Mridula Ramesh's 'The Climate Solution'

The following is an excerpt from a book called 'the Climate Solution' by a well educated young entrepreneur.

I reproduce it from 'Scroll.In'.

The author is trying to explain why bad 'mechanism design' causes environmental degradation under India's segmentary type of democracy.

Does the author succeed? Let us see.

Our first protagonist is an average middle-class urban city-dweller – let’s call him Akash. Akash has recently finished college and has received an offer with an IT firm working in analytics. He drives to work and lives in a flat with three of his friends. He enjoys going to the movies. He is asthmatic. Akash pays his taxes (it’s deducted from his pay cheque every month, so he does not have much of a choice). He’s also amongst the tiny fraction of Indians who do pay direct income tax…

Akash never went to a government school. He has never and does not ever plan to go to a government hospital. He does not take public transport. He does not receive any food from the public distribution system. He somewhat trusts that the FSSAI stamp on the food he buys makes it safe to eat, but he nurses his doubts. He likes the peace the nation enjoys and is proud of the Army. Last year, when floods devastated his city, he was rescued by the Army, and he is grateful to them. He likes the fact that he has not been robbed or assaulted (as yet) and for that he is thankful to the police. Akash has never voted.None of the candidates appeal to him. And, to be frank, he feels society does not do much for him. The politicians appear to be aware of this: He is not courted before elections…

What is the author trying to say? I suppose what she is getting at is that Akash pays into the system through tax but doesn't get much out of it and so has little 'skin in the game' politically speaking.

Is the author correct?

Briefly, the answer is no. Akash comes from the middle class. Chances are he has already benefited from historic subsidies given to people of his class. His School may have been private but it was given land at a low price by the State in return for low fees and quotas for government servants. His College education is likely to have been highly subsidised.

His reluctance to vote means nothing. He has other ways to influence political outcomes and will need to do so because he is likely to have children and, even if he emigrates, he will inherit ancestral property or have investments in India.

Why mention Akash? Sooner or later his own economic self-interest means that he will be part of a class which has a lot of influence on political outcomes- though it may pretend to have been marginalised.

The author now wants to introduce a 'free rider' who takes from the system but does not pay in.

Enter Muniammal, our second protagonist. She is a 55-year-old woman who lives in a ten-by-ten illegal shanty on the banks of the Cooum river in Chennai. She does not pay for her electricity. Her children went to the corporation school, for which she did not pay any tuition. When she is sick, she visits the government hospital, which is free, in theory. She depends heavily on the Re 1 per kg ration of rice for her sustenance. 

But Muniammal has little control over the quality of the services (or products) she receives. Indeed, she often needs to grease many palms to get what she is entitled to or what she needs to get away with: to the policeman to look the other way, to the ward boy at the hospital so the doctor will see her, to the ration shop for preferential access. In fact, when there was an assault on her daughter-in-law this past month, she could not get an FIR filed without her local councillor’s help.

What on earth is the matter with this author? She was educated at top American institutions. Why does she say that Muniammal 'needs to get away with' anything? Is the woman a bootlegger? Is she pimping out her daughters? Why does she need to pay a policeman to 'look the other way'? Does this have to do with her living 'in an illegal shanty'? But no policeman can arrest her for that. Only the owner of the land can get a writ of eviction and then serve it upon her. She has a legal entitlement to due process. It is not illegal to live in a place whose ownership is disputed or to which one has not yet been able to claim a defined legal right.

It may be the author is thinking of a specific woman engaged in some shady activity. But that is a different matter. She should say this plainly. It is not the case that any very substantial portion of women of this description in Chennai are engaged in any type of criminality.

It seems the author thinks of this woman as a criminal simply because she is poor.

Why does she speak of paying the ward boy or ration shop owner for 'preferential access'? It is merely her own legal entitlement that she is asserting. It is sad that she feels she has to pay a douceur.  But that is not an indictment of her character.

The author now quotes another smart South Indian who says stupid things-

The system, which is supposed to work for all citizens, is often broken for her. Raghuram Rajan, India’s former RBI governor, has been widely quoted as saying that “the tolerance for the venal politician is because he is the crutch that helps the poor and underprivileged navigate a system that gives them so little access”.

What Rajan meant was 'we tolerate the venal politician because he has a countervailing power over the corrupt civil servant.' However, if the system had been properly designed, bureaucrats who tried to restrict access to it so as to extort money would be fired.
The truth is that 'the system' was always cosmetic and based on service provision discrimination. This in turn means that cheap ways to segment the market- stuff like caste or creed- gained salience.

But this “crutch” comes with a big caveat: Muniammal , the 55-year-old woman, cannot hope to command the attention, let alone the assistance, of the local councillor.
Only Muniammal, who belongs to Caste A or Religion B, can. Especially if Caste A is a large voting bloc. And Muniammal gives her vote as her caste leader directs. This means caste definitions and ethnic divisions need to be highlighted to command attention and delineated to create a unique power base – an interesting thought.

This is a poor argument. The Muslim Councillor from the cultivator caste is very happy to do a favour for a Hindu from an artisan caste because this creates the impression that he can command a following outside his own sub-caste which in turn gives him a leg up over his cousins.

Now take Rajiv, our third actor. He’s the hot-shot heir of a large business family with interests in construction, steel and retail. Rajiv would not dream of taking public transportation in India, and would not venture near a government hospital or school. He does not even know where a ration shop is, or what he can get there. He has never seen his ration card. He wants the government to keep multi-brand retailers out of the country and he wants high import duties on steel. Thus far, he has got what he wants.

Right! Coz Rajiv is as stupid as shit. Some business houses may want 'high import duties on steel', others don't. As an anti-dumping measure, steel tarriffs were reasonable when the author was writing this. Multi-brand retailers have always existed in India. What this careless author- dashing off a book to burnish her credentials- is targeting is MNC retailers- single or multi-brand- but, again, this isn't really such a big deal. The author is out of date.

If we were to look at sheer numbers, the Muniammals of India overwhelm the other two in numbers.

This is true everywhere. Few people work in 'analytics' like Akash. Fewer still are heirs to billion dollar fortunes.

What are the characteristics of such an equilibrium? What kind of social contract would manifest here?

I will answer this later on.

Can the author make a stab at it herself?
No- this is what she writes-

The provision of services of the society needs to be broken, or at least flawed.

What type of sentence is this? Where was her brain when she wrote it? Does she not re-read what she writes? What about the editor at the 'Scroll'? Why did he or she let it pass?

Both Akash and Muniammal, for different reasons, cannot really influence the service quality they receive from the government.

This woman must be utterly mad! Does she really think Muniammal has equal access to services provided by the Government? Akash probably wouldn't even need to hire a lawyer to get much better treatment. In every justiciable matter, Akash is likely to get better treatment than Muniammal. But this true all over the world. Government services are rationed- there is service provision discrimination- with money as one segmenting factor. Within income classes, resources may be rationed on a first come first basis. That is a separate issue.

Why? Public provision of services is sometimes flawed because of the incentives of the constituents, the vacancies within several essential departments, such as health and education, and the complete lack of competition…

This is not a flaw. There is always scarcity at the margin in the provision of public services. Once the allocation runs out, some people are turned away.

Thus, Akash cannot shift his custom to another when the government has a virtual monopoly and Muniammal cannot afford to do so.

Akash has already shifted to other service providers for things like housing, food, education and so forth. He may live in a gated community with its own security, water, electricity generator etc. However, where something valuable- like a Govt. of India scholarship to Ivy League- was on offer, Akash would certainly have pursued it with vim and vigour.

Little competition means the “badness” of the service can persist.

Competition is not the problem. The problem is that resources aren't released and reallocated from inefficient service providers- for e.g. a dysfunctional Government school-  to efficient service providers- for example a voucher type, independent school.

Muniammal cannot command better service; she can influence the process only through her politician, and that too as a member of a specific caste or ethnic group. This is important because otherwise the politician loses his meaning to the Muniammals of the world….

Suppose I were Muniammal's local councillor. Would she hesitate to see me because I'm from a different caste? Of course not. She'd come to me and promise to get out the vote for me in her ward. She might well mention her caste- it might qualify for special benefits- and her economic status- so as to get BPL entitlements- and I'd be happy to help her because it would help me snatch votes from my rival or at least make it appear to my caste fellows that I could do so.

It is perfectly rational for collectivities to form around existing identities so as to lobby for deprivation or social exclusion based entitlements.  My Old Etonian boss, when not Merchant Banking, was a vociferous member of a distressed agricultural community which, he chortled over the port, received more money per cow than was spent on the education of school-children in Wales. Hoping to ingratiate myself with him, I said I thought this a perfectly sound policy; the two heifers of his I'd met at dinner- who were now in the withdrawing room waiting for us to finish our cigars- were indeed comparatively erudite despite having grazed at Girton.

Add to this a tremendously delayed judiciary process – we have more than 26 million pending cases as on February 2018 – which imbues the politicians with the power of ad hoc decision-making.

It is estimated that 46% of those pending cases involve sections of the bureaucracy suing each other so as to avoid having to take any sort of action- ad hoc or otherwise.

For instance, if someone beat up your son and the case dragged on and on, wouldn’t it be simpler (and more gratifying) to approach the local politician for speedy street justice?

Is this lady utterly mad? If a case had been lodged against your son's assailant, the police must have already beaten a confession out of the fellow responsible. Otherwise how could the case go ahead? Obviously, the assailant would have retracted his confession and his lawyers would have managed to drag things out. But this can happen anywhere. This is not the sort of thing one goes to a politician for. A gangster maybe- but that would involve extorting money.

Lastly, data is crucial. As the saying goes, knowledge is power, which perhaps explains why departments are shrouded in relative opacity and data seems to be unavailable, hard to access or outdated….

This lady has an MBA from America. She holds some high position and has just published a book. Why is she unable to string two thoughts together in a cogent manner?

Why is data crucial? What sort of data? We don't know. Out distinguished author won't tell us. Instead, she says knowledge is power which is why Government Departments, which are notoriously power hungry, don't have up to date data.

Why do we allow slums to creep up on flood plains?

WTF? Slums aren't sanctioned. We aren't allowing them at all. The question she means to ask is why do many parts of the world permit building on flood plains.

Muniammal needs inexpensive housing close to where job opportunities are. It’s illegal, so the politician leans on the policeman and the judges to look the other way.

Nonsense! Whether in Britain or Chennai or New Orleans, building on floodplains occurred not because of the need for 'inexpensive housing' but for big profits for property developers.

Muniammal is grateful and rewards him with her vote.

How on earth does Muniammal get to know which politician to reward? It would be impossible for her to do so. That is why it is likely that a slum-lord is the person who manages the thing in precisely the same manner that a property developer would and for exactly the same reason.

And because she overwhelms the Akashes in numbers, her writ prevails.

This is a hideous travesty of the truth. I'm pretty far to the Right, but what this lady has written is... it is hate speech directed against...someone of my ethnicity and religion who no South Indian would not consider a better and more worthwhile person than myself.

The slums encroach on the river and reduce its carrying capacity. Of course, cheap housing cannot come with underground sewage, so the waste – both solid and human – finds its way into the inviting river, further reducing the river’s carrying capacity. Naturally, when it rains heavily, the river is more likely to flood.

So, that's what happened in New Orleans or what happens in the Home Counties. Muniammals create slums and this causes floods.  What a wonderful discovery this lady, who used to work for Mckinsey, has made! Donald Trump should appoint her to his Cabinet!

Moving onto the second question, why do we dump construction debris into our drains and canals with impunity?

We don't. A builder might want to, to cut costs. But he won't get away with it in England. That doesn't matter. Big estates will go up anyway. Devastating floods will still occur.

To answer this, let us come to Rajiv. He wants to rebuild the city in his way.

It is not possible to 'rebuild' any Indian city because of obsolete rules and regulations.  What people dream off is building a greenfield land-bank and creating a second Gurgoan. There are plenty of well built housing colonies in India created by 'Rajivs' who knew their business.

Naturally, that involves acquiring buildings on the cheap.

In India? How? The thing will take an age and cost a fortune. Far better let rent controlled buildings collapse on their own.

He leans on his brother-in-law, the MP, to ensure other builders cannot buy old buildings easily in “his” part of town.

The M.P has no such power. This is sheer fantasy. Indeed, this strategy it is a quick way to lose money.

He then breaks down the buildings. Carting the waste would add to costs, and why should he do that when the river lies so invitingly close? Who will stop him? Any official who dares to will get transferred or worse.

Which river is so invitingly close? In any case, India happens to be very good at recycling rubble. Remember the Twin Towers? A scrap merchant from Chennai bought the rubble and recycled it. Why is Rajiv dumping stuff which can be sold for money?

In his book, When Crime Pays, Milan Vaishnav talks about the link between builders and political houses, and the increasing criminality in politics. To highlight his case, Vaishnav shares data that shows cement prices go down just before elections because builders divert funds to the campaign.

Elections mop up 'black' liquidity of diverse origins which then flow back into real estate. So what?

Meanwhile, Rajiv’s first venture does so well that he wants to build the second one. The only problem is there is an old lake there. Earlier, the lake had farmers around it with water rights. But farmers have sold their land and moved as the city has developed. The corporation has taken some of it over, and the rest is too inviting for Rajiv to pass on.

There are plenty of small developers in every city of India. Every family has extended and built up its property. Lakes and water courses get short shrift. Still, this does not mean proper City planning and drainage can't greatly mitigate much of the problem.

Not to worry, dump some earth and debris there, and there is a new site in place.
The unholy alliance between the Rajivs, who promote rule‑breaking to make a quick buck, and the Muniammals, who require rulebreaking as a fiendish substitution to the provision of good services, overwhelm the wishes of the Akashes of India.

Muniammal can't buy the flats Rajiv is selling. Akash can. Why blame the poor woman living in a shack for a problem she has not created at all?

Moreover, the Muniammals vote and, very often, the Akashes don’t.

Muniammals do vote and often they are paid to do so. However, they are not voting for Muniammals. Their votes get divided up between politicians who are clones of each other.

This results in the trampling of our common goods like air and water – of our environment, in short. And because the politician – who gains his power from the broken system – is the one who can fix it, we need to look at addressing the underlying equilibrium instead of merely spouting platitudes.

Equilibrium is a word from Economics. What does economic theory have to say in this context? The answer is that what is happening here has to do with property rights. Encroachment and zoning violations infringe the State's property or residuary control rights. 'Appropriable control rights' give rise to rents. The State can't afford to assert residuary control rights while politicians and administrators can share rents from those who appropritate them. The Coasian solution would be to minimize rent contestation and forget about how property rights were distributed in the first place. The equilibrium to solve for has to do with implementing a mechanism that can 'internalise' externalities. So stuff like a local cess to pay for drainage, utilities, municipal services etc. The incentive for paying the cess is getting some property type claim and thus establishing a path to security and having a fungible asset.

Is this what our author herself recommends? No. Don't be silly. She is simply spouting platitudes and making out that some poor Tamil woman- my age but, unlike me, still of great benefit to Society- is a terrible villain.

But as they say, every cloud (or worsening climate) has a silver lining.
As the frequency of floods increases, Muniammal’s satisfaction with her housing falls.

WTF! Muniammal was very satisfied with her riverside condo was she? The woman is living in a shack! She is barely clinging on. Why speak of her 'satisfaction' as if she were sipping martinis in her penthouse?

It made sense when it was close to her place of work, and she was willing to put up with the sewage and the lack of water. But when it floods every year, she loses the few possessions she has, and the relief doesn’t cover it all. Moreover, Muniammal’s son has done well, relatively speaking, and he does not want to live in a slum anymore. The vote bloc is beginning to crumble, and a new vote bloc, the “development” vote bloc is becoming viable.

Sheer fantasy! There was always a vote bloc for development. What Muniammal and her son and everybody else wants is both for the slum to be improved and the chance to sell and move up the housing chain. There will always be new entrants- perhaps from outside the State if demographic transition has occurred.

Also, once in a while, the system throws up a hero – whether a bureaucrat or a vibrant politician – who wants to make a difference. There are recent examples in India – a bureaucrat who heads the irrigation department of a state, or one who ensured a public transportation project was completed on time and under budget, or politician who revamped the department he was charged with, and delivered results.

Yes, yes. But what happens to these heroes? They are promoted away from genuine problems or reach mandatory retirement age.

Typically, this happens when outsiders – either politicians or lateral entrants into the bureaucracy – take charge. They don’t benefit from the equilibrium, so they are happy to make the change. There are usually tell-tale signs of these heroes – the data will speak for itself. The good news, if you want to call it that, is that climate change throws into strong relief the fissures in the Indian system.

Sheer idiocy. Economic processes don't involve heroes. Solving for a Coasian solution is about minimising rent contestation and using the resources thus freed up through a mechanism which can internalise the relevant externality. It's the story of how municipal services got started in the first place. All this mumbo-jumbo about some supposedly disaffected Akash, with his head in the sand, and Rajiv who will go bankrupt following the author's crazy business model, and villainous Muniammal gloating in her shack, is a fantasy of the author's which exposes something very ugly about her American educated mind-set.

Shame on her and shame on the editor who published this worthless book.