Rules and Principles

Kunal and Gaurav are right. In this post, I was talking of the trade-off between rules and principles in policy enforcement.  Actually, when you think of it, rules vs. principles is not a simple dichotomy, but a spectrum of choices.

Imagine that these choices are spread from left to right. At the left end of the spectrum is automation. Rules are enforced automatically, without anyone having the responsibility of enforcing them. The best example  of automation in my stories was actually the turnstile – it automated the task of checking for tickets, leaving very little scope for discretion.

Another example is the jugad “automation” that the Hyderabad police enforced. Blocking off the right turn doesn’t seem like an example of automation, but for our purposes, it is, because it enforced the rules without the police having to intervene.

To the right of automation come rules – clear and transparent rules that leave no scope of discretion to the enforcers. But then, whether to follow the rule or not is still a choice – and ensuring that officials enforce the rule depends on the existence of procedural mechanisms.

As you move further to the right,  you find that the rules have more and more discretion embedded in them. For example, consider the difference between enforcing a red light and ticketing someone for rash driving. The former is easier to enforce fairly than the latter.

At the extreme right of the spectrum is the idea of “principles-based regulation”.  This distinction  between rule-based regulation and principles-based regulation is used most often in the financial sector, so let me use an example from Banking to illustrate.

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Three Stories and a Lesson

Story One

This was when I was in Bay Area for a few months on a project.  I was a  frequent traveler by the BART.    In the train stations of the BART system, they have turnstiles where you one has to swipe the ticket both during entry and exit.  Presumably, the idea is that if you buy a ticket for a certain distance and overshoot that distance, the turnstile at the exit won’t let you out and you have to call for help from an official  who will then proceed to ticket you – I never tested this, but it sounds plausible.

Once, at the exit turnstile, I found to my chagrin that I had lost my ticket and I was stuck.  I looked around and realized that there was  a broader gate that one could open without swiping a ticket – this was to be used by handicapped travelers on wheelchairs and people like me. Of course, there was a booth with a BART official directly overlooking this gate, and as soon as I opened the gate to pass by, he walked up to me and asked me what I was up to.

I told him, with as sheepish an expression as I could muster, that I had lost my ticket.  The official took one look at me and said: “Oh you have lost your ticket? In that case, I will have to…”

I took a deep breath. Memories of my misadventures in Mumbai’s local trains came back to me. While I have never travelled ticketless, I’ve had experiences where I got confused and landed up at the wrong platform. Upon realizing my mistake, I would have to get to the overbridge to reach the correct one, and I would be stopped by the TC. On finding that the ticket or pass I had with me did not entitle me to that platform, he would tell me that he would have to fine me – and of course, that meant that I would have to offer a bribe. I didn’t expect to get away with a bribe here, but of course wouldn’t that mean that I would have to pay a hefty fine that was many times the ticket’s value?

“… charge you for the ticket.”

Wait, what? Not a fine? Just the price of the ticket? It was still a loss, but wasn’t a big deal anymore.

I nodded in assent, and he asked me where I had boarded the train from. I truthfully told him that it was the stop previous to that one.

“Oh just one stop? Foggetaboutit.” and he let me go. He had evidently decided that it wasn’t worth the effort collecting the small ticket fare for one stop.

I was grateful to be allowed out of the station without being poorer by the dollar and fifty cents it would have cost me otherwise. I also had that NRI reaction – you know the sinking feeling that an NRI experiences when he realizes that he would be treated worse in his own country than by the officialdom of a foreign one. On reflection, I found the whole  thing strange. What if I had lied about the stop I had boarded the train from? Also, did the official commit an “irregularity” by not following the rules and collecting the ticket fare?

Story Two

I was visiting my uncle in Bangalore. My uncle was then working in a public sector insurance company, and he introduced me to some of his colleagues. We got into small talk about the nature of my work. This was around 13 years back, and “computerization” was still a new thing and not accepted as a matter of fact as it is now.  So I ended up waxing eloquent about how awesome software was at automating routine tasks leaving you free to focus on the big decisions. While grunt work would be eliminated, computers would not take away the potential for knowledge work. All basic stuff, but remember that I was doing small talk, not giving a lecture, and that this was 13 years back.

At some point, I started realizing that we were speaking at cross-purposes. While I was trying my best to assure my uncle’s colleagues that computers would not make their decisions for them, it turned out that they, or at least the one person who was talking in a most animated way, wanted computers to automate decisions -his boss’s. Specifically, he wanted computers to somehow automate things in such a way that it left no scope for his boss to indulge in favouritism and politics during appraisals and promotions.  And this was a fairly senior person in the organization.

The discussion never got anywhere after that.

Story Three

I work in Hi tech city, Hyderabad. On my commute to work,  there is a T-junction, where a minor road connects to a major road. In the morning, vehicles have to turn right at the T to join the rush of vehicles that are getting to Hi tech city. The volume of traffic ought not to have caused a gridlock in any city except Hyderabad. In most western countries where traffic rules are enforced, the problem could have been solved by a simple stop sign. In Mumbai, they would have put in place a traffic light. But this is Hyderabad, where no one obeys traffic lights, let alone stop signs. When putting an actual traffic policeman to direct traffic did nothing to prevent an insane mess from developing every morning, the police hit upon a solution that is increasingly the norm in Hyderabad. They simply blocked off the T junction, forcing vehicles to take a left and a U to join the traffic.

These are three different stories, but all three have a common theme. The theme in question is about a particular trade-off in public policy. What is the theme?

A Rant About Poverty Numbers

The good Pragmatic Desi asked me to write about the release of the latest poverty numbers from NSSO. I do want to write a follow up post to my Pragati article. But the bad news is that I have accumulated a lot of heavy reading material in preparation for that follow up post which I need to read. The good news is that a long weekend is coming up, and I hope to get the reading and the post out by then.

But in the mean time, here is a rant.

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A Tale of Love and Heartbreak

I don’t know how many remember the story of Syed Modi, who was murdered in 1988. He was a star badminton player who had fallen in love and married Amita (Ameeta?) Kulkarni, also a badminton player. He was shot dead in Lucknow while returning from practice.

Suspicion fell on his widow and on Dr Sanjay Singh, then sports minister of UP. The allegation was that they were having an affair. The case ended up with the CBI.

As it happens Sanjay Singh is a relative of the late VP Singh, who, at that time, was leading the fight against the Rajiv Gandhi government over corruption and misgovernance. Sanjay Singh is also the “Raja” of Amethi. It was the height of the Bofors scandal – a few newspapers, notably N Ram’s Hindu and Arun Shourie’s Indian Express were courageously exposing the bribery. I had just started reading newspapers, was following the various scandals with avid interest and virtually hero-worshipping Shourie.

Arun Shourie decided that the CBI investigation into the murder was intended to persecute Sanjay Singh, and mounted a full-scale defence of Amita Modi and Singh. Looking back, it is incredible how much of it I swallowed. I don’t remember the specifics, but a few things stand out. The CBI had found Amita Modi’s diary, where she had written about the conflict she felt in choosing between “S1” and “S2”. It should have been obvious even to a stupid 14 year old what S1 and S2 were, but I bought the Indian Express version where it quoted Rani Jethmalani (Ram Jethmalani and his daughter were fighting on behalf of the defence) to say that the diary just reflected Amita’s disturbed mind and nothing else. The Indian Express also went to Amethi where they interviewed the people there. They were quoted as saying that while it was imaginable that their Raja would do a bit of womanizing, they couldn’t believe that he’d committed the murder. Garima Singh, the then wife of Sanjay, stood behind her husband.

Eventually, the case came to trial in 1990, by which time VP Singh was the prime minister. The CBI had weakened the case sufficiently that Amit and Sanjay were acquitted.

I forgot all about the case till I read a small news item tucked away somewhere, to the effect that Sanjay had married Amita. By then, VP Singh had gone from being the darling of the middle-class, the crusader against corruption, to its most hated symbol, with his Mandal agenda. Arun Shourie had gone from campaigning vehemently for VP Singh to fighting him. I don’t think he has ever mentioned the Syed Modi murder ever since VP Singh became Prime Minister. But the news of the wedding made me feel profoundly stupid. It’s difficult to believe now, but at that time, I had honestly thought that even their supposed affair was a story concocted by the CBI as part of its witch-hunt. (That is how the mind rationalizes. I suppose I could have believed that they did have an affair, but did not commit the murder. But then, how could it be a with-hunt to investigate the suspicion?)

So, quite clearly, Shourie had been perfectly willing to lead his newspaper on a campaign to subvert justice even as it was fighting the government on corruption. I am sure he did it with the highest of motives – I think he thought that getting the Rajiv Gandhi government out was then the highest national interest. But something didn’t seem right.

Of course, Sanjay Singh then had a fairly typical political career for a UP politician. He switched parties a few times. He was with the BJP for a few years before finally landing up with the Congress. Now, he and his wife are the feudatories of the current royal family.

The story faded to a dim memory for me, but I suppose the lesson has always stayed with me. It accounts for my cynicism over the Lok Pal and the concept of “Persons of unimpeachable integrity”. It accounts for my scepticism over the idea that the dynasty represents everything that is wrong with the country, or that if only the country rediscovered its Hindu soul, we would be great. It accounts for my discomfort with idolizing or demonizing (Narendra) Modi. In general, I am sceptical of any solution that relies on people’s character rather than structures and incentives.

White Rice

I just finished reading “Nothing to Envy: Ordinary Lives in North Korea” by Barbara Demick, who was the Los Angeles Times correspondent for the Koreas at the time of writing. Published in 2009, the book follows the lives of six defectors, all of them from the Northeastern city of Chongjin, as they starve through the famine of ’94-’96, escape to South Korea through China, and struggle to remake their lives in the new country.

 The stories are horrifying. It is one thing to read the newspapers and learn that North Korea’s criminally mismanaged economy, propped up almost entirely through assistance from the Soviet Union collapsed when the Soviet Union did.  To view the account through the eyes of the people chronicled in the book is another thing entirely.

 There is the story of Mrs Song, a loyal party worker who finds that the party can no longer supply  the regular rations that  provided for her family. Forced to work in the free market she has been taught to despise, she is stymied at every turn by the sheer lack of anything to produce or sell, and has to witness the deaths of her mother-in-law, husband and her only son before she is rescued by the daughter whose loyalty to the party was always suspect.

 There is Mi Ran, the daughter of a South Korean POW who works as a kindergarten teacher. She sees her class strength go down from 50 to 15. She also trains herself to walk by children starving to death on her way to work without helping.

 There is also Dr Kim who works as a paediatrician at a time when her hospital has run out of medicines to provide, and is reduced to writing prescriptions in the hope that the patients have the foreign currency or contacts to procure the medicines. She eventually has to write prescriptions for her young patients when what they need is food. She has to scavenge for food, and unable to take it anymore, decides to defect. She still retains some loyalty to the regime and tells herself that she is going away only temporarily in order to eat and regain strength.  She finds herself in a Chinese village and sees that there is a bowl of rice and meat left on the ground for the dog, and realizes that dogs in China eat better than doctors in North Korea.

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Poverty in Pragati

As promised, I have an updated and expanded version of my post on The Poverty Numbers at Pragati. From my blog post, I have subtracted some things in the interest of space – the discussion on the recall period being most prominent. More importantly, I have added some things, so you should read the Pragati piece even if you’ve read my post.

I have referred to some papers in the Pragati article. Here are the original links to those:

  • The Tendulkar Report on the methodology on estimation of poverty.  Suresh Tendulkar, by the way, was an excellent free market economist.
  • Angus Deaton’s 2008 paper on why Indians are consuming fewer calories is here (PDF link). Look at pages 53 onwards for discussion on the calorie decline.
  • Deaton’s other paper on how the divergence between the NSS data and the CPI affected poverty numbers is here.
  • All of Deaton’s work on poverty can be viewed here.

The Journalism of Outrage

After retiring from the Supreme Court, Justice Markandey Katju now heads the Press Council of India, a role that everyone knows is a sinecure.  Nonetheless, he has managed to stir up a controversy by saying nasty things about the competence of Indian journalists. He also wants additional regulations on newspapers.

 We don’t have to agree with his proposed solution to recognize that he is right about the quality of Indian journalism. Take, for example, last week’s outrage of the week.  Apparently, little children are dying in hospitals of West Bengal.

If you read news reports like this, you will “learn” that the “death toll” in the hospitals has reached 45. You will also learn that the Chief Minister has not woken up to the gravity of the crisis,  has parried the questions asked of her, while her minister  of state for health has made light of the crisis. The Governor, you will learn, has taken the government to task on the question.

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Avatar, Technology and Steve Jobs

I recently watched Avatar. The movie is set in a future  where humans have colonized other planets. The protagonist, Jake, is an ex-marine who has lost the use of his legs in war and is confined to a wheelchair. (Apparently, he has not been able to obtain treatment that would make him whole because his insurance wouldn’t pay for it. Of course, no matter how advanced  a society we visualize, we can’t help imagining that it will face the same problems we do.) He’s taken a job with a company that intends to mine the planet Pandora  for a rare mineral, but they are facing resistance from a sentient species Na’vi that have a deep and abiding connection with the planet’s flora and fauna.  Jake is given the ask of infiltrating into the Na’vi  ranks. This is achieved by taking a backup of his mind and installing it in the body of a Na’vi-human hybrid and sending him to live among the Na’vi.  Jake ends up liking the Na’vi way of life so much that he switches sides, eventually leading the Na’vi in their violent resistance to the aggression of the humans. Jake prefers to abandon his human form, choosing to live the rest of his life as a Na’vi with his love.

 What accounts for the attractions that the Na’vi lifestyle held for Jake? Supposedly, it is the fact that the Na’vi were much more in tune with “nature”  than the humans. But that doesn’t explain why Jake felt so comfortable in a Na’vi skin. Wouldn’t abandoning your human body and taking on another one be a profoundly umm… alienating experience?  To put it in another way, while being “in tune with nature” may explain the happiness the Na’vi experience, it doesn’t  explain why Jake felt so comfortable switching.  It also doesn’t explain why the viewer would be expected take the side of the Na’vi. Why would an artificially constructed nature be more attractive to us than our technologically enhanced lifestyle that should be more familiar and hence more “natural” to us?

 The more likely explanation is that Jake was attracted to the Na’vi experience because it was a path to escape from the limitations his disabled body imposed on him.  It was either taking on a Na’vi body, or a human lifestyle that was enhanced through machines. In the movie, humans have access to large robot-like war machines  that are controlled by a human standing inside .  And if you think of it, Jake’s disability is beside the point.  Set against what the Na’vi were “naturally” capable of, all humans were handicapped.

 Perhaps the point of Avatar was that the Na’vi lifestyle was better because they were more peaceful? Yeah right. Yes, they were more peaceful, but the last 20 minutes of the movie was taken up in a violent war where both sides used the best possible weapons available to them. The humans used their magnificent flying machines, while the Na’vi  were mounted on their 100% natural, organic, tamed birds.  If the denouement of the Avatar story had involved the Na’vi winning over the hearts and minds of humans by demonstrating the superiority of their peaceful, harmonious lifestyles, it would have been a different matter, but the fact that the makers felt it necessary to end the movie with a special-effects laden war tells us a lot about what we, the viewers, like.

 I didn’t mean this post as critique or even a review of Avatar, though it might be 600 words too late to put in that disclaimer. Instead, my intention is to understand the appeal of Avatar for the viewer, and through it, to investigate what exactly we seek when we seek to go back to nature. The yearning for “nature” has always been a little fake. Peter Drucker noted over five decades back that even when Americans went camping, they took along an entire van full of modern amenities.

 Perhaps what we are looking for in a more “natural” lifestyle is some combination of elegance, simplicity and a more human scale. We are looking for technology to enhance our capabilities, but in a way that is elegant, simple and seems within our control. When we achieve that, it seems more “natural”; our tools seem more like an extension of our bodies rather than an intrusion on them.

 Put in another way, it was only fitting, and yes, “natural” that someone like Steve Jobs who set out find enlightenment in India, failed and found only chaos, then went back and found it while developing elegant, simple devices that extend human capabilities without overwhelming us.

The Scrap Over Poverty Statistics

What should we make of the latest scrap over the Tendulkar committee report? Here are some thoughts.

 Poverty isn’t a binary variable. There is no switch that, when turned on, defines a household as poor vs.  non-poor.  There are various degrees of deprivation, and we have differing intuitions about at what level of deprivation we should classify a family as poor. Part of the root of the outrage over the seemingly low household income (Rs. 26 per day per person in villages to Rs. 32 per person per day in cities)  comes from the fact that our intuition about what constitutes poverty has changed.

 My uncle started his career after completing his graduation in the mid-70s in Bombay’s weather office. He was single and lived alone then, but he’d send part of his salary home to his family. Towards the end of the month, his money would run out, and the last few days of the month, he’d be able to cook and eat only one meal a day.

 Then, as now, if you were a graduate and you were earning an entry level salary in a government firm, you would be categorized into the middle-class – lower middle-class to be sure, but middle-class nonetheless. When did you last hear of a middle-class person lacking for food in India? But that’s how things were till the 70s, and my uncle’s situation wouldn’t excite comment then.  One can only imagine the situation of the others who were poorer than my uncle.

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The Moral of the Corruption Tale

Gaurav argues that the only discernible  moral from my tale of corruption is that Indians are corrupt.  Well, that is a good enough summary, but I need to fill out an entire blog post, so here I spell out the lessons I drew from that incident.
The most striking aspect of the tale, to me, was this: B, who was undoubtedly a well-meaning man, saw nothing wrong in misusing the CBI to achieve what he considered were morally justifiable ends. But if misusing public resources to achieve private aims is what is considered corruption, how were B’s actions any less corrupt than A’s?

There is a tendency in India to think of incorruptibility as a personal quality roughly equivalent to “lack of avarice”.  We believe that corruption is caused by a hankering after material wealth, and consequently, the tendency is to hold the saintly man, preferably with no family to lead him astray, as the model from which good governance will flow.   Sometime back, I read a story on how Nitish Kumar was transforming Bihar. I do not remember the source now, nor the exact words, but there was a line on how honest a man Nitish was. Apparently, industrialists who went to him with bags of money (presumably as donations to the party fund) found that Nitish did not even look at or touch the money when they tried to hand it over, but asked them to keep it in one corner.  Now, without detracting from Nitish’s achievement in making Bihar governable, which is indeed a considerable one, Nitish’s own personal “cleanness” makes no difference to the fact that the wads of notes that industrialists contribute to his party funds distort policy-making, just as B’s own personal honesty made no difference to the fact that his actions ensured that a person who ought to be arrested and in jail was out of it because it served the cause of a private dispute.

This tendency to think of corruption in terms of personal characteristics is a consequence of the saintly idiom in Indian politics. Gandhiji contributed significantly in establishing this, but he was by no means responsible for originating it. This mode of thinking has had many deleterious consequences on our polity.  One of them, which has thankfully reduced in severity, is an Indian inability to distinguish between a dishonest man and a person who, having made his money honestly, enjoys the good things in life.  This inability was fueled by, and in turn contributed to, the antipathy towards free-market policies.  Whether it is liberalization that changed this attitude or generational change, this particular attitude’s trend is downwards. Other consequences, however, remain. We tend to search for the incorruptible person to run our systems, and our fantasies of a perfect society display a disturbing willingness to hand over dictatorial powers to such a person.

The second aspect of the story to note was the reaction of the association’s members. The membership was split in its support between A and B, but there was no dispute over facts. None of A’s supporters thought him to be an honest man. Indeed, it never occurred to them that there was anything wrong with looting from the public purse.  What tipped the views of his supporters in A’s favour was the fact that A did a good job at the association – and yes, they knew that he took a cut there too.
For that matter, A’s opponents weren’t particularly concerned about the public money either. It was his avarice and his behaviour at the association that they were concerned with (Of course, as we have noted, B, the supposedly honest man, wasn’t that concerned about A’s corruption)
This is an important point, and unless we address it, we are not going to get rid of corruption. For us, the government’s money is “out there”, something external to us. It exists to be looted. The job of our representatives is not to be incorruptible and govern impartially.  It is to be corrupt in our favour.  We are strongly opposed to corruption when indulged in by our opponents, because they are denying our side the opportunity to do the same thing.

That brings me to the Jan Lok Pal idea, which is essentially a fantasy that we can get rid of corruption without addressing the systemic problems that cause it. I will write about it in a subsequent post.

(Update: Aadisht pointed out that I mixed up A and B in the last few paragraphs. Fixed that.)

What Just Happened?

I have tried in the past, with some success, to explain how economies work with the help of The Model Village, so let me try again.  This time I will try to explain how the American Economy got into the situation it is in. These, by the way, are the fundamental reasons that I will be explaining. There are many, equally valid and mutually consistent ways of looking at the situation. I will be explaining just one aspect of it, which I hope, cuts to the heart of the matter.
So, in The Model Village, there was a huge Zamindari. By huge, I mean really huge. It was a mini-economy by itself. Many crops grew on its lands, it had cattle, goats and chicken. It also had small factories that processed the produce of its land into finished goods that could be sold outside.

Of course, this Zamindari, while enormously productive, did not produce everything it needed. What it did not, it would buy from the traders of The Model Village. And while the Zamindari was extremely rich, it still needed credit to smooth out its consumption cycle – it needed to borrow early during the planting cycle and repay when the harvest came in. Also, the Zamindar was focused on making improvements in his lands and factories, and he needed credit for that.

The way the Zamindari got credit was to issue IOUs in return for whatever they needed, and those IOUs could later be redeemed for fixed quantities of wheat, rice, etc. (And oh – by the way – this was a primitive model village, so no one had bothered to issue currency yet. They were still using barter.) But the IOUs suited the traders just fine. They knew that they’d get something of value later in return for those IOUs, so they applied the time value of money to calculate how much they could offer in return now. The Zamindari was extremely well-run, so its IOU was seen as extremely stable. It would soon perform the function of money. People in The Model Village traded Zamindari IOUs among themselves, their savings consisted of these IOUs, and so on.
After a time, the Zamindar announced a change. He said that these IOUs would no longer be redeemable against fixed quantities of wheat or rice. Instead, the Zamindari would buy whatever it wanted against the IOUs, and when it came to redeeming the IOUs, he’d auction the produce of his estate, and the price, in IOUs, would be determined by the results of the auction. When asked why he was introducing this change, the Zamindar gave an honest answer – he needed the flexibility to print IOUs to finance his estate’s expansion, and he found the constant need to worry about making sure that the IOUs were good constraining. But surely, the traders did not need to worry about? In any case, the IOUs were backed by the good credit of the Zamindari, and as long as the Zamindari’s lands were fertile and its people hardworking,  there was no need to worry – after all, if the Zamindari was too reckless in issuing IOUs,  it would not be in a position to buy what it needed next time round.

The traders saw the logic of this – and in any case, they had no choice. The Zamindari was the biggest deal in The Model Village, and not trading with it was not an option.

Things went fine for a while. The Zamindari continued to be well-managed, and the Zamindar was prudent in issuing IOUs. The IOUs continued to strengthen their position as the de facto currency of The Model Village. Its value began to be determined less by what the Zamindari could pay for it and more by what other traders would. Traders in turn began to measure their success by the number of IOUs they could accumulate.  The rest of The Model Village got prosperous and began to produce a lot of stuff, much of which was sold to the Zamindari in return for IOUs.

The prosperity of The Model Village grew so much that very few took notice of the fact that the output of the Zamindari was in fact slowing down. The old Zamindar had died and his son had taken over. The new Zamindar was, compared to his father, a reckless man, and he had not failed to notice that the traders’ willingness to accept his IOUs was rather out of proportion to his ability to repay. His lands were turning infertile and his workers older, and he needed to keep issuing IOUs to keep up the expenses of his Zamindari, and so he did.

From the point of view of the traders, they were behaving prudently.   While they intellectually understood the views of those who pointed out that this was a classic bubble, the fact was that they were working hard, making sales, making money (they no longer thought of it as IOUs) and saving. Everything they were doing was exactly what their wise men had told them to do. How could that be wrong?

But of course, things were bound to go wrong. Very, very wrong. It was just a question of how.

By now, most of you would have understood the elements of the allegory. The Zamindari is the United States of America.  The IOUs are dollars. The Zamindar’s decision to cease setting the value of his IOUs is analogous to Nixon’s decision to take the dollar off the gold standard. The traders are those countries who, over the past few decades, have run an export surplus with the US – Japan, China, India, to name a few.

You will notice that it is rather difficult to fix the blame here. Was going off the Gold standard the mistake? Perhaps, but it also presents advantages – and which other country is on the Gold Standard? Was the Zamindar too reckless? Well yes, he was, but not too much. He issued the IOUs because there were always greater fools to buy them. Were the traders at fault? Yes, but it isn’t easy to notice at first glance, because, after all, they are doing what they should be doing – selling stuff, making “money” and saving it – the problem of course is that they shouldn’t have treated those IOUs as money.

You will also notice that this edition of The Model Village was not particularly difficult to understand. It is  not even very controversial. In many bubbles, you will find many sensible people disagreeing over whether  we are in fact in a bubble – if there weren’t such people, we wouldn’t have bubbles. But you won’t find that to be the case here. If you stop two mainstream economists who are vehemently arguing over the Debt ceiling debate and ask them if they, in essence, agree that the parable of the Zamindari is a valid model of the US economy, they will agree before moving on to argue over the specifics of how long  the bubble will last, whether the bubble will burst or slowly lose steam and how to deflate it. And yet, we ended up here.

A Little Tale of Corruption

This story played itself out back when I was a teenager.  The two protagonists, let’s call them A and B, were locked in a dispute. The dispute was about how the affairs of a particular association ought to be run. Now, it is somewhat important to mention that the association in question was a caste-based association, and the specific caste in question is Brahminism. However, I feel some regret having to mention this, because this fact will prejudice the minds of many of my readers. I, therefore, ask them to try and ignore the caste-based nature of the association and treat it like any other voluntary association of citizens. The import of the story and the morals to draw from it will not change significantly.

With this caveat in order, let us return to the story of A and B. Now, as it happened, both A and B were government employees. A was known to be extremely corrupt. Not a file passed through his desk without a bribe having to be paid to him. His extra-income showed up, not in his lifestyle, but in the assets that he was known to possess. He had no flashy taste in clothes and he had no unbrahminical “bad habits”. His wife, a genuinely good woman, wore much less jewellery than the ordinary middle-class woman at weddings. However, it was well-known that he had accumulated a lot of money. He had used it to buy up houses and stock up enough in his benaami bank accounts to last his descendants seven generations.


B, on the other hand, was known to be an honest man. He had never taken a bribe in his life, and his family’s lifestyle reflected this as well. For long, they lived in the same Central Government Quarters that his employer provided, and while his family did eventually achieve its ambition of buying  a modest house, at the time of the story, they had been unable to achieve it. B was widely reputed to be uninterested in wealth – and rumour has it that he was also uninterested in family life, believing himself to be cut out for higher pursuits, one of which was the association that is the subject of our story.


Let us now turn our attention to the subject of the dispute between the two men. We will not get too much into detail, but suffice it to say that the rights and wrongs of the dispute were exactly what one would expect from the character sketches of the two men we have drawn above. A had monopolized the affairs of the association, and it was widely thought that he took a cut from the association’s budget. To be fair to him, however, it was also widely thought that the association was in fact being run well, and its members regularly reelected him. B was proposing a change in the association’s by-laws that would bring in more transparency and bring in some degree of fresh blood in the association’s managing committee.


The dispute between the two men got personal, as these things frequently do. Apparently A struck the first blow – the details of which I do not remember. In response, B retaliated by calling in his contacts – he had many – and getting the CBI to open an investigation of A’s affairs. (“CBI” was the term used in the conversations I listened in on. It might have been some other investigative wing.)  The CBI carried out a series of raids on A’s property.


The response to the raids among the association’s members – and here I think it is relevant to point out that almost all of them were middle-class, educated Brahmins – was mixed. Some thought that A had got his comeuppance. Many others felt that B had gone too far in involving the police in an internal dispute.


In any case, these raids shook up A and made him ready to open talks with B for a possible compromise. After  extensive discussions, a “compromise” was reached, which can better be described as a surrender. A agreed to the rule change that B wanted – and B used his contacts to call off the CBI raids and hush up the investigation.


I will end this story here.  There are of course many lessons to draw from this, and if  I start off on them, the size of this post will double, so I will leave those for a subsequent post. But I must mention that this story tells us almost everything we need to know about the Indian’s attitude towards corruption, and the Indian’s conception of honesty.  Of course, we will get a Jan Lok Pal  who will fix everything.