Politics
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where he makes a great point about discourse where he points out that, and this is in an
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American context, where he says that in American politics you always have different sides talking
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past each other, not to each other and he wrote this book I think maybe 15 years ago
#
but it's more true today than ever before.
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And his point was because they're all coming from different first principles in the sense
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your progressive will value just equality as it were, your libertarian will value freedom
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and your conservative will value tradition, you know, to put it to paint with broad strokes.
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And because they're starting from those priors, you know, you have to address those priors
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of the person you're talking to.
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You can't just from where you come that person might look wrong or even evil and you might
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look the same way to the other person and you could both be completely coherent.
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But it's important in the discourse to kind of address the priors of everyone.
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So if I am, for example, and like you correctly said, freedom for me is the greatest value
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and in terms of values, I haven't changed in all the time I've done this podcast where
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I have evolved as an understanding the complexity of the world a little more and how to deal
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But the values are what they are.
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And so if I'm speaking to a conservative, I'll speak about, you know, how freedom can
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help, if I'm speaking to a progressive, I'll speak about how freedom can help achieve those
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goals of equality, which I, you know, believe that they largely do and equally.
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So you have to, so anyway, that's, that's kind of a...
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On that point, Amit, see, even Keynes, when he postulated or whatever said this, he didn't
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frame this as a trilemma or something of that kind, right?
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What he was saying was that that's the political problem to solve and you have to solve it.
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People who participate in policy, who participate in politics, exactly the point that you're
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They have to bring these three together because there is no inherent contradiction in trying
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It's not one of those two out of three, the third one won't.
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It's something that you need to be working towards and you need to understand that, like
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you mentioned about Chandrabhanji, just, you know, making one the most important one will
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lead to, you know, somewhat, you know, negative or not so, you know, constructive outcomes.
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You will figure out as if you think deeply, maybe he's done that and through lived experience
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as well as through his studies, that eventually there are answers which can make the three
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come together so long as you are willing to be open to the idea that there is a market
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which can work and can solve for this problem and you don't have a dogma around market being
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a bad thing and don't have a dogma around social justice being anti-meritocratic or
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whatever these dogmas that you carry.
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If you don't stick to those dogmas, then this is a genuine political problem to solve, can
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be solved, but it is therefore a very difficult political problem because like you said, people
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come with those initial prayers and then they eventually end up talking past each other.
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No, in fact, this also goes to one of the points you guys make in your book about how
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people in India especially conceive of politics as being a dirty thing, they don't respect
#
politicians but as Pratap in fact in both his episodes with me has been at pains to
#
point out that politics is an honorable calling because what you are really doing in politics
#
besides rent seeking and predatory behavior and I could go all in on, but what you are
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really doing theoretically and to a large extent on the ground as well is you are trying
#
to reconcile these different contradictions, but to me these contradictions are really
#
in the discourse and between ideologies, they are not so much a contradiction in reality
#
in the sense that if you accept that all three of these purposes can be achieved and you
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try to figure out how you want to achieve them, they will still be an order like in
#
another context when you talk about what makes a state work, you speak about how there has
#
First you need a strong state, then the rule of law, so on and so forth, we will discuss
#
that in detail later, but here also I think there is an order that until you bring people
#
out of poverty, you are not going to have that kind of equality in society in the same
#
way as you point out in your book that in the growth versus redistribution battle, it
#
is not really a question for India right now because the pie is not big enough for redistribution
#
to lift people out of poverty, what we need is growth which will kind of lift everyone
#
which in fact we have seen since the 1991 reforms lifted millions of people out of poverty
#
and I will link all my episodes on that from the show notes.
#
Yeah, I think Pranay usually has a very strong point on why politics matters and should be,
#
I think he has possibly had a few chapters on that, so maybe Pranay should talk about
#
that because he has seen some of this first hand in terms of why policy is difficult and
#
why should we not always just keep blaming the politicians or painting politicians in
#
And before that, isn't this a very sort of elite kind of discussion in the sense that
#
the terms that we are talking of like social justice and individual liberty and all of
#
that are not actually terms in the real discourse down there, in the real discourse, the politician
#
out there and the policy makers out there are dealing with a much more concrete set
#
of constraints and trying to figure out how to get past that.
#
Yeah, absolutely and I was again thinking of that trichotomy and I was just wondering
#
the way I see it from a very engineering point of view is it's like you are optimizing for
#
multiple parameters, so for example, if you are designing something, you are optimizing
#
for power, area, speed, things like that, so it's not as if you have to optimize for
#
all three, but there will be different ways to get there and there might be some ways
#
that you do which will help you on all three parameters.
#
So we have to find out what are those pathways for us, so that I think is the way I approach
#
Going to the politics point, absolutely and the way we start off and our starting point
#
is generally people who are doing politics, they at least have skin in the game.
#
They are there, they are talking to the people, they know India much better than you or I.
#
So they know what is the situation on ground and that's why they are optimizing.
#
So our model of the world is basically on the overturn window concept, I think you would
#
have discussed this many times, but broadly overturn window is just that the range of
#
something which is possible is much narrow, the range of what is socially acceptable is
#
much narrower than all the options possible on that particular issue.
#
So the politicians represent something which is socially acceptable, which is inside the
#
overturn window based on the fact that they don't want to be seen as something who is
#
radical or something who is unacceptable because they have to finally go and talk about these
#
But over time overturn window does move, overturn window can also be stretched at certain times.
#
So our model and I think that was the motivation behind writing this book as well that everyone
#
knows about people who study politics deeply, talk to the politicians, there are people
#
in the government who know about that much better, we aren't either of those.
#
But what we want to address is the other side of the policy pipeline, that is the people.
#
If we are able to understand the state better, understand the society better, maybe we will
#
change one what we demand from the politicians, second, we will also be able to understand
#
when governments take us for a ride and when they don't and third, the discourse itself
#
We will not talk about intention of the politician because how do you judge the politicians intention
#
but then we will be able to talk about consequences, results, outputs, outcomes.
#
So that was sort of one of the reasons why we even write the newsletter and hence the
#
Yeah, I mean, as far as the question of optimization is concerned, I completely agree with that
#
and I think we should optimize for one thing and I think that's what Gandhi said, which
#
Where I think Gandhi said something to the effect of that with every policy, the one
#
question I ask myself is what will be the impact of this on the poorest of the poor
#
and in India, as you guys have also mentioned and I'd use the same term as you, it is a
#
moral imperative to lift people out of poverty and the only thing that really does that is
#
growth like I think your colleague Nitin has pointed out how, you know, in all these years
#
for every 1% rise in GDP growth, 2 million people came out of poverty and I think at
#
some point he changed it to 3 million people.
#
Yeah, so the study which is there on this estimates around 2.5 to 3.
#
2.5 to 3 million people come out of poverty with every 1% of GDP growth, which is why
#
It's not just, you know, economic efficiency, wonks are talking, engineering mindset, all
#
No, it has real human consequences and that is the first thing and, you know, once we
#
tackle poverty, you know, then we can look at other things like inequality because they're
#
completely different things, as I kind of keep pointing out in my show, people often
#
But here also, Amit, there's some interesting point, right, when we talk about economic
#
growth and say individual freedom, let's take these two, keep everything aside.
#
So take examples of other countries, right, so let's take say Singapore, not comparable
#
to India, but we'll let's indulge in that example, right?
#
So now, would we say that they have individual freedom in the sense now, at one level, just
#
the fact that you have a lot of safety, security, women, especially will have a very different
#
But when you talk about political freedoms, maybe the political freedom, after all, just
#
one political party has been ruling there over and over again.
#
But on the economic growth scale, they have done really well, right?
#
So there are contradictions, different pathways within these two parameters of economic growth
#
and individual liberty itself.
#
But I think what is necessary but not sufficient for economic growth is economic freedom and
#
Both of these are necessary, but not sufficient in both of these Singapore provided.
#
You know, that whole political freedom question is a slightly different one, like these days
#
people talk about Dubai, I have many of my friends moving there, they are pushing the
#
creator economy hard, they've changed many of their laws in the last three years, setting
#
themselves up as a haven for whatever.
#
Now, the friends who live there tell me that, you know, it is the safest country in the
#
world for women, according to them, right now, absolutely the safest rule of law is,
#
you know, beyond compare, full economic freedom, really low taxes, you know, and then beyond
#
that you have the question that it's not a democracy and all of that.
#
But my point is that, you know, at least on the economic margins, they have the relevant
#
freedoms and they're necessary, but not sufficient conditions, but they're necessary.
#
And where you don't have them, you cannot have prosperity unless you have oil or, you
#
know, unless you luck out in natural resources kind of sense.
#
And you know, that is sort of a key problem in India.
#
Actually, Shruti had a very nice episode with Land Prichad on our podcast and there one
#
of the papers that Prichad talks about was how economic growth is not just a necessary,
#
but sufficient condition for well-being.
#
So what the paper essentially does is look at all the social welfare or well-being indicators
#
and try to map that with economic growth.
#
And the paper finds that, you know, it's not just a necessary thing, but countries which
#
have higher economic growth, it's they talk about national income, so there are more parameters
#
than just growth, but things which increase income of people also lead to welfare on many
#
So they map some 58 parameters, which we would see in human development indicators.
#
You can bring all of them in, but economic growth really leads to, you know, achieving
#
a lot of them, accounts for a lot of them.
#
So I guess, yeah, I mean, economic growth is one central thing that we talk about.
#
And that's why, and especially in our context, it's really, really important.
#
Yeah, I mean, I'll link that episode in the paper from the show notes.
#
Shruti keeps, Shruti's, you know, offered to set me up to get Land Prichad on this podcast.
#
And he is, of course, a great thinker.
#
And I keep quoting him his flailing state paper and all that.
#
But A, I decided a while back that I'll just stick to Indian guests because foreign guests
#
do have the platforms they need.
#
And two, it's a bit intimidating because he's such a great economist.
#
And, you know, one has to do a lot of reading up to just be at the level to have a conversation
#
But maybe in his case, because he's written so much about India and the kind of connection
#
he has, I should perhaps make an exception.
#
Let's sort of go back to the chronology, as it were, chronology.
#
And at what point does, and this is no doubt a question I've asked both of you in my individual
#
episodes with you on this, on how you got drawn to public policy or why you felt it
#
But you start off the book by making a profound point, you know, in the same way that I said
#
that these numbers, GDP numbers and these interest rates and this, you know, to most
#
people, they're arcane things, no connection with life, but hey, they have a human consequence.
#
Similarly, you point out that all of us should be interested in public policy, that, you
#
know, public policies affect our lives in intimate and unseen ways.
#
And therefore it is important for us to understand that, except that so much of the discourse
#
around us is in such, you know, often such boring language and it's just, you know,
#
who's going to follow that shit and you feel like you need a prior training to understand
#
And what you have tried through this book, and I think largely succeeded through this
#
book is just making all of this much more accessible for the public, as it were.
#
You know, you quote Rajesh Khanna and Roti saying, yeh public sab jaanti hai, Raku.
#
And you point out that actually wo to film mein bola tha, public sab nahi jaanti hai.
#
So kind of elaborate on, you know, why should the listener of this podcast give a damn about
#
They can't affect anything.
#
You know, they have busy lives, rational ignorance, which is, you know, a term from public choice
#
dictates that it is rational for them not to invest too much time trying to understand
#
these complex subjects because they can't really impact anything.
#
One vote doesn't impact anything.
#
So make me a case for why public policy is such a big deal and why we should all care
#
But yeah, no, I think we were inspired by Trump.
#
We were saying, just like Trump said, make America great again.
#
We thought we'll make public policy interesting again.
#
Maybe we were too enamored by what Trump was saying.
#
But anyways, what I was getting at is I, like I said earlier, right?
#
First of all, the state has disproportionate impact on all our lives.
#
You know, there are public policy touches, everything that we can see, right?
#
Like, I mean, we can see the Metro outside from this window or things which are even
#
We'll talk about mosquito rackets and things like that.
#
There are real consequences that state has on all of us, right?
#
Now there are two ways to look at it.
#
One we can just say that, yeah, it does.
#
And it is outside our locus of influence, so we shouldn't care about it.
#
And the one response to that would be we secede from the state in that sense, right?
#
At least metaphorically, we are not worried about it.
#
But the other way to look at it is, and that's where I think Indian polity has now reached.
#
I always say that there's no more apathy in Indian politics.
#
In fact, you've gone the other way where we have tried to look at the state as an instrument
#
to achieve things that it is not set up to do, you know, so we are there is a whole lot
#
of this religious idea that state should do this, that on the religious front or it should
#
do something great from a pride front, etc.
#
But we are not able to think of what the state is meant for and what happens if the state
#
doesn't achieve that, you know?
#
And those are the real consequences, right?
#
So for example, we always talk about basic public services, law and order, etc.
#
If we see it all around us that, you know, they aren't there, they aren't right.
#
And sometimes we can build our own private sanctuaries.
#
But that can go only to a certain extent, you know, beyond that, finally, you have to
#
step into the real world and real consequences do hit you, do hit you hard as well.
#
So that's why the state matters and that's why public policy matters.
#
So that's one motivation.
#
And yeah, finally, like I was saying earlier, that if we don't understand this, the governments
#
can do whatever they want.
#
Already, it's the most powerful institution in this society, in any society.
#
And if you don't understand what it is supposed to do, it can keep doing anything it can use
#
the power of its influence on the media to tell you nice stories, to tell you different
#
And you might just keep getting drawn by what the government says, right?
#
So that's why we need to first question everywhere.
#
What is the statement for?
#
And can we hold it to that standard, right?
#
That is one real core idea, because the one idea I see all around me is generally we,
#
the politicians do what they do because we demand from them a lot of things and we don't
#
understand why the politician exists in the worst place and when would it be good if they
#
act and when would it be good when they don't act.
#
So I think that's a question for us as a society to solve, not for the politicians or the people
#
They are happy getting more power or getting things done.
#
So that was, I think, one core reason why everyone should know public policy.
#
And yeah, that's why we are interested.
#
And you can see that now even there are many public policy courses, et cetera, in India
#
Remember this discipline in like in the US, it is more than 100 years old, like Brookings
#
Institution and all are 100 years old, you know, think tanks, which were talking about
#
public policy to the people and forming the link between the people and those in power.
#
But this is new in India in the sense that now we are thinking about models frameworks
#
about how the state works, how the state doesn't work in a structured way to a large number
#
And there is a lot of interest here, right?
#
Especially now there are young people who are working not in the government in the sense
#
they are not IAS or UPSC officers, but there are many opportunities which are now opened
#
up for people who work with a politician, with an MP or they are because governance
#
is so complex, government doesn't understand anything.
#
So there are organizations which probably give subject matter knowledge.
#
So there are all these interstitials that have opened up now.
#
And that's why also there is one need to know the state better before we get headlong into
#
what the state should do and not do.
#
One of my favorite quotes, which I used to spout frequently on the show, and I think
#
Raghu has quoted me quoting it in the newsletter is the Breitbart quote, politics is downstream
#
And you guys also point out, and this is a profound point, so I'll just read this out.
#
And you say, you might wonder why should you, a common Indian citizen, bother about learning
#
public policy concepts?
#
Should we take these ideas to those who make policy, politicians and bureaucrats instead?
#
We believe that in a democracy, the government mirrors society more than it directs our choices.
#
And so with this book, we want to address a demand side of the public policy pipeline
#
And this is again, what I keep saying that if you want fundamental change, then you've
#
got to address a demand side of the political marketplace, not the supply side, because
#
they are just responding to incentives.
#
And you've kind of pointed out that if people at large understand public policy, three things
#
One is that governments are more accountable, two is that people are able to sharpen their
#
demands from the government, get concrete if they understand the issues better.
#
And finally, better public policy understanding will raise the level of public discourse.
#
Stop code, these are your words, which are all great points.
#
So here's a sort of a related question.
#
What has typically happened through history is that when you have a democracy or a republic
#
come, you know, the original sort of formulation of it is that the people are in charge.
#
And initially it is possible because your local government can be really small.
#
Like you point out in your book, a farmer can know what he needs quite precisely, stuff
#
But with modern life over the last two, three centuries, the world has become increasingly
#
Most people really, I mean, there is no one person who has a complete grasp of everything
#
that is happening, who even with a supercomputer could run everything from the top down.
#
And how democracies have evolved to deal with this is that you have a class in the middle,
#
which has been this class of intellectuals and think tanks and experts and so on and
#
So the people elect a government and then the government goes to these experts and these
#
intellectuals and they sort shit out.
#
But at some point over the last few decades, that has gone to hell.
#
You know, experts have also have terrible incentives quite often.
#
You know, they're captured by lobbies.
#
They have different interests at heart than necessarily what would be good for the people.
#
You know, Jonathan Rauch has a great book called Government's End about how, you know,
#
trust group lobbies have basically taken over America, you know, and the extent of that
#
And I'll link that book from the show notes.
#
So tell me a little bit about this, because then it would seem to me that if we are an
#
age where, for example, there is no consensus on the truth anymore with mainstream media
#
falling apart and everything is narrative battles, that experts and elites have lost
#
their aura of people who can be trusted on these matters.
#
And often to a large extent, rightly so, you know, it becomes all the more imperative that
#
people, you know, can be educated and the discourse can be lifted.
#
But when we are engaged in narrative battles, you know, when, you know, the everything is
#
so polarized, how hard is that?
#
Or do you think that even if these ideas don't necessarily reach the masses, they at least
#
reach a large enough section of the elites who will run the country and who will run
#
policy tomorrow, so at least you can affect them?
#
So I think, I think we sort of spoke about some of this previously as well.
#
See there is that original idea about 100 years back Lippmann had, right, where he,
#
he precisely pointed out the problem as the democracy in the US was getting to about 100
#
I mean, this is, Tocqueville went in the 1830s, he enjoyed, he saw what he saw.
#
And then about 90 years later, you know, there were problems.
#
And the problem that Lippmann identified was exactly that, that, you know, we were small
#
little communities voting, choosing our representative, the representative knew exactly what the
#
We got bigger and this is still 1920s America, I mean, what was that big vis-a-vis where
#
It's just, I mean, it's another 1000 times, I guess.
#
And then as we have gotten bigger, it's very difficult for the representative to fully
#
appreciate, you know, especially with, you know, urbanization and with just the proliferation
#
of various professions and vocations.
#
And therefore he advocated that there is a need for a intermediate class, to which then
#
10 years later, Dewey said, you must be mad.
#
I mean, this will eventually lead to the same problems of the elites, you know, capturing
#
And there is a problem there because, you know, how do you judge the performance of
#
this class and who do you then give the access to become this class?
#
Because then this class becomes, you know, fairly, becomes a very close, incestuous sort
#
of a group and then they only take their own people.
#
And that's how it worked out eventually.
#
And it worked out the same way in the US where you, like you said, you know, they have taken
#
over and, you know, pretty much run the government.
#
And in some sense, it was always the case in the UK, you always believed the same set
#
of people from same colleges, same schools, anywhere and I don't think I don't remember
#
the last UK prime minister who didn't come from Oxford or Cambridge.
#
In fact, who didn't do the PPE very specifically over there.
#
In fact, didn't do PPE.
#
So maybe Thatcher didn't do PPE, she was some chemist or something.
#
So you know, this particular problem has always been there.
#
You need intermediaries because it is natural, but over-dependence and over-reliance on that
#
level, on that elite kind of a layer will lead to, you know, eventually the problems
#
of their capturing it completely and all kinds of wrong incentives for them.
#
And this is exactly the cycle in history, right?
#
I mean, you go back, French Revolution was that, I mean, maybe Louis XVI possibly took
#
the hit of it, but the sun god, whatever Louis XIV and his, you know, set of people around
#
I mean, some of the greatest French writers, artists, dramatists, all of them were part
#
of his court, including Cardinal Richelieu and all of that, Balzac and not Balzac, Mollier
#
and you know, all of those great guys were there.
#
But they started totally capturing the access to this decision making all of it.
#
And then, you know, 100 years, 150 years later, you had, you know, everybody went to the guillotine.
#
So this continues to happen, therefore, what democracy allows in a way is for people to
#
have a counter to this in a manner which is very sort of organic and well governed, which
#
is mass media, which is elections on an ongoing basis, which is freedom for people to, you
#
know, counter it, give other opinions, etc.
#
Now you are right that if mass media also starts getting polarized, getting captured,
#
if people do not want to hear other points of views because they are also polarized,
#
if the platforms are such that they continue to, you know, be an echo chamber, then it's
#
all becomes more and more difficult to do this.
#
But my sense of some of this is that maybe that's slightly more exaggerated than real.
#
People do love to, you know, back their sides, etc.
#
But if presented in a manner which is somewhat apolitical, and it's difficult to make it
#
apolitical, but you go to the nub of the issue, talk about the issue, and you'll realize and
#
talk about the issue in a manner where you understand the underlying logic, economics,
#
whatever that might be about that particular issue, and ask the question, why is this being
#
And forget who the political, you know, class is, who today is making these decisions.
#
I think, at least in my experience in drawing room conversations, in general conversations,
#
people are willing to listen to this because they have not gone so tribal that if you sort
#
of approach them in a manner which is not very sort of antagonistic or adversarial,
#
they will listen to this particular point of view.
#
And therefore, in some ways in the book, we've tried to be, you know, not political because,
#
you know, our view is it wouldn't matter if we were replaced, if we replace this, you
#
know, state with another state or this government with another government, because some of the
#
underlying, you know, issues, the lack of clarity about them are just common to a whole
#
lot of political class and therefore, focus on the issue, talk about the issue, make sure
#
that people understand that.
#
And you are right, maybe, you know, this is not going to be a blockbuster book or a newsletter
#
of any kind, you know, which will reach too many people.
#
But you know, if you are able to influence about a thousand people who are involved in
#
some ways in different, you know, aspects of public policy, India still is a fairly
#
small country in terms of, you know, being able to influence the right people very, very
#
quickly because, you know, some of these ideas people read, then they go and contribute in
#
one way or the other like Rane mentioned, there are so many opportunities where youngsters
#
are going in and supporting political parties, supporting politicians, helping them with
#
research and things of that kind.
#
So our hope is not so much to hit the supply side, but go to the demand side, be realistic
#
about how many people you can touch there, but at least touch people there and the demand
#
side so that that thing keeps getting, you know, that level of realization is keeping
#
on getting better with the people.
#
And then there is this, therefore then there is always this balance that there is a intellectual
#
class which is having a certain perverse incentive, some of them, but they also know that people
#
are getting better in terms of appreciating and knowing this and between the two, hopefully
#
you'll get some kind of an equilibrium, but like I have always mentioned, these things
#
just keep repeating themselves.
#
So you know, if you have too much of power going back into that elite class, there will
#
be a backlash as there has been globally in the last 20, 30 years, because I think we
#
had 30, 40 years of tremendous power with that particular class, which they abused as
#
And so the chickens will eventually come home to roost and then that cycle will again go.
#
I mean, there'll be some kind of creative destruction and another cycle will start.
#
So I never think of anything as this has now gone down a path that we won't be able to
#
ever recover from, because history has shown that, you know, you just sort of keep going
#
through these in cycles and people keep coming back and, you know, go through another cycle
#
in a slightly different form, but at the heart of it, it's the same cycle, you come back
#
and go through and repeat the cycles ad nauseam.
#
So just to add to what Raghu was saying, just knowing more about public policy will act
#
hopefully as a check against that intellectual, you know, capture of certain issues as well.
#
And the way we think of it is again, you know, like the fact that public policy is a discipline
#
you can understand, it is itself new, you know, we are starting there, there are some
#
frameworks so that you can understand what happens when you put a price cap or what happens
#
when certain incentives are distorted.
#
You know, you don't need to actually put that in place yourself in your own country
#
to realize, oh, this happens and now I should change it.
#
So the idea is that if we are equipped with some of these fundamentals, we won't make
#
those mistakes that's, or we would know what are the better ways of doing things rather
#
than the worse of ways of doing things.
#
So that I think, so just knowing that helps.
#
And I agree with that point that finally see change happens at the margin, you know, it's
#
not as if change will suddenly happen at the ends.
#
So change happens at the margin and there are enough people at the margin.
#
Even though the political part is polarized on policy issues, there are the change does
#
I mean, just take an example of the fact that economic growth is important is I think now
#
widely understood by a large number of people.
#
It wouldn't be have been the case 20 or 30 years ago, but now I think even the government
#
realizes it, they might sometimes even fudge numbers, but they will say that growth is
#
That just shows that, you know, we have come a long way, change has happened on that particular
#
So, so yeah, idea is to influence people at the margin, think about these issues, approach
#
public policy as a discipline, not as a ideological contest between two or three political parties,
#
you know, so that is the concern.
#
And one more just point that when we say political, what Raghu was saying, we are talking about
#
That's not what we are addressing, but yes, of course, there's no policy without politics.
#
So you have to engage politics in the sense you have to look at interest, you have to
#
look at stakeholders, you have to look at what happens when you don't align interest,
#
the farm laws being a classic example, right?
#
Great policy, but you have not thought about the stakeholders who are going to be impacted
#
and how you are going to align their cognitive maps, like Pratap Banu Mehta says, right?
#
How do you align their cognitive maps that thinking if it is not done, your policy will
#
not see the light of the day.
#
So in that sense, you still have to do politics, but you don't have to get into the electoral
#
And without that, also, you can understand what are the frameworks, what are the models
#
which go into making better policies than worse.
#
Actually, the point on that roti song, the public knows all this, actually that song
#
Rajesh Khanna is singing for other people saying, you know, you are doing something
#
that the public knows everything.
#
In the movie, Rajesh Khanna himself is actually an imposter.
#
So what has happened is, he's a dacoit who's pushed a guy off the train and he's taken
#
that guy's identity and come into this village.
#
So even in that song, while he's telling the public, he knows that the public doesn't
#
know who he really is, which is classic metaphor for, you know, politicians in the country.
#
No, I kind of love that point you made Pranay about how, you know, if the government is
#
fudging numbers, the positive side of it is that they see the need to fudge numbers because
#
even the public understands that growth is important.
#
Even though in some circles like degrowth is becoming a fashionable phrase, but hopefully
#
they will remain a deluded fringe as they indeed are.
#
And you mentioned price caps and that reminds me of the importance of this kind of education.
#
Like I did an episode with a historian I won't mention a while back.
#
And at one point we got into an argument about price caps because he said something casually
#
about how they are a good thing.
#
And I was like, you know, by you trolling me, I mean, it's econ 101 that price caps
#
always lead to scarcity.
#
I pointed out that, you know, I remember when the government proposed a price cap on strengths,
#
I think three years ago when I was editor of Pragati and I used to sometimes come down
#
to Bangalore and sit with you.
#
And I think I was sitting in your Takshashila office when I tweeted about how this will
#
definitely lead to shortages.
#
It's always, but this person who's got a PhD in another subject doesn't know this 101 thing.
#
And that just tells me about the enormous importance of, you know, this sort of education
#
or getting these basic concepts out there and also these basic concepts.
#
Once you explain them, I often feel it's like a light bulb going off, a light, a switch
#
being flicked rather that once that switch has been flicked, you can't flick it back.
#
You've seen, you've seen the light for many people at least.
#
And Raghu, you also, you know, pointed out about how, in a sense, we are all playing
#
Like sometimes I think of the seen and the unseen and like fine, you know, discussing,
#
you know, going deep into interesting subjects and interesting people and all that.
#
But who's listening, though, you know, the absolute numbers are great.
#
But I'm not reaching millions.
#
I could be reaching maybe six figures of people, but definitely not millions.
#
But my point is it doesn't matter even if you reach a certain set of people, if those
#
set of people are, so to say, super spreaders and the super spreaders tend to be people
#
who are curious about the world, who want to know more and are therefore more likely
#
to listen to this podcast and to read your book, then that's what makes a difference.
#
Like I would hope that somewhere at this moment in time, there is a girl listening to this
#
episode who will be prime minister of India in 2050, you know, and maybe we've together
#
planted some seeds somewhere there.
#
And I think that long game is incredibly worth playing.
#
You know that Varun Grover was one of your guests and one of the things that Varun did
#
in this movie Masaan was he took a very famous line, a very famous poem of Dushyant,
#
To kisi rail se guzarti hai, ab mai kisi pool sa dhar-dhar aaj aata ho.
#
And then Varun made that, I mean, wrote the poem from in the lyrics from there on after
#
And I kind of prefer Varun's version with all due respect to Dushyant ji.
#
Just to, on this point on who's listening, kya kare hain, karna chahiye ki nahi.
#
There is another very legendary Dushyant poem, the lines of which, the starting two lines
#
of which are, kaun kehta hai ki aasmaan pe surag nahi ban sakta, ek pathar to feko tabhiyaat
#
se, uchalo tabhiyaat se, meaning who says that you can't make a hole in the sky, with
#
full passion, at least throw one stone, let's see what happens, right.
#
So some of this is that only, I mean.
#
A call to violence right there, that's a beautiful line.
#
Ek dhela toh feko uchalo tabhiyaat se.
#
So in the great chapter on the state that you have, you talk about three foundational
#
assumptions and we just discuss the second of them, which is the omni-competent citizen.
#
There is an assumption that the citizen knows everything and that's a basis of a democracy,
#
but soon that falls apart because the world gets too complex, governance gets too complex,
#
a class of experts come, but power corrupts inevitably and it all goes to hell and therefore
#
the need for what we do.
#
Now that was the first assumption, the first foundational assumption.
#
The second one is also one I want to talk about, which is a limited state, right.
#
And I want to talk about it on two margins.
#
One is that at one level, sure, the state comes into being to protect our rights, right.
#
So in exchange for that, we give it the monopoly on violence and therefore by default give
#
away some of our rights.
#
But what happens is that power corrupts, absolute power corrupts, absolutely.
#
So those in power tend to use their monopoly on violence to consolidate more and more and
#
more and more power till the state just grows and grows like a terrible cancer, which becomes
#
What a terrible metaphor, I should not think aloud like this, but it just grows and grows
#
And there seems to be a kind of no way of stopping this.
#
And I am hard pressed to come up with an example of a democracy anywhere in the world where
#
the, you know, where the state is actually shrunk.
#
And of course we, I think we'll all agree that the state in India, instead of, you know,
#
doing many things badly, should do a few things well, we'll talk about all of that and many
#
aspects as you pointed out, the Indian state is not as big as other states.
#
It's just that its influence is larger, which is kind of what I mean as well.
#
But so on one margin, there is that thing that once you, you know, capture a little
#
bit of power, it's very, you just tend to grow and grow and grow.
#
That's one aspect of it.
#
And to be a little more specific, to be a little more concrete, the second aspect, as
#
you also point out when you write in that same chapter about the Indian case, is that
#
over here, we centralize power.
#
We actually, you know, almost took over the colonial state in a way, and there were good
#
You know, Gyan Prakash read an episode with me when he wrote his book on the emergency
#
where he spoke about how nothing that Indira Gandhi did was unconstitutional.
#
And the reason the constitution allowed her to do all those things is that when the framers
#
of our constitution were framing the constitution sitting in Delhi, the entire country was burning.
#
You know, the map of India as we know it today did not really exist.
#
You had 600 princely states who were to be kind of brought into the union, you had communal
#
So it was a natural impulse to make sure that the center holds, that things don't fall apart,
#
that you kind of centralize power.
#
So we have, so we have that, you know, both of these coming together, that one, we already
#
have a state where we centralize power, and that state only, you know, never gives up
#
power really, it just gets more and more powerful.
#
We have at moments like the 91 liberalization and all of that, you know, where we took a
#
move towards freedom, but otherwise it doesn't.
#
And you know, so what are sort of your thoughts on this?
#
Because this is like the second of those foundational assumptions about the state, which made it
#
seem such a good idea that one is, of course, the omni-competent citizen, except that now
#
we know that, you know, the omni-competent citizen is not quite so even interested.
#
And the other is sort of the problem of the state, because we talk about all the kind
#
of economic principles and incentives and all the policies with the assumption that
#
it is all for the good of the people and all of that.
#
But at the center of this project is not the people, but the state, which has an outsized
#
role in relation to society so far.
#
See, one of the things that we have tried to do in the book, and the book is in some
#
sense, you know, for those who possibly know public policy very deeply, it's like a 101.
#
But even at a 101 level, we've tried to go back into some things which are very fundamental
#
so that there is clarity in thinking when people are starting to think about these things.
#
And we've tried to keep it as simple as possible in terms of the language used.
#
And that's why some of these, you know, initial sort of chapters do cover, you know, the idea
#
of the conception of state, where it comes from, what does it mean, so that people appreciate.
#
Because otherwise you start with a knowledge of things that are, you know, not very grounded
#
And therefore, you know, then you have some of the, you know, some of the misconceptions
#
about state and its intentions and its incentives.
#
On this particular point, see, you are right, once you have got a state, then, you know,
#
which has all of these powers, and some of these powers are inherited and you get only
#
a few opportunities in history to correct them.
#
If you've not used those opportunities fully, then one should always remember that the number
#
one incentive of a state is to perpetuate itself, right?
#
So they will not in any way cut themselves down.
#
And then therefore, what can we do?
#
And therefore, you know, you go back to questions like, you know, the classic sort of examples
#
of when people think that the state shrunk itself, which actually is not proved by data,
#
which is, you know, the Reaganite and Thatcherite sort of revolution of the 70s and the 80s,
#
you know, and things of that kind, where actually if you look at the spends, they actually never
#
But what they could do, and that wouldn't won't go down because nobody there is interested
#
in actually cutting that.
#
But what they could do, I think they could do, you know, a couple of things well.
#
One is the allocation of that, you know, where you are putting that overall amount.
#
They could change that, you know, and therefore, and this is a non-trivial, you know, exercise
#
because in corporates, in any sort of large area where you are dealing with funds and
#
you are thinking about, you know, where to put the funds, etc.
#
The core question always is capital allocation.
#
You get capital allocation decisions right, you will solve a lot of problems.
#
And therefore, what they did at that point in time in my mind was, you know, somewhat,
#
you know, a change in the mix of where the capital is being allocated to more productive,
#
better sort of return areas and left the other things to be left to the market or whoever
#
else who could possibly do the things better.
#
And that is good enough.
#
You know, in my mind, that is good enough.
#
You know, people might have questions on whether that was an entire force of good or not and,
#
you know, there are ideological and other differences about those years.
#
But you know, in the longer arc of history, you will realize when broad metrics are taken,
#
it worked out well for most people at that point in time if you compare it with how things
#
were in the 60s and the 70s.
#
So even for us, a lot of our argument is not about, you know, become a smaller state and
#
cut the state down and make it smaller because it's a futile exercise to go back and tell
#
So in some ways, our view is that, keep it the same.
#
Look at where you have the maximum impact and where your presence and that putting all
#
of that capital is actually, you know, doesn't make any sense.
#
And for a country like India, that fund is anyway very small.
#
And therefore, you know, misallocating it is a crime.
#
And even, you know, basic changes in the mix by a few percentages here or there can have
#
And that's really all our, you know, effort is, I mean, you know, why should you have
#
large departments, you know, looking at running hotels in this country and those kinds of
#
Thankfully, we have sort of gotten better at many of them.
#
But there is a large opportunity still lying around making the allocation decision right.
#
After that, you know, you can constantly ask yourself, you know, how to decentralize,
#
Again, you don't need to take away and reduce your powers by any stretch of imagination.
#
But can you make the composition of power and can you change that, you know, and make
#
it different or, you know, how you allocate and maybe Pranay will talk about that.
#
You know, this horizontal devolution versus vertical devolution of the, you know, outlays
#
that we have as part of, you know, our planning process, there is huge opportunity there.
#
Just changing that, the way you think about devolution can actually make tremendous impact
#
And so, you know, like Pranay mentioned, at the margins, you can make a difference in
#
the lives of people tremendously if you just think about this problem without getting into
#
very fundamental principle based, you know, changes.
#
Yeah, there is a lot of room for a lot of room.
#
But I'll go back to that point that you said, Amit, and I don't have an answer, but I just
#
wanted to discuss that the way I see it is, I don't know if you've read this book, The
#
Moral Arc by Michael Shermer.
#
So it talks about how, you know, the arc of morality keeps increasing, you know, so we
#
now think of, you know, maybe animals also are, you know, you shouldn't do bad things,
#
you shouldn't kill animals now, right?
#
Maybe 100 years back, that was not the notion.
#
So basically, our arc of what constitutes which, who are the subjects or objects of
#
morality or moral beings keeps increasing over time.
#
Now, when that happens, automatically, the next response will be because more things
#
become moral, you need to do something to address or to protect their rights or to protect
#
Don't let's not get rights in, but to protect them or to ensure that their well-being is
#
Now, when that happens, then immediate responses, which institution will do that, right?
#
And one response that we instinctively come up with this, yeah, state should do it, right?
#
So that is the challenge why, in my view, the states will keep expanding as they have
#
expanded across all types of word, whether you take the quote unquote capitalist world
#
or the socialist world, states have expanded, right?
#
But again, this is a problem, which we discussed right in the front, it is still an optimization
#
States have expanded, but in different ways, right?
#
So for example, you can say that the state expenditure has increased, even in the US,
#
all US governments account for nearly 40% of their GDP is, I mean, this comes as a surprise
#
to a lot of people who think of it as a, you know, a typical capitalist state.
#
But the difference is that this, what is the state spending on?
#
That's what Dragu was mentioning on also, right?
#
So if the state is largely spending on the domains that we think are the highest priority
#
and also the things where it's comparative advantage lies, right?
#
Things which only it can do and no one else can, right?
#
If those things are what we are prioritizing on that money is well spent.
#
So in our case, I think the unique problem that we have is one, the Indian world is global
#
Our intellectual influences are from the West, our internet is open.
#
It's not like China or any other place.
#
So our morality might get influenced from the world over and therein, we might also
#
import solutions from that.
#
So because their priority in the different region is for the state to do X, Y, Z, we
#
might just think that, you know, why can't the Indian state do X, Y, Z?
#
But that's where we come to the reality of Indian state that we haven't fixed the most
#
basic things, which if the state gets right, there will be like disproportionate incomes,
#
that is proportionate impact across everyone's lives, right?
#
So our thing is, yes, less, let's address those first, you know?
#
So there is this dichotomy, you can say it's a paradox between ambition and competence,
#
Our ambition is of that scale, but our competence is nowhere there, our capacity is not there.
#
So you're just ending up stretching the state beyond means and that's, we use this word
#
called Omni-absent state in the sense that, again, you are, the state is everywhere and
#
You are trying to do so many things, but you're not able to do a few things.
#
So this is a challenge.
#
I don't have an answer as to how we can manage.
#
But I guess the story is, if we know these things, if we know these pathways, if we know
#
what the state is meant for, maybe we will make better choices and ask better of the
#
state that we have created.
#
You know, when you mentioned the phrase, you know, too much ambition, not enough competence,
#
I'm reminded of that very early folksy phrase used by our honorable prime minister, niyat
#
toh achi thi, you know, which is really not enough.
#
The way I say it is niyat aur niti mein zameen aasman ka farhan, right?
#
They're very different things.
#
This deserves to be on a t-shirt.
#
Galeb had a, Galeb has talked about public policy, Galeb has talked about everything.
#
But Galeb at this point, ki hazaar khwais hai haasi, ki har khwais pe dabh nikle, the
#
state has that kind of, everything it wants to do, everything is important, har khwais
#
You are painting the state as a romantic more than a rogue, so, you know, every 70 episodes
#
I tell a story, so, I mean, I've divided the number of times I've told this story
#
by total episodes, so I think it's about every 60-70 episodes I tell this story, so
#
I will tell it again in the hope that many of you may not have heard it at all, and some
#
of you who have heard it before are as old as me and have therefore forgotten, and the
#
others will forgive me, and it's a story about this government department called CCA.
#
I'm guessing both of you have heard this, right?
#
That sometime in the 80s, I think, this government department in the government of Tamil Nadu
#
applied for a raise in their budget, and one senior bureaucrat decided to look into what
#
this department does, and the department was called CCA, so he said yeh CCA kya hai, right?
#
What does CCA stand for?
#
And for that we have to go back to World War II, that England's Prime Minister at the
#
time was Winston Churchill, and Churchill loved cigars, and all his cigars came from
#
Now what happened was when World War II broke out, his supply of cigars from Cuba stopped,
#
but the man's got to have his cigars, right, nothing you can do.
#
So the second best cigars in the world, and this should be a matter of great nationalistic
#
pride for all of us, were from this place in Tamil Nadu, I think maybe Trichy, the Tiruchirappalli
#
Yeah, yeah, so that was the second best cigar in the world, so a department was set up in
#
the Imperial Government of India, or whatever it was called, which was called CCA, Churchill
#
Cigar Assistant, right?
#
So World War II ends, India becomes independent, Churchill dies, decades pass, and still this
#
department called CCA exists as has budgets, and you know that's, eventually I think the
#
department was abolished, but this is how hard it can take, but moving on, you mentioned
#
the moral arc, and that reminds me of this great concept that I've written about in the
#
past called the expanding circle, which was a phrase coined by the philosopher W.E.H.
#
Leckie in this, I think 1900 book, The History of European Morals, I don't know why the book
#
has such that title, and his point was that, you know, there is, all of us have a circle
#
of people we consider worthy of a moral consideration, and initially that might have been a family,
#
but later it's a tribe, later it's a larger community, maybe at some point it's a nation
#
state that keeps expanding, and his point was that it will keep expanding more and more.
#
Peter Singer, the animal rights activist, in fact wrote a book called The Expanding Circle
#
and making the argument that animals will soon be, you know, within that circle, and
#
you brought up the moral arc in the context that as the moral arc expands more and more
#
people will need protection so the state's role expands, but what I see actually happening
#
is that the moral arc or the expanding circle, call it whatever, isn't really expanding so
#
much and may even be contracting in these tribal times, you know, certainly in India
#
there are many people of one community who will not consider people of another community
#
to be within that arc of people worthy of the moral consideration, you know, in a sense,
#
you know, you earlier you spoke about the Obertin window and we policy people speak
#
of the Obertin window, for example, shifting in the direction of freedom, but in India
#
I think it's perhaps shifted in the direction of bigotry or perhaps the discourse reflects
#
what was already underlying, so, you know, so I don't know where that sort of goes.
#
Yeah, actually on that, I mean, just if you were to just spend a few minutes on that,
#
maybe Pranay can add to this, you see, the economic, you know, measures are very difficult
#
to exclude, I mean, you can't be targeting economic measures for growth, for discrimination
#
you can, you know, if you want to discriminate against someone economically, you can think
#
of ideas that might just discriminate a particular unit.
#
But when you're thinking growth, it's very difficult to target growth on one for one
#
particular group and exclude the other group because it's way more complicated and you
#
will actually, you know, you'll actually, you know, jeopardize growth in it.
#
Yeah, but the problem is if your politics is based on attacking the other as it were,
#
then you are jeopardizing growth.
#
Yeah, so that's on the social, maybe cultural, those parts, it's easier.
#
I think on economic, the thing, broader thing of a rising tide lifting all boats mostly
#
I mean, it's very difficult to keep a boat out and the rising tide will not lift that
#
boat, it will lift, you might question whether that is coming at a cost of some other, you
#
know, social, cultural, other aspects that are being terribly discriminated against, which
#
I think is a point, but on economic thing, I think it's difficult.
#
It's a bit more tough to do the only growth for some and not for the other because the
#
rising tide does, equivalence does happen in economics.
#
So I'm going to ask you guys to elaborate on another profound point which you make and
#
which we are in agreement on and the way I speak about it is I use Fukuyama's framework
#
of the scope and strength of the state where you can draw a quadrant on how strong it is
#
on these and the problem with the Indian state, we would all be agreed, is that it's a weak
#
state that does a lot, whereas it should be a strong state that does just a few things,
#
do those few things well.
#
Now, we don't do those few things well in terms of law and order and so on, other basic
#
We do a lot of things we should not be doing really badly and beyond all of this, beyond
#
what we should do, beyond what we should not do, we also stop private enterprise from expressing
#
Some of those went away with the 91 liberalization, some of those remain with us and hobble us
#
and hobble the creative spirit and entrepreneurship of this country.
#
So you've expanded lucidly in your book about these different aspects.
#
So I'd like you to do that again for me here, that what are the things we should focus on
#
where we have failed and what are the things which we really have no business doing?
#
I think we would all agree, Raghu, you and I remember the 80s, I think Pranay was a mayor
#
taught back then, but in the 80s, just to get a telephone, you had to wait eight years.
#
A used car used to cost more than a new car because there was no waiting period.
#
And we saw those, in those sectors which were freed up like telecom, like airlines, which
#
were prohibitive to fly even for someone as privileged as me in the 80s, those sectors
#
which were freed up, we suddenly saw private enterprise come in, competition come in, the
#
And now telecommunications is much more widespread.
#
Not only is there no waiting period, people who could not have dreamed of possessing such
#
magic in their palms can actually sort of do so.
#
And equally with air travel, it may not be as cheap as trains has been one of the stated
#
intentions of politicians, but compared to the 80s, a long, long way.
#
So there is value in that third aspect also, not just what the state should do and what
#
the state should not do, but where it should get out of the way.
#
So can you elaborate on these for me and the listeners?
#
Yeah, I think lots of economists would already talk about this and they have talked about
#
it on your podcast as well about the basic things of intervene where there's a market
#
failure and there's a definition for a market failure, you know, high prices doesn't mean
#
that the market is failing.
#
There are four conditions under which you can say the market fails.
#
And I'm not going into the details of that.
#
In fact, I'll link my episode with Vijay Kalkar and Ajay Shah and you've got a great book
#
also read the book, read the book, fantastic book.
#
Their book or your book?
#
All of this explained in, in, in, I was like, I think Ajay Shah Kalkar book is a, is a,
#
I mean, it's absolutely a fundamental textbook, but we've sort of covered this point.
#
I was telling Ajay the other day that both these books, like I'm so glad they've been
#
written because these are exactly the kind of foundational books you really need for
#
someone trying to understand the subject, but carry on.
#
So I thought what the way we could understand this is through some examples.
#
Now there's this one bugbear for both of us that when we talk about public policy, one
#
of the reasons why it is boring is we talk about some abstract idea, abstract example
#
from some place, which we don't even have the context for.
#
And then we just say, oh, oh, Bogota, BRTS, so we just think that, oh, BRTS, if we bring
#
it here, our problem solvers, or your bicycle lane, and other lands may too.
#
And, but we don't understand the context is different and we need to understand why there
#
are many other things that fall into place for that bicycle lane to work and that we
#
Anyways, returning to that, so the way we try to explain this is through examples.
#
Let's take everyday things and everyday experiences to understand how the state can be a pain
#
and where can the state actually help?
#
So this one example that I really like was about Sandalwood.
#
Now Sandalwood is there in many Indian homes.
#
People use it for religious purposes, perfumes, et cetera, but there is a very interesting
#
story of property rights.
#
Now we know property rights are important, central.
#
When property rights are protected, good things happen.
#
People have a reason to invest in making that, using that resource better, et cetera.
#
Armen Alkean is a noted economist whose work, his life's work is on economics of property
#
So there's one way that we can talk about that, right?
#
But that is so distant to understand.
#
But let's take the example of Sandalwood and there is the story of property rights there.
#
Now why is Sandalwood so costly and why is Sandalwood so much in shortage in India?
#
Even though around 90% of the world's resources are in three Indian states of Tamil Nadu,
#
Kerala, and Karnataka, why is that so?
#
And also you would have heard of Veerappan and whole idea of Sandalwood, but all that
#
links through state action.
#
Now what happened earlier was that first Sandalwood was produced in these states, et cetera.
#
And the Britishers in East India Company found out that China has a lot of demand for Sandal.
#
So like East India Company does, they wanted to monopolize this trade.
#
Now where does it belong to?
#
It belonged to Tipu Sultan, et cetera, in the Karnataka region back then.
#
The East India Company and Tipu Sultan actually have a big confrontation on this.
#
This was one of the reason why the Anglo Mysore wars also happened.
#
But one thing happens for public policy there is that Tipu Sultan says that we will stop
#
trade of Sandalwood to anyone who's British.
#
Then he declared Sandalwood a Royal tree in 1792.
#
But anyways, Tipu Sultan finally loses to Britishers and now Britishers come into power
#
and they monopolize trade.
#
So Sandalwood becomes government thing.
#
Now you can say that was a colonial state, extractive, et cetera, but that continues
#
even after independence.
#
So that is what, so we take away the property, right?
#
So there is, there are very fascinating stories that even if the Sandalwood was growing in
#
your garden, it actually belonged to the state.
#
You know, the forest officer could literally come in and chop away the tree and give you
#
some 75% which he determines what the real price or the value of it is.
#
You could be imprisoned or you could be held liable if there was a theft or damage to that
#
But you can't extract the benefits out of it.
#
So just imagine what happens when you don't have, you can't enjoy the fruits of labor
#
over certain things, right?
#
So this is a classic violation of property rights.
#
You're held hostage by your Sandalwood tree.
#
The production really slips.
#
So around 65, in 1965, 70 India used to produce around 4,000 tons.
#
By 2019, it was 200 tons.
#
And in fact, the demand still exists, right?
#
So in fact, now we are importing Sandalwood from Australia for oil, etc., who by the way
#
have used Indian Sandalwood seeds to start the market and a business on their own.
#
So just look at how a violation of this property right leads to many things.
#
Now there are many other branches of this story as well.
#
First because the demand is high and the supply becomes low because there are no property
#
There are government forests.
#
Now government forests grow Sandalwood.
#
So then there is a lot of demand for it, right?
#
So what happens when this gap exists, smuggling, there is incentive for smuggling.
#
So this guy called Veerappan, he changes careers from killing elephants for ivory to actually
#
just smuggling Sandalwood.
#
And then you have various things, right?
#
You have forest guards.
#
You can say you can put forest guards to protect these forests.
#
Forest guards are in cahoots with Veerappan and basically they have their own market transaction
#
happening there, right?
#
So from this basic violation of property rights and this story of Sandalwood just tells you
#
what can be the consequences downstream when you indulge in something like this.
#
So I think this is one of the things we try to explain to just emphasize the point about
#
property rights, the centrality of property rights and what happens when you take them
#
And this illustrates what the state should kind of not interfere in.
#
Like another great example you give in your book is the alcohol prohibition in Mumbai
#
in 1949, you know, so just reading that bit out quote, as a policy turned out to be one
#
of the reasons why the underworld flourished in that city.
#
First it made bootlegging a viable business and encouraged smugglers to get into it.
#
These smugglers then used this money to diversify into other illegal activities, eventually
#
a strong police underworld politician nexus developed.
#
There are a number of accounts tracing the rise of underworld figures such as Varadaraj
#
and Mudaliar and Haji Mastan to this well-intentioned policy called prohibition, stop quote.
#
And Bruce Yandel has this great essay about Baptists and bootleggers, you know, showing
#
how the moralizing Baptist will say people should not drink, ban alcohol and the bootleggers
#
So in a sense, whether overtly or not, they are sort of in kind of cahoots.
#
So this is a great example of, you know, when, you know, the state should not stand in your
#
way, but if you had to sort of look at what are the incentives for it to do so much in
#
areas where it has no business being and at the same time not doing its basic kind of
#
functions of the rule of law and all the rest of that.
#
Just two sort of general anecdotes on this.
#
One is this Anglo-Mysore war that Pranay spoke about.
#
I mean, the Anglo-Mysore war actually had a huge impact on not just the East India Company,
#
but on the British Crown because there were four Anglo-Mysore wars fought.
#
The second one was fought by a guy named Cornwallis who won the war and therefore earned his stripe
#
as someone who's a very good general.
#
So he was the guy who was there as part of the American War of Independence.
#
He was the guy who was leading the charge for the British and he actually finally surrendered
#
And then later, the fourth Anglo-Mysore war was fought by Arthur Wellesley who then defeated
#
Tipu, then later defeated the Maratha Confederacy at the Battle of Assai and then went back
#
and then was given the charge to lead the Napoleonic War and therefore defeated Napoleon
#
at the Battle of Waterloo.
#
They all learned their battle craft in India while fighting Indian wars.
#
So the long arc of history goes from there.
#
They went there after winning the Napoleonic War, then came the real British rise for the
#
next 30-40 years which led to their consolidation of power in India and then they created the
#
constitution in a way which we later inherited.
#
So all of this in some ways is connected.
#
But also on the Bombay underworld, actually the all Bombay underworld story, the entire
#
history can be traced to bad public policy.
#
So till about 1920s, 30s, there was no underworld in Bombay.
#
There were petty crimes but Bombay was one of the safest cities.
#
There were all kinds of, because it was a port city, there were these three great port
#
Burkittah being a bit inside didn't have as much of influx of people and by 1920s it
#
was starting to lose its sheen.
#
But in 1920s, the two great port cities in the British Empire were Aden in south of Yemen
#
Then independence came and one of the first things we did was we had the Bombay Tenancy
#
And the Tenancy Law meant that you as a tenant, basically it was a lopsided law for the tenant
#
to continue to have all kinds of rights and privileges and the landlord cannot increase
#
the rates, cannot get you out.
#
But then, but the landlord still wanted people to be evicted out.
#
And therefore the first underworld gang happened.
#
So there were these bunch of Pathan's who had come from Afghanistan, some from UP.
#
They all got consolidated under a guy called Kareem Lala.
#
And Kareem Lala was the first underworld, primary job ye hi tha.
#
The landlord would call Kareem Lala, he would physically, he was like some six feet seven
#
He would physically lift the tenant and physically lift all their luggage and throw it out on
#
I mean mostly it was that, you know, that particular locality where people had to be
#
And then Kareem Lala started having a full gang and Kareem Lala settled down in Dongri
#
and that's how the whole Dongri, you know, gangs of Dongri started.
#
So Kareem Lala was the first one.
#
He's the guy who introduced the Rampuri Chaku, you know, the famous Rampuri Chaku.
#
And then Pran played that Kareem Lala character in Zanzir as a, you know, tough talking Pathan,
#
but a man with a heart of gold and all of that.
#
And then from there emerged.
#
Then the next round happened where we started stopping gold, you know, coming into India
#
because we were trying to conserve for an exchange.
#
And then that was happening in the sixties and that led to Haji Mastan, who then started
#
doing, I mean all the seventies movie as you might remember, Sona Kab Land Karega in Madayal.
#
As kids we were like why is Sona landing in the first place and what is terrible about
#
Sona landing that Amitav has to drive a truck and go pick it up and what's the big deal?
#
I mean, how are people abusing Sona after it comes, I mean, drugs one can understand.
#
But it was essentially this.
#
So then it was Haji Mastan and then of course in simultaneously we did the prohibition and
#
then you had all of these Bhattis and again all Hindi movies have one or the other scene
#
The Bhatti scene, the most famous one actually is actually in a comedy called Golmal, a very
#
legendary sort of Amol Palekar film where at the later part of the movie because of
#
some reasons and too detailed, it's a PG Woodhousian plot that Utpal Dutt who's like a rich guy,
#
very well respected member of the society, for some reason he's in the police station
#
and only in his banyan and he's sitting and he's sitting really angry there and you know
#
Kishno Mukherjee, this guy who forever plays drunk in Hindi cinema, he comes and sits next
#
to him because he's also been apprehended for some reason and this guy Utpal Dutt looks
#
at Kishno Mukherjee like who's this guy who's come and sat next to me and then Kishno Mukherjee
#
also looks at him and the only question Kishno Mukherjee asks is, tumhara bhatti kaha hai,
#
which means where is your Bhatti which makes that Desi liquor.
#
So you know the classic sort of default thing was that if this guy is sitting in the police
#
station, clearly he was running an illegal Bhatti and that was in the late 70s.
#
So yeah I mean all the Mumbai underworld stories from 1940s till 1980s are because of bad public
#
policy decision and that impacted the life, that seriously impacted just the fabric of
#
the city over the 40 years.
#
Rent control act being result and the result you see old dilapidated structures still there.
#
But just on that point again there is a very nice story in Rohit De's book on the people's
#
constitution again first of all by the way both gold and prohibition was done by Morarji
#
Desai in some way was there for this but so he should get the title of banning most victimless
#
crimes not a title that anyone should have but so one example that he gives in this is
#
again how public policy operates and how incentives change right what happened was and this is
#
from the book that Rohit De writes about how once alcohol was banned the demand has not
#
gone away right people still want so this demand for tinctures increases.
#
So suddenly the planning commission guys are finding trying to see that suddenly the demand
#
for tinctures in the 70s has increased now by that time tinctures were no longer in fashion
#
right I mean modern medicine has come and they were trying to find out what is the reason
#
and turns out a lot of these were just alcohol with something else that suddenly the demand
#
for that rose there were in fact ear drops and eye drops in which there was just alcohol
#
and people were just selling that right so again in a centralized state mode you can
#
ban something and we have many examples of how bans don't work but when you think about
#
this people respond in very different ways you know and if there is a demand people will
#
find ways out and that I think this is one central idea that most of us in India still
#
don't get we still think the state is on the right side when it does ban of this sort but
#
just this example again shows you know I mean literally people are using ear drops for alcohol
#
how are you going to stop that so yeah.
#
No man I have written a bunch of pieces on how banning victimless crimes can have exactly
#
these kind of inevitable consequences unintended but inevitable and you can anticipate them
#
you can anticipate them and I had also commissioned a bunch of pieces when I was editing Pragati
#
and that I'll sort of link all of those and here again there's another fundamental fallacy
#
that comes into play here is that when we see something wrong with society it has kind
#
of become a default mindset in India that the state should solve it always the state
#
is a solution but for a lot of social problems the state is not going to solve anything it's
#
probably going to make things worse so you know a lot of social problems like alcoholism
#
for example have to really be solved you know within society the state can't really step
#
in and play such a part there and I'll you know before we go in for the break I'll counter
#
to you guys with another story which is you know when you spoke about all those wars in
#
the 18th and 19th century and the consequences of that and all of that and I think I might
#
have asked this as a quiz question to you that you know in the mid 19th century there
#
was a sudden boom in American industry because a lot of companies in the Midwest apparently
#
if I remember correctly were manufacturing ice and shipping it to India and what is the
#
reason for that if you haven't heard this dear listener please pause for a moment and
#
think about you know what India could have had to do with the US producing ice all right
#
pause let's continue the reason is that there was a massive problem that our colonial rulers
#
were facing with malaria and one good treatment against malaria and a preventive was quinine
#
but quinine on its own was bitter and unpalatable so quinine was therefore took the form of
#
tonic water and the typical way that it would be had in India in those times was gin and
#
tonic and you needed ice for gin and tonic and that ice came from America because remember
#
you know we have normalized so much progress but no fridges so back then so actually I
#
mean just on that ice trade there was this company in New England which actually would
#
cut ice from the you know frozen lakes during the winters and then you know put all these
#
roll it in all these sacks and have all these anti-freeze and dry ice or whatever the salt
#
mostly and they would transfer this and this was one of the biggest trades happening between
#
America and India and if you read Amitabha Ghosh's Sea of Poppy the Ibis trilogy the
#
Sea of Poppy the first few chapters are about the ice trade that the ice is coming some
#
of these luskers come there and then another thing goes which is typically the opium or
#
indigo which goes to China I mean that's that was the sort of the circuit and so he's
#
actually written two three chapters in which there is constant reference to the ice trade
#
happening between India and the US.
#
Raghu how you know so much what is this you know so you know we'll go in for a break but
#
before a break you know you guys mentioned a bunch of things I've done episodes on so
#
I'll quickly point out I'll link them in the show notes one about how we will often
#
transplant a policy that has worked in some other country and bring it here economists
#
have a phrase for it called isomorphic mimicry and I'd done an episode I think called premature
#
imitation with Shruti Rajgopalan and Alex Tabarrok so do check that out.
#
You mentioned property rights I'd done my first one hour episode before that everything
#
was 20 minutes 25 minutes my first one hour episode and sort of a quote unquote deep dive
#
in those times was episode 26 which Shruti Rajgopalan on property rights which you know
#
both of us realized while doing that episode that hey you know why were we cutting our
#
conversations off this is so much fun and finally there's a really short episode I
#
think it's with Alex Tabarrok on rent control which would have been 15-20 minutes I will
#
link that also from the show notes and for now let's take a quick commercial break.
#
Long before I was a podcaster I was a writer in fact chances are that many of you first
#
heard of me because of my blog India Uncut which was active between 2003 and 2009 and
#
became somewhat popular at the time I love the freedom the form gave me and I feel I
#
was shaped by it in many ways I exercise my writing muscle every day and was forced to
#
think about many different things because I wrote about many different things well that
#
phase in my life ended for various reasons and now it is time to revive it only now I
#
am doing it through a newsletter I have started the India Uncut newsletter at indiancut.substack.com
#
where I will write regularly about whatever catches my fancy I'll write about some of
#
the themes I cover in this podcast and about much else so please do head on over to indiancut.substack.com
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and subscribe it is free once you sign up each new installment that I write will land
#
up in your email inbox you don't need to go anywhere so subscribe now for free the India
#
Uncut newsletter at indiancut.substack.com thank you welcome back to the scene in the
#
unseen I'm chatting with Pranay Kutasane and Raghu Sanjelal Jaitley about their brilliant
#
book missing in action but in about public policy in general and when we just went for
#
the break but Pranay cunningly reminded me that he hadn't answered the question I'd
#
asked just before the break so I'll ask it again that in terms of you know what the where
#
the state does what it shouldn't and where the state does not do what it should what
#
are the incentives that play that drive them in these directions I mean there are obvious
#
rent seeking incentives for example in terms of where it interferes where it should not
#
but you know just give me an overview of the different kinds of incentives so I'll try
#
to summarize some of the work around this that I have read right so one of the important
#
works on this is by Devesh Kapoor very well known political scientist and he has this
#
excellent chapter which I think everyone who's any even a little bit interested in public
#
policy should read it's called why the Indian state both fails and succeeds so one part
#
that he talks about this in that chapter is that actually this is these incentives are
#
common in many developing countries it's not just that India is an outlier that whenever
#
you become an electoral democracy before economic development the incentives that play differ
#
you know in the sense that people might seek narrow club goods so instead of public goods
#
yeah so club goods in the sense that you want club you want certain benefits for your own
#
community or your narrowly defined community rather than public goods or goods which might
#
benefit people at large okay I'm not going to the economic definition but just to understand
#
it broadly so that happens in many countries where the electoral democracy part comes before
#
economic development and I think that is what we are also contending with so there are strong
#
incentives towards you know redistribution rather than provision of you know goods which
#
will benefit everyone in the society right so what are the reasons for that I mean you
#
can go one layer further as well I guess it is because one you you have this zero-sum
#
mindset which comes out of probably scarcity and in when you are in that situation and
#
when you suddenly have this option of democracy you are then optimizing for what I can make
#
of it not just for me but for my narrowly defined community rather than things which
#
will take some time but benefit people at all no one has that patience so I think that
#
is one explanation which he gives in that chapter people have called it precocious democracy
#
I think Arvind Subramaniam and others so probably there is something to that which explains
#
why we are the way we are so this is a structural thing right it is not because of one generation
#
of politicians or others or just because of the Indian mindset or anything it is common
#
to many developing countries so yeah I think yeah I mean see one of the things that often
#
we you know underestimate is that you know if you take not underestimate or we get possibly
#
sometimes wrong if you just take someone who's you know holding the levers to power and they
#
are completely well-intentioned like you know we just mentioned Niyat is not equal to good
#
Niti but say strongly very well-intentioned and one of the things that they are searching
#
for is say for instance fairness or justice which is one of the things that states should
#
pursue as a matter of one of the objectives but you decide that okay we should give justice
#
to people and and then you will find ways to create you know some kind of a level playing
#
field and let's fully take a very well-intentioned very well-read set of people who want to pursue
#
justice and let's say that they go down and they say okay we'll read the best modern scholar
#
on justice you know Rawls and we'll pick up Rawls and we'll follow that oh you know what
#
you will learn from there is that you know there is a way to sort of have some sense
#
of equity for people who have don't have the same set of advantages starting off right
#
and you know Rawls has an entire book on it you know from the veil of ignorance to how
#
to think about fairness and how to think about justice all very good now these are principles
#
that you need to think and apply but if you start saying that I will now use the power
#
of state for me to you know have this you know this particular version or this particular
#
way of justice administered that's where you know things start going wrong because you
#
need to understand if that is the objective these are the kind of things that we need
#
to do you need to ask yourself the question what is the in some sense the least interventionist
#
way to actually get to that end objective without actually imposing it in a manner where
#
you think that you've got the answer because that's where things start going wrong and
#
I think somewhere I find that we are doomed even if we have the best and the most knowledgeable
#
of you know person leading some particular you know entity we are doomed because you
#
will once you have that power you would want to utilize that power rather than not use
#
the power or rather than use the power in the manner that actually is least interventionist
#
and that's really where the problem is I mean just the fact that you have the power will
#
sometimes make you use it in a manner which you think is good but will often results in
#
a negative thing in fact even Rawls after he wrote that book you know from his university
#
itself Nozick wrote the response and you can read both the books at the heart of Nozick's
#
response was say for instance you follow everything that you said and you pattern the society
#
in a way which follows this principle of fairness or justice that you are saying you patterned
#
it and you reach that particular pattern the next transaction will break that pattern so
#
it is just and in order for you to then continue to keep the pattern you will try and regulate
#
the next transaction and the next transaction and the next transaction and that is the road
#
to you know hell eventually and that's really what has happened everywhere whoever has tried
#
to use the power of entire power of state to say get justice eventually you know goes
#
down the path of many of the totalitarian regimes that we have seen in the world and
#
therefore some of this is very important to appreciate that it is such a power that it's
#
you should use it very very lightly you should follow first principles apply the first principles
#
use the power of state in a very light you know touched manner or whatever in a very
#
light sort of a you know manner so that you don't you know create a bigger monster than
#
what you had originally planned to solve for and that it's very difficult I see the just
#
the best intention people fall prey to the fact that they have such a powerful tool with
#
them yeah and to add specifically to the Indian context this was like in general both of us
#
talked about the state as an institution but the Indian state and we've talked about it
#
Amit earlier about how the Indian state the Republic of India came hard-coded with this
#
social revolution algorithm right that the there are lots of things which have happened
#
in the past and they need to be set right there was discrimination and there was lots
#
of bad things right and the state took it on to itself to be the primary change maker
#
for all of this right so when that happens and that has brought in great things to India
#
as well right we've suddenly moved away from what was their pre-independence at least that
#
vision was there so because that is a positive side but right but the other side of that
#
is precisely what we were talking about that the state can be drawn into anything that
#
you can virtually think of because it is the chief agent of social change that's how we've
#
conceptualized Republic of India right so it is I mean if you take a broad sweep of
#
history it has been on the positive side better than what we had in the past but there are
#
always trade-offs in public policy and one trade-off is this that we unfortunately end
#
up with a situation where state is the starting point for any change that you want to bring
#
out and we are then have to figure out what are the other ways that it can deviate so
#
the default is always the state and then you have to find out other ways so that I think
#
is an Indian context answer to why we approach what the incentives that are play are slightly
#
different so I'll drill down with a further question but first just for my listeners to
#
contextualize Rawls and Nozick and you've also run that in your book in a very lucid
#
way I always say that Rawls's book a theory of justice and Robert Nozick's book anarchy
#
state in utopia are two books you should always read together because they are coming at in
#
a sense the same problem from two different points of view and it's just remarkable reading
#
and I of course tend to side more with Nozick but both were great thinkers just to kind
#
of summarize Rawls came up with a formulation of what he called the original position where
#
he said that imagine that you know nothing exists and you there's a veil of ignorance
#
in front of you how would what kind of world would you want to live in and therefore everybody
#
would know that they can be among the most disadvantaged and therefore they would want
#
a world where the most disadvantaged are not that badly off are doing fairly well and for
#
this he arrived at his second principle which is maximum which you know in your words quote
#
the logical choice for all of us would be what he called the maximum strategy that would
#
maximize the conditions of those who have the minimum why because when the veil of ignorance
#
is lifted we wouldn't want to find ourselves to be the most disadvantaged in a society
#
that doesn't care about such inequality this gave him his second principle the social and
#
economic inequality should be arranged only to provide the greatest benefits to the least
#
advantaged stop quote and and leaving aside the issues I have with using the term inequalities
#
instead of you know focusing on poverty the main issue with this is means versus ends
#
and as you point out one of the Nozick's fundamental points was that if you are going to redistribute
#
then the means of redistribution have to be legitimate and according to him there were
#
three legitimate means one is if nobody owns something and you use it and you know you
#
can acquire property that way in the modern world there's hardly any any way like that
#
second a voluntary transfer of ownership between two consenting parties and third a redressal
#
of a past injustice in acquiring or transferring the holdings but apart from this you know
#
if everyone is in a state of perfect equality any transaction that you make immediately
#
changes that I forget which example Nozick used in his book I read it ages ago was it
#
the basketball player Will Chamberlain I think the Will Chamberlain yeah well you know if
#
Will Chamberlain is at a basketball game and all of these people buy tickets to go to the
#
game you know all that money goes to Chamberlain and the organizers and all of these people
#
are you know hundred dollars poorer or whatever it costs and so what are you going to do about
#
that and if you are going to coercibly redistribute that then you know Will Chamberlain might
#
as well not show up right so you're kind of I mean this is sort of an extreme example
#
and I'm really simplifying but the books are really worth reading and the point is that
#
the aims that Rawls speaks of can actually be achieved many would argue without state
#
coercion so the whole using it as a justification for a lot of straight coercion becomes a problem
#
now my question to you following on from this is once again about incentives in a different
#
way in the sense that once you are in power you know you can cite whatever golden aim
#
you have you can say that social justice is needed equality is needed these people were
#
discriminated against let's change that you can have the noblest justifications for carrying
#
out acts of coercion which don't do anything to solve the problem and may often make the
#
problem worse history is replete with this your book is replete in a sense with kind
#
of examples of this that's inevitably going to happen because of the incentives within
#
politics and part of that is even how politics is structured in a democracy like ours for
#
example if you look at our incentives play out if you're a politician today and you want
#
to do something about say agriculture right the easiest thing for you to do is to give
#
out farm loan waivers which is almost a hygiene factor because your event horizon is the next
#
election you know you don't necessarily want to take the risk of carrying out long term
#
changes which where the benefits will accrue to you know will be obvious in you know the
#
scene instead of unseen 10 years from now but you could end up losing the elections
#
now because nobody gets what you're doing and it's possible to put any kind of a spin
#
on it so that's one kind of incentive the electoral incentive and then there is also
#
the incentive of special interest like I wrote a when I was a professional limerick writer
#
for the Times of India I wrote this limerick for them called politics a neta who loves
#
currency notes told me what his line of work denotes it is kind of funny we steal people's
#
money and you some of it to buy their votes right so politicians need money to win elections
#
and and that money will come from special interest groups who will want a quid pro
#
quo and you can dress that up in the language of welfare or in noble language that makes
#
it seem as if you're doing something for the people for example you know if you're voter
#
base and if the people who contribute to your party are small traders then they could push
#
you to come up with a law that say bans fdi in retail right and you can do that with a
#
noble rhetoric that hey we are protecting our small businessmen but actually what you're
#
doing is you're harming the consumers like I call it a redistribution from the poor to
#
the rich right if I'm a local trader and you are a trader Prane from outside from China
#
who can come and sell something two rupees cheaper than me then what is happening is
#
all the consumers are paying me two rupees extra they could have kept that two rupees
#
it could have gone back into the economy generated wealth generated jobs that's unseen that's
#
not happening so what happened is all those poor consumers lost two rupees and that was
#
redistributed to me the local trader who is then giving the money to his political party
#
and saying yeh karo and the political party will then you know use the rhetoric of protecting
#
local jobs you know atma nirbhar india for example and it harms the people it harms the
#
many for the benefit of a few so these are different kinds of incentives these are not
#
really part of the design of the state per se but you know part of politics in a sense
#
so what are your sort of thoughts on this yeah so again I think my primary position
#
is that we go back to the overton window and the fact that it depends on what we as citizens
#
want from the politicians like I mean a politician can tell any story and justify that right
#
and they really do that well so it's the question of what we position as demands that matters
#
and that's why our role as citizens as people who are aware of public policy matters so
#
this is a classic thing about stationary versus rowing bandits which manker olson talked about
#
right so there are examples where politicians are also like stationary bandits and not like
#
rowing bandits there are many examples where things have happened where people look at
#
the long term where people overcome concentrated interest groups and take action which is largely
#
for the benefit of everyone right so there are examples of pro market reforms in india
#
as well there are examples of our tax rates going down from what they were earlier at
#
a high rate marginal interest rate of 97.5 percent to now whatever 30 percent it had
#
it has benefited so many people right again we can argue that it earlier it was only benefiting
#
some the when you the pro market reforms really came from a bunch of elite reformers right
#
time right place right crisis at that time they managed to get it through can you think
#
of something like that coming from popular demand coming from because our contention
#
right now is that we want to educate the masses so that you change the demand side of the
#
political marketplace but can you think of such changes emanating from the demand side
#
rather than elites who happen to be there and we are very lucky that manmohan and montexing
#
alu alia and all of those guys were there but can you think of something like this in
#
an indian context coming from the demand side i mean my see my this particular point on
#
the demand side cannot be on specific agenda and in the sense that you have to ask yourself
#
this question and i think there is some amount of study now done that that since the
#
90s reform mostly politicians who have lost re-elections have lost it because they have
#
actually had an economic growth percentage that has been lower than their previous five
#
years i mean during their term than in the previous five years and broadly that data
#
holds 2004 i'm saying if you take all state elections
#
i think there are old columns of swaminathan where he has done this and i think he's quoted
#
somebody else so it is broadly true that people have said now that if you give me stronger
#
economic growth i will vote you back into power that's like you know you know if there
#
is a specific agenda it's very difficult to sometimes say that because no single no polity
#
speaks in a single voice on any topic that that there is mass consensus that this should
#
be you know this is what we need to do it's very difficult to find except some you know
#
defense or some such issues you you might find somebody agreeing to an agriculture policy
#
and another set of people saying no we don't want somebody will say that we should privatize
#
you know air india and others will say we should not so it's very difficult to find
#
overwhelming majority saying that we want this change but you can make this out by looking
#
at for instance the point that we made that the reason why sometimes government or some
#
state governments or some people you know try and fudge the data on growth is because
#
it's very important you can't show that growth is flagging in under you because you know
#
that the you know public will punish you if the growth is not strong enough and that's
#
a good indicator of what the broader public demand has been that you have to either show
#
the growth or you have to do some things to make sure that the numbers are looking good
#
so i think in that sense i would say that macro you know demand side things have changed
#
in very fundamental way in the you might still find that okay the farm you know somebody
#
might want to give a loan waiver and so on and so forth but i think you can give as many
#
loan waivers but if the overall employment numbers are bad growth numbers are bad you'll
#
lose election i think that kind of thing is established now in the country so i would
#
answer it that way but i mean vajpayee lost in 2004 and modi didn't lose in 2019 so i
#
mean and obviously i understand that you're talking about an entirety and a large sample
#
size of state and central elections and i'm just cherry picking these two examples but
#
i'm picking these two examples i mean after dimon the beach which was such an economic
#
and a humanitarian disaster they won stompingly in up you know so that would indicate to me
#
from those examples that but i mean i'm still unclear whether actually for up for the people
#
was i mean even for the state did it actually de-grow because of demonetization or did the
#
growth there was a cost it grew less than it would have in the than in the counterfactual
#
possible yes that is true for at least but the up election was very very uh immediate
#
i mean maybe it was six months after the demon so i don't know man i mean i don't think it
#
is a case that the people in up thought that economically it was a good measure i don't
#
think so at all i think other factors like schadenfreude and that others were hurt more
#
than them and local factors played into it but i don't think anyone was under the illusion
#
that is going to help the economy in any way even that's true but i i don't think the economy
#
of say up or between 2014 to 2019 of india was so badly mismanaged at least on the broad
#
metrics for ordinary people that they would say that we'll punish this so you know some
#
of this is i don't i mean i'm sorry here is a question if if we have say you know one
#
percent two percent growth for the next five years with everything else that you know you
#
might run in terms of social and cultural agenda would have would have party come back
#
to power and really i don't know i mean i think the state election data etc show that
#
it's difficult for a party to come back i think if you have a disaster like going down
#
to a one percent two percent growth rate obviously not but regardless of which party is in charge
#
barring a black spawn event like covid the rates won't be that low it's it's um you
#
know uh i mean i get your broad point like just to sort of paraphrase it and tell me
#
if i've got it right your broad point is that whereas the public's desire for good governance
#
may not reflect in their demand for specific policies it reflects in their demand for economic
#
growth which is the right priority and which forces governments to do good governance in
#
chasing that economic growth is what you're saying at an aggregate level but yeah but
#
you know honestly between 2014 and 2019 we didn't see it from this government right at
#
the start perhaps where there was a continuity between uh jaitley's first few months in chidambaram's
#
last few months and puja mahera has written about this in an excellent book the lost decade
#
and there was some kind of a continuity there but from the time the suit boot ki sarkar
#
jab started happening you know for political reasons modi just changed tack became much
#
more populist and whether it is demonetization or the way in which gst was carried out you
#
know and i'm not just talking about implementation because obviously you know uh it's just the
#
way it was conceived and carried out at the time hit us hard and we can't even quantify
#
the extent to which it hit us hard because so much of the damage was in the informal
#
sector and etc etc etc we know it hit us hard which is why even the modi government never
#
boasts about demonetization they'll boast about every damn thing including things done
#
by previous governments but never about demon so so i'm just kind of wondering and i'm not
#
trying to like contradict you i'm just saying that i mean this only underscores the importance
#
of the task which you guys and shaan kelkar have set out upon i think see i mean again
#
i said there are i mean see this comprehensive study of what has happened either in this
#
term or in the previous term i think will be available with full data maybe five ten
#
years down the line when all kinds of data is available and really useful to see because
#
you know right now there is a whole host of things that are there which you know different
#
people pick those things up to justify so for instance there is this entire argument
#
made that you know this cylinders and gas cylinders in the villages and all of that
#
actually has you know helped tremendously who knows you know same with electrification
#
and rural electrification i mean it has happened in a big way and it has helped so you know
#
what is a parameter of growth while we say on one hand some of the informal sector might
#
have been impacted badly in some other respects you know they get the advantage of some of
#
these things so you know we'll have to see this in its entirety because my general sense
#
is that people are not of the kind who will forever get swayed not for one may two three
#
four if you include state and general election for many of the states for the same set of
#
you know what you might consider non-economic matters it may be one election or so you want
#
to teach some lesson there is some issue like corruption there is some issue which polarizes
#
people but for three or four elections if they are voting on a certain way you have
#
to admit that there is something which has at least in my thesis that there is something
#
that is happening which is making their lives better they are not eating and drinking and
#
you know breathing this you know sort of intangible which is you know showing some other side
#
down or increasing your pride about yourself and your past that can be there but your life
#
tangibly has to have somewhat improved for you to actually digest that other message
#
also that's I mean I therefore I'm I'm increasingly asking this question that we should be collecting
#
more data around some of these points to understand what is happening on the ground.
#
One point to add first of all economic that correlation between economic performance and
#
political vulnerabilities also difficult because the effects of good reforms are generally
#
delayed on the economic side right so 2004 probably our benefits were felt later on right
#
the golden decade that we had was from 2003 to 2011 right so that complicates it but I
#
was thinking about your question what are some public demands so one thing broadly is
#
also that all these are diffused demands right by definition so but you can see some examples
#
like even you take we take the example of prohibition which we started with most states
#
in India don't have it now so now it's very difficult to say that there was no what you
#
call dharna for alcohol but it is only there in three states now I mean dharna was planned
#
but no one showed up because they were too busy so yeah because it's the same thing
#
right it's a diffused interest group so by definition no one is going to do a dharna
#
for this but the fact that it doesn't exist in most states tells you something right it
#
is it if it were popular then most states in India would have had it also I mean just
#
going back and I mean this is one of the things which I started with which is that Jatana
#
Puja Sadhu ki I mean one of the things that both of us do as much as possible is just
#
read everything I mean or at least imbibe everything to see kya kuch hai ki nahi and
#
the other thing is just look at the data without having too much of too many ideological blinkers
#
I mean none of us can be freed of any I mean completely of ideological blinkers but keep
#
now I have been tracking credit growth data for the last 24 months now pehla bara maine
#
I just after covid the first quarter second quarter third quarter I said okay there is
#
a base effect that the previous 12 months there was not much of credit off take so the
#
credit off take is good now last three quarters some of the base effect is starting to go
#
down I look at the MSME sector credit growth I look at the small corporate credit growth
#
small pharma credit growth and I am taking only non-food credit growth the numbers are
#
in 25 to 40 percent that is the sector that we often think has been impacted most because
#
of either covid or demon or GST so now how do we how do we explain 25 to 40 percent credit
#
growth because 25 to 40 percent credit growth is I mean you take credit when you are optimistic
#
about your future you are you have confidence about your current balance sheet and your
#
business and only then and banks are having the best most pristine balance sheet at any
#
time in the last 20 years right now so banks are not being indiscriminate in giving credit
#
banks are underwriting these guys after fully appreciating their risk profiles so with the
#
with a fairly stringent underwriting regime credit growth for that sector is 25 to 40
#
percent one has to investigate what has happened now there is some people say that actually
#
the benefit of GST finally being implemented is working it's easier now I mean you might
#
have had questions around implementation around glitches in systems etc etc some are saying
#
that it's just good fortune that we are now in a situation where there is clearly China
#
plus one playing out but even for that to play out you have to be ready with the opportunity
#
to cash in on that and then some are saying that actually the inside the you know ease
#
of doing business stuff that where our ranks have gone up initially it was believed that
#
we were just writing the question paper well and getting our ranks improved maybe it has
#
started improving it so sometimes when one looks at these kind of data one then has to
#
be a little more open-minded about things which might actually be working on the ground
#
whether intentionally or otherwise whether through some other means you can attribute
#
multiple reasons to it but then the data is data so so my sense on some of these is that
#
like Pranay said some of the good policies or actual benefits of the policies play out
#
in the longer run maybe the first two years were bad because GST was difficult to implement
#
we had too many slabs and that automatically meant a more complex system implementation
#
but we have implemented it and it's running so and therefore you know the every month
#
I see in from data about GST collections hitting new records you know we've now averaging
#
almost one point four five lakh crores every month one point five lakh crores every month
#
so I you know I feel somewhere the you know what is working on the ground economically
#
and what data and evidence we have I think there is a lag and maybe the lag is economically
#
we are collecting the data with a lag but politically that information is flowing faster
#
through the election results one of my thesis it could be wrong but one has to keep one's
#
mind open to the idea that that is possibly one of the contributing factors as well and
#
on the GST pointed I'll just again I think that's the difference between say an academic
#
and a policy analyst again you will look at the trade-offs right so you look at was the
#
world better without GST compared to with GST there's no good or bad it's just better
#
of us and if you look at the world we forget the world that existed then no because we
#
didn't measure it it was not important we just say so just the fact that every market
#
of the state was different you had those checkposts that was horrendous like I mean just imagine
#
the cost for any business if you have to just wait at state boundaries I think there was
#
an FTPs to the effect of if you want to send something from Bangalore to Chennai or Hyderabad
#
easier via Paris than directly through state borders it's an old joke that I have if you
#
have to come in Bombay from Sakinaka in Andheri East to Varsova the easier thing is to go
#
to the International Airport take a flight to Dubai sit in a dhau and land in the Juhu
#
things have changed things have changed they have metro right outside my house snap it
#
will take you to Sakinaka earlier crossing east to west in Bombay was worse than going
#
north to south to north or whatever anyway so just that benefit alone like I mean there
#
should be some studies to calculate the economic value generated out of this I haven't come
#
no no macro points that will be really big right I mean macro point is there I mean again
#
who do you attribute it to right the what is the logistics as a percentage of our GDP
#
I think we are now I mean in in advanced economies that number it should be around 8% right which
#
means that you are logistics is a good part of your cause but it is very efficient I mean
#
it's I think we were running at about 14 I think we've got it down to about 12 or 11
#
percent and that what that means is that maybe we are building a whole lot of road infrastructure
#
or ports infrastructure and other things are getting better but there is clearly something
#
to this elimination of unnecessary boundaries and checks and octroies and other nakas etc.
#
which is just making that flow now that 2% or 3% reduction is a significant value add
#
because you know that was actually a logistics cost which was genuinely a cost it was possibly
#
adding up to something in the GDP but it actually didn't it was actually you know not the right
#
kind of cost to be bringing into the system it was an inefficient cost so some of those
#
things are you know we'll have to see with my general hypothesis on this so I have sort
#
of three points to make and maybe the third leads to a question I'm not sure yet but
#
before that I'll kind of point out that whenever I hear of tax collections going up I have
#
this bittersweet feeling I feel ki haan bhai theek hai ki matlab it's a good thing because
#
it shows economic activity is happening and all that vibrancy might be there but also
#
it is a transfer of wealth from the productive part of the economy to the predatory part
#
of the economy so anyway that is so long as you are not increasing it if it is what it
#
was always and now you are able to collect more than what it was in the past it only
#
goes to show that either economic activity is getting better or more people are coming
#
under the yeah yeah sure I mean I was being tongue in cheek but you understand my sentiment
#
exactly now sort of three points and the first of my three points is that I think the best
#
way to gauge what the demand in the political market place is for what do people want is
#
by saying what do politicians promise you know because the supplier is responding to
#
demand politicians are better placed to understand that than we commentators on the outside because
#
they have skin in the game even though as we know there are so many incompetent politicians
#
in our opposition today and if you look at poll promises right either there is a clear
#
line of sort of almost a soft Hindutva or a kind of nationalism like the road that AAP
#
goes down upon or again you know something amplified by AAP this culture of promising
#
freebies left right and center free electricity free water free what free whatever at whatever
#
fiscal cost every pilgrimages right and these sort of dominate the landscape of what is
#
being promised by the supply end of the political market place to the demand and so therefore
#
I am assuming that they are doing that for a reason unless there is a failure of imagination
#
unless you are fundamentally wrong about something I don't see any party going out there and
#
saying that your GDP growth last year was 4% we will do 5% absolutely no one is saying
#
See if you look at manifestos of all political parties it's a mix bag of all these things
#
no but if we are saying that that politicians response to incentives manifestos are one
#
way to know what they are promising right actually they are not an efficient way I would
#
argue that what they say in campaign rallies to people and on television that's the efficient
#
way manifestos you can go and look at this government's manifesto whatever they have
#
put in their manifesto they are implementing it whether you agree we agree or not is a
#
separate question they have actually a lot of studies on that as well but then I look
#
at the last congress manifesto and one of the better parts of that were agricultural
#
reforms which they promised which they immediately opposed when those same points came out in
#
the farm laws just for the sake of opposing correct so I mean it's a mix bag but even
#
on all the two manifestos that I have seen they won't promise GDP growth of this number
#
but they will promise rise in incomes for agriculture also I think even in the campaign
#
rallies the PM had a statement right I double your agricultural income so they do talk about
#
incomes plus all the other things which we won't agree with but I there is always this
#
idea that your lives will be made better off it's not expressed in GDP but it will be through
#
incomes and often like we are going to the central paradox right there is more demand
#
for redistribution than public goods or law and order or and so those kinds of things
#
will be promised right so maybe you know you we will have more government jobs we will
#
have more people in the government but all of them relate to this idea that your incomes
#
will raise your future economic prospects will be better than what they are through
#
ways and means that we might not agree with but there is definitely if you look at all
#
manifestos and even promise that element is there but those promises are near than not
#
neti if you are saying will raise your income you are saying that's near it's not neti
#
that will raise your income by doing this by allowing MSMEs to you know grow by removing
#
constraints and etc etc but then the point is then you go back to neti and ask among
#
the hundred things that you know any government including this government has done how many
#
of them are you know what they keep tom-toming on you know general media you know which is
#
all cultural issues etc and how many are concrete you know issues of economics right or of development
#
and you will find that oh there are some five headline things which we might completely
#
disagree with that that's a different point but barring those five headline things the
#
other everyday work of the government is like doing the other 90 things here so again so
#
if you look at the actual action I think they might be broadcasting for different reasons
#
the ones that gain the maximum you know whatever media and public attention because they are
#
easier emotive issues they can have all kinds of conversations around that but I think in
#
terms of action I don't see that there are ministries and bureaucracies sitting and doing
#
work only on that they are doing their everyday work I mean there is some gel program you
#
might disagree that it should not be done this way or they should be done differently
#
some Urja program some you know road program that is happening on a fairly reasonable clip
#
so so you have to then also not just look at the manifesto and the promise but also
#
see on the ground how much time is being spent on what and forget about what is the voice
#
there that the share of voice that some points have that that is a different reason altogether
#
why that is there it has its own downsides and you know somewhere you have to be careful
#
about how much that share of voice truly remains at share of voice and it should not then come
#
into the body politic in a real way which starts impacting you know people and in a
#
really really bad way but right now you don't know I mean my sense right now is that there
#
is a lot of share of voice of some of these issues in some areas they do impinge on real
#
you know sort of action and in lives in real ways but I think the general action of the
#
governance otherwise in many sectors are just you know the general acts of governance that
#
is happening and I agree with you on the Niyat versus Neeti thing and I'm not trying to say
#
that the Neeti's are great I mean if they were great this book would have been completely
#
useless but the idea is on the Niyat point itself I'm not going that the Niyat of all
#
governments is towards yeah we have to increase economic whatever prospects and how they are
#
defined is the question of Neeti where we think there are wrong ways that people are going
#
and also I think one last point on this say I think I find that and this is a broader point
#
and that you know the just the natural progression of any party that starts becoming more and more
#
dominant if democracy works in the way it works it should you know have you know greater probability
#
of losing the next election because there are some very real reasons for it one real reason
#
is your incumbents don't want to leave they keep winning then people who are below they find that
#
you know of belonging to the same party that they have no prospects right and then they have to make
#
that choice that is the party winning because the party has become so strong at a macro level
#
that even if I jump out of this they will continue to win or is the party winning because I do all
#
the hard work on the ground and if I start moving out then the party will not win now we might be
#
in a place today where you know it is still that the party will win regardless of who the candidate
#
is but you know after one round two rounds maybe the third round of election this starts fraying
#
you know people forget about people wanting a change the people who are aspiring for power will
#
say that I want I want to be out of this because otherwise I'll never get access to power because
#
there is just one party unless the they keep distributing goodies in the way that they can
#
keep everyone happy very difficult even in a totalitarian regime like china it became difficult
#
but there are also a combination of actuarial odds and game theory actuarial odds because the
#
people in power are tend to be kind of oldish and you know that they won't be around forever
#
and game theory ish because you want to be the survivor who is jostling for position when those
#
guys are gone and jumping ship may just leave you yeah yeah so then that that choice you have to
#
keep making now I would argue that more and more you will find that you know see it's not even a
#
matter of you know 25 years later if somebody who has some ambition finds that at least for the
#
next 10 years it is blocked then they would start thinking about alternatives because what's the
#
point of waiting for 10 years till this guy goes because for who knows after 10 years the whole
#
sort of I'm skeptical about anything happening at this point in any time close because anyone
#
who's tried to defect from the BJP for example has basically got rogered no no I'm not what I'm
#
what I'm trying to get at is the broader point of democracy the broader point is that the party
#
today has this confidence that they will win regardless of who you know they put up and
#
they put up and therefore you know it can be reasonably confident as they get into the
#
second electoral cycle the third electoral cycle they have to constantly find reasons for
#
them to be continuing to be viewed as a good party that they should be voted back and so on
#
and so forth and that is where they will have to start showing performance and it's you just can't
#
back yourself on some of those emotive issues because that can take you only that far plus
#
there are natural pressures of democracy where others will be wanting to have their chance etc
#
who will go out if you don't show real performance so it is in some ways a necessary requirement for
#
the party by the time that's hit the second or the third that boss we need to start showing real
#
results on the ground because that gives us greater you know continuity possibility of continuity than
#
some of the other issues so I mean that which is where again my point is whether you like it
#
or not so the incentives of some of the politicians at least if they are in the second or the third
#
term in power is let's just rather focus on performance because other issues we might start
#
hitting diminishing returns fair enough now the second and third points I was making and they kind
#
of bleed into one another so I'll kind of go over them quickly before we move on and the second
#
point was that you know you and I just sort of had a back and forth about how the economy is
#
doing I think both of us would agree it's not doing great but how do you quantify that and
#
you pointed to something that an area where it is doing well which is credit growth and you know so
#
on and so forth and even for people like us sitting in a room it is so complicated to get a sense in
#
this massive mess of whether we are doing well or not so for the common voter to have a sense of it
#
is literally impossible all the common voter has to go on are our own circumstances yes and typically
#
what tends to happen and this brings me to the third point is that there is this interesting
#
duality with our regard to the state that on the one hand there is like I often say that the most
#
common the most popular religion in India is the religion of government because no matter what
#
problem you have even problems caused by government you look at government as a solution you know
#
which gets a little bizarre at times but this is I think this is counteracted by the tendons by the
#
apathy that voters often show like I think many many many many people in India have given up on
#
the state they live despite the state they do what they can and they don't have any concrete hope of
#
their vote making a difference because to them you know all politicians are scoundrels and therefore
#
that is the apathy that you know that is a jostling and therefore whatever voting happens
#
happens not on lines of who will give me good governance but on other tribalistic lines like
#
you know maybe if the guy from my caste becomes MP then I you know I'm in a better position to
#
you know get a quick get my water supply fixed or whatever the hell it is you know at that
#
extremely local level or they are showing their allegiance to their team as it were you know the
#
same way you go and cheer at a Manchester United match for example you know in that same way you
#
go to the booth and you vote for whatever your side sort of is so I think that even that connection
#
that in this age of narrative battles does governance really matter and how has a common
#
citizen adopted the attitude that was you know so famously and well expressed by Kashi Nath Singh
#
and Kashi Kashi even if I have to paraphrase it for a family friendly audience which is certainly
#
the temptation that I as a relatively as an extremely privileged well-heeled member of the
#
elite even I have you know feel that way a lot of the time so for a common guy out there it's like
#
nobody gives a shit you know it's competing mafias fighting for the right to be the stationary bandit
#
as it were so you know so that that's just the sort of yeah yeah no that ties into what we were
#
discussing earlier that the people or all of us are apathetic towards not the state as a whole
#
right if we are to take that proposition they still want something from the state
#
but our conception of what the state should give is not public goods good public services so we are
#
apathetic in those core areas but we still want the state when everyone realizes that state is an
#
really powerful instrument and we different people want it to achieve different goals right
#
and like I was saying it is not just for India for generally there is this idea that in many
#
places where electoral democracy comes first there will be this tendency to have things which meet
#
my narrow private interest or my community interest rather than as a whole right so I would just add
#
that qualify right so no one has given up on state as a whole they have given up on what the state
#
should do and there are there are different conceptions about this so that's why there is
#
a job for all of us to at least talk about what happens when a powerful instrument like state
#
gets into all our lives in various domains of our community our markets etc right so I think
#
that is an evolution that every society goes through and we are in that moment in India as well
#
so let's I want to talk about another duality where the state is concerned
#
whereas one thing that you've pointed out when you talk about the Indian state's response to
#
Covid which you drew certain different lessons from and I'll ask you to elaborate on that
#
but the first point I want to focus on is you on the one hand you speak about how the state is
#
effective in reducing avoidable deaths so I'll quote from your book where you write quote
#
there's a generally held view backed by the evidence of a huge number of avoidable deaths
#
that the value of life is cheap in India however this isn't entirely true there is also a counter
#
narrative of multiple success stories large scale vaccination programs reduction and infant mortality
#
and control over communicable diseases that suggests the state is effective in reducing
#
avoidable deaths also there's a collective memory that's still fresh among people in the
#
administration of outbreaks going out of control all of these meant that the state had the will and
#
the people were willing to live with a complete lockdown quote and you stop quote and you wrote
#
this in the context of you know how they could have how they had the will to you know put the
#
lockdown on there and the people largely accepted it now what Covid showed and I wrote a column at
#
the time for the times of India called we are fighting two disasters Covid 19 and the Indian
#
state and my point was that Covid 19 was a scene disaster it was upon us and the Indian state acted
#
quickly they they messed up a lot of things which you've also mentioned in your book but they also
#
acted at a you know with a lot of speed at a kind of big scale etc etc you know and it's a scene
#
disaster but the unseen disaster is a dysfunction of the Indian state which we have completely
#
normalized like some of the statistics I gave in that piece were 3000 children die every day in
#
India from starvation one in four Indian children are malnourished now if there happened to be some
#
natural disaster which was killing 3000 children a day you know the UN would be up in arms or who
#
would be here it would be an international calamity even American newspapers might start to report
#
something of that magnitude but it's normalized it's an everyday thing it is part of what it is
#
and we don't even notice and this I think plays back into the apathy that I mentioned that is
#
kind of ingrained in all of us so there are these sort of dual aspects and we are speaking in dual
#
aspects we are speaking about how some things the state should do it doesn't do at all how some
#
things it should not do it is meddling in many many things where it should not meddle now this is
#
another sort of duality it's a visible crisis they acted you know and I still feel they could
#
have you know they messed up a lot of things like the migrant labor crisis and all of that which
#
you've also written about in your book but the state was visible but in so many other areas
#
the state is invisible and if we had a normalize them they would count as a natural disaster
#
yeah I think see the players acting on behalf of the state are also the kind who would want
#
I mean there is a certain performative nature which thrives on you know being seen to be solving
#
for problems and when there is a crisis of this kind like we had at COVID-19 sometimes you might
#
say that their desire to act leads to worse consequences than if they had not acted but then
#
there is a great desire to act because it shows that you are caring and you know there is no
#
better time to demonstrate agility to demonstrate concern and so on and so forth and I would say
#
that there were multiple occasions at least during the second wave when we had that terrible you know
#
period between March and May in the second wave where a lot of people realize that there is no
#
I think performative here right now because things are really really bad and we had almost radio
#
silence for a couple of months but the moment that that got under control and vaccine started
#
coming you again had the performative nature this is somewhat natural you know you would like to
#
show that you are capable acting visible when there is a real problem on hand that is clear
#
and present but the other problem that you mentioned which is the 3000 you know deaths every
#
day of children now that's you know it's not there's nothing performative it's so spread out it's
#
happening at different levels at different houses in different talukes in different districts that
#
it's really not you know in some sense tangible real for a lot of people till you bring the data
#
together and going back to the point again a lot of the demand side story that we want to
#
improve on is to make some of these things real and tangible so that then there are some real sort
#
of you know action that you can take on public health for you know for women who are going
#
through maternity or for children who are just about born and and all the right kind of neonatal
#
care and things of that kind so the question is how do you make these very you know real disasters
#
but which do not come out you know in in in a way that is that allows them to be performative
#
how do you make them real and in that sense give them the opportunity to make it performative for
#
themselves if you are able to do that then they will try and solve those problems also
#
I mean one of the reasons why I think that often in this government and maybe in the previous
#
government also the surface transport minister often was getting decent credit maybe because the
#
transportation and the surface transport minister is actually more competent than others but it's
#
also because you know we can see the tangible so it that is one of those cases where even if there
#
is no crisis the nature of the work is visible you start building good roads between two states
#
you know 10 people will come and tell you was six years back I used to drive it used to take me 14
#
hours these days it takes me six hours you know it's clear now this was very easy we could have
#
done this elsewhere now what is the equivalent for say you know the children's death if we can make
#
the problem statement more specific and tangible for people to understand and then demand for it
#
you will find that the politician will respond to that incentive and it's a sad thing that they
#
should do it on their own but then you know there are many things everybody should do
#
in the in an ideal world but is there a way that we can articulate this in a manner
#
that makes it important for them to do it because if they solve they appear as you know as stars or
#
heroes if you are able to do it you will get the right incentive just one point here like see one
#
of the things that I often have asked in the past also that okay I mean and I think now we are
#
starting to get this articulation somewhat better is one of our big you know reasons for current
#
account deficit is the oil bill that we have for imports it's large we are largely dependent on
#
imported oil and my general question is anyway the world is talking that we should go for green
#
alternative energy renewable energy and everything everybody supports that we might get even good
#
you know at fairly good funding for many of these things and in a very simple way we can
#
and in a sort of very sort of double whammy in a positive way the more we go towards a renewable
#
energy economy the you know we'll continue to have lower current account deficit because our import
#
bills will come down right I think only now somewhere this these two things started coming
#
together in the minds of people at least that's how I read it once you get it then you know you
#
can you have all the opportunities to become performative in the then the Paris Accord in
#
everywhere else because your incentive is not necessarily that I should be driving green but
#
your actual incentive is I should stop having such large oil import bills and you can actually sell
#
this you can sell this internationally one way and you can sell this domestically in another way
#
and if you are if you are able to do that then of course you've got a political
#
winner on your hand right you you win outside India and you win within India so I don't know
#
whether it dawned upon the the political class on their own or gradually through multiple
#
conversations etc it has dawned upon it I see now that push happening now what are similar opportunities
#
available in education in healthcare if you are able to frame these that allows them to be seen
#
as stars you will get action you might argue that why should it be that way they should be able to
#
do it on their own because these are real problems for them but you know fair I mean you need to
#
you need to learn to live with what you've got rather than expect the best yeah another example
#
of this I completely agree that there are certain issues which go unnoticed but I look at it from a
#
framework point of view right so now look at an example of drought right now is drought
#
a mistake of the government or is it a natural cause so there is a framework that Deborah Stone
#
talks in her book that there are narratives of causes are powerful narratives so there are two
#
axes if you can imagine one a cause and causes can be intentional or unintentional and then the
#
result is the other axis which can again be intended and unintended so now it is completely
#
the incentive of every government forget India or anyone to say if something wrong happens to say
#
that the cause was unintentional natural etc and the result was unintended so that shields them
#
right so in that quadrant they would want to be so many of those things which you were talking
#
about are currently in that quadrant right they can go and what Raghu was telling is are there
#
ways in which then we can say that no these are not in that quadrant you could have done something
#
to avoid so for example on drought we now know that you know many of these droughts are manmade
#
right like if you know that year on year drought is happening and by the government declares a
#
drought here right it's like a procedure so if you know that this was the situation you could
#
have done lots of things in the last year right like i mean if it is shortage of water we could
#
have built reservoirs or i don't know there are 30 other things that agriculturally people will
#
tell so so the question is now can we say that these were the reasons why there's a drought you
#
can't go scot-free by saying that this was an unintended result from an unintentional sorry from
#
from unintentional natural cause so i think that's the public policy challenge right for all of us
#
and as long as we are able to make it real and connect to the real consequences on ground people
#
will respond to those incentives i think we should just the simplest solution is to outlaw droughts
#
and therefore anyone who talks about something that is outlawed is by definition anti-national
#
right so that solves the problem no and speaking of green energy i think that there is a movie of
#
based on a you are anand murthy book called sukha it's a similar concept oh okay i must
#
check you are reading all the books you're watching all the movies where do you get the time boss
#
mr jetli so you know and speaking of green i think india has got a great opportunity
#
in the sense that and this is something that i think pranay i discussed with you and nitin in
#
the russia ukraine episode that we did which by the way was the fifth most downloaded episode of
#
final 22 so congratulations and which is just going nuclear like you know if and i'll put
#
relevant links in the show notes but nuclear energy is by far the safest form of energy
#
the total fatalities over the history of nuclear energy are but you are less than the lives lost
#
through coal in a month or a week i forget what the exact figure is you know it's it's by far the
#
safest you know the fear-mongering over it is completely unjustified only it's become a matter
#
of dogma in some circles that oh nuclear to unsafe air it's absolutely it's absolutely not
#
and you know there's sort of an opportunity which and i think india has i think in the world now
#
first or second most number of nuclear power plants which are going to be commissioned
#
or in in the works so there is that sense that you know this is one way out and also the technology
#
has improved now right so there are also options which are smaller more efficient so yeah i think
#
there again there is the the bigger challenge is not that this i think our politicians can manage
#
saying that why this is important for all these reasons that is not the problem but yeah there
#
are other challenges in this idea of nuclear like we want to also optimize for the thing that the
#
nuclear fuel cycle should be indigenous it should be the one which we've been trying there are
#
thorium cycles all sorts of things which are there so that is again you know you're trying
#
to optimize for many objectives that you know it's not just that i want to have nuclear energy but
#
also i want to do it in a certain way for other goals and when you try to optimize for so many
#
goals you don't end up with either so brilliant so i want to now talk about a frame that you have
#
used in your book which is the frame of sarkar samaj bazaar of looking at the state society
#
and markets has three different prompts i think raghu ram rajan has used the same frame
#
rohani nalikani has used the same frame and i'm supposed to be to have her on the show as well
#
pretty soon and i have a problem with this frame and let me say why i really think that there are
#
two prongs one is a state and the other is society itself and markets are a mechanism used by both
#
now if i look at society the way society often functions when there is a rule of law is through
#
voluntary actions and voluntary interactions one way of doing that is through a free market
#
where you have and every voluntary transaction makes both people better off and therefore you
#
know that's why free markets are great that's the reason for all the prosperity in the world it's
#
not a zero-sum game it's a positive sum game and and society expresses itself through various
#
devices such as markets such as philanthropy such as civil movements and so on and so forth
#
and equally markets can also be used by the state you know to favor the the cronies they want to
#
favor and you have also pointed out a distinction i keep pointing out between market friendly and
#
business friendly you know there's a big difference between what is good for markets and what is good
#
for big business and it can be used in that way also so i don't understand this i don't agree with
#
this rather this third uh prong thing because to me it's like you know to take a writing analogy
#
the state is a bad writer society is a good writer they're both using microsoft word you know and to
#
blame microsoft word for either the good writing of one or the bad writing of another is not fair
#
instead what we should look at when we look at a particular piece of writing is look at the qualities
#
behind the writing the reason free markets work in society when they become a mechanism for society
#
to you know people in society to serve each other and make themselves better off by making other
#
people better off is a voluntariness of the action that consent is paramount and there is no coercion
#
and that is also the reason that markets can be corrupted and perverted you know sort of by the
#
state so i just feel that you know something about this frame doesn't sit well with me.
#
So i mean if you look at how we have written the chapters on market if you follow the flow of all
#
of those chapters it is to say that you should just leave it alone it's it is not something that
#
anybody should act on but that's like saying leave society alone no no but society if you
#
leave alone there are some i mean the you see in the society section and the state section we have
#
views on society in the state how we have reached here where we are going so on and so forth in
#
market all our conversation all our discussions is i mean unnecessary you know it's an efficient
#
allocator to the extent possible leave it alone only when there are some failures you manage it
#
so in a way we are not actually making market and how it should be what it should do etc as
#
a prong in this the reason why we have picked up market and had a separate section on it
#
is the highest misconception in India or about the market and for various reasons one is intuitively
#
people you get things wrong about the market it's broadly because people get many things about
#
economics wrong because they are not able to sometimes fully appreciate like unintended
#
consequences second-order effect Bayesian principles stats you know many of these things
#
so we wanted to have that because we wanted to in some ways highlight that these are misconceptions
#
it should generally be left alone it's just a way of allocating resources whether society does it
#
state does it they should use it as an efficient allocator of resources second we also wanted to
#
put it there because in a way you know we need to be getting out of this stigma of you know market
#
profit you know what it does what it means by taking i mean it's the same thing as the first
#
point that there are misconceptions about it but more than that the first point was that we want
#
people to appreciate for market for what it is and the second one is we want people to also make
#
sure that they do not blame market for what are actually problems of the state or the society not
#
the problems of the market market by itself has it's in some sense value neutral it's what it is
#
is so you know we are not necessarily talking about it as a extra prong we are only just
#
highlighting the fact that we have a very different understanding of the market which
#
unless corrected we blame the tool and we often sometimes want to throw away the tool instead of
#
using the tool in the right manner you know or just thinking of it as a tool
#
and so that's the problem anyway we're coming back to the point that you made on microsoft world
#
i don't know whether you have seems like you've not had a situation where you have drafted something
#
fully and then the world has crashed and you've not never been able to recover it that's happened
#
to me but my writing is worthless anyway but i remember amit we've discussed this earlier
#
also and i have gone back and tried to think of it i think those three prongs exist but
#
these prongs can be defined differently so forget about state markets and society but what if we
#
talk about governments businesses and community or society then there is a difference right so i
#
understand where you're coming from that markets are like anything which happens outside the state
#
any exchange positive some is can be classified as markets right but when we are talking about
#
businesses then we are talking about one particular element subset of the entire marketing so maybe if
#
we define as government businesses and communities that distinction makes sense the reason why i say
#
that is see you are talking from the angle the parameter that you're looking at is coercion
#
right we are looking at it from if you put an individual at the center and you look at broadly
#
what are their interactions they have with then these three elements come up and why these three
#
elements come up is all three optimized for a slightly different thing all have their
#
advantages disadvantages right so their strengths and weaknesses you can say like that right so
#
state has its strengths it can you know it is needed for certain things to maintain some basic
#
law and order for the other two prongs to function but it can become overbearing right similarly the
#
society by the way can also be very coercive it's like it's not as if society is always representing
#
the will of the for an individual it can be coercive at times right so if you place individual at the
#
center society again has its strength right it will give a feeling of community it can give things
#
that probably a business can't or a government can but also it can become overbearing in other
#
ways and similarly businesses can also provide the best way to express your creativity to generate
#
value out of it but again they are not optimizing for inequity in reducing inequity in any way so
#
i think of it from those three prongs placing individual in this yeah i i think what's happening
#
here is that these terms contain multitudes so we could even be speaking at cross purposes like in
#
some context society is a bad word for me because the good of society is often used as an excuse to
#
crush individual rights and as you pointed out there is coercion involved there but i'm broadly
#
looking at like two ways in which people interact and one is coercive action which the state
#
typifies because every action of the state is coercive because it exists because of you know
#
coercion that's a liberal paradox because we want our rights to be protected and we need the state
#
for that we give away some of our rights by you know giving the state the monopoly on violence
#
so every act of the state is necessarily a coercive act which is a moral cost we must always consider
#
whenever we say the state should do this or the state should do that and equally and and i
#
contrast coercive action with voluntary action and ideally where there is a rule of law in a
#
well-functioning society you know people will get ahead through voluntary action and the market
#
is one expression of that but i get what you're saying that all these are such loaded terms and
#
can mean so many different things but yeah so here's my question for you pranay as someone
#
who's taught public policy and even for you raghu as someone who's you know possibly gotten into
#
these arguments with people as you said raghu the a lot of beliefs about a lot of what is true about
#
markets are unintuitive right for example the notion of spontaneous order that you don't need
#
a central planner i think uh one of my heroes wrote an essay about how does the city of
#
paris feel itself there's no central planner saying and planning all the supply and everything
#
it just works magically there is you know those shortages aren't there people broadly get what
#
they want they kind of manage and it could not be centrally planned and that's spontaneous order
#
where languages for example again you can't have a central planner they they evolve through
#
a collective action through human action not through human design as adam ferguson
#
memorably used that phrase another unintuitive concept is positive sumness right and i often
#
speculate that this is because our brains evolved in prehistoric times where you're in a small tribe
#
conditions of scarcity one apple for you means one less apple for the guy next to you and so on and
#
so forth so you think in zero sum ways that if i get richer this guy will get poorer whereas you
#
know that's not the way society and economies work at all they work in a positive some way in what
#
john stossel called the double thank you moment that if i buy a coffee from starbucks you know i
#
say thank you when i get the coffee and the cashier says thank you when she takes the money because
#
starbucks values the money more than the coffee i value the coffee more than the money that's why
#
it's a voluntary action we are both better off this is how it's almost magical how the more
#
voluntary interactions there are the more we progress the wealth in the world can actually
#
grow and not stay the same and these are again another this is another unintuitive concept the
#
the concept of how for example prices carry information and incentives as hayek wrote about
#
in his great essay the use of knowledge in society and by the way i should inform my listeners that
#
pranay runs his brilliant hindi podcast called puliyabazi and i have been on that speaking about
#
frederick hayek for an hour in hindi so if you want to make me make a classic fool of myself i'll
#
link that from the show notes as well so my question to you as a teacher of public policy
#
pranay and to you as someone who discusses this with others and tries to convince them on matters
#
of policy how much of a barrier is it that these ideas are unintuitive that essentially you know
#
every baby born will automatically think in a zero-sum way that the battle to get these ideas
#
across to get econ 101 across for example is and is like a never-ending battle you know everybody
#
will imagine that okay you know xyz is too expensive price control we'll be able to afford it
#
right that is intuitive counter-intuitive you should do you know you should never do that
#
because immediate shortages and just suffer so how how much of that in your experience
#
have you faced with the people you teach no i think that is a biggest challenge and i myself
#
have gone through that right the way i used to think about this 10 years ago is very different
#
from what i started thinking of after reading all this work right so so in fact like the fact that
#
i have i started thinking differently means everyone can start thinking differently on this
#
right so what works i think is again giving concrete examples of where you are able to
#
illustrate this right so one example we have also in the book about masks during covet 19 right so
#
now there was there were some moves initially to put a price cap on masks but generally we didn't
#
put and you just saw i mean masks were there earlier there was a shortage in the beginning
#
first two months but then just the brilliance of the market rate the garment manufacturer
#
suddenly shifted to producing masks there were masks of various types there were masks which
#
didn't match your ears and there were masks of various price points quality etc now imagine if
#
this were to be done by a central planner how would that have worked out right so i think this
#
is one concrete example which people have felt it you know like did anyone plan for the different
#
types of masks no but it works so again my answer to that is we just have to it is tough i wouldn't
#
say and a lot of things in public policy or generally in politics and things are counter
#
intuitive right so if they are counter intuitive also because this is a complex system it's not
#
just a linear system there will be some emergent phenomena there will be some part dependence like
#
lot of those variables are there which inherently make it complex and make it a tough thing to
#
explain but yeah i like we talk about examples we talk about these writings once you are able
#
to go through them it's again like the switch going off that you mentioned right after that
#
you will start thinking it differently so my experience teaching and learning has been
#
first people come with this strict notion that no you know prices are there should be some price
#
cap you know some things for certain things there should be price caps and they'll start with that
#
position but people do change that opinion once you are able to give examples illustrate that
#
with what happens in real life so again it changes at the margin you are not going to convince
#
every everyone but there are people who start at least questioning that and when they find other
#
examples where actually putting a price cap in other context has gone wrong they are able to
#
connect the dots so for me it's like often to the people that we teach public policy the journey
#
takes around a year or so you know like even though our course might be for 12 weeks or so but
#
people start thinking about it deeply after reflection after going through the news with
#
these armed with these new frameworks and models and then certain people we've seen like they often
#
come back and say to my colleague who teaches economic reasoning that you know like i hadn't
#
thought about that at all and now i see things in a completely different way so that happens it's
#
up to us to also collect these examples to illustrate things which people can connect with
#
if it is abstractly explained it becomes difficult because it is so counter-intuitive
#
yeah i mean i think the concretization of it with simple examples is the most effective way
#
and i would say that in a way it's a failure of firstly not having many of these as curriculum
#
in our schools because these are not very difficult concepts to explain once you explain it in a
#
manner which is you know with examples etc you know students in class 9th and 11th 12th can
#
understand this but we don't do enough of this and therefore you continue to have people build
#
you know somewhat you know mistaken notions about about many of these things and then when you are
#
you know fully formed you've lived through life and you've seen things then you try and explain
#
this it's very difficult some of the things here is that these are i mean basic economic reasoning
#
forget economics itself should be a very important part of the curriculum and i've always argued this
#
you know statistics basic economic reasoning these are all life skills first i mean probability
#
thinking in probabilistic terms these are life skills they should be there like any other
#
you know core life skill at the school level and i think we should introduce
#
those it's it's just like probably don't think of it as a subject but as a skill right so if
#
you're looking at it as a skill you're trying to think of what are some key frameworks that
#
can then apply across subjects but now economics is a subject and we mostly teach economic history
#
and that doesn't help right economic reasoning is different from learning how india's economy
#
changed over the last 50 years yeah and even even that i mean even when you teach economics i think
#
i don't see how you know if you teach the i mean if you just teach the demand supply
#
you know concepts well and the point and the point about what is price that price is a signal
#
well you teach them teach that for two classes fully explaining how price is a signal people
#
will get it in fact you mentioned life skills and there's actually a folder in my room research
#
called life lessons which is basically this course i wanted to put together with friends at some
#
point which cover all these basic subjects which are not taught to people which includes
#
statistics which includes mental models of how to think about the world and which includes economic
#
reasoning but a basic set of mental tools that can help you navigate the world and is far more
#
useful than the rest of the shit that you learn there so maybe someday i'll do something like
#
that because i think that there is kind of a lacunae there and before the break by the way
#
remember i'd mentioned this argument i had about price caps with a former guest on my show in case
#
people are wondering who that is i must say that i actually cut that 10 minute argument out because
#
i didn't want the focus to go on something like that and instead stay with an excellent book which
#
he wrote so you will never know but here's sort of my next question you know you also talk about
#
mindsets in your book and why mindsets are for example so much against markets and one reason
#
of course is the colonial hangover that you know we associate markets and all of that with the
#
british because after all east india company traders and all of that and therefore there is
#
this distrust of them and that was very much the fashion of the times during independence nehru
#
once said to jr d tata do not talk to me of profit it is a dirty word and so on but that's actually
#
in a sense it seems that distrust of market is much more widespread today in the sense that among
#
a lot of people especially those who have quote unquote studied the humanities it is almost like
#
a dogmatic belief like every time somebody uses the word neoliberal i just feel that this person
#
isn't thinking for themselves they are kind of parroting the holy book of whatever tribe
#
that they are part of and they're often you know they're tweeting from their iphone or you know
#
they'll be sitting in a starbucks with their laptop and on their laptop and raging against
#
capitalism and the dissonance there is remarkable like everyone listening to this is living a life
#
of tremendous privilege that has been sort of enabled by free markets by voluntary exchange
#
right so why do you think there is that sort of is it's it does it remain so fashionable to hate
#
markets for example i was i read this great essay by russ roberts who's been on my show before host
#
of the og podcast econ talk and russ was talking about the sudden tendency to demonize milton
#
friedman for all that is wrong with the world today and how market orthodoxy failed us and
#
russ's point was that milton friedman lost you know his ideas were never mainstream practice
#
the state has only grown bigger and bigger and bigger you know you you are you're blaming markets
#
for something that is really a failure of the state a failure of a big government but it's just
#
so fashionable everybody's shitting on markets all the time i mean whoever is listening to this
#
right now this is a market interaction you know your time is money and i am producing it for
#
benefits that may not be immediately monetary but it is a voluntary exchange it is a market
#
interaction as far as i'm concerned you know so why are you even listening to this you know why
#
do you have a macbook i think like apart from the reasons that we discussed about this moment and
#
again i'll go back to that idea that we live in and the elite in india are closely connected with
#
the world elite right and we borrow conversations ideas from across the world which is great in
#
many many ways but it is also again there are trade-offs there's one trade-off is this right so
#
there are conversations in the u.s probably once you reach a 64 000 per capita income maybe you
#
have different ideas of what is good for your country i am fine with that right i mean you
#
have reached that but when you are at 2000 per capita income your conversation your priority
#
should be different so but that's not so i think that is one reason why we might be thinking you
#
know okay us may they are doing something against big tech or big businesses so we should do same
#
thing here where is your big tech boss so i mean first create that so so but so i think that is
#
one reason why we are seeing it in this moment why it's happening there i really don't know you know
#
i i i don't know the ferment and the intellectual ferment which is taking place there to come up
#
with these ideas but i see of it practically right like you're so far down the ladder you
#
uh have your priorities will be different from their priorities that is should be very clear
#
in our minds and that is what often doesn't happen and that leads to this confusion that
#
yes we should do something different like what some x country is doing yeah so i mean just as
#
an aside one of our one of the things i have i mean not theoretically or otherwise rigorous
#
is that in india they used to call the british state company and those guys used to be called
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company bahadur in our country we have been having a paranoia about anything named company
#
and therefore i think we have some very sort of deep rooted worries when we hear that you work
#
for a company or there is a company that is going to come and set up something because the east
#
india company used to be just referred to as company you know rural and the general sort of
#
interior india coming back to this point i think this particular point is very important that we
#
do take influences at a certain level in india people do take influences of what is happening
#
in the rest of the world whether it's relevant to us or not is immaterial and and that is a very
#
important point to pranay's point on why that is happening there in the us i mean sometimes i think
#
that you know once you got you know once you in some sense won against socialism you finish that
#
enemy till that time there was no way somebody could even remotely say that i have this i'm
#
somewhat socialist and have any chance of a public life in the us till the time you were till the
#
time the ussr and the eastern block existed right it was impossible i mean people in india don't
#
realize how much of a you know anathema the word socialism was in the us or socialist and even now
#
it is and with good reason because it implies coercion i mean bernie madhav initially people
#
were just throwing that thing saying you are socialist till it became somewhat that you can
#
throw that and yet people won't get scandalized in some parts of the year i think you mean bernie
#
sanders bernie sanders not madhav madhav i think once once you eliminated that threat
#
and one generation grew up with no idea of that threat yeah then there is a certain seduction to
#
that idea that you know we all should live you know this whole you know imagine and you know those
#
kind of ideas because you don't you're not you're intellectually lazy you're not thinking rigorously
#
and the intentions are great you can feel very noble yes so it's very difficult to argue
#
against that because when you bring tangible into it they will continue to drag you into the
#
intangibles that isn't it why should one guy have 100 billion dollar worth of you know his worth then
#
you know 10 of them put together if you tax them at 20 percent for everything that they did
#
can solve the you know hunger problem of you know all of africa very i mean of course this is true
#
of course this is true you know but the question is in order for you to start taxing these 10
#
people and you know where do you go down the path how do you decide to do it you will not stop there
#
you will once you get down that path you will go down the path of you know trying to again
#
do the same thing trying to make everything equal for everyone and we've all gone down that path and
#
seen where that ends up but like i said once you don't have that large threat anymore
#
and one generation grows up without that threat then that idea is very seductive to a certain
#
set of people who have not seen any other you know sort of want or have not seen any other
#
you know lacking anything in terms of real resources so i am 100% confident that all of those
#
ideas are going to continue to become stronger in you know in many of these economies i can see it
#
i mean i you know you read fiction and many of these are actually good forward leading indicators
#
of where the thinking is and you read them today these are all you know in one way or the other
#
constantly attacking the ideas of economic freedom you know market voluntary transactions all of these
#
ideas are under attack when you read good quality literature today and sometimes i feel it is no
#
different from the late 18th the late 19th century i mean some of the great works of literature but
#
at the heart of it was you know all these ideas that you know industrial revolution has brought
#
us a lot of you know problems in in terms of inequality and things of that kind which maybe
#
somewhat was right but the solution to that which a lot of countries went through then was actually
#
was actually a worse system the results of which came out much later and i i can sense that you
#
know we will go down that path at least in the next 10-15 years in many countries where some of
#
these ideas will become mainstream and then you'll go through that cycle again but i can quote books
#
and films that i have seen in the last five years where in very very powerful sort of storytelling
#
methods and stuff they're essentially making the same point i saw this glass onion knives out too
#
you know at one level it is hilarious how they have portrayed you know some people but you are
#
also sometimes worried about you know what you know even if it is fictional what is that portrayal
#
you know indicating about people who are actually entrepreneurs who are actually creating
#
you know breaking boundaries thinking about new things solving real world problems
#
it's all very it's all going down that route eventually we will we will go through that cycle
#
again why should india go down that path i have no real i mean we are where you know many of these
#
countries were in 1930s we have to go through our 1930s to 2000 before we start saying that all of
#
this is a bad thing bad idea we have at least 50 years left so since you mentioned fiction films
#
all of that and and you also shared your interesting theory about the word company
#
the connotations give me a sense of how bollywood has looked at big business because i think that
#
could you know that would also be an interesting indicator of what they perceive the demand to be
#
within uh society like for the longest time your villain was the capitalist or the businessman or
#
the smuggler or the factory guy or whatever i remember i wrote a piece in 2003 or four or
#
whenever the film guru came out for the world street journal about how i mean it was it was
#
not a good film it was a mediocre film but what the one way in which it was different from a lot
#
of what came before was that it was pro-free market rhetoric it was valorizing the entrepreneur you
#
know and you know so how have you seen that landscape kind of changing because i think
#
india hasn't reached that sort of privilege jadedness that you see in a lot of the first
#
world you know a lot of india is aspirational hungry you know looking at success stories
#
with admiration rather than resentment and jealousy so what is your sense of yeah i think i would say
#
this is fair amount of you know whatever scholarship that has been done on this and some of it is i
#
mean if i were to be somewhat pat about this it's very sort of and it's sort of lends itself to
#
this kind of pat instead of scholarship that we had the 40s and the 30s and the 40s i would say
#
there were only two kinds of not two only two but there were two broad categories of films there
#
were some kind of you know mythological or historical sort of films which used to do fairly
#
well and then somewhere in the late 30s you know we started in early 40s started having you know
#
films that had social sort of issues at the at their core and many of them largely you know
#
driven by maharastra slash pune and you know west bengal bengal calcutta even this was part of the
#
both pune and bengal renaissance and its outcomes because they had written some books and they had
#
some of these things going and so being a half bengali who went to college in pune i'm also
#
yeah i'm i think you're kind of bengal and pune renaissance on my own you're the renaissance man
#
your name should be vankim chatra agarkar
#
which well should i dive into sir kindly direct me agarkar agarkar
#
and therefore the that time the you know the whatever the there was no real villain in the
#
film it was mostly you know some kind of a society thing that you had to improve and then somewhere
#
in the early 40s etc we also had a few films where colonial rule was the villain and you had
#
various indirect ways of showing how they were the villain most famous of which was this movie
#
called kismat where you know there's a song called you know durhato duniya valo hindustan amara
#
which they could get away from the in terms of censorship by showing that as some kind of
#
you know british india fighting against the axis powers and so it was more that way than this
#
is but then yeah the moment the independence came in and then we had the whole of early
#
50s mid 50s as the village and the moneylender slash jamindar which was very much keeping in
#
the times and by and sometimes in early 60s you started having the challenge of we are getting
#
more and more industrialized and the city is a den of vices and evils and they showed that as
#
not really as a some kind of a capitalist but some you know some people who would profiteer
#
and they were bad and there were a lot of films actually a lot of later raj kapoor films and
#
some of devanand films are all this kind you know the kala bazaar anadis shri charsobees these are
#
all that kind of films of profiteering kind of a guy and that continued till i think by late 60s
#
nobody even bothered you know because people had gone into such bad state that you couldn't be
#
bothered about that you had a general anti-rich sentiment and then you know most of the 70s were
#
spent either having a smuggler or having the main hero do some of these kind of activities which was
#
considered anti-hero and by 80s you had classic police smuggler nexus with politicians so i think
#
in some sense it has reflected how we have also evolved i mean very few films in the 50s 60s or
#
70s had politician as a villain they were they were characters that you would make fun of saying
#
they were opportunistic and so on and so forth but i don't i don't recollect a film in which they
#
were portrayed as villains till we got into 80s in 80s in the book also you have written
#
about that mohan joshi has where the tendency laws were taken it to their to their limits
#
so i think that thing has gone on now i mean 90s and 2000s where crap everybody was going
#
you know outside of india and stuff of that kind actually in that sense we were lacking any villains
#
in 90s and 2000s which coincided with our best years so somewhere we were doing something
#
right because we were not having real villains to show there was some underground some underworld
#
kind of stuff but not beyond that if you look at things now and i don't watch as intently as i
#
used to watch earlier but i still catch up with ott and some of the films actually we are in a
#
very different state than i mean there are some films where they show that the rich guys are bad
#
etc but in most of the last few years that the films i've seen actually the it's in some ways
#
you know that guru kind of a tendency that i mean that smart people are doing smart things and
#
it is people one of the big successes was this thing called scam it was a harshad mehta
#
biopic uh on a on one of these ott channels it was quite successful i mean because people
#
somewhat enjoyed the idea that here was a guy who you know sort of made and made his money by
#
using the system and so on and so forth and a whole lot of films that i've seen in the last
#
couple of years not whole lot but quite a few where i don't see there is any moralizing
#
on you know on some of these aspects i think we are still in a in a in a phase where we have not
#
gone down that path in that the u.s has gone down we have gone down another path with all of these
#
sort of you know the south indian films that are being remade reworked larger than life and so on
#
and so forth where we have gone to a different level altogether but any of these films that have
#
somewhat more slice of life thing we i think our leading indicators are not as bad as the
#
leading indicators of what i see in hollywood hollywood leading indicators are terrible
#
why do they tend to be like that i mean right now i think it is because they feel that
#
the real audience which is you know which they believe is the audience is is of the is responding
#
to this kind of stuff which i think fair enough i think then they find that that audience is
#
is the one that is paying the but i also think like i mean it isn't it natural that priorities
#
of 64 000 per capita income will be different from what we have i'm i really don't know what
#
they are optimizing for me you know so unless we are in that situation don't know we will know for
#
from us at a distance it looks like you know very madness yeah madness but if you are in that
#
form and probably it looks you know yeah i mean let's look at other things you know there are
#
other things to do so for me that is one point but i will i'll also see that there is still a streak
#
in the movies where state is still an actor which tries to is is fundamentally good at heart i'm
#
talking about the indian movies in state okay i'm not talking about government but and again it is
#
a default solution i don't think recently there was this uh movie telugu movie about movie fines
#
i think mahesh babu was the actor or something i forgot the exact name but the idea was again
#
that you know he becomes chief minister it's like very nayak kind of a film plot but he the way he
#
says that you know he comes from the u.s and then here people are breaking traffic norms and also
#
his solution is he traffic fine i will increase 10x and because i have increased 10x problem gets
#
solved no so again that idea that just because you state is risk state can do great things and
#
there are these simple solutions which are available just there's no intent and if there
#
is this intent and one great person comes our state will do great things that is still there
#
as one of in parallel with what raghu said fines will not i mean we know the ante we can anticipate
#
the unintended consequence yeah well you better after the way you named your newsletter because
#
you had one job as it were because the guy who's responsible for collecting the fine
#
and the guy who has to pay the fine now there is much greater incentive for both of them to collude
#
and go ahead half the fine and the state gets zero of the fine and those two guys you know the
#
the agent of the state makes 50 percent of the fine i mean that's exactly what is going to happen
#
in that so to sort of you know you spoke about how our priorities have to be different from
#
there and i completely agree what should our priorities be you've spoken about the importance
#
of growth in the book you've used terms like moral imperative and you know set a very clear vision
#
so just in terms of niyat you know what should our priority be and then in terms of neti
#
in broad strokes what are the sort of frameworks we must adopt to get there yeah so again the
#
niyat will be market failures look at market failures there are enough and those we have to
#
fix right that's simple thing to say but in terms of what you would do right again look at any of
#
the parameters that the state must do right our courts our judicial system the deal is i mean no
#
one other than the state can solve this like you can't outsource the judicial system to someone else
#
and expect it to perform better even defense right you can't outsource possibly defense and
#
expect these are the core things the state should so there are many and i mean people think india is
#
the third largest defense budget we do terribly there as well in terms of allocations to real
#
powers building our you know deterrence against a power like china etc a lot of the expenditure goes
#
on just paying salaries etc not building real firepower so there is lots to do on defense on
#
law and order you know look at the police system as well right i am happy now now there are reports
#
i mean just look at it these are the core things of about the state but have you looked at any
#
indicators or have you seen discussions about indicators on these issues year on year tracking
#
how the state is doing or not right they didn't exist now there are so a few people have started
#
reports which try to see okay how are we performing on prisons or how what is the state of you know
#
how many under trials go to prison for the lack of the judicial system working etc so now we are
#
beginning to measure that once we start beginning to measure that maybe that's policy pipeline cycle
#
will kick in we will start having a indication of you know what is good what is bad what numbers are
#
desirable what are not and then it will generate incentives for us to fix that but until now these
#
were not even conversations like we just accepted you know policies doesn't work so it's fine
#
judiciary isn't there so what you know we'll find other ways but again these are the core things
#
where most of our near than neti thinking has to go in even public health again not health care but
#
public health we saw like covid 19 did give the public health imperative but yet i don't think in
#
the policy pipeline we have great solutions to manage the public health problem still unlike the
#
1991 crisis where the solutions were there so it was just about picking up but we don't have that
#
now so again that is one area so classic market failures where there are positive externalities
#
negative externalities public goods market power these are the areas and broadly if you think of
#
the three things that keelkar and shah talk about finance produce regulate if these are
#
three functions of the state three kinds of things that the state do we have to get much better at
#
regulate and we have to do much less of production right now are still mental
#
modulus if the state has to do something it has to produce that and that's where we start with all
#
sorts of psus or government solution to improving education which is a thing that the state should
#
do but our mental model is we should have state-run universities state-run primary schools
#
and state-run secondary schools but we know that has not worked right so then we have to think of
#
can the market be used with some regulations right so we need like from a broad stroke perspective
#
we need to move away from the production function to see how we can do those things through
#
financing and through regulating and by financing it will mean fixing getting better at procurement
#
getting better at you know how can the state use the forces of the market for producing some of
#
these goods and regulating again means let the market play but have rules that you know are pro
#
market and not certain pro-business rules so yeah i would and and and you know a mistake people
#
often make is that they assume that if you're arguing for markets you must necessarily be
#
saying that the government should not do it you know as if you know it is a sort of a binary
#
and when it comes to education what i always say is that i'm not saying that sub-government
#
school i'm saying let the government do whatever it is doing but let it allow private players
#
to be in the field and i've done episodes on education where we as we spoken at length about
#
how they don't even do this and that distinction of producing and financing is important because
#
what they are trying to do now is they're trying to produce education and they're failing miserably
#
because incentives state capacity all of that but you could easily finance it by essentially
#
not putting money into schools but putting money into schooling by giving school vouchers to
#
parents and allowing the parents who have skin in the game who are in the best position to choose
#
you know allowing them to choose where they take their kids and and then you reward whoever is
#
delivering according to the parents you know that is in fact it's a milton feedman idea though
#
ideally if you just let the market work my contention is that in the same way as today
#
you know it doesn't matter government airline hacking it doesn't matter government telecom
#
hacking in a similar sense our education problem could also be sorted out if you just let private
#
the private sector operate i mean across cities we have found that you know the poorest of people
#
living in slums prefer to spend a fairly big percentage of their meager incomes and sending
#
their kid to a budget private school operating illegally you know rather than to a free government
#
school and and you know that's a revealed preference that alone speaks for itself yeah and another
#
example of this is just the medical education part and we've written about it in the newsletter
#
india has the largest number of medical colleges in the world and yet we produce one third of the
#
mbbs graduates than what china produces why is this yeah again so there are very strong incentives
#
for every medical school to be small why because first of all the state runs many of the medical
#
colleges and there are huge amount of restrictions if you want to scale a medical college from 50 to
#
100 to 150 you can actually go on the nmc website and see the kind of restrictions they just scale
#
insanely and also there are restrictions like for every medical college you need to also have an
#
attached hospital and the rules for the attached hospital are even more overbearing so if you have
#
more seats you will have to have like a ton of bricks falling on you on other counts so the
#
result of all this is the only people who have there is still demand right so who satisfies the
#
who is able to get through all these are the politicians or the people who have political
#
cloud so we have lots of colleges but they produce very few medical students so we have got into this
#
weird mix of bad regulation and production by the state which is leading to really sub-optimal
#
outcomes right so yeah yeah i think one of the additions that we had written right after
#
the ukraine war had started was why are so many indian medical students stuck in ukraine yeah
#
forget about why they are stuck why are they there and that is what led to that addition
#
yeah that why are indian students going to ukraine of all places to study when there are so many
#
medical colleges in india and are we not able to produce a more number of colleges or create more
#
number of seats and then when you go deeper into that you realize that the incentive is all
#
misaligned for any medical college to scale in terms of number of schools the number of seats
#
yeah in fact sometimes like the biggest thing the government can do in so many domains is just get
#
out of the way you know whether you produce or finance or whatever is an ideological battle
#
others can fight i don't really care but at least get out of the way and let us solve our own
#
problems let's sort of talk about the second prong or what you would say is a third prong we can
#
argue about whether markets are a prong but let's talk about society now i have done episodes with
#
ashwin mahesh where he does admirable things in bangalore in terms of you know leading civil
#
society initiatives that work with government in making it more efficient and i get why he's
#
doing that and they did great work during covid as well but my sort of point on principle was
#
ki yaar yeh state ka kaam hai state is failing and doing it uske upar hum aake abhi kar rahe hain
#
it's like we you know civil society initiatives are having to plug the leakages of the state are
#
having to you know compensate for what the state cannot do rather than you know complement it and
#
do other things which is a point that you guys make in your book as well so tell me a little bit
#
about you know your thoughts on this particular prong like why are you writing about society in
#
a public policy book is what a lot of readers you know might ask when they look at the chapter
#
headings yeah again the starting point for us was again if you place individuals at the center
#
what are the various interactions they are having and the third part is because state is so central
#
to in the indian imagination the state does a lot of things which are to be left to the domain of
#
society right so again we can talk about how the state gets involved in religious issues or you
#
know many of these things come from this presumption that the state is an important player so from our
#
angle in this book it is not as much about society but as much it is more about the interaction
#
between the state and the society so that's how we thought of it and there are various angles that
#
we try to explore like one angle is about population now population is a thing about
#
the society right it is a characteristic of the society and you've talked about it many times
#
right how it is foolish to say that population is our problem now maybe yeah 70 years back there
#
were other considerations but today i absolutely disagree people are brains not stomachs and you
#
know i'll i'll i'll i'll link my column on this from the show yeah so there is the entire thing
#
about how the state thinks about population as a problem right and then if you think start from
#
that mindset there are lots of other things which come up for example there are these local
#
reservation laws which come up from the state they the at at its heart is this idea that there
#
are too many people too many people are coming into my state or in this city and that is a problem
#
right so once you start from that angle then you start thinking like how should we think about
#
what is the role of the state in this angle you know and is it a problem or that we have many
#
people and it's right so these are the some of the angles that we try to explore there yeah i think
#
i mean one of the things that we ask i mean the reason we picked society is that old question on
#
who should be the agent of change the state or the society and i think there are fault lines
#
because we have chosen state to be the agent of change and then there are some things that the
#
only the state can do especially if you want to bring in some sense a revolution and i think
#
there were say areas where for good or bad i think the founding fathers mothers of the constitution
#
believed that this has to be a revolution and a revolutionary change it cannot be done in an
#
incremental you know bottom-up manner i still have my doubts about it but they in their wisdom
#
thought about it so we thought i mean so one is that but because that is an unresolved question
#
and we have to constantly ask ourselves whether i mean how should society if if there are problems
#
that those that are related to society how should we think about the state solving it
#
for the society in a manner which is actually sustainable and does not have another second
#
order problems that will crop up 50 60 years later which will be worse we see some of it today
#
and then there are of course the other things i mean the state's interaction with the society
#
in the domain of religion for instance is an important point which we thought was
#
the state's interaction with the society on things which are very personal in the domain of people
#
for instance i mean apart from religion for instance you know population or you know how
#
how state intervene interferes in what ideally should be a social matter to be you know tackled
#
by the society and why do we often think that it might be a good idea for state to intervene
#
actually the idea that it is good for the state to intervene often is an elite idea individuals
#
have lived most of their lives even before the you know before the colonial sort of you know coming
#
in colonial powers coming into india where the state had nothing to do with the social affairs
#
of people very little so i think there are areas where people resent it and they possibly in the
#
past had some incentives with the state provided to sort of go along with the flow but the minute
#
that has been taken off or it's no longer an incentive which we have written that once people
#
started having private sector jobs and didn't really depend on state they were the first ones
#
to start opposing state you know getting into issues of what they thought were societal
#
issues to be taken and that actually is one of the large sort of basis of you know political
#
parties who use that discontent to you know get electoral gains so we thought it's useful to
#
sort of you know go deeper into this relationship between state and society and ask the question
#
how much is enough where should they draw the line are there ways to think about where to
#
draw the line so state as a dispenser of you know of justice where is the line to be drawn
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state as a as an agent of social change a state using the mechanism of judiciary
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to you know make changes in you know civil laws in religious practices etc i mean how should we
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think about it where should the lines be drawn so i think we have covered about six seven of these
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topics as part of this completely Indian examples and thinking about this so that's really the
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effort and i'm hoping that people will find this useful because this is one area where you know
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are we are with the masses more than the elites i think masses have a point in in this one
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elites are overreaching when they think that they should use the state to do things with the society
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should solve for itself at least i mean our default sort of going in position often is maybe
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we have over sort of stressed the states we have we have overstepped the boundaries in in trying
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to solve some of it even as like usual with very good intentions yeah and one thing to add on that
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was where you began with is the role of the society to complement the state or the or substitute the
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state right i think yeah this is again a very important question so you will hear different
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views from different people you're going to have Rohini Nilayakani on this so she she has a different
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perspective on this what i agree with that that you know you need to hold society should do what
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the state can't or won't because you know again two thousand dollar per capita income let the
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state do what we need it to do there are other things to do that the society should resolve but
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often state doesn't so again the example on that is CSR right so we see this example in CSR where
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the state has imposed the imposed charity on something which is supposed to be by definition
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of a matter of choice right but so when you start with that assumption there are very nice studies
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on what has happened because of the CSR law so just one figure to look at what is the total
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amount of money that is generated from all this CSR right i was trying to look at this number
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it is just 20 000 crores from all the things that are done that's like a drop in the ocean
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for the government right like yeah i mean what 35 lakh crores is the budget so 20 000 crores for
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that you are having this machinery where you're saying that you're having this and so and what
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have been the implications so some studies we've quoted in this they say that one what has happened
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is that people who are actually donating more than that two percent number four percent number
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etc so the people who are donating less than one percent of their profits they have increased to
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two percent but those who are actually donating four five percent have also lift slipped to two
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percent so the net gains are hardly significant right so these are that's one there there are
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other angles also that now people companies intuitively have become very sensitive
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to doing philanthropy depending on the stickiness of the profit so if the profits are low there is
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no corporate social responsibility funding happening and if the profits are high only then
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it goes into so it's become a matter of you know a thing that you have to do because it is in the
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law rather than something which by definition should have been in the domain of state and the
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third angle which is relevant to this point is the money that goes out of the CSR by definition will
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go into areas which the state defines as being charity so it leads to this conundrum where we
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are drawing the efforts of the society into something to substitute the state the state
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is desiring that right so if the why will anyone try to take a bet and invest in something like
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a fantastic library or a museum when they know that the government will might come back and say
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that hey this is something not corporate social responsibility why don't you do something on
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education because we have so i think that's the state is trying to coerce things i think you
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mentioned that i think 70 percent of CSR funds go into education and health care which must be
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are anywhere state what must be you wrote the book so yeah it's health education are all the big
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things in which money goes but we would actually want society's efforts into things which the state
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can't do and probably shouldn't even do given that it has other things right so but once you
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frame it as a law and you make it mandatory then these outcomes are going to come up yeah i was
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wrote a column about how profit is actually the biggest form of philanthropy in the sense that
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all of these companies in a free market how do they make money they make money by making other
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people better off by giving people what they want by making society better you know so they're
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already doing a great service to society on top of that the idea of an imposition of charity
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is just so absurd it's kafka esque it's bizarre you know you know and the whole thing and here
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again i agree with you i'm on the side of the masses against the elites here as well because
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the whole thing is so patronizing to say that hey you know you guys are messed up and we are
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going to fix you by using our coercive power and the monopoly of violence and there's a great poem
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by but all backed called the solution have you guys heard i'll just read it out it's a great
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poem and this was written after the east german uprising of 1953 after the uprising of the 17th
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of june the secretary of the writers union had leaflets distributed on the stalin ali which
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stated that the people had squandered the confidence of the government and could only win it back by
#
redoubled work would it not in that case be simpler for the government to dissolve the people and
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elect another you know and this is the this it's exactly this patronizing attitude which the state
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has towards all of us individuals i won't even use the collective term society all of us individuals
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who are subjects and not citizens and it is exactly this attitude they show when they talk
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of population being a problem like everything that is ascribed at the gate of too many people
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is actually a problem of too little governance you know there are governance failures and you're
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saying hey there are you know essentially it's a state telling society it's a state telling each
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of us you are the problem bugger you know and and i have you know in my column i've given examples
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of how the most prosperous places are places of population density you know where i mean that is
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why for example the greatest movement in human history is a movement of people towards cities
#
right cities are far greater population density and cities also have much more you know prosperity
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you know people are good people are brains not stomachs anyway i'll link to that article from
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the show notes and not just on one point on this you know when we are talking about the csr point
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and the point you made profit is the best philanthropy so long as we are clear that the
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the competition is fair otherwise it would be in seeking and regulations are there to make sure
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that there is you know the market in some sense is working efficiently right in a way i think that
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by doing csr and making it mandatory there is some acknowledgement that we are not able to
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not able to you know meet those two conditions some people are making extra profit because they
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should not who knows they should not have been doing this and let me sort of ask another two
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percent of their profits because i'm not able to regulate that market well or i'm i've not been
#
able to create perfect competition or good competition in that particular thing so in a
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way it's an acknowledgement also of the fact that we have not been running whatever market we are
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running you know whatever business that we are supposed to regulate well we are not regulating
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well as well i agree and i think there is on the csr point there is also coming to the demand side
#
of the policy pipeline the way we think of it normally is through a scene and scene lens right
#
so people will say that see some lake that they have seen is good because of the csr initiative
#
so because you have seen one scene example of something being good you say why do you think
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that is wrong you know see there are i mean i you can give 100 examples of yes some things if you
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put 18 000 crores on something obviously something good will happen but what is the opportunity cost
#
of that what have you foregone in order to get that and would there have been better ways to just
#
do that that is the second order question that we have to ask right so again it's not yeah the state
#
does what it does but if we don't ask this question the state will be happy to expropriate what it gets
#
yeah absolutely and another angle which you talk about in that section on society is you know our
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discussion so far today has really been talking about economics when you're talking about public
#
policy because that's like a primary interest for all of us we're talking about price controls
#
you've got a great chapter on that with so many examples including of capacity controls and what
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rent control did to bombay and all of that blah blah a great chapter but you know public policy
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also can play havoc in the social domain a domain classic example perhaps you know being the
#
controversy over the hindu court bill which you've written about at length so tell me a little bit
#
about that the i mean the hindu court bill the idea was that should we reform a particular
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religion at top down and not the others and not the others for various reasons again there were
#
reasons and why we picked this because there was a view that there should be the majority religion
#
should lead by example and so on and so forth and let's start with this and then others will
#
possibly follow and i mean there is a whole chapter there on how the bill in its entirety
#
was a problem and then you know neru and the cabinet decided to split it neru had to face
#
tremendous opposition from within because i think that opposition some of it was somewhat ideological
#
that you know there is nothing wrong with the religion some of it was that there might be
#
something wrong with religion but who are we to you know codify this into a law rather than the
#
you know religion itself find its solution because their thing was if you focus on education you
#
focus on you know awareness and so on and so forth the religion will reform itself and this is a fair
#
assumption if you were following some of the western examples of you know how liberal values
#
were incorporated there was never a law that you know changed christianity and said some of these
#
things in fact as late as two years back or so the most progressive of some of the catholic countries
#
would not even have a law to ban you know to you know lift the thing around abortion and
#
say that abortion is legal it's like well we won't say anything you figure out you learn you do your
#
things but we won't necessarily officially say that abortion is legal and so on and so forth and
#
we were trying back in 50s to do fairly fundamental things around property rights for women and you
#
know all very correct things looked at from a human rights perspective you know liberal values
#
perspective but a significant sort of a leap for a society which till then was just about starting
#
to do some things where they're very basic and then to make them you know go through this particular
#
path. Now the interesting thing is because of a strong you know majority in the parliament and
#
a fairly strong leader who otherwise had complete faith and the love of people
#
he faced the opposition yet you know he could in various ways break it into multiple smaller
#
bills and get it passed and my question is and our question is has it served its you know purpose
#
and I think the answer to that would be mixed because there is a lot of what we find today
#
which is somewhat revisionist in our culture especially around Hinduism and you know sometimes
#
I was listening to your episode on Ayush and Ayurveda and some of that a lot of that is
#
actually emanating from that you know origin of that is there that you know we were forced to
#
abandon a lot of our things through law through you know constitution which were good things
#
and we should now bring a lot of them back and the only reason we should bring them back is
#
because in the past we have abandoned it because some liberal elites thought it was wrong and now
#
we won't even question whether it was right or wrong because we all believe as a matter of faith
#
it was right because the guys who had taken them off were people who were against things like this
#
with no reason. So you find these things that you suppress and not reform then take very different
#
forms which are worse in the ogres of their own kind which come back and then you know start hurting
#
you so again our effort in this in some of these chapters is to again you know in some sense make
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the point to the people as well as maybe some people who are reading it who might influence
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policy is there is a way for state to intervene in social issues but you know you have to be very
#
very careful you have to ask some of the more fundamental questions on what are we intervening
#
for what is the objective rather than just take a very sort of enlightened view of what is right
#
and what might be right might be too far away from where you are currently and which is the
#
problem some of that some of the points that we again raised in the before that somebody is doing
#
something in the US it seems correct on when you read it and in and what might might be right for
#
them it might even be right for us but is this the time and if you try and impose it you will
#
find a very different form of reactionary sort of element to that coming up not now
#
because people might accept it you are in power you have brute majority but it might come back
#
30 years later because that particular strand that you have tried to suppress does not go away
#
it sets it builds its own you know history it builds its own story and then when the
#
opportunity comes and it is given you know freedom to air itself it will air itself in
#
a very negative way so some of these are very worrisome things in my mind because playing with
#
society is a real thing that i mean it's a real danger you're playing with fire there
#
you will lose 100 percent in the long run because people don't forget i mean you know people over
#
generations continue to have through one way or the other underground it continues to be there
#
i mean i sometimes look at some of that you know like that Kurdistan issue for 200 years they have
#
thought of themselves as a nation you do laws you outlaw them you make it illegal
#
they keep coming back and some of these are you know you want them to be integrated with
#
the population that part that is in Iraq or the part that is in Turkey or the part that is in Syria
#
you have to find other ways of doing it not by outlawing them their belief their practices etc
#
that's impossible for 200 years four different countries have tried to you know kill that
#
nationalism it cannot be killed there's i done an episode with Kapil Komeredi and he made a point
#
that Manu Pillay also later said he agreed with which was that one fundamental mistake that
#
happened in the 50s and 60s was that you know state-supported historians decided to whitewash
#
some of the stuff that the Mughals did and their logic was that hey you know it'll just lead to
#
communal tension so let's not tell the full truth right and what is happening today in a sense is a
#
backlash to that and you could just have come to terms with all of that by treating history as
#
history and just putting it out there in a matter of fact way and instead it's being forced it's
#
been driven underground forced to fester and my you know thinking on how much how far the state
#
should go when it comes to sort of dealing with society is that your job is to protect
#
individual rights you do that so if a khaap panchayat says ki intercast marriage hai inko maro
#
the state has to step in and protect them that's a given you're protecting their rights but apart
#
from that when it comes to other stuff you've got to tread with caution because you know as i keep
#
saying on the show you know politics is finally caught up with society and it's taking an extreme
#
form no that is true i mean there are just and treat people like adults yeah they will read it
#
they will read it like history they're not going to then find tomorrow that boss you did this or
#
you did this because if there is no end to this i mean that's in in various sort of strange you
#
know mutant form this is all that is there in the us now i mean you never very explicitly taught
#
people that listen some of our founding fathers or whatever you know were actually slave owners
#
and that was in that time you know somewhat you could live with that and while talk about all
#
men are born equal and we all of us have you know certain inalienable rights without thinking that
#
was i am a slave owner myself if you told them that well these guys were doing this while they
#
were themselves slave owners people would be fair i mean they would somewhat understand that
#
contradiction but not doing that now means that people are willing to pull down statues of
#
jefferson and washington because somebody else is now saying that these were all racist guys and
#
you know we have a we should be thinking of a different history i mean eventually this just
#
doesn't serve anything it only makes things worse you you mentioned treating us as adults is a great
#
quote by david bose who'd done an episode on libertarianism with me and the quote goes quote
#
conservatives want to be your daddy telling you what to do and what not to do liberals want to
#
be your mommy feeding you tucking you in and wiping your nose libertarians want to treat you
#
as an adult stop good but yeah i mean that aside the the patronizing attitude that the state gives
#
you and in fact which elite liberals give you thinking they know what's good for the world
#
kind of gets my goat sometimes yeah so you know i've taken a lot of your time and we've spoken
#
about serious subjects and it's you know time to move from policy to art i already read out a but
#
all break poem so would you guys have anything to share on that front raghu i know your your book
#
is full of such entertaining songs and shiree and so on i mean i mean there is always sahir and there
#
is always gallip to court for every context and for every you know scenario i think i mean there
#
is a i think we have quoted that in as part of the samaj since we were talking about society and
#
samaj there is a movie called in which sahir has this song called or you know has written this song
#
which is an outstanding song where sahir actually says that all these business of
#
thiyag sacrifice running away from material world is complete and the line that he uses
#
that this enjoyment of these worldly pleasures is also a kind of tapasya
#
ki ye bhok bhi ek tapasya hai tum thiyag ke maro kya jano
#
apmaan racheta ka hoga apmaan racheta ka hoga rachna ko agar thugra hoge that if you
#
you know if you decide to leave these worldly pleasures and go off to the forest and in some
#
ways you are actually insulting the creator who's created all this beauty for you to appreciate
#
so in the book we use the second stanza which goes and i'm hoping i'll get this right
#
uh which says ye paap hai kya ye punya hai kya reeton pe dharm ki mohre hai
#
ki what are these customs and traditions these are nothing but not sorry not what are these
#
customs or traditions what are these what is you know uh paap and punya what is sin and you know
#
the right thing to do these are all everyday traditions that we were following in which
#
the religion has come and stamped its you know mohar so ye paap hai kya ye punya hai kya reeton
#
pe dharm ki mohre hai har yug mein badalte reeton ko kaise aadarsh bana hoge that the these
#
traditions will change every you know in every new age how will you how can you hold on to one as
#
the right thing you have to just constantly evolve as beautiful things go on and i think the reality
#
there was he was saying that you if you leave it to itself people will do these changes themselves
#
right you don't have to sort of impose this so yeah so that's one of the things that i often
#
quote i think sahir sort of captured something very different in a regular film which sometimes
#
i think is quite interesting yeah i don't do the shairi part but my high point is that i have used
#
crime master gogo in a public policy book uska dialogue i have used so i think that is a big
#
achievement for me well share it with all the listeners no we have said that aaya hu toh kuch leke jaam
#
so in the sense that there are hopefully the readers will also find that way that since they have
#
seen the book probably they'll get some takeaways from it so yeah i mean i hope they first take
#
away the book and then they take the take away the takeaways it's been you know we haven't even
#
captured a fraction of your wonderful book quite deliberately because i thought we'll just ramble
#
around and let listeners and readers pick up the book for themselves it's essential reading
#
so pranay and raghu thank you so much thank you
#
if you enjoyed listening to this episode go to your nearest bookstore online or offline
#
and pick up missing an action why you should care about public policy by pranay kota sanay
#
and raghu sanjilal jetli you should also subscribe to the newsletter anticipating the
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unintended which is linked from the show notes and check out the rest of the show notes enter
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rabbit holes at will you can follow pranay on twitter at pranay kota's raghu is not on twitter
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you can follow me on twitter at amit varma a m i t v a r m a you can browse past episodes of
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