Are good institutions enough? - V

Humans have always struggled with the question of how to design institutions that make self-interested individual action result in the welfare of society. This situation is sought to be achieved by market institutions. But there is a large sphere of behaviour that is not governed by legislation. 

Around 1919, a man named John Fletcher Moulton, an English mathematician, barrister, judge, and Member of Parliament, gave a speech which was transcribed verbatim by someone in the audience. It was published in The Atlantic in 1924 with the title "Law and Manners". There was no transcript of the speech and if someone in the audience had not written it down, it would have been lost. (It was published after his death. I came to know about this speech from this episode of the podcast econtalk) 

In the speech, he says that there are three great domains of human action. First comes the domain of positive law, where our actions are prescribed by laws which must be obeyed. Next comes the domain of free choice, which includes all those actions in which we claim and enjoy complete freedom. But between these two domains there is a third large and important domain which doesn’t get much attention these days. 

Here there is no law which tells us what should be done, and yet we feel that we are not free to do whatever we feel like doing. The freedom of action that we have will vary from case to case and will depend on our discretion. It grades from a consciousness of a duty nearly as strong as positive law to a feeling that the matter is just a question of personal choice. This is the domain of Obedience to the Unenforceable. "The obedience is the obedience of a man to that which he cannot be forced to obey. He is the enforcer of the law upon himself."

That is a brilliant phrase - "obedience to the unenforceable". Moulton gets at the fact that if you take the idea of a "free debate" literally, the debate will be destroyed. The assumption regarding a "free debate" is that you don't actually say whatever you want because that destroys debate. A "free debate" is not totally free. You have to recognise that there are unenforceable obligations of self-governance.   

If you have a set of norms surrounding speech, where people are given freedom and there's very few formal restrictions and we rely on obedience to the unenforceable, then it is better to leave it alone. But once you fail to be obedient to that unenforceable obligation, creating that obligation is very difficult.  If everyone else is talking too long and you respect this norm, then you feel like a sucker. You start to say, : "I'm a fool. Doing what's right is foolish." And then you've lost that norm.

Moulton's analysis suggests that we have a set of impulses which, over time, we can either cultivate or we can desist from doing. So, if I have the right to do something and I always do it, then I am cultivating a habit of vice. But, if I say, 'No, I shouldn't do that: that would be wrong, even though I can do it' then I am cultivating habit of doing the right thing. So, if a situation comes along that happens to be in the third domain of Moulton's framework, I know what the right thing to do is even though it is unenforceable because I've made it a habit. 

If we all cultivate that habit, then the society that we live in is much better for everyone. If I'm the only one doing that, I'm a chump and it won't work. If everyone else does it but I don't do it, I start to corrode their commitment to those habits. So, it really is important that when I look around, I see everyone else doing it.

The modern trend is to expand the scope of what Moulton calls law to prescribe things through the power of the state. But things that are legal are not necessarily things that should be done. And similarly, many things that should not be done perhaps should not be illegal. They should just be part of what Lord Moulton was calling manners or "obedience to the unenforceable". Many things should not be enforced through the state but through our social interaction. Many people underestimate the importance of moral strictures that we obey because they are the right thing to do. This is what Moulton emphasised when he used the term "obedience to the unenforceable". 

Adam Smith thought that over time, human beings both individually and collectively, were capable of perfecting a kind of self-governance. Much of our behaviour would actually be governed by the reactions of others, represented by the impartial spectator, which we had internalised to a great extent. He says in The Theory of Moral Sentiments that my desire for your approval and your desire to avoid my disapproval, is the foundation of civilisation.  It pushes us in a direction of doing the right thing.

He's aware it doesn't work all the time and that sometimes laws are necessary, but there's an impulse toward being a decent human being even when you don't want to be, because you don't want to lose the respect of the people around you. But modern economists will say that these are all principal-agent problems and all we have to do is design a set of rules and impose those in order to solve them. 

Thus, the eagerness and willingness to "do the right thing" has been eroded. This puts pressure on the state to use the power of the state to enforce the things that were once unenforceable. This, in turn crowds out the natural impulse of norms and institutions to emerge that would enforce these without the state. This back and forth between our imperfection in creating a demand for government intervention and then that government intervention crippling our ability to solve these problems is a positive feedback loop that is difficult to arrest once it begins.

A lot of what's disturbing about the world right now is the erosion of those norms. We are left with  disobedience to the unenforceable and facing the choice of having to legislate improvements.

Are good institutions enough? - IV

Bureaucracies ­display large differences in their capabilities. In third world countries especially, bureaucracies are regarded as corrupt and bureaucrats are regarded as cogs who surrender their discretion to politicians. In Making Bureaucracy Work: Norms, Education and Public Service Delivery in Rural India, Akshay Mangla investigates why some bureaucracies perform more effectively than ­others. He investigates the delivery of primary education in rural north India, an unlikely setting for public services to function well. Some states in the Hindi belt perform far better than expected, while others show sluggish and uneven progress. 

India’s failure to provide quality public services is not for want of resources or an absence of political will.  With economic liberalization in the 1990s, state control of the economy receded, but social programming expanded substantially in some areas. The Midday Meal Programme provides a free daily meal in more than 2 million government schools. The 2010 Right to Education [RTE] Act places a legally enforceable duty on the state to guarantee free and compulsory education for all children of ages 6 to 14 years. Not all developing countries have such progressive social legislation. Yet, there are wide variations in educational achievements between states. 

In the Himalayan region, Himachal Pradesh stands out as a leader in primary education within India. It lags only behind Kerala. HP’s educational achievements are even more remarkable than Kerala’s in many ways. HP’s mountainous topography, harsh climate and low population density make the administration of services far more challenging. At independence, Kerala had a substantial lead in literacy (47.2 percent) over the rest of India, whereas HP (at 8 percent) was among the least literate states in the country. Since the 1980s, HP has surged ahead of other states, with educational gains broadly shared by women, lower castes and tribal populations. This is in contrast to the adjacent state of Uttarakhand, which has similar economic and sociocultural characteristics to HP. It performs much worse in primary education, even though it had a substantially higher literacy rate (19 percent) around independence.

You will be given explanations for such variations. It will be said that modernization and economic development lead to improvements in public service delivery. As an economy develops, the state accumulates resources and citizens acquire new abilities to demand primary education. You will be told that there is a virtuous cycle between growing affluence and good governance. Economic growth leads to increased social spending as well as improvements in bureaucratic quality. 

Although social spending in India increased significantly in the 1990s, implementation of social programs is uneven. Several lower-income states in India have made substantial gains in primary education and other aspects of human development, outperforming wealthier states. An economic laggard like UP made notable gains in enrollment and infrastructure provision, while performing quite inadequately on other dimensions of implementation. Services in UP’s more affluent western belt is similar to that in poorer parts of the state. Economic development alone doesn’t explain these differences. 

Another common argument will concern geography - villages further away from urban centers perform worse on many dimensions of governance. There is also an urban bias in development. But HP performs better than other states despite comparatively low urbanization and population density, scattered settlement patterns, unfriendly climate and terrain, making it costlier to provide services. On the other hand, Uttarakhand performs markedly worse than HP despite similar physical characteristics.

Another common argument is about the type of institutions present -  the formal structure of constitut­ions, electoral systems, rules of federalism and executive power. Yet, formal institutions cannot account for variation in the performance of different state  bureaucracies since they all operate under a common legal, fiscal and electoral framework. 

It is also argued that different types of colonial institutions produce lasting effects on economic performance. So the author compares districts of HP and Uttarakhand having similar histories of direct British rule and military recruitment, but different contemporary patterns of education service delivery. He also examined districts of UP with different colonial land tenure systems, but similar implementation patterns. 

The above factors – economic development, geography, formal institutions and colonial administrative legacies – are important, but they do not fully explain variation in how states in northern India implement policy.  He finds that this difference depends on the informal norms that guide bureaucratic behavior. These norms guide public officials on how to interpret the instructions of their political masters and take appropriate actions. These norms influence how officials interact with individuals and groups in society which influences how the public views the bureaucracy. 

As ­citizens gain exposure to the local state, their experiences condition future expectations and the collective monitoring of schools, impacting the quality of services. Bureaucratic norms have evolved differently across Indian states even though they have common political, legal and administrative institutions. He finds two types of bureaucracies - “deliberative” and “legalistic" - which have different mechanisms for policy implementation.

Deliberative bureaucracy encouraged flexibility in the interpretation of rules. Lower-level bureaucrats learn to discuss problems collectively with senior officials, transmitting local knowledge throughout the system. This enables officials to undertake complex tasks and adapt policies to varying local needs. It includes rural women, lower castes and other marginalized groups in the decision-making process which yields higher quality services.

In contrast, legalistic bureaucracy, encourages officials to strictly follow the rules resulting in a rigid interpretation of policy. Lower-level officials treat policy rules as binding constraints and show no personal initiative on how to apply ­policies in particular cases. It results in poor implementation of projects that require repeated state–society interactions. It creates administrative burdens for marginalized groups and tend to reinforce inequalities. Thus legalistic bureaucracy leads to uneven policy implementation. 

These distinct types of bureaucratic norms produce very different implementation patterns and outcomes for primary education. 

Are good institutions enough? - III

Democracies need not always die because of military coups. Democratic governments may die at the hands of elected leaders. They may be killed quickly as at the hands of Hitler, or they may erode slowly, in barely visible steps that nobody will notice. The latter is more probable since the end of the Cold War. Most democratic breakdowns now are caused by elected governments themselves by slowly  strangling democratic institutions. Examples include Hungary, Nicaragua, Peru, the Philippines, Poland, Russia.

If constitutional rules were enough, then figures such as Perón, Marcos, or Brazil’s Getúlio Vargas would have been one-or two-term presidents. But this did not happen. All of them came to power under what were thought to be well-designed constitutions which contained an impressive array of checks and balances that should have reined them in. The constitutional and legal safeguards can be easily manipulated by a determined authoritarian leader. Why? 

Constitutions, no matter how well-designed, will always have countless gaps and ambiguities. No set of rules can anticipate all possible contingencies or prescribe how to behave under all possible circumstances. The rules can only be general and are subject to different interpretations by different people. What does “advice and consent” or “crimes and misdemeanours” mean? If constitutional powers are open to multiple readings, they can be used in ways that their creators didn’t anticipate. Also, the written words of a constitution may be followed to the letter in ways that undermine the spirit of the law. 

When electoral route is used to throttle democracy, you don’t get the usual signals about the death of a democracy like the president being killed or sent off into exile, the constitution being suspended, tanks in the streets etc. On the electoral road, constitutions and other well-known democratic institutions remain in place. People still vote. All the outward show of democratic processes will be maintained. 

Each individual step that seems to undermine democracy seems minor — none appears to truly threaten democracy. Elected autocrats will tell you their efforts are aimed at making the judiciary more efficient, combating corruption, or cleaning up the electoral process. Newspapers still publish but are bought off or bullied into self-censorship. Citizens continue to criticize the government but often find themselves facing tax or other legal troubles. There will be nothing that will set off the  alarm bells of a majority of people. Those who protest against government abuse may be dismissed as exaggerating or crying wolf. 

Government actions to subvert democracy often seem legally correct and will be approved by parliament and the supreme court. Key players who might threaten the government like opposition politicians and  business leaders who finance the opposition are bought off or enfeebled. Would-be  autocrats often use security threats — wars, armed insurgencies, or terrorist attacks—to justify antidemocratic measures. For such leaders, a crisis represents an opportunity to begin to dismantle the inconvenient constitutional constraints. Over time, what was once seen as abnormal becomes normal.

Institutions alone are not enough to check elected autocrats. Whether the autocratic leader subverts democratic institutions or is constrained by them will depend on democratic norms. Norms are shared codes of conduct that are widely accepted within a society. These norms are what make a constitution work smoothly for a long time. Because they are unwritten, they pass unnoticed and we can be fooled into thinking they are unnecessary. But their absence can prove dangerous. These norms prevent political parties from acting in such a fashion that the whole system is endangered. One such norm is that rival political parties don’t regard each other as enemies. 

Without robust norms, constitutional checks and balances do not work. Institutions become political weapons, wielded forcefully by those who control them against those who do not. The courts and other neutral agencies are packed with their sympathizers, the media and the private sector will be bought or bullied into silence. In the electoral route to authoritarianism, the very institutions of democracy will be used to kill it. With the courts packed and law enforcement authorities brought to heel, governments can act with impunity. In How Democracies Die, the authors give four warning signals, any one of which indicates danger: 

when a politician 1) rejects, in words or action, the democratic rules of the game,

2) denies the legitimacy of opponents,

3) tolerates or encourages violence, or

4) indicates a willingness to curtail the civil liberties of opponents, including the media.

Are good institutions enough? - II

A common example of how fallen moral values of a society can lead to horrendous consequences is the holocaust. Many people have tried to analyze how, in a society that was once regarded as the pillar of Western civilisation; in a culture of law, order, and reason, industrial scale murder of millions of people could have taken place? How could large numbers of people willingly tolerate the mass extermination of their fellow citizens? Within a couple years of Hitler coming to power, he was hailed as a great national statesman. So what if Jews were being discriminated against? The economy was doing well, right?

Hannah Arendt published a book entitled Eichmann in Jerusalem: A Report on the Banality of Evil in which she pointed out the general pattern of how ordinary people become brutal killers. One of the aims of employing the word banality was to show that great evil did not require abnormal, monstrous people. They could be achieved by ordinary people carrying out routine activities. These activities were not murderous in themselves. They consisted of office work such as organising transport, deciding how many Jews should be deported and to where. 

Adolf Eichmann had the task of regulating “Jewish affairs and evacuations” in the Nazi regime. He knew perfectly well the train destinations and understood that the Jews were to be killed, and how they were to be killed. But he had a curious idea of duty: if he did not see Jews being killed, his activities were not responsible for the crimes. He was ready to do anything to advance in the Nazi bureaucratic grades. He had carried out orders to the best of his ability and experienced no regret. 

Efficient production of evil depends on each person specialising in a part of the process. This diffusion of responsibility makes it easy for people to use their remarkable powers of rationalisation to wash their hands off any responsibility for the resulting monstrosity. At no step was there a protest. Over time, criminal activities had become routine and criminal orders were implemented without revulsion. Arendt recognised that Eichmann was the perfect example of the modern man devoted to carrying out efficiently what he had been tasked to do without being burdened by feelings.

It is rare to find Nazi documents in which such bald words as "extermination," "liquidation," or "killing" occur. The prescribed code names for killing were "final solution," "evacuation" and "special treatment"; deportation was called "resettlement" and "labor in the East". The function of such clichés and stock phrases is to protect people against reality. In ordinary language, they would be called lies. Eichmann easily accepted and internalized these "objective" Nazi rules which deprived them of their emotional content. 

Eichmann believed his inhuman acts were marks of virtue. He would have had a bad conscience only if he had not done what he had been ordered to do. Arendt had little sympathy for the excuse repeatedly used by Nazis criminals: “I was a cog in the machine”; “I obeyed the orders”; “anybody would have acted the same way”… etc. She insisted that “obedience and support are the same."

None of the various "language rules," carefully constructed to mask the truth, had a more decisive effect on the mentality of the killers than the first war decree of Hitler, in which the word for "murder" was replaced by the phrase "to grant a mercy death." If the creeping normalization of hate speech is not opposed at the very beginning because they still seem “below the threshold” of concern to many, it may escalate into unimaginable violence given the "right" kind of leader. 

The Nazis were elected but the democratic institutions were unable to keep them in check. The reason was that the values of the people manning these institutions slowly got aligned with Nazi views. There were physicians, engineers, military leaders, etc. who were in support of the Nazis. Many prominent scientists and engineers built the Nazi war machine and helped Hitler to come close to world domination. German physicists and engineers built solid and liquid-fuel rockets, worked on developing an atomic bomb, invented nerve gases such as sarin, produced a cruise missile (the V-1), and much more. 

Doctors tested new drugs on the prisoners, presenting the results to a scientific conference. By 1939, around two thirds of all German doctors had some connection or other with the Nazi Party. Nazi racial hygienists were among the top professionals in their fields. Academics in every field gave support to the Nazi regime.  Many university faculty used party membership as a method of advancing their careers. In short, the most educated, privileged and respected people were Nazi sympathisers. There has been no evil in history that has failed to find support among many of the great and the good.

Are good institutions enough? - I

Nowadays, private morals have been made less relevant in public life. The West relies upon external rather than internal restraints. The hope is that institutional checks and balances will control those who are in power rather than self-imposed ethical limits. But rules and regulations can only go so far and no further in catching unethical business/political practices. To work effectively, good institutions should be strengthened by matching moral values held by the majority of the population.

Gandhi considered as futile the modern quest of trying to make institutions so perfect that they would obviate the need for the individual to be good. A person in public life has to be a person of character exercising self-restraint all the time. Gandhi believed in self-imposed internal ethical control as against institutional restraints imposed from the outside by society on one’s behaviour, especially when in public life. Gandhi emphasises moral and individual change as necessary for social and economic change. He said:

Unfortunately a belief has today sprung up that one's private character has nothing to do with one's public activities. This superstition must go. Our public workers must set about the task of reforming society by reforming themselves first. This spiritual weapon of self purification, intangible as seems, is the most potent means for revolutionising one's environment and for loosening external shackles. 

This reliance on inner strength rather than external institutional control was because Gandhi believed that such external controls are easily subverted resulting in the abuse of power that we see around us. Practicing self-restraint is more sustainable and irreversible. If a person has taken a conscious decision to be in public life, he or she has to exercise self-restraint in private behaviour. Both perfecing individuals and perfecting institutions are impossible tasks but Gandhi believed that the former was a better gamble. 

What’s very important is that no amount of “good institutions” will stop people from cheating. No matter how well-designed rules are, and how good is the system of sanctions forcing people to follow the rules, if everybody is a rational agent maximising their own material benefits, the system will not work. Crooks will pay the cops to look the other way, while judges would decide in favour of who pays them more. Good institutions will only work when they are strengthened by appropriate values and preferences of the people who occupy them. In Anna Karenina, Leo Tolstoy wrote about what it means to be "honest": 

. . . when they talk of an "honest" politician, an "honest" writer, an "honest" newspaper, an "honest" institution, an "honest" tendency, meaning not simply that the man or the institution is not dishonest, but that they are capable on occasion of taking a line of their own in opposition to the authorities.

How well a society functions depends on its package of social norms. Adam Smith said that it’s our automatic norm following — not our self-interest or our cool rational calculation of future consequences — that often makes us do the “right thing” and allows our societies to work. In the period leading up to the financial crisis, some asset managers on Wall Street and mortgage lenders who sold toxic assets knew they were toxic and were proud of their ability to exploit unsuspecting investors. Institutions like SEC, The Fed or the banks proved ineffective. 

Two behaviours that have become devalued in modern times are guilt and shame. Feeling shame is about wanting to hide; feeling guilt is about wanting to make amends. Consistently ignoring the need to examine one’s own actions reduces the moral credibility needed to persuade others to make sacrifices to defend shared values. They reflect our judgments of our actions and the kind of person we think we are. These emotions tell us that there is something wrong in our lives and relationships that we must correct. 

Politics and the Gita - V

The sociologist, Timur Kuran, wrote Private Truths, Public Lies in which he coined the term “Preference Falsification”. Even in democratic societies, there are many things we feel or believe but do not express because we fear social disapproval. People’s willingness to speak freely depends upon their unconscious perceptions of how popular their opinions are. People who believe their opinions are not shared by anyone else are more likely to remain quiet; their silence itself increases the impression that no one else thinks as they do.

This increases their feelings of isolation and artificially inflates the confidence of those with the majority opinion. Thus, our perception of reality changes reality by altering the way we might otherwise act. This falsification of private preferences when people have to express them publicly causes much tension to build up in a society that appears asleep. Deceptive stability and explosive change are thus two sides of a single coin.

But as soon as people realise that others share their views, they are emboldened to express themselves. This leads to a “Preference Cascade” which makes it possible for profound transformations to occur. Kuran argues convincingly that the phenomenon not only is ubiquitous but has huge social and political consequences. They include the unexpected fall of communism, the paucity, until recently, of open opposition to affirmative action in the United States, and the durability of the beliefs that have sustained India's caste system.

In India, such a preference cascade has been caused by social media. Whatever beliefs or impulses we might have, we can find and connect with like-minded people online. Finding others who share our beliefs makes us more strident, and soon we form multiple echo chambers. This also means that impulses we would otherwise not express in polite society find validation, and a voice. Because liberal elites ran the media, and a liberal consensus seemed to prevail, people did not express these feelings. Social media showed the people who did not share these views that they were not alone, and gave them the courage to express ourselves.

Even avowedly secular politicians are pandering to what they see as the Hindu voter bloc, to the point of displaying religiosity publicly in order to not give the impression that they are too pro-Muslim. They perceive the need to do that because the atmosphere has already been shaped, the public discourse has already been shaped, in a way that polarises. So, Rahul Gandhi began wearing a sacred thread, visiting temples and calling himself a Shiv bhakt. The Congress and other Opposition parties try to boost their Hindu credentials believing they had to compete with the BJP for the Hindutva vote. 

This means that the men and women who wrote the Constitution were an out-of-touch elite, and the values they embedded in it were not shared by most of the nation. The “Idea of India” that these elites spoke of was never India’s Idea of India. These “liberal” values were imposed on a nation that, deep down, did not accept them. It is remarkable that the icon of that fringe - Gandhi - was able to pass off his minority version of Hinduism as the majority view and persuaded the majority of the country to accept it.

In From Beirut to Jerusalem:, Thomas L. Friedman compares the Left and Right in Israel and the situation has some similarities with India: the only difference between them was in rhetoric. The Right wanted to shout at the top of its lungs while the Left was ready to just quietly mouth the words. The debates were monologues in which everyone was speaking and no one was listening. He writes: 

If there is one thing I have learned in the Middle East, it is that the so-called extremists or religious zealots, whether in Jewish or Muslim society, are not as extreme as we might think. The reason they are both tolerated and successful is that they are almost always acting on the basis of widely shared feelings or yearnings. As Israeli political scientist Ehud Sprinzak rightly put it, these so-called extremists are usually just the tip of an iceberg that is connected in a deep and fundamental way to the bases of their respective societies

PS: For an interpretation of the Gita for present times as Gandhi would have seen it, see The Bhagavad Gita for Daily Living: by Eknath Easwaran (3 volumes)