Medalless army

The defence ministry must quickly resume issuing official medals.

Last week, a colleague and I were struck by what we saw at a new military supplies store that had opened in our neighbourhood. Among the usual uniforms, shoes, hats, bags and kit, we were surprised to see medals. Not just the ribbons, but the entire suites of medals ready to be stuck on to uniforms. This struck us strange and dubious.

Dinakar Peri’s report in The Hindu tells us why. It turns out that the defence ministry department in charge of issuing medals has not been doing so. Since 2008. So for eight years, the defence ministry has been awarding medals but not issuing them to officers. That’s so long that many younger officers do not even know that they ought to receive the medals from the defence ministry, and not have to buy them from military stores.

It’s not only sad, but undermines the purpose of medals by devaluing them. The economic reasoning behind issuing medals for service and gallantry is to create a “honour incentive” which can both be stronger and more effective than monetary incentives. If you undermine the honour attached to a medal, you weaken the incentive that encourages the behaviour that the medal recognises. If devalued to the point of become a routine, the incentive fails. The fact that the defence ministry hasn’t bothered to issue medals for eight years is therefore disturbing.

It should be the easiest of things for Defence Minister Manohar Parrikar to do to order the Department of Medals in his ministry to resume issuing medals prospectively, and clear the backlog over time. It’s not merely what society owes to its soldiers. It’s an important step in arresting a drift in professional standards.

Why parking needs more than proof of space

The big idea in urban transport is to get users to pay for parking and suchlike. Not another piece of paper.

The Union government is considering a proposal to make car ownership contingent on the prospective buyer producing an “adequate parking space available certificate.” M Venkaiah Naidu, Union urban development minister stated that he was keen on this and promised to persuade the Union surface transport minister and the state governments on the need to do this. A recent magazine article claims that this is an “absolutely sensible move” as it has been implemented in Sikkim and Mizoram, and has is compulsory in Japan and in one place in South Korea.

Mr Naidu means well, but by itself, the requirement of a parking space certificate will open another source of corruption without doing much to reduce traffic congestion. Anyone who’s visited a local road transport office (RTO) or obtained a pollution under control certificate will know how this works.

But let’s spell it out nevertheless: it is easy to ‘show’ you have adequate parking space because spaces do not have unique identities that are in a common database. It may be necessary to pay someone — a petty official or a person with space — to ‘show’ that you have parking space. Actually, few will take the trouble to do this. It’s more likely that the licencepreneur who owns the photocopying shop next to the RTO will arrange for the parking space available certificate for a small fee. Neither the RTO, nor the traffic police, nor the Union development ministry have the resources to check whether the certified parking space exists in reality or merely in-between folds of red tape.

Needless to say this won’t make a dent in the number of vehicles being purchased. Sikkim and Mizoram are small states with populations and geographies that might even make such a policy workable. In most other places in India, especially in places where traffic congestion is a massive problem, we will just have one more layer of regulation, one more piece of paper to be procured, some more money for petty officials an licencepreneurs.

That said, Mr Naidu is nearly on the mark. The way to reduces incentives for people to purchase and use cars is to charge for parking. Every car parked on public roads not only creates road cholesterol, but also is an implicit, undeserved subsidy to a car owner. The more cars you park on public roads, the greater the subsidy you get from the government. This creates positive incentives for vehicle ownership and use. If we stop rewarding vehicle users for parking on public roads and charge them the market price of the real estate they temporarily occupy, then we will see vehicle use coming down. That, by the way, is what they do not only in Japan, but in almost in every country and city that has sensible urban traffic. It’s not unusual for parking fees to be exhorbitant in central business districts of the world’s cities. In fact, when governments charge market prices for parking in public spaces, more parking space is created as private owners realise there’s good money to be made by creating private parking lots. [Parking availability certificates have reduced car ownership in Japan because parking spaces are available at market prices. See Paul Barter’s blog post.]

The Union and state governments must come to an arrangement on pricing vehicle parking. As Donald Shoup’s research shows, the best way to make the policy work, and get public acceptance, is to ensure that the parking fees collected go to the localities from where it is collected. People are less likely to oppose paid parking if they are convinced that the proceeds from their locality will largely be used to improve that very locality. Funds can be used to finance public transport: from bus services to bus stops, to metro and commuter rail. My colleagues at Takshashila estimate, conservatively, that implementing paid parking on fewer than 10% of Bangalore’s roads can add more than 20% additional revenue to the municipal corporation’s annual budget.

A national policy to make road users pay for parking (or dumping construction material, or hawking) would be a GST-scale reform that Mr Naidu has the opportunity to be the author of. He shouldn’t settle for that red herring called the parking space proof certificate.

Related Post: Eight ways to improve traffic flows in our cities quickly and without spending a lot of money.

Tailpiece: Donald Shoup’s insight:

Drivers want to park free, and that will never change. What can change, however, is that people can want to charge for curb parking. The simplest way to convince people to charge for curb parking in their neighborhood is to dedicate the resulting revenue to paying for added public services in the neighborhood, such as repairing sidewalks, planting street trees, and putting utility wires underground. That is, the city can offer each neighborhood a package that includes both performance-priced curb parking and the added public services financed by the meters. Performance pricing will improve the parking and the revenue will improve the neighborhood. The people who live and work and own property in the neighborhood will see the meter money at work, and the package will be much more popular than meters alone. [Cato Unbound]

The paradox of a cashless society

To be successful, the push for cashless society must accommodate the anonymity of cash

There is no doubt that moving towards a cashless society has immense benefits: from making transactions convenient and highly efficient to bringing most of the economy under accountability. From where India stands at 2016, a concerted push towards reducing the use of cash makes a lot of sense.

In an editorial last week, Mint enumerated some important steps to ease the path towards a cashless society: availability of telecom connectivity, investment in technology that improves security and simplicity, and government incentives that favour cashless transactions. In an earlier interview with the same newspaper, Nandan Nilekani argues that since much of the necessary infrastructure — Aadhaar, IndiaStack and Unified Payments Interface — is already in place, the Modi governments currency reform (‘demonetisation’) will act as a shot in the arm for India’s move towards a cashless economy. [Disclosure: Mr Nilekani is a donor to the Takshashila Institution.]

The Mint editorial, however, misses one crucial aspect. Apart from cash being a wireless technology with near-infinite battery life, and one that needs no telecom connectivity, it is its inherent anonymity that makes it a very valuable instrument. Yet, most advocates of a cashless society advocate it precisely because it gets rid of anonymity. Ergo, the extent of cashlessness might well be defined by the extent that people value anonymity and privacy. What this means in practice is that unless the demand for anonymous transactions is satisfied, India might not cross what the editorial correctly describes as “the threshold level after which the network effect will take over.” The question is whether the desire for anonymity prevent a forming a critical mass of Indians that rely on electronic payments. This, more than technical considerations, might dictate the pace at which cash is displaced from its throne.

It is understandable, not least at times of moral panic, that ordinary people will fall in line with the arguments of moral puritans and self-righteous advocates and assert that law-abiding citizens need not fear lack of anonymity. Such views ignore the the reality that families and societies are often held together by harmless lies. For instance, one family member will to put away some money from the rest, without any illegal purpose in mind. Some people like to give anonymously to charity, without any malice or illegality involved. These kinds of innocuous, quotidian acts are a glue that binds society.

Then there are perfectly legal acts that people wish to hide from their families, society or government in order not to attract criticism or punishment. Many people have food habits they’d rather not admit to their family, others might want their alcohol and cigarette purchases to remain hidden. People might give money to NGOs and political parties that are heterodox, dissenting or championing unpopular causes. Such acts characterise and sustain liberal societies. Indeed, even some illegal activities — say prostitution or consumption of certain narcotics — that take place regardless of the letter of the law might have a stabilising influence on our societies. The fact that puritans are disgusted and outraged by this is beside the point. Indeed the story of post-Enlightenment social change around the world is one of legitimising a number of acts previously considered immoral, after weighing them in the court of Reason.

For this reason, some jurisprudence has equated anonymity of cash with free speech. I usually avoid turning policy arguments into a question of rights, as it forestalls further discussion. In this case, though, I think it is justified. It would be hard to sustain free speech if there is an audit trail exposed to the market, society or government. The chilling effect this would have would impinge on the foundations of a liberal society.

Therefore, there are good reasons, both practical and of principle, to retain anonymity in financial transactions. To succeed, initiatives to promote a cashless society must, er, account and accommodate them. Good policy ought to be able to balance many valid considerations and arrive at an optimum approach. Allowing cashless transactions to be anonymous below a certain limit might offer a reasonable compromise. For instance, a stored-value “cash” card, available without requiring proof of identity, limited to payments of Rs 10,000 per month, with an six-month expiry date is one type of solution. This will achieve the transactional benefits of electronic payments, the anonymity of cash and limit the risk of use in large-scale criminality. Of course, even these cards can be abused, but I’d argue that the social benefits outweigh the costs.

If the government takes such a route, it will create enough room for innovation that can, paradoxically hasten the march towards the cashless society. Otherwise, we might take a very long time to cross the threshold that will unleash those network effects.

Tailpiece: It’s not as if a cashless society will lead to greater honesty. Dan Ariely’s experiments suggest otherwise.

“From all the research I have done over the years, the idea that worries me the most is that the more cashless our society becomes, the more our moral compass slips. If being just one step removed from money can increase cheating to such a degree, just imagine what can happen as we become an increasingly cashless society. Could it be that stealing a credit card number is much less difficult from a moral perspective than stealing cash from someone’s wallet? Of course, digital money (such as a debit or credit card) has many advantages, but it might also separate us from the reality of our actions to some degree. If being one step removed from money liberates people from their moral shackles, what will happen as more and more banking is done online? What will happen to our personal and social morality as financial products become more obscure and less recognizably related to money (think, for example, about stock options, derivatives, and credit default swaps)?” [Dan Ariely, The (Honest) Truth About Dishonesty: How We Lie to Everyone – Especially Ourselves.]

An eightfold path to improving urban traffic

There are quick an inexpensive ways to improve traffic flows in our cities

This is a version of an op-ed that appeared in the Bangalore edition of today’s Times of India:
We can approach a solution to the vexed problem of road traffic if we pay attention to one simple concept: flow. It is distressing to see so much of the public debate, civil society angst and government policy follow various red herrings. One the one hand policymakers blame lack of funds, and it is true that the municipal corporation’s entire annual budget is smaller than what is required to upgrade the road network to modern standards. On the other, citizens blame the pyramid of corruption that brazenly siphons off even what little funds are allocated for the purpose. There are also issues of masterplanning, infrastructure design and maintenance.

While there are degrees of truth in all these arguments, what seems to be lost is that conceptually, the problem of traffic is a problem of flow. While more money, less corruption, more infrastructure and better design are indeed medium-term and long-term solutions, they are complex and unlikely to be easily addressed in the churn of India’s democratic politics. Even so, we must push forward on them. However, in the meantime, if we focus on improving flows we can enjoy some respite from the tyranny of traffic almost immediately.

Here is an Eight Fold Path to improving traffic in the short term, without requiring to spends massive amounts of money.

First, and most important, focus on the flow. Do not get mesmerised by road-widening projects that are not only messy but might not improve the situation. Unless a road is of uniform width throughout its length, flow is unlikely to improve much by widening. In fact, uneven road width causes congestion and can actually worsen the situation. Do not widen a road unless you can widen it along its entire length.

Second, remove road cholesterol. In many places almost 40% of the road is unusable because, like clogged arteries, circulation of traffic is choked by various blockages. Potholes, construction materials, parked cars, auto rickshaw stands and street vendors interrupt traffic flow and not only cause congestion points but also endanger safety of motorists and pedestrians. No, this does not mean banning these legitimate activities. Rather, it means regulating them to minimise the impact on traffic flow. Make it compulsory for construction material and debris to be placed in bins, with a fee charged for occupying road space. Make parallel parking compulsory, draw parking lots and assign a serial number to each of them. Move auto-rickshaw stands away from street intersections. Similarly, ensure street vendors occupy designated lots.

Third, get cows and other animals off the road. It should be astounding that a city that connects India to the global economy, and one that suffers so much traffic congestion, tolerates herds of cows on its major roads. Cows might be holy but that does not prevent them from causing congestion and endangering their own lives and the lives of motorists.

Fourth, make all lanes of uniform width. Today, lanes are mostly not marked, and where they are marked, they bisect the available road width. The lack of lane markings and lanes of varying widths create no behavioural triggers for people to drive in a disciplined manner. Lane markings should always be clearly visible and not left to drivers’ imaginations.

Fifth, enforce queuing for right turns. One of the biggest reasons for congestions on major roads is that when vehicles wait to turn right, they do not queue up one behind the other. Instead, they line up side-by-side in an right-turning arc. What this means is that all the vehicles that intend to go straight ahead or turn left are blocked. It doesn’t matter how wide the road is, if right-turning vehicles do not queue up. Barricades can be placed to create a right-turn queue to create this driving behaviour norm.

Sixth, there have to be a lot more directional signs on our roads. Overhead gantries identifying lanes for left, right and straight ahead are necessary. These must be placed well-ahead of the intersection so that vehicles can change lanes much before the intersection.

Seventh, the stop line at intersections must be prominent. Right now its exact position is left to the imagination and discretion of drivers. This makes it impossible for pedestrians to cross safely or other traffic to pass across the junction. The stop line must be a lakshman rekha crossing which should attract severe penalties. Cameras already exist that can enforce this easily.

Eighth, movement of heavy vehicles and tractor-trailors cannot be unrestricted as it is now. Slow moving vehicles such as these not only slow down traffic but also create incentives for illegal and dangerous overtaking by other motorists. If they cannot be limited to certain corridors and certain times, then they must be compelled to move only in the left-most lane. Again, camera footage can be used for penalising offenders without burdening on-ground police personnel.

Finally, although pedestrians ought to have the first right on the road, they are constantly robbed of their safety and dignity. Traffic lights for pedestrian crossings seem to have been designed for Olympic sprinters, as it is almost impossible to cross even a mid-sized road in the ten seconds that are allocated for the purpose. Skybridges and underpasses are impractical if they have steep staircases or are located at unnatural crossing points. At times where traffic lights are sought to be synchronised to create “green channels” and smooth traffic flows, the pedestrian’s rights must not be sacrificed. Give them more time to cross the road; and dissuade them from crossing where they shouldn’t.

When should the government subsidise training filmmakers?

There is no case for government to subsidise FTII (and, for that matter, IITs and IIMs too)

One of the numerous controversies surrounding the Modi government’s appointments in the education sector revolves around a minor television actor being appointed the chairman of a government-run institute on the basis of his party, and perhaps ideological, affiliation. Students, alumni and many public commentators have opposed the appointment of Gajendra Chauhan on account of his weak acting credentials and lack of stature in the industry.

Mr Chauhan’s critics might be right. His defence — that he is being judged ahead of his performance — can also be taken at face value, not least in a country where “officially certified” graduates are unemployable, and great actors and film-makers need not necessarily be good administrators.It is not as if having great personalities running the film institute has prevented the Indian film industry from distinguishing itself through sheer mediocrity. Mr Chauhan does deserve a chance.

The Film and Television Institute of India is a government run institution. The elected government has the prerogative to appoint whoever it likes. If students and faculty do not like it, they can voice their protests, which the government ought to listen to. But if the government does not, or does not accept the criticism, then that should be the end of the matter. Students and faculty who cannot accept Mr Chauhan’s leadership can decide to quit. Whatever your politics, this is the right conduct in a republic. With apologies to John Roberts, the Chief Justice of the US Supreme Court, it is not the purpose of democracy to protect the people from the consequences of their electoral decisions.

However, the bigger issue is why is the Union government running a film institute and training actors and filmmakers with public funds? The economic argument is that the government can subsidise education that has large externalities, if there is an undersupply of such education. In other words, the reason to subsidise medical education (whether or not through government medical colleges) is that a doctor benefits society even when making money for herself. If there are too few doctors, there is a case for subsidising medical education. If there are too many of them, it doesn’t.

So do actors and filmmakers have large positive externalities? To the extent that entertainment is necessary for the well being of individuals and society, then it is possible to make a case that filmmaking ought to be supported with public funds. But are there too few actors? Are there insufficient incentives for the private sector to invest in filmmaking institutes? You could argue that a few decades ago, there was a need for government to subsidise Indian actors and filmmaking. It is difficult to argue that is the case today: the film industry was worth over $2 billion last year and almost produces more films than the United States, China and Japan (the next three biggest producers) combined. There are too many films. There are too many television channels. There is an oversupply of films, television programmes, actors and filmmakers. It makes no sense to subsidise film-making in this situation. Privatising the Film and Television Institute of India is a good idea, especially if it can use the autonomy to improve industry standards.

In a twitter conversation, a fimmaker retorted saying if government can run IITs and IIMs, then why not FTII? The answer really is that just like FTII, the government should get out of running IITs and IIMs too. Where there is need for government is in the running of 665 universities where around 30 million students are enrolled. All the IITs and IIMs together account for a mere 15000 students. The poorest student who secures admission to IITs or IIMs is likely to secure grants, scholarships or loans to pay her fees. On the other hand, the pure sciences, social sciences and arts need greater public funding because of the dismal state these disciplines are in. Universities represent education in its broadest sense, and has the broadest externalities — an educated population is in the public interest.

The debate on a few elite institutions is misplaced. The government ought to get out of running film, engineering, management and law institutes. There is no case for pouring scarce public funds in areas where there is a glut and where there are enough incentives for private provision.

Good ideas, not just honest people

The politics of populism or misplaced notions of polity?

An interview with Sunday Guardian‘s Atul Dev on the Aam Aadmi Party’s government’s actions in Delhi.

The AAP’s dharna against the Delhi Police officers was termed unconstitutional by many. What is your view regarding this?

(Nitin Pai). Anyone going on a dharna is adopting non-constitutional methods. As Ambedkar says, there is no place for non-constitutional methods when constitutional methods are available. For a chief minister to go on a dharna is doubly disturbing because an official sworn to uphold the constitution is resorting to non-constitutional methods. It sets a bad example — if everyone who feels dissatisfied with the “system” decides to adopt non-constitutional methods, what is the yardstick by which society decides what to do? We will end up with the law of the jungle, and the strong will prevail over the weak.

Q. How do you react to Arvind Kejriwal being labelled an anarchist, and if you agree, how will it affect the political atmosphere of Delhi?

A. Mr Kejriwal might or might not be an anarchist, but the methods he adopted legitimise people breaking rules and due processes, based on their own assessment of right and wrong. This is a formula for anarchy, as in a diverse country like India, almost everyone has a grievance, almost everyone believes that his cause is right and almost everyone believes that they’ve waited too long for justice.

Q. Many wrote off Arvind Kejriwal as the Lokpal movement came to close. What do you think were the major factors responsible for him coming to power?

A. There is clearly a wide-open governance gap because the UPA government almost entirely lost the plot, and was unable to even persuade people that there is a coherent government in charge. There are also underlying factors: urbanisation, sizeable middle class, instruments like RTI and social media created the conditions for urban India to begin to find its political footing. These factors, plus some clever old-style populist political promises helped Mr Kejriwal win. Continue reading “Good ideas, not just honest people”

What causes corruption and erosion of moral values?

Ans: The abridgement of economic freedom

Click to enlarge

An illustration showing how government interference in economic activity increases corruption, crime and leads to the moral degradation of society. Although the chart only refers to bans, it also applies to lesser interventions like price caps, price floors, excessive tariffs, quotas, reservations and so on. The difference is one of degree.