Friday, December 27, 2013

How online surveys get it wrong.



An online survey on NDTV shows a classic example of what we technically call the sample bias. Only rich, well off and english speaking people would have taken this survey. While the poor would also have voted for fighting corruption, many would not also have voted for public goods like water, schools and hospitals. Obviously the rich don't care about government schools and hospitals and they are more concerned with women safety. The survey thus reflects distorted demands.

Thursday, December 26, 2013

An open letter to Mr. Arvind Kejriwal


 Dear Mr. Kejriwal,

I am great admirer of what AAP has done so far and what it is trying to do and as the head of the AAP, I offer you my heartiest congratulations. The challenge of cleaning the politics and public administration processes is daunting one and I feel that your decision to join politics to try to clean up the system from within was the right one. But it is also important to remember that while you give hope to the entire nation, your every step will be scrutinized and you will be required to meet the high standards that you have set for yourselves. Any mistake, or falling short on any of the promises you have made, will give an opportunity to both the cynics, as well as your opponents to downplay you. The trust you have gained can be lost easily.

Therefore as a concerned optimistic citizen, and as an economist I have certain suggestions for you. Very bluntly put, I feel that the claims you have made of providing electricity and water are a 'little' extravagant (I will explain the use of the word 'little' later in my letter). This concern has been voiced by many other experts as well. India is a country poor in resources simply because of a very large population, and therefore success of an economic policy should not be judged merely on the basis of what it delivers today but also on what it saves for future generations.

Let us take the example of water. Improving water supply to poor people living in slums of India is very important and I am confident that you will be able to achieve it. But I also think that providing 700 litres of water free of cost is a little too much. If we consider a household of 4 persons with each person using about 4 buckets (about 100 litres) of water per days, it makes it 400 litres per household. Thus one should start charging a modest amount after that and anything above say 800 or 1000 litres of consumption per day should be charged very high rates.

Regarding electricity bills, I think it will be very difficult to reduce the rates to half by the processes of auditing the companies, bringing transparency and others which you have mentioned in your manifesto. But it can be done for people using small amounts, with higher rates being charged to those who consume a lot. Thus there can be a cross subsidization of electricity. Reducing the electricity rates uniformly by half, as your manifesto suggests, makes no economic sense. So there has to be gradual increase in electricity rates with only the poor seeing a reduction of electricity prices by half while the middle and upper middle class seeing only a small reduction if at all. I like the part where your manifesto talks of improving the processes and making them more transparent. But people don't care about processes. They care about outcomes. One of your biggest challenge will be to convince the middle and upper middle class, which forms a big voter base for you and is hoping for a 50% reduction in their electricity bills, to accept only a marginal reduction in prices. It will also give your political opponents an opportunity to come at you.

More that anything else, I am looking forward to see how you improve the public services such as eduction, health and transport systems. There are many people and organizations, such as Pratham, who have done very good work in these field. You should try to hire people from these organizations to work for you. They will help you come up with out of the box practical solutions to the problems.

One of your agendas is to punish the corrupt politicians and bureaucrats. While they should be punished, please do not put it in your top few priorities. People do not care if a certain politician went to jail or not, but they care much more about their day to day problems. Governance and not punishing the corrupt should be your first priority.

I have another suggestion regarding the upcoming Lok Sabha elections. There could be many people who would vote for you but playing the kind of role at national level that you did in Delhi seems unlikely. You also have lesser time to raise funds and strengthen you base in other areas. So my suggestion would be that you should focus your energy mostly on governing Delhi right now and not fight on too many seats (at best 15-20 in and around Delhi). While you may win more seats if you contest election in more constituencies, there is danger that your efforts to provide better governance in Delhi could get diluted. You should fight elections only on as many seats as you can without compromising on your efforts to govern Delhi.

I wish you the very best for your future noble endeavours.