How long will the Great Currency Swap be popular?

As long as schadenfreude exceeds inconvenience

Many of us at Takshashila have been struck by the seemingly paradoxical situation of the Prime Minister enjoying popular support for the Great Currency Swap (‘demonetisation’) even when everyone has been inconvenienced to various extents. In a recent post, I argued that this confirmed my cynical hypothesis of what kind of public policies enjoy public support, because “most citizens feel the cost they are incurring is a lot less than the cost others—those with unaccounted money—will incur. For the moment at least, intangible schadenfreude is outweighing tangible personal losses.”

In a discussion today, we attempted to project the two feelings — of schadenfreude and inconvenience — to see how public support might change over time. This is described in the following chart:

Update: This is an updated version of the chart.


The excess of schadenfreude over inconvenience constitutes the level of support for the the policy. The excess of inconvenience over schadenfreude constitutes resentment against the policy. As of 15th December 2016, people still feel that the inconvenience is a price worth paying to ensure that those with unaccounted incomes suffer relatively more.

Note that this is a schematic, and the shape of the curves in this chart is not a forecast: events can move them in time or change their shapes.

For instance, if inconvenience continues to grow as people and businesses run out of adequate cash, and if they come to believe that the holders of unaccounted money are getting away relatively unscathed, then we might head towards point B, where resentment builds up. Then, as the situation eases — with adequate cash being pumped back into circulation, and with people adapting to a less-cash lifestyle — the resentment will begin to taper down towards point C.

The chart assumes that schadenfreude will diminish over time, in which case at point C, support and resentment will cancel each other out. However, if schadenfreude does not diminish, the policy will continue to enjoy popular support.

The Modi government can prevent or mitigate the rise of resentment by reducing inconvenience and by feeding schadenfreude. The former, by supplying enough currency quickly, before point A is reached. The latter way is to persuade the public that wrongdoers are getting their just deserts. However, as people hear news of seizures of hoards of new currency, or of others circumventing the moves using clever methods, the schadenfreude is likely to fall sharply.

The greatest danger to the Modi government, and to Prime Minister Modi himself, is if inconvenience does not fall, or fall quickly enough, and it continues to rise beyond point B.

3 thoughts on “How long will the Great Currency Swap be popular?”

  1. “as people hear news of seizures of hoards” – Doesn’t this also confirm that whoever is trying to game the system are getting caught? If govt tries a radical new step to catch black money hoarders and we don’t hear of a single wrong-doing/ppl getting caught, wouldn’t/shouldn’t that be more worrying?

    1. @prasanth, Bro, what are you saying. Think about the optics. It would appear to those who have little cash as that a lot of people have gotten away. It is common knowledge that we have a lousy system. And that if many people are caught, then the natural conclusion is that these seizures are the tip of the iceberg. And we also know how ethical the people of this country are. No one except perhaps Mr. Chappan himself would follow rules or allow a rule based system to function. Everyone down to the most sundry clerk will game the ‘system’.

  2. a simple but realistic way of looking at public support to demonetization. Actually no one has systematically gone around to take a survey of public opinion. Those pundits who write (mostly against) are basing their opinions on pre conceived ideas.

    Ask ordinary consumer who has very little savings, he or she is not disturbed by demonetization. As some one wrote based on prices of different commodities demonetization has been a success. I am sure there are others who interpret the same data to argue that demonetization is a failure. They argue that since people do not have cash to spend prices have come down. It is it really true?

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