Trait or theory?

A few years ago, the multitude of responses to an interview with Prof Kaushik Basu about a rather serious, dour subject took me by surprise. These messages were from his former students at the Delhi School of Economics, all wonderful people, all saying nothing about the interview, all recalling how charming he was in their college days. It had always been obvious that Prof Basu is gracious, a quality rarely seen in economists, but this sea of popularity was terrific: a professor so well liked is awesome. The former chief economist in the World Bank and former chief economic adviser in the Government of India is of course a prolific and easy-to-read writer. His newly published memoir, 'Policymaker's Journal' (Simon & Schuster), lets even lay readers with no background in the subject access his wit and brilliance. The diary notings cover many themes. His observations about people, bureaucracies and societies and application of economic theory for explaining their basic traits are superbly funny and illuminating at the same time. I've picked out a few - humourless I am afraid - entries that are instructive about stuff that we see all around us all the time but barely understand.

An entry on March 27, 2011 - knowing the date of the jottings helps with gauging the general context in which the specific point was made - has the answer. Prof Basu writes about why by overcoming an issue, which is an example of what economists call free-rider problems, societies can prosper. If there is a society that is known to consist of trustworthy people, that society will do well. In other words, such societies have evolutionary strength. They will prosper. Honest individuals seldom do well economically but honest societies generally do. However, individuals who are not trustworthy but part of an overall trustworthy society are likely to do even better. Therefore, the success of societies depends on their ability to solve this free-rider problem.

A couple of days later, on March 30, 2011, he writes that Karl Marx's dream of a society in which we work and give according to our ability and get according to our needs is ideal. Although it has tremendous moral resonance, many of the policy interventions that communists recommend for reaching that ideal would not, in his view, take societies to that ideal. They may even make matters worse, something the world has already been witness to - as happened in the USSR. He writes that some of the means communists recommend are much more likely to end up creating a crony-capitalist society than any kind of socialist utopia.

In the longish note dated January 5, 2010, he records preliminary-stage discussions with Nandan Nilekani that he had as the chief economic adviser in the UPA government to discuss the former Infosys chief's unique biometric identification system, the Aadhaar programme. The entry is very insightful for understanding how a thinking economist can see so much more than a technology person does. He explains how the Aadhaar programme is a transformative scheme that can help vault India ahead, although much will depend on how much use it is put to.

He writes that Nilekani and others emphasised that it is basically a technology "to make sure that you are you". Then he goes on to explain why according to him that is an inadequate way of understanding and approaching the scheme. He begins by saying that the right approach would be to describe this with a little bit of set theory. And adds how there are zillions of transactions and activities taking place in India - people buying goods, cutting deals, boarding trains, joining clubs. The unique identification system is, to his mind, a way of associating each individual with a subset of this universal set of transactions. So, for instance, if the system throws up a case suggesting that a person who withdrew money from a bank in Chennai and the person who bought a train ticket in Delhi are the same person, then this conclusion can be contested or confirmed. Whereas "you are you" is tautological. If a transaction or an activity is defined in such a way that each of them is performed by one person, then the unique identification system helps create a partition of the set of all recorded transactions and activities in India. What this means is that biometric identification is basically a platform for partitioning all the activities occurring in a country. He's sensitive to the downsides and writes that while the richness of the information will, of course, have risk but we should be mindful of the inevitability that all technological advances do come with their own risks. We simply have to develop safeguards against them and try to get the benefits, which in this case can be very large, according to him.

Just like honesty, he also explains punctuality in terms of economic theory. This "game-theoretic sketch", written originally with Jorgen Weibull, shows that punctuality or its absence is not a hardwired trait in society but is an equilibrium response to other people's behaviour. In other words, each society has multiple equilibria. It can be unpunctual. In which case it is rational for individuals to be unpunctual and that in fact bolsters the "unpunctual" equilibrium. Equally, the same society could be in a punctual equilibrium. When a Japanese sociologist directed him to some writings by European visitors to Japan on how unpunctual the Japanese were a hundred years ago, his belief strengthened that theory was "talking" to reality. Japan clearly moved from one equilibrium to another, he writes.

So, there's nothing cultural about these things. Next time I get a chance, I'll ask him if a society's capacity for and attitude towards cleanliness could be explained using some such principles. Do squeaky clean and carefully maintained places deter people from littering? Do people feel less reluctant to litter in a place already decrepit and filthy? Why don't the stiff fines and penalties applicable on the Delhi Metro stations and train premises deter riders from squatting on the floor and consuming food in the coaches?

Puja Mehra is a Delhi-based journalist and author of 'The Lost Decade (2008-18): How India's Growth Story Devolved Into Growth Without A Story'