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Public Policy Review #3
PolicyWTF, Causal Stories, Mastodon, Linguistic States, and more
Welcome to the third edition of the weekly policy review. I have a few action-packed sections lined up. If you find this content useful, please do consider sharing this thought-letter.
PolicyWTF: Reservations, of a different nature
This section looks at egregious public policies. Policies that make you go: WTF, Did that really happen?
The licence raj is a minefield for PolicyWTFs. Here’s a gem from there: items reserved for manufacture exclusively by the small-scale sector. Essentially, to boost employment growth in India’s small manufacturing establishments, only firms considered to be small scale industries were allowed to manufacture a reserved list of items. In 1967, 47 items were put on this list. By 1978, this number was 504. And by 1997, this number had reached over 1000, and even included many electrical and electronic goods!
Notably, despite the economic overhaul of 1991, this policy couldn’t be dismantled. It was only in the last decade that the list was pruned significantly. The last 20 items on this list were removed as late as April 2015.
What’s the big deal? To answer that, one needs to ask what were the opportunity cost of this policy. The overt policy objective was to boost employment growth in the small-scale sector. But this Ideas for India article (Harrison et al) conclusively proves that:
once a product was de-reserved, the number of establishments making that product increased by nearly 15%. In addition, employment increased by 50%, output by nearly 35%, capital by 45%, and wages by 6%.
Contrary to the expectations for such policy, we find that eliminating the policy was in fact associated with increases in overall employment and that these increases were driven by entrants into the de-reserved product space. Our findings are also in keeping with the evidence on the relationship between establishment size and growth in India. We find that it is young establishments, not small establishments, that exhibit high employment growth. The removal of small-scale reservations increased overall employment by encouraging the growth of younger, larger establishments − those that are most likely to pay higher wages, create more investment, be more productive, and generate growth in employment.
Apart from failing to meet its major policy objective, it also derailed India’s chance of developing a competitive manufacturing sector, the implications of which afflict us even today. On this note, I found these lines from Jairam Ramesh’s book To the Brink and Back: India’s 1991 Story illuminating:
Besides, what this reservation had done, was kill India’s chances of emerging as a global supplier of consumer goods, garments, sports goods, toys and many electrical and electronic items—all of which became areas of China’s manufacturing leadership in the 1980s and thereafter.
For an indictment of this policy, read the Report of the Expert Committee on Small Enterprises under the chairmanship of Abid Hussain (1997).
Remember, good intentions are no guarantee of good policymaking.
A Framework A Week
Tools for thinking about public policy
One of my all-time favourites is a typology of causal stories in politics and policy by Deborah Stone. Think of any public policy and you will find several causal stories contesting with each other. Was the drought caused by the weather or government neglect? Was the smog in Delhi caused by vehicular pollution or stubble burning or both?
The key insight is that implicit in the causal stories we choose is the act of assigning responsibility. Look at the framework below from Stone’s chapter. The framework makes a distinction between actions (guided or unguided) and policy consequences (intended or unintended).
Actors within the government often use causal stories in the top-right box to explain a negative phenomenon. So the causal story they use for draughts is: this is the wrath of nature — unguided and unintended—so please don’t blame the government for the consequences.
For someone outside the government, the lower half of the table is more useful. A policy analyst will often use the causal story in the bottom-right. For example, why was the government careless about drought adaptation given that its occurrence is quite regular? Or why did the government omit to change crop patterns?
For a political opponent, the bottom-left corner is often attractive — all consequences are a result of wilful malicious actions of the government, not just acts of carelessness.
The paper linked above has more details about the framework. Think of the causal story you choose while pushing for a policy change. I end this section with these lines from Stone:
In politics, causal theories are neither right nor wrong, nor are they mutually exclusive. They are ideas about causation, and policy politics involves strategically portraying issues so that they fit one causal idea or another. The different sides in an issue act as if they are trying to find the "true" cause, but they are always struggling to influence which idea is selected to guide policy. Political conflicts over causal stories are, therefore, more than empirical claims about sequences of events. They are fights about the possibility of control and the assignment of responsibility.
India Policy Watch
Insights on burning policy issues in India
November 1 was celebrated as state formation day in many Indian states. Many of these states now have now developed their own nationalisms and imagined identities. But let me throw some spanner into the works by quoting from Ambedkar, who had a nuanced and controversial take on this topic. His ideas can be summarised as follows:
A Linguistic province has nothing to do with what should be its official language. All states should have the same official language as the Union government. In Ambedkar’s words:
By a Linguistic Province, I mean a Province which by the social composition of its population is homogeneous and therefore more suited for the realization of those social ends which a democratic Government must fulfil. In my view, a Linguistic Province has nothing to do with the language of the Province. In the scheme of Linguistic Provinces, language has necessarily to play its part. But its part can be limited to the creation of the Province, i.e., for demarcation of the boundaries of the Province. There is no categorical imperative in the scheme of Linguistic Provinces which compels us to make the language of the Province its official language. Nor is it necessary, for sustaining the cultural unity of the Province, to make the language of the Province its official language. For, the cultural unity of the Province, which already exists, is capable of being sustained by factors other than language such as common historic tradition, community of social customs, etc. To sustain Provincial cultural unity which already exists it does not require the use of the Provincial language for official purposes. Fortunately for the Provincialists there is no fear of a Maharashtrian not remaining a Maharashtrian because he spoke any other language. So also there is no fear of a Tamilian or an Andhra or a Bengali ceasing to be a Tamilian, Andhra or Bengali if he spoke any other language than his own mother-tongue.
One State, one language should be the rule, NOT one language, one state. Because the role of language is only as an instrument for conveying homogenous local preferences, Ambedkar argued that people forming one language can divide themselves into many states. In a way, he foresaw the formation of Telangana. He wrote:
All that one can think of is that the Commission has been under the impression that one language, one State is a categorical imperative from which there is no escape. As I have shown one language, one State can never be categorical imperative. In fact one State, one language should be the rule. And therefore people forming one language can divide themselves into many States.
Controversial, isn’t it? I wonder what Ambedkar would have said today. I guess he would have agreed that he overestimated the fissiparous tendencies arising out of provincial nationalism. Anyways, do read Ambedkar’s fascinating take on linguistic states (complete with maps of divided states) here.
For my take on the Future of Indian States, here’s my episode on Pavan’s The Pragati Podcast.
For other podcasting platforms, click here.
Big fish eating small fish = Foreign Policy in action
You’re in for a treat. This week’s Matsyanyaaya is literally about matsyanyaaya. We had a chance to speak to Dr Rajesh Rajagopalan, one of India’s finest foreign policy theorists of the structural realist tradition. Listen in to find out answers to these questions:
What explains the worsening ties between India and China?
Is there is very little difference between China and the US as great powers? Does that count?
What are the strategic choices available to India with respect to China?
Unless India is at peace with all its neighbours, it can’t aspire for greater acts elsewhere. What will a realist say about this claim?
For other podcasting platforms, click here.
Radically Networked Societies
When networks meet pyramids
This week in India was witness to a digital exodus — the move away from Twitter towards Mastodon in protest of Twitter’s policies. An explainer on this exodus attempt is here.
The question doing the rounds was: will Mastodon replace Twitter? Most people answer in the negative because of two reasons: high switching costs from Twitter and the strong network effects that the incumbent enjoys.
My answer to this question is slightly different. Mastodon is unlikely to replace Twitter. Neither does it have to. What it needs to do is to be able to attract a new section of users to it. See YouTube and TikTok - two prominent video sharing platforms for instance. Even though it suffered from the same disadvantages that Mastodon does, TikTok became big because it was able to attract a new demographic of creators and watchers. The stars on TikTok are not the stars of YouTube. That’s really the key: what is Mastodon offering new so that a person new to social media will pick it over Twitter.
On the other hand, a top-down exodus of influencers from Twitter is less likely. They are faced with the cognitive bias of loss aversion and are likely to stay put. A minor reminder about switching costs: monetary switching costs are actually zero. It doesn’t cost you any money to move over to Mastodon. It’s the opportunity costs of switching that prevent twitter influencers from switching. But those with minor followership on Twitter have less to lose and will happily jump ship for something different.
Reading and listening recommendations on public policy matters
The Policymaker’s Guide to Emerging Technologies, A White Paper by the Niskanen Center is an enjoyable read for anyone interested in technology governance.
Six models for internet + politics (Fung et al), a 2013 paper on internet politics has stood the test of time.
That’s all for the week, folks. Read and share. 再见 👋