Vivek Dehejia is an economics professor at Carleton University in Ottawa, Canada. He is also a regular economic commentator on India for the New York Times India Ink. He has most recently co-authored Indianomix – Making Sense of Modern India (Random House India, Rs 399) along with Rupa Subramanya. The book is along the lines of international bestsellers like Freakonomics and The Undercover Economist, and tries to answer a wide array of questions ranging from why did Jawaharlal Nehru did not see the 1962 war with China coming even though there was a lot of evidence to the contrary, to why seatbelts don’t save lives. Dehejia speaks to Vivek Kaul in an exclusive interview. Excerpts:
One of the controversial ideas in your book is that the BJP’s India Shiningcampaign of 2004 was not as much a disaster as is made out to be. Why?
I am glad you asked that. We think it is one of the interesting contributions of the book. I would agree with you that it is a controversial hypothesis because we have this received narrative of the 2004 election – which is that the poor voter had punished the BJP/NDA for the triumphalist India Shining campaign. Even the BJP bought into this interpretation. This has had far-reaching consequences. If you look at the political history of India since 2004, what was the lesson that was drawn? The lesson that everyone drew from the so-called disaster of the India Shining campaign was that you cannot win an election based on economic reform, economic policy and economic success.
And you don’t agree the India Campaign was a disaster…
Our argument here is that if you look at the numbers, if you look not just at the seats won but at the vote shares as well, you get a different story. Yes, there was a swing away from the NDA, but the actual vote share difference between the NDA and the UPA was just over 2 percent. The NDA won 33.3 percent of the vote and the UPA won 35.4 percent of the vote. For us that 2 percent difference in vote share can equally be attributed to a number of other explanations, such as bad luck, as it is to anything else.
Or let me put in another way; if you look at those results, basically it came down to a coin toss. A third of the voters voted for the NDA, another third voted for the UPA and a third voted for somebody else. As we see it, the role of luck and randomness in an outcome should not be underestimated.
That’s a very interesting point…
The NDA might well have won the election. And, in fact, they actually would have won if the DMK hadn’t pulled out their 16 seats at the last minute. And that really was what made the difference. Hence it is very difficult to conclude that it was the voters punishing India Shining. In all Indian elections, there are many regional and local issues at play and then there are issues about the complex way in which alliances work. Our point in the chapter really is that it is a very appealing narrative. We like to have these very convincing explanations because to say well, you know, it was bad luck doesn’t seem like a very satisfying explanation. But if we know that the BJP lost because they had this India Shiningcampaign and the poor voters punished them for it, that appeals to human psychology. We want to have a convincing story that explains everything.
A convincing and simple story that can be broadcast on TV..
That’s right. A story that can fit into a sound byte.
You also talk about the role of luck in Sonia Gandhi‘s life. If it was not at play she would not have ended up at where she is now…
We sort of tell the story as to how she met Rajiv Gandhi at a particular Greek restaurant in Cambridge, England, on a particular day in 1965. That itself was a chance event. Maybe if she did not like Greek food, or if she had gone on a different day! And the number of chance occurrences it took to go from being the shy Italian housewife that she was to being the most powerful person in the country. It took two assassinations and five unexpected deaths. The assassinations, of course, of her mother-in-law and her husband, and then the deaths of five senior Congress leaders (which included Rajesh Pilot, Sitaram Kesri and Madhavrao Scindia). The probability of that happening is so small that you have to call that an accident of fate. Or luck. Or randomness. Or whatever you want to call it.
Any other interesting examples on luck?
We have this study by Shekhar Aiyar and Rodney Ramcharan, two economists of the IMF, who look at the role of luck in test cricket. And they found, amazingly, that the advantage of debuting at home for test cricketers actually had a long lasting effect on their careers – which was really surprising. You would think that if you debut at home, sure it would effect your performance in the debut series, but in fact it has a long-lasting effect.So basically people who debut at home end up playing a lot more…
That’s right. Selectors unfairly punish those who debut abroad and don’t do well. Therefore, you are more likely to be dropped from the side once you debut abroad and don’t do well. But also there could be some learning by doing here. If you debut at home you are able to hone your skills and technique on your home turf and, therefore, you become a better player. Both things could be going on there. But the bottomline is that it is a result of luck because these Test schedules are set months and years in advance, and when someone is picked up for the national side is really the luck of the draw.
An extended portion of your book deals with Jawaharlal Nehru and the fact that for a very long period of time he did not see things heating up with China in 1962, despite there being evidence to the contrary. What is the broader point that you were trying to make?
That forms a central part of our chapter on cognitive failure when we draw on recent behavioural economics literature. The point and the purpose of looking at Nehru in the lead up to the 1962 war was how could something so obvious be missed. It had become clear at that point that China was flexing its muscles. It was a nationalistic state and the border issue was going to be a real problem. But the fact was it apparently caught Nehru by surprise. He himself admitted that he was more or less been living in a dream world before the war. He said: “We were living in an artificial atmosphere of our own creation”. So how could Nehru’s own assessment have been so far off the mark and have changed so radically over a short span of time?
And what did you figure out?
Certainly, one of the several possible interpretations is that Nehru and Krishna Menon (the Defence Minister when the Chinese attacked India) and people around them had succumbed, perhaps to a cognitive failure, where they couldn’t perceive the Chinese threat for what it was. They were looking at it through a different lens.Could you explain that in some detail?
Krishna Menon, for example, was ideologically towards the left and he found it very hard to accept that China, being a socialist state and being an Asian power, could have any threatening impulses towards India. This showed an ideological blind spot to Chinese nationalism that had been detected as long back as 1950 by the shrewd Vallabhbhai Patel. So the broader point we were trying to make is that a strongly-held ideological view can blinker you to some realities that don’t fit in with that view. There is this pattern that one sees where leaders can become overconfident in a lead-up to a crisis because what is happening doesn’t fit their world view of things.
From Nehru you jump to rail accidents in Mumbai…
Yes. A staggering 15,000 people die on railway tracks throughout India every year. Of this 40 percent, or about 6,000 deaths, take place in Mumbai alone on the suburban railway network.
And why is that?
If you look at it from a strictly conventional economic point of view, there is a cost-benefit calculation. So someone who is crossing the tracks at an unfenced point will reckon that he is saving the time it would take for him to get to the next safe crossing, i.e. the foot over-bridge. But that foot over-bridge could be several kilometres away from where he is. If, say, you are a daily wage labourer who has get to the construction site and give your name to the foreman, if you arrive half an hour or 45 minutes late you might miss out on a day of work and so the day’s wages. So the cost can be pretty high. That would be the end of the story from conventional economics and you would say let’s build more foot overbridges to reduce the time cost.
But that is not the whole story?
Let me tell you a little story. Biju Dominic, a former ad man and a co-founder of FinalMile, learned about the daily tragedies on the Mumbai rail system while teaching a class at the railway staff college. So he and his team started gathering some data. They realised that 85 percent of those trying to cross tracks were adult males. Of course, this may also reflect the fact that it is mostly men who are trying to cross the tracks. Also children were most adept at crossing tracks. An interesting finding was that people who are used to crossing tracks tend to underestimate the danger to their lives. This is a classic example of the overconfidence bias, along similar lines that had happened in Nehru’s case before the 1962 war with China. While crossing they don’t consciously realise the risks they are taking. They filter out the boiler plate warning signs and the text signs.
That’s very interesting…
So given the possibility of cognitive failure, it’s possible that some targeted interventions might change that tradeoff. FinalMile came up with three specific interventions. First, they painted alternate sets of railway ties (that’s the series of metal beams that connect the two ends of the track) a bright yellow. This was to help compensate for the psychological fact that people tend to underestimate the speed of large moving objects. With an alternate set of ties painted yellow, someone would be better able to gauge the speed of an oncoming train as it as it passed from the painted to the unpainted ties. Suppose you are in a high a speed train and you are looking out at the landscape, it is hard to tell how fast you are going, unless there is some reference point for the speed. That was one nudge.
What was the second one?The second one was to get the train drivers to switch from a single long warning whistle to two short staccato bursts. Again, this was based on neurological research that showed that the human brain was more receptive to sound that was separated by silence. And the third, the most striking nudge, was an image. People tend to filter out generic boiler-plate kind of warnings. So here they actually hired an actor to portray the wide-eyed horror of someone about to be crushed by an oncoming train and made a poster of it. The poster was vividly visceral enough to really get to someone’s gut, to effect someone psychologically. It is much harder to filter out something like that vis-a-vis a generic sign which says it’s dangerous, don’t cross here. And the poster was put up at points were people crossed tracks. Those were the three interventions.
And how are the results?
They started at Wadala. In the first half of 2010, the number of deaths dropped by 75 percent to nine from the previous year. When we spoke to them in February this year we were told that railways were rolling it out at the Mulund, Vikhroli and Ghatkopar stations. But the other point that we note there is that the success of that really won’t show up in any kind of statistic because if someone looks at the poster and decides not to cross or makes it across safely because of the yellow paint on the ties, it will be the absence of a statistic.
Another interesting piece of research you talk about are seat-belts…
Our inspiration is this classic 1975 article by Sam Peltzman, at the university of Chicago, who wanted to test whether seat-belts saved lives in the United States (US) where everyone had just assumed without argument that seat-belts must save lives. And what Peltzman found was that, in the US, that turned out not be the case. What was going on was that since the cars were now safer, the driving became more rash. The human reaction was, now that my car is a little safer, I can drive a little faster and I don’t need to worry as much about getting into an accident. The human behaviour offset the effects of a well-meaning government programme.
You can find examples of this everywhere. We give an example of sports equipment. There is some evidence now that in team sports where there is a lot of protective gear, you actually see more violence on the pitch. So American football and ice-hockey have a lot more protective gear and so you get a lot more violence. It’s the same thing because the players feel safer as drivers feel when they wear the seat-belt. But in soccer there is relatively very little protective gear and hence very little violence.
How does the seat-belt thing work in an Indian context?It’s not been very much studied but we found this one interesting study by Dinesh Mohan at IIT Delhi. The Delhi seat-belt law came into effect in 2002. What he found was that seat-belts saved very few lives. If you look at his paper, he concludes that the seat-belt law at most saved around 11-15 lives per year in Delhi out of nearly 2,000 fatalities.
Why was that the case?
There are two things going on here. The fatality rate for drivers and front seat passengers was already relatively low. And that dropped a bit after the seat-belt law came in. The deeper explanation is that most of the victims are not the front-seat passengers or the drivers. They are the other people. They are pedestrians. They are two-wheeler drivers. And others. With seat-belts in place drivers are essentially transferring the risk from themselves to the pedestrians.
An interesting part of your book is where you talk about how Indian states that were ruled by native princes are doing much better economically than the states that were ruled directly by the British. Could you tell us a little bit about that?
One of the questions that we like to ask in India is what if we hadn’t been ruled by the British, would we have done better? Or questions like: were the British good for India? And here there are all spectrum of opinions. There was a debate published an American magazineThe New Republic between Niall Ferguson and Amartya Sen which looked at this question. Sen wrote that had India not been colonised by the British then it might have evolved in a different (and) better way than with the colonisation. Then Ferguson replied to that. And Sen had a rejoinder. Ferguson is very much a believer in the British Empire. His argument is that the British Empire in its later phase did a lot of good for its colonies by integrating them into global trade and finance.
So what is the point you are trying to make?
It is very tempting to say that Indian economic performance or growth stagnated during 190 years or 200 years of British rule, and then growth began to take off after independence. The point we make is that by itself it tells you nothing and you have to have a counter-factual scenario. What are you comparing it with? And this is where we draw on the research of Lakshmi Iyer of the Harvard Business School.
What is this research about?
She very interestingly compares the economic performance post-independence of those regions which were directly ruled by the British as against those which were ruled by the princes of princely states. And she shows statistically that the native-ruled regions have done better on average even post-independence. And that is a very striking result. One sort of hypothesis is that the British, to the extent that they were more likely to rule states that generated taxation revenue for them (because tax on land and agriculture was a big source of revenue), may not have invested so much in physical capital and human capital as the Maharajas and Nawabs may have. At least, among the more progressive princely states, they probably realised the good value of education, health and so on and began to invest in that.
Can you give an example?
You can take the example of the Maharaja of Baroda, Sayajirao Gaekwad III. He ruled from 1875 to 1939. He had compulsory primary education, including that for girls. He put in place a number of socially progressive policies. That sort of legacy is still being reaped till today. That is one possible explanation and a suggestive idea.
The interview originally appeared on www.firstpost.com on December 19, 2012.
Vivek Kaul is a writer. He can be reached at [email protected]
Ravi Batra is an Indian American economist and a professor at the Southern Methodist University, in Dallas, Texas. Over the years Batra has made many predictions which have turned out right. He correctly predicted the fall of communism in USSR and at the same time said it would continue in China. He also predicted an enormous rise in wealth concentration in the United States that would generate poverty among its masses. These predictions were made way back in 1978 in his book The Downfall of Capitalism and Communism. These along with many of his political and economic predictions have come to be true over the years (for a complete list click here). Batra uses the Law of Social Cycle to make these predictions. On the basis of this law he now predicts the rise of the Team Anna political party. “Through long and painful fasting Anna Hazare has captured the attention of people, and finally decided to form a political party. Indians will indeed vote for him or the candidates he supports,” says Batra. Batra is the author of many bestselling books like The Crash of the Millennium, The Downfall of Capitalism and Communism, Greenspan’s Fraud and most recently The New Golden Age. In this interview he speaks to Vivek Kaul.
What is the law of social cycle?
The law of social cycle was pioneered by my late teacher and mentor, Shri Prabhata Ranjan Sarkar. It can be explained in a variety of ways. Let’s start with a simple observation. A careful examination of every society reveals that there are three possible sources of political power –the army, popular ideas, or money.
Could you explain that through an example?
For instance, if we carefully explore the political landscape of our world, we find that in places like the United States, Western Europe, Canada, India, Australia and Japan, money rules society and super-materialism prevails. In places like Iran, the priesthood is dominant with control over religious ideas, whereas in Russia former intelligence officers such as the ex-KGB chief, Vladimir Putin among others, hold the reigns. In China, the communist party is supreme but the ultimate source of political power is the military, which established the party’s rule in a Marxist revolution in 1949. The Tiananmen Square massacre of 1989 clearly illustrates this point. When the Chinese government faced a serious challenge to its authority, it is the army that restored order in the country and crushed the opposition to the communist rule?
So what does this suggest?
This suggests that there are three main sources of political power—the military, human intellect, and, of course, money or wealth. Religion may also bring power, but priests dominate society by mastering scriptures and rituals. In other words, they also utilise their intellect to control and influence people. Thus, ultimately political power or societal dominance stems from three sources—physical strength or skills, human intellect or intellectual skills, and the hoarding of wealth. As a result, through the pages of history, we find that a society is sometimes dominated by warriors, sometimes by intellectuals (including priests), and sometimes by acquisitors who are experts in making money. However, the law of social cycle goes a lot further than merely describing the three classes of people.
Could you explain that?
It analyses the evolution of civilizations and states that a society evolves in terms of a cycle wherein a nation is first dominated by a group of warriors, then by a group of intellectuals, and finally by a group of wealthy acquisitors. Then towards the end of the age of the wealthy, there is so much corruption and crime that people get fed up and revolt against the elite or the rulers, who are overthrown in a social revolution. Since it takes a lot of courage to revolt against the authorities, the successful revolutionaries are the true warriors, who start another warrior age and bring an end to the corrupt rule of money. This way the social cycle begins anew and moves along in the same succession of warriors to intellectuals to acquisitors and then to the social revolution.
That’s very interesting…
Historically, the warrior era has been represented by the rule of the army, and the intellectual era by the supremacy of the priesthood or prime ministers. By contrast, the eras of acquisitors have occurred when feudal landlords or wealthy bankers and merchants were dominant. Thus warriors come to power with the help of physical might, intellectual with the help of ideas, and acquisitors with the help of money.
Since when has this cycle existed?
The social cycle has existed since the birth of human society and its validity can be proved by written history and the logic of social evolution. For instance, in India, around the times of Mahabharata, warriors dominated society; then came the rule of brahmans or intellectuals, followed by the Buddhist period, when capitalism and acquisitors were predominant; this era ended in the flames of a social revolution, when a great warrior named Chandragupta Maurya, put an end to the reign of a king named Dhananand, and started another age of warriors. What is interesting is that India’s overwhelmingly powerful caste system, wherein the brahman is placed atop the social hierarchy followed by kshyatriyas, vaishyas and shudras, was not able to thwart the law of social cycle. There were times when in practice, though not in theory, the brahman accepted the supremacy of people belonging to other castes. During the Buddhist period, for instance, the vaishyas were treated with great respect. They were called shreshthis, meaning “superiors.” In today’s acquisitive age, of course, we clearly see the priest eagerly and humbly accepting money from the rich regardless of their caste.
What happened after Chandragupta Maurya?
Reverting to the cycle, the Mauryan age of warriors was followed by another age of intellectuals in which the kings themselves claimed to be brahmans. The latter period was followed by feudalism, representing the age of acquisitors. Later, the feudal landlords, sometimes called rajas, were overthrown by an illustrious warrior, named Samudra Gupta, who thus organised another social revolution against the rule of acquisitors. Some historians have called the Gupta king the Napoleon of India, because he destroyed the armies of a large number of landowners and brought the wealthy under control.
And the age of Samudragupta was followed by?
The Gupta warrior era gave way to another intellectual era in the 9th century, when a renowned ascetic named Shankracharya revived brahmanism and uprooted Buddhism from the land of its birth. Priests and prime ministers dominated again, but their influence waned in a few hundred years and gave way to another round of feudalism, which was followed by yet another age of warriors, this time under the rule of Muslim invaders. Thus began the Muslim warrior era during the 14th century and continued as the Mughal empire in the 15th. Akbar the Great was the most illustrious emperor of this age, which lasted for a while and then gave way to another intellectual era, this time under the dominance of Muslim priests or Ulemas, who held sway over the Mughal king Aurangzeb. Around these times the great warrior Shivaji founded the Maratha Empire, which, after his death, came under the influence of brahmans known as Peshwas. At the same time, the northern Mughal Empire came under the sway of its wazirs or prime ministers. Thus this Mughal-Maratha period was the latest era of intellectuals, which was followed by yet another era of acquisitors, when the British took over around 1800. India has been in this age ever since. Indians will indeed vote for him or the candidates he supports
So what is the point that you are trying to make?
The main point is that no class remains in power forever, and that the acquisitive age always ends in a revolution. Such was the case in all civilizations. In fact new revolutions are already taking place in the world. Muslim society, where Saudi oil wealth is the main source of power, is also in the age of acquisitors, as is much of the planet. Rebellions have already occurred in the Islamic nations of Tunisia, Egypt, Libya and Yemen, and now Syria is facing the same fate. The Syrians have shown admirable resolve, and even though unarmed or heavily outgunned they are revolting against their ruler, President Assad.
What about the current state of affairs in India?
Courage is contagious and gradually inspires the masses to fight tyranny. The wave of courage that has dethroned many Muslim rulers is now budding in India under the guidance of Shri Anna Hazare and Baba Ram Dev. The movements they have started are still in the early stage but such movements are likely to grow and ultimately succeed in their mission to rid the nation of political corruption, because the age of acquisitors is about to end around the globe. Who could have imagined just a few years ago that Egypt’s Hosni Mubarak and Libya’s Colonel Kaddafi would be overthrown by their people?
Yes you are right…
A revolution doesn’t occur overnight, but when it starts it engulfs the nation in a mighty wave that crushes the ruler. It is initiated by small groups that have been opposing corruption for a long time, and for a while it faces public apathy and even opposition, but when the right moment comes it ignites the people to decimate the elite. The current decade is likely to be the decade of revolutions that will consume the ruling classes around the planet. The revolutionary wave began in the Muslim world and it is bound to spread in all areas where the acquisitors are dominant, because remember that courage is contagious. India gained independence in 1947 and so did many other countries within a few years. The point is that when a revolutionary wave begins in one area, it unleashes a flood that engulfs the neighbours. The moment has arrived to dethrone the corrupt acquisitors, and someone has to seize the moment to feed this flame. Anna Hazare and Ram Dev are doing it and they deserve the support of moralists around the world.
But how do you see the current rule of wealth being overthrown in India?
The rule of wealth in India will end through the electoral process, because people will vote for those who vow to end corruption. Through long and painful fasting Anna Hazare has captured the attention of people, and finally decided to form a political party. Indians will indeed vote for him or the candidates he supports. Although, some of his followers will be unhappy with his decision to enter the political fray, this is the right thing to do. As Mahatma Gandhi demonstrated, fasting alone is not enough to achieve a desired goal. You also have to offer a concrete and credible alternative. The social revolution against the acquisitors has started in Muslim society and is slowly gathering steam in India and the United States. By the end of this decade, if not sooner, the age of acquisitors will be a thing of the past, and those with courage to oppose the elite will start a new age of warriors, because courage is the chief hallmark of a person of warrior mentality. Today, an acquisitor’s democracy prevails in most nations; in the near future it will give way to a warrior’s democracy, where money will not be needed to win an election.
So how do you see this new age that you are predicting?
During the Buddhist period preceding Chandragupta’s ascension kings were elected in some areas of north India. That was an example of warrior’s democracy wherein a person’s martial skills, not wealth, brought him the high office. Similarly, in the future a candidate’s military background could be important in his rise to power. Whoever brings about the new warrior age will also give birth to a new golden age.
(The interview originally appeared on www.firstpost.com on August 7,2012. http://www.firstpost.com/economy/raghuram-rajans-advice-isnt-what-upa-may-want-to-hear-410694.html)
(Vivek Kaul is a writer and can be reached at [email protected])