Archive for May 14th, 2015

What is wrong with Macroeconomics? Perhaps most things with hubris topping the list..

May 14, 2015

An interesting short paper by Robert Skidelsky.

He looks at state of economics and says how hubris has destroyed the profession:


How Indian govt is getting some nudging right..

May 14, 2015

It is a pity that all we look for in a government’s role in economy is some big bang, bold reforms (without anyone defining what they mean). It is even a bigger pity that governments fail to mention few small things they have got right and are quite useful. After all, small changes don’t matter as they are irrelevant (covered beautifully by Prof Thaler in a recent article).

R Srinivasan points to one such small thing which the govt has got right.

The other day, I got a text message from my bank. It asked me to send an SMS from my registered mobile number to signify my assent to taking accident insurance cover under the Pradhan Mantri Bima Suraksha Yojana, along with my nominee’s name. All I had to do was type in PMBSY, followed by a ‘Y’ (for Yes), and my nominee’s name. That was it. The premium of ₹12 would be automatically deducted from my account, and I would be covered up to ₹2 lakh for a year, against accidents leading to loss of life, limb or livelihood. It was as simple as that.

The interesting thing about this little episode was not just the ease of the process, impressive though that alone was. The way the participating banks have rolled out the PMBSY, as well as the other major insurance-based social security scheme launched by this government — the Pradhan Mantri Jeevan Jyoti Bhima Yojana, which provides life cover of ₹2 lakh a year for a premium of less than one rupee a day — demonstrates what can be achieved by simply leveraging available technology, and using a customer-centric approach.

Of course, critics have carped that this was merely rebranding and repackaging schemes which already existed. True, but I am willing to bet a substantial chunk of my meagre earnings that this time around, a heck of a lot more people would actually realise some tangible benefit from the scheme, pre-existing or not. What’s even more impressive is that by removing red tape, by simplifying the process, by leveraging technology, and most importantly, by going to the beneficiary instead of making the beneficiary come to it, this government has done what its predecessors failed to do — treat citizens as customers deserving of service, not supplicants seeking largesse from the ‘mai baap sarkar’, who need to be made to jump through hoops in order enjoy that privilege.

But that’s not even the most impressive thing about this experience. To me, a middle-class Indian, the son of a middle-class bureaucrat, and the grandson of a schoolteacher, the most impressive aspect was that for the first time in my life, I had actually been at the receiving end of a government welfare measure (it would have been two, but I missed out on the ₹2 lakh life insurance because I am over 50!)

Hmm.. I don’t know really whether this has been applicable across the country. I dont recall getting any such message from my bank. But wherever it has seems like a good thing (without getting into economics of the scheme).

This is a good case of using a simple nudge – just frame the question properly and use simple defaults. The SMS just seems to have asked whether interested or not. If Yes, then it automatically withdraws Re 1 from your bank account. As simple as that. One could have easily complicated the whole thing as it happens in most govt schemes.

As the author says and this blog has been saying, one central purpose of public service/good is to see it is delivered with minimal headache. It is here behavioral knowhow/nudges can help. The skeptics might argue well no these have to still be designed by someone (read govt) who will be biased and get it wrong. Well, no harm in trying to get the nudge right. Instead of looking at all kinds of jazz to get public distribution right and wasting crore, simple nudges can do wonders..

Thinking about smart cities as charter cities..

May 14, 2015

terrific interview of Prof Paul Romer.

He discusses charter cities, urbanisation, Honduras experiment going awry, and also shares some views on India’s smart cities project.  First what is a charter city?


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