The economic (negative) consequences of Professor Amartya Sen

It was amazing and unimaginable to see Sachin Tendulkar being howled at his home stadium – Wankhade sometime back.

It is equally amazing to see the negative coverage Prof. Amartya Sen and his camp is getting these days. Well getting criticism from the academic junta in academic press is part and parcel of the profession. But to see it in mainstream media and pretty regularly at that is amazing.

Arvind Subramanian of PIIE writes a nice piece on the topic. He points how Prof. Sen’s several rights and entitlement programs have craeted an economic mess in India. As Niranjan pointed in a brilliant piece that UPA’s economic (read political) strategy is hugely influenced by Prof Sen’s work.  So the economic faultlines have appeared mainly because of following Sen camp:

This United Progressive Alliance (UPA) government is heading into the tenth and possibly last year of office, a tenure whose crowning achievement might well be the Food Security Bill. One may fault this government for incompetence, corruption, and delayed action but it cannot be faulted for lacking a vision. There has been an overarching idea that underlies many of its economic policies: namely, that the poor and underprivileged in society must be empowered by conferring them with new rights – to work, education, food, and presumably, all basic needs.

Call this the redistribution through rights and entitlements (RRE) approach, which is now associated with the articulate advocacy of Professor Amartya Sen, channelled effectively into policy through his co-author and long-time collaborator Professor Jean Dreze. Their latest book is a cogent exposition of the RRE approach. Nobody can question the moral urgency of helping the poor which is the key objective underlying this approach. But that should not exempt its methods and consequences from critical scrutiny. And this scrutiny reveals some serious failings.

He points to following problems that have risen because of the RRE approach:

  •  RRE causes instability and vulnerability
  • RRE legitimises atrocious policies
  • RRE undervalues opportunity costs
  • RRE overburdens state capacity
  • RRE undermines the state

As Prof. Kapur has argued really well – it has reated several rights of wrongs in the country. It sets pretty bad examples as well. States could not ape the NREGA but what prevents States from getting their own right to food security acts? Karnataka has already started a version and many more likely to follow as well.

The last point on RRE undermining State is so true:

Intellectually, the most damaging consequence of RRE in India, and least recognised, is that it does not just burden the state, it has the potential to fatally undermine it. How so? The evolution of the state provides one important lesson pointed out recently by Professor Indira Rajaraman of the National Institue of Public Finance and Policy. The history of Europe and the US suggests that typically, states provide essential services (physical security, health, education, infrastructure, etc.) first before they take on their redistribution role. That sequencing is not accidental. Unless the middle class in society perceives that it derives some benefits from the state, it will be unwilling to finance redistribution. In other words, the legitimacy to redistribute is earned through a demonstrated record of effectiveness in delivering essential services.

A corollary is that if the state’s role is predominantly redistribution, the middle class will seek – in Professor Albert Hirschman’s famous terminology – to exit from the state. They will avoid or minimise paying taxes; they will cocoon themselves in gated communities; they will use diesel to obtain power; and they will send their children overseas for higher education. All these pathologies are in evidence in India. By reducing the pressure on the state, middle class exit will shrivel it, eroding its legitimacy further, leading to more exit and so on. A state that prioritises or over-emphasises RRE, risks unleashing this vicious spiral.

This is exactly what is happening. No one cares about the State. Talk to anyone and they are like why pay taxes, why bother over water supply, why bother over public transport etc. Make your own arrangements…

Actually Prof Subramanian misses even a more important point – such policies help win elections! So all the economic losses are ignored as the biggest political  game is won. That is what matters at the end of the day. Isn’t it? :-)

Prof Subramanian is also an admirer of Prof Sen’s earlier works:

For this admirer of Professor Sen’s exceptional academic work two ironies stand out. His Nobel-winning insight was about the importance of broad purchasing power rather than the narrow (physical) availability of food in avoiding famines and mass starvation. It is curious, even mystifying, therefore, to see him forcefully advocate, through morbidity-laden polemic, the physical provision of one type of food – cereals, which are rapidly declining in people’s consumption basket – to help reduce malnutrition.

His second major insight was that development was about freedom, especially the freedom to exercise choice. Yet, the RRE approach has privileged paternalism – by determining that the poor need specific assistance – over expanded choice in the form of “untied” cash transfers or broader employment opportunities that enhance purchasing power.

If there is a tension, even contradiction, between Sen, the academic and Sen, the advocate, this government might, in the twilight of its tenure, do well to ask itself: did we draw our inspiration from, and put faith in, the wrong Sen?

Really nicely put.

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One Response to “The economic (negative) consequences of Professor Amartya Sen”

  1. ram dev bajaj Says:

    excellent and analytical

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