Government and markets

It’s been a while since I wrote a post like this one – I remember a decade ago, I used to flood my blog with such stuff.

In any case, last week, in response to the “10yearchallenge” meme, Nitin Pai of Takshashila wrote an Op-Ed in the Print on how India has changed in 10 years. While he admits that the country has grown and the lives of people has improved in some ways, the article leads with the headline that India should be be ashamed of what has happened in the last 10 years. This paragraph is possibly representative of the article:

While individual Indians seem to have done well over the past decade, India is more or less where it was. Worse, politics and policy priorities seem to have regressed to 1989.

Reading through the article (I encourage you to read it, it’s good – never mind the headline), I found a clear and distinct pattern in the kind of things where things have gotten better in India and where things have gotten worse.

Everything where markets function, or where the government doesn’t have much of a role, things have changed significantly for the better. Everything where the government has an outsized role, either because it is the government’s job or the sector is overregulated, things have gotten worse. So our cities have gotten more crowded. Infrastructure has gotten worse. Law and order has regressed. And this has had little to do with the party in power – whatever the government touched has regressed.

Looking at it in another way, Indians seem to be highly capable of making their lives better by coordinating using the invisible hand of the market. However, we seem incapable of making our lives better by coordinating using the government process.

From this perspective, there is one easy way to progress – basically reduce the government. Get rid of the overregulations. Get the government out of things where it shouldn’t be. Give a freer hand to the market.

Unfortunately, ahead of general elections this year, we see most parties taking a highly statist line. This is a real tragedy.

On liberalism and government control

My first exposure to political ideologies took place in 2004, when I joined the now-defunct (but then brilliant) social networking site Orkut. While filling up my personal details, I was asked to pick my political beliefs from a drop-down.

It had things such as “left-liberal”, “very left-liberal”, “right-conservative”, etc. Now, while I considered myself liberal back then (I’ve moved far more liberal on personal freedom issues since then), there was no way I could describe myself as “left”, since I’ve always been a free market fundamentalist. Finally I noticed there was something called “libertarian” in the dropdown, and assumed it might stand for my beliefs and chose that. In hindsight, it turns out I was right (no pun intended).

A year or two later, I got introduced to a “libertarian cartel” (I was never a member, so don’t know who were members). Presently, I was invited to join some of them in discussions, and my love for the libertarian philosophy grew (these discussions were instrumental in me moving far more liberal on personal freedom issues). Yet, looking around the political spectrum, you had few libertarian parties (going across countries).

You had the set of parties that can be broadly classified as “Republican” which allowed you to do business the way you liked, but sought to restrict personal freedoms. And there were the parties that can be classified as “Democrat” which promoted personal freedoms, but restricted how you could do business. And you had philosophies such as communism which sought to control both. The “fourth quadrant” was (and is) largely empty.

It is not hard to understand why this fourth quadrant is empty – in exchange for responsibilities of governing, politicians desire power, and this power can only come at the cost of restricting freedoms of the constituents. Different political formations choose to exercise this power along different axes, but little differentiates them – they all seek to control. While libertarianism is appealing for the constituent, it doesn’t make sense for politicians since it doesn’t compensate sufficiently for the responsibility of  governance. Hence you don’t find libertarian political parties.

Yet, we find that slowly but surely, reforms do happen. Over time, restrictions on freedoms (both personal and economic) do get relaxed, albeit at a glacial pace, and this is true across countries, despite there being no “libertarian” politicians. Why does this happen?

The simplistic answer is that politicians in functioning democracies have to face lengthy periods of time in opposition, when they are at the mercy of the party that is then in power. Since politicians tend to be vindictive animals, you don’t want to leave behind any laws that might be used to harass you while you are out of power. So the ruling party should tend to ease restrictions that can be used against its members when they are out of power.

Again, this is fine in theory, but why does it not always happen? The answer is that opposing political parties are not “orthogonal enough”. If politicians on multiple sides of the divide have broadly similar ideas on certain issues, there can be a tacit understanding (a “doctrine of no first use”, perhaps) to not use the laws that they agree on against each other.

When you have parties that have orthogonal philosophies, you can expect them to do their bit while in power to undermine the sources of their rivals’ control, so that their rivals might enjoy less control the next time they are in power. And citizens in such democracies are likely to enjoy greater freedoms.

As the old saying (paraphrased) goes, “when politicians from all parties agree to something, it is unlikely to be in the interests of the people”.

Politician salaries and corruption

Recently, Vijay Nair, CEO of OML Entertainment, which organises the popular NH7 Weekender music festivals, tweeted that the Weekender in Delhi last month was the first where he didn’t have to pay a single paisa of bribe.

Just before the event, Delhi Chief Minister Arvind Kejriwal gave a speech in which he stated that he had bought passes for the event by paying for them, and urged his ministers and other government officials to do the same rather than asking for freebies.

Yesterday the Delhi government increased salaries of its legislators and ministers by a factor of four (which the Economic Times incorrectly reported as a “400% increase” – it’s a 300% increase).

The basic monthly salary of Delhi MLAs and ministers is all set to go up by a whopping 400 per cent besides significant hike in a slew of allowances with the assembly today approving a bill to effect the increase considering rising cost of living.

The Delhi government will now send the bill to the Centre and if it is approved, then basic salaries of legislators will rise from current Rs 12,000 to Rs 50,000 …

The move to increase Delhi legislator salaries has been expectedly panned by opposition parties, but it is an important step in reducing corruption, the main plank on which the Delhi government came to power last year.

In order to better understand this, go back to Kejriwal’s statement before the Weekender urging officials to purchase their tickets and not ask for freebies. The on-ground price of a ticket for the Delhi Weekender was Rs. 3500.

As per existing salary structures, a Delhi MLA would have had to spend a quarter of his monthly basic salary for the event. If he were to buy tickets for his family of four, he would have to spend his entire monthly basic salary (I understand there are other components of compensation, too)! And this would have been good enough justification for him to ask for free tickets.

While a higher salary might still not prevent an MLA from demanding free tickets, his earlier moral justification for the demand doesn’t exist any more – since the new salary structure now makes the tickets affordable. This removal of moral justification is certain to have an impact on corruption at the margin.

More importantly, official salary levels have a massive impact on the kind of people the profession attracts. When you get paid a pittance as a politician, it repels people who are loathe to be corrupt – for it is next to impossible to make a decent living on such salaries. People will be loathe to leave well-paying jobs for politics, and the only people politics will attract are those that hope to make money on the side.

I hope the Centre approves the Delhi government’s proposal to increase salaries, and other states match this. Given the small number of legislators and ministers, fiscal impact will be marginal. But the impact it can have on corruption, in terms of removing the moral justification, and on the kind of people it will attract to politics will more than pay for this.

Gerrymandering in Bangalore

So a couple of years back, just before the Karnataka Assembly elections, I had taken a look at Gerrymandering within the constituencies of Bangalore. This picture shows the boundaries of the parliamentary constituencies in the city, and you can see that it is bizarre. For example, parts of the Bangalore North parliamentary constituency (black) lie to the south of all of Bangalore South constituency (green)!

Now, the word “gerrymander” was invented in the 1800s, when one Mr. Gerry, who was the governor of Massachusetts, redrew the districts (constituencies) in the state in order to maximise the chances of his further election victory, and the redrawn districts looked like some kind of a mythical creature, which was given the name “gerrymander”.

Now, while the Bangalore figure above looks bizarre, no doubt, it doesn’t really resemble any animal, mythical or otherwise. However, with the proposed BBMP Restructuring, Bangalore’s wards are in the news again. And I was just looking at the population densities in different wards, and happened to take a look at Padmanabhanagar, which is my current assembly constituency. And this is what it looks like (different components are the different wards within the constituency, and intensity of colouring indicates population density within these wards).

padmanabhanagarYes, really, that is the shape of the Padmanabhanagar assembly constituency. If you have any doubts, get the data from and check out for yourself (that’s where I got the mapping data from; density data came from the BBMP Restructuring site  – there’s a link there with excel file on areas and populations).

Anyway, so what do you think Padmanabhanagar looks like? To me, this looks like a hen that is running. To Thejaswi Udupa, with whom I shared this picture, it looks like a “hen doing ballet”.

Whatever it is, such gerrymandering leads to atrocious policy and implementation. My house, for example, is very close to the beak of the hen described above. In other words, it’s in one extreme corner of the constituency. Actually, if you look at the portion forming the hen’s head, that’s Yediyur ward, and my house is at one extreme of Yediyur ward, too.

The road outside was dug up a year and half back and hasn’t yet been asphalted. Stone slabs covering storm water drains were removed four months back for desilting and are yet to be placed back. And because we are at one extreme edge of both assembly and BBMP constituencies, neither MLA (R Ashok) nor corporator (NR Ramesh) bothers.

If there were no gerrymandering, there wouldn’t be any “extreme corners” like this one. And that would mean less chance for elected representatives to ignore certain parts. And that would lead to better governance!


This is what all the constituencies of Bangalore look like (click for a full size image)


Let your imagination run wild!

Twitter Peek-a-boo-boo

So I must confess that for the last one week I’ve been cheating. I’d made a grand statement here a couple of weeks back about being off twitter, and how it was giving me so much time. After that post, however, for a variety of reasons I logged on to twitter. And I’m not sure I want to return to it as yet.

The first time I returned to twitter was during Rahul Gandhi’s interview with Arnab Goswami last week. It was a fairly hilarious interview so I was interested in knowing what people were saying. I didn’t cheat fully that day – I used the otherwise rarely used twitter tab on my flipboard to see what people were saying.

The next morning, one of my election pieces got published in Mint. I have a mechanism where any post I put on any of my three blogs gets automatically posted on twitter. This, however, doesn’t work for things I put on Mint, and that needs publicity. And so I decided to log on for just one tweet.

While I was at it, I also happened to check my mentions and messages. There were lots of them. Just one tweet announcing my temporary absence hadn’t been seen by enough people, I think – there were lots of mentions and messages. To each of the messages, I replied with my email ID mentioning I’m not on twitter any more, and to not contact me there henceforth. I also spent a lot of time replying to some mentions. It must’ve been hilarious for those people to get the replies after so long. So I logged on, replied, posted my tweet about my piece and logged off. I saw some 10-20 tweets before I did that, and I thought I was missing something. I logged on again on Thursday to tweet another piece I’d written for Mint.


Again I tweeted, read a few tweets and disappeared. Felt happy being back again and thought I should prepare for a good limited comeback. I would only log on through the browser – no apps – and not use it on my mobile devices, I thought. However, I decided i’d give it a full month of absence before coming back.

That full month ended on Saturday.

When there is an event that makes you happy, you want to talk to other people who are feeling similarly. So I logged on to twitter yesterday as soon as Karnataka had won the Ranji trophy. And jai happened.

So it seems Narendra Modi was giving a speech somewhere at the same time, and my timeline was flooded with tweets about every word he said, and analyzing them. Offenders were on both sides – some gloating over Modi, others bitching about him. It was horrible.

And then I realized that the forthcoming elections are among the most polarized in India’s history. And this is the first national elections since everyone got on to twitter. I realized that the longer I stayed on twitter the more I would be subjected to such tripe. And I logged off.

I have made a mental note that when I do start my limited comeback on twitter, I should first unfollow all these political types. The problem is how fine I draw the filter – there are some people who mostly tweet political stuff. They can be safely unfollowed. There are trolls who tweet stuff just to draw attention. They can be unfollowed too. But what about those people who mostly tweet useful stuff but go into a frenzy during an event? What does one do about those? Until I have an answer to that I’ll delay my comeback.

And when I logged on yesterday, there were a few tweets about the Ranji trophy victory that made me happy. The one that made me happiest was this one:



The Congress Party is a bubble

I think the congress party is a bubble. From what I’ve observed of the party in the last 10-15 years, they have no real ideology other than “loyalty to the Nehru-Gandhi family”. In other words, they have grown and flourished significantly without having any strong fundamentals. Which means they are in a bubble.

Let’s say you are a congressman and for whatever reason you were pissed off with Rahul Gandhi following his interview with Arnab Goswami on Monday. Now, because the uniting ideology in the party is “devotion to the family”, you cannot come out in criticism of the family or one of its members. If you do, you get hounded by other Congressmen, whose loyalty to the party is chiefly due to loyalty to the family.

Now, imagine a large number of congressmen think thus. If they had a way to communicate to each other about their displeasure with the family, they would come together and raise a no confidence motion against the party leadership. However, the problem is that no Congressman wants to let it be known in the party that he doesn’t like the family, for he can be accused of betrayal and removed from the party. Hence he keeps his thoughts to himself. That he keeps his thoughts to himself means that other congressmen who feel the same way also keep their similar thoughts to themselves, and the general discourse is that all congressmen are loyal to the family.

So why is “the family” is so powerful in the Congress? The answer is that the family is powerful because Congressmen think the family is powerful. A congressman thinks that his career in the party will be furthered if he is seen as being loyal to the family. So irrespective of his opinion, he puts up a facade of being loyal, and that increases the value of being loyal to the family!

A commodity is said to be in a bubble if its price is being driven up solely because other players in the market think that its price is going to be driven up, without the fundamentals being in favour of an increase in prices. You can think of “the family” of the Congress as one such commodity. Congressmen like to praise the family (i.e. go long the commodity) because they think everyone else in the Congress is doing the same, and thus the “price” is going to increase.  You can see the cycle of positive reinforcement that is at play here.

Like all bubbles, the Congress Party bubble is also bound to burst. And like other burst bubbles, this one is likely to end badly for the party – a split in the party cannot be ruled out in the period immediately after the bubble is burst.

The problem with bubbles, however, is that you don’t know when it will burst – anyone who can predict when a bubble can burst would be an extremely rich person. And you don’t want to be shorting a stock thinking the bubble might burst, only for the bubble to continue. And so you continue to dance, for the music is still playing.

Kabaddi, Jesus Navas, Digvijaya Singh and Modi Bhakts

Writing during the last FIFA World Cup in 2010, I mentioned a concept that I named after the Spanish (and now Manchester City) winger Jesus Navas. It was the strategy of one guy breaking off separately from the rest of his teammates, and ploughing a lonely furrow in a direction different to what his teammates were working on. So when the rest of the Spanish team played tiki taka and relied on a slow build up based on intricate passing through the middle, Jesus would come on and run away on his own down the right flank. It was a useful distraction for the Spanish team to have, for now the opposition could not mass its defences in the centre.

In the same post, I had mentioned that it is similar with Kabaddi. When a team is “defending” all but one person in the team form a chain and try to encircle the attacker. The other guy works alone, and his job is to lure the attacker deep into the territory so that the chain can close in around the attacker. This way, the lone ranger and the team work together, towards a common objective, just like Jesus and the rest of the Spanish team.

Having observed Indian politics for a while now, I realize that the Indian National Congress has successfully adopted this strategy, while the BJP has failed to keep up. Now, the reason you want to use a lone ranger in politics is slightly different, but on the same lines. Sometimes, there can be disagreements within a party on certain issues. For political reasons, the party can officially adopt only one of the two possible paths. Yet, they know that by sticking to this official path, they might lose out on some support. How then can parties tackle this issue of giving out the “dissenting judgment” while still appearing united?

This is where people like Digvijaya Singh come in. Digvijaya is a known loose cannon, and has mastered the art of taking a line different from the mainstream Congress line. In case he turns out to be right, later on the party can claim that he was right all along – and quietly bury the official party line. In other cases, the party can publicly castigate him, and distance itself from his claims. In a way that I can’t fully understand, the Congress has mastered the art of managing the loose cannon, such that they “recognize” his statements when he is right and unceremoniously ditch him otherwise.

The opposition Bharatiya Janata Party (BJP), however, hasn’t got its act together. The biggest problem with the BJP is that there is no one loose cannon with whom an agreement can be struck on the lines of what the Congress possibly has with Digvijaya. At different points in time different party leaders espouse views that are out of line with the party’s official line, and this being hard to control, the party gives off an image as being disunited. The matter is made worse by the thousands of online fans of Gujarat Chief Minister Narendra Modi, who like to voice their personal opinion which may not tally with the party line, but whom the party cannot publicly dissociate from.

It is in this particular issue that the BJP significantly lags the Congress when it comes to media management. As a BJP supporter mentioned on twitter yesterday, Digvijaya can say whatever and the Congress can get away with it, but whatever a Modi Bhakt says gets attributed to the BJP. It is this differential handling of fringe elements that leads to significantly worse press for the BJP than for the Congress. The answer lies in appointing an official lunatic whose job it is to make outrageous statements and be prepared to get censured by the party frequently.

Too many fringe elements, all of them shooting off in different directions, weakens the core, and weakens the focus of the attack. One can be managed, and is useful. More is the problem.

More Karnataka: Averaging between ULB elections and 2008 elections

Recently I met my MLA, who is from the BJP, and told him about my analysis extrapolating from the recent urban local body elections, which gave Congress an absolute majority. He countered that the BJP has never been strong at the sub-state level so one shouldn’t read too much into these elections. So I decided to create this tool which uses a slider which you can use to decide how much importance to give to the ULB polls. A value of 0 represents the seat distribution as per the 2008 elections. A value of 1 uses an extrapolation of the ULB elections only (without using information from the 2008 polls). I hope you have fun with this tool.

You might also notice that I now give you the actual seat distribution party-wise.

Congress Tipped For Major Gains in Forthcoming Karnataka Assembly Elections

For each major political party, this graph shows the number of seats they won (red) and the number of seats they came second in (blue) in the recently concluded Karnataka Urban Local Body Elections. The horizontal black line is the number of seats the Congress WON. Notice that the number of seats the Congress won exceeds the number of seats the BJP or the JDS won or came second in. Based on this, it is very likely that the Congress will do very well in the forthcoming Assembly Elections
Data source:




For each major political party, this graph shows the number of seats they won (red) and the number of seats they came second in (blue) in the recently concluded Karnataka Urban Local Body Elections. The horizontal black line is the number of seats the Congress WON. Notice that the number of seats the Congress won exceeds the number of seats the BJP or the JDS won or came second in. Based on this, it is very likely that the Congress will do very well in the forthcoming Assembly Elections