Battlefronts

Freedom of speech is high on our minds in India today, with the
problem rooted in laws about three fronts: obscenity, defamation and
hate speech. While freedom of speech is an essential foundation of
democracy, it is closely connected with other dimensions of freedom.
Here are some fascinating episodes, in the liberal project of
getting to personal freedom.

United States, 1644

Faramerz
Dabholwala in the Guardian:

When the Massachusetts settler James Britton fell ill in the
winter of 1644, he became gripped by a "fearful horror of
conscience" that this was God's punishment on him for his past
sins. So he publicly confessed that once, after a night of heavy
drinking, he had tried (but failed) to have sex with a young
bride, Mary Latham. Though she now lived far away, in Plymouth
colony, the magistrates there were alerted. She was found,
arrested and brought back, across the icy landscape, to stand
trial in Boston. When, despite her denial that they had actually
had sex, she was convicted of adultery, she broke down, confessed
it was true, "proved very penitent, and had deep apprehension of
the foulness of her sin ... and was willing to die in satisfaction
to justice". On 21 March, a fortnight after her sentence, she was
taken to the public scaffold. Britton was executed alongside her;
he, too, "died very penitently". In the shadow of the gallows,
Latham addressed the assembled crowds, exhorting other young women
to be warned by her example, and again proclaiming her abhorrence
and penitence for her terrible crime against God and society. Then
she was hanged. She was 18 years old.

India, 2007

Vinod
K. Jose in Caravan magazine:

...on the morning the poll was published, an angry mob of about 50 people
attacked the Dinakaran office in Madurai, Azhagiri's home base. They
threw petrol bombs and set the newsroom on fire; two journalists and a
security guard were burned alive.

Pakistan, 2012

Declan
Walsh in the New York Times:

One morning last week, television viewers in Pakistan were treated
to a darkly comic sight: a posse of middle-class women roaming through
a public park in Karachi, on the hunt for dating couples engaged in
`immoral' behavior.

Panting breathlessly and trailed by a cameraman, the group of about
15 women chased after - sometimes at jogging pace - girls and boys
sitting quietly on benches overlooking the Arabian Sea or strolling
under the trees. The women peppered them with questions: What were
they doing? Did their parents know? Were they engaged?

Some couples reacted with alarm, and tried to scuttle away. A few gave
awkward answers. One couple claimed to be married. The show's host,
Maya Khan, 31, demanded to see proof. ``So where is your marriage
certificate'' she asked sternly.

India, 2012

Reportage in
the Hindustan
Times:

Over 50 Shiv Sena activists attacked the The Times of India building
at south Mumbai on Saturday and damaged plants and furniture at the
reception.

The men, who claimed to be supporters of former Sena MLA Anandrao
Adsul, were protesting against a news report that appeared in
Maharashtra Times, a Marathi daily. The report speculated that Adsul
was on his way to join the Nationalist Congress Party.
Adsul, who addressed the media later, has threatened to file a Rs
100-crore defamation suit in addition to a complaint with the State
Election Commission and Press Council of India. "Such baseless
allegations made without hearing my version won't be accepted," Adsul
said. The Sena man was unapologetic about the incident. "My supporters
went with a letter, but they were not allowed inside. So they reacted
in anger."

India, 2012

Johnson T. A. in the Indian Express:

While she was being beaten up, Suvarna insisted that she would only
marry Govindaraju and that it was she who wanted to meet him that day,
Govindaraju told the police in a statement last week when he briefly
emerged out of hiding. An enraged Davalana, according to the police
complaint, directed his relatives to `hang this girl who is insistent
on marrying a Madiga'.

Police investigators say they believe Suvarna probably died after
the thrashing from her father at her relative's house but her body was
dragged to Govindaraju's house and strung up on a rope to make it seem
like a suicide in the lover's home.

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Inflation targeting has come to the US

Reportage by Robin Harding and Michael Mackenzie in the Financial Times:

The rate-setting Federal Open Market Committee predicted low interest rates until late 2014 and set a formal inflation objective of 2 per cent, reflecting chairman Ben Bernanke’s long-held goal of providing greater transparency.   

The FOMC downgraded its estimate of growth in the coming quarters from “moderate” to “modest” and Mr Bernanke indicated that another monetary boost for the economy – most likely another round of quantitative easing, or QE3 – remained an option.

“We are prepared to take further steps in that direction if we see that the recovery is faltering or if inflation is not moving toward target,” Mr Bernanke said.

The Fed also published its first detailed forecasts of future interest rates. 

... 

Adopting the 2 per cent objective is a historic move that binds the whole FOMC to a defined goal that will endure after Mr Bernanke leaves. It means the FOMC can easily justify more easing if it wants to because its inflation forecast for 2014, of between 1.6 and 2 per cent, is below target.

The FOMC voted for Wednesday’s decision by 9-1. The only dissenter was Jeffrey Lacker, president of the Richmond Fed, who wanted to leave the late 2014 date out of the policy statement.

The US suffers from legacy legislation, which predates modern monetary economics, which places the burden upon the Fed of pursuing both price stability and low unemployment. The evolution of the US Fed has been led by human energy within the Fed. Starting from Paul Volcker, who took charge in August 1979, the US Fed has run a Taylor rule with a nice strong above-1 inflation coefficient. In a recent column in the Indian Express, Ila Patnaik tells us about Paul Volcker's story and how it matters to us. In effect, from Volcker's chairmanship onwards, the behaviour of the US Fed has been that of an inflation targeting central bank. This was the de facto reality. Everyone knew that the US Fed targets inflation at 2%. What is new now is that the Fed has put greater credibility behind this, by going closer to de jure inflation targeting.



A key dharma of good central banking is to say what you will do, and then do what you just said. By saying that there is an inflation target, there is now full alignment between the words and deeds of the US Fed.



The day will come when India will enact high quality legislation which puts monetary policy on a sound institutional foundation. But we should not accept mal-performance by RBI until that day. It is possible for RBI to do much better, when compared with the present, even though the present legislation is really badly written. The US Fed is a good example of how technical capabilities within the Fed, and not an external legislative mandate, have driven improvements in the functioning of the Fed. This sort of progression is what RBI can and should aspire to, and this does not require waiting for a high quality RBI Act.

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Education in India: A compact reading kit

With the first release of OECD PISA results for India, and with the
release of one more year of Pratham data, there has been an upsurge in
interest in education in India. The following set of materials are a
useful reading kit to get a grip of the field.

Elementary education

• At the crossroads, in Pragati, 16 February 2012.


• Education
  in India at the crossroads, 24 January 2012.
  


• Ila
  Patnaik in the Indian Express, 20 January 2012.
  


• ASER
  2011 report by Pratham. Article in the Indian Express on
  this
  by Rukmini Banerji.
  


• Accountability
  in education by Jeff Hammer, 18 January 2012.
  


• The
  first PISA results for India: The end of the beginning by
  Lant Pritchett, 5 January 2012.
  


• The
  Right to Education Act: A critique by Parth Shah, 1 April
  2010. Also see Raghuram
  Rajan and Abhijit Banerjee 20 February 2010.
  


• Getting
  results on education and health expenditures of government, by
  Lant Pritchett and Jeff Hammer, 16 July 2009.
  


• Ila
  Patnaik on the then draft Right to Education Bill, 13 January
  2008.
  
  


• The
  mess in education by me in the Business Standard, 28
  February 2006.
  
  


• The World Bank's WDR
  2004: Making
  services work for poor people.
  
  


• Rethinking
  elementary education by me in the Business Standard,
  1 July 1998.
  

Higher education

• The
  THES ranking of the top 400 universities of the world. The only
  win for India in this list is IIT Bombay (ranked in the 301-350 range).
  
  


• The
  six ingredients for a great university, 5 January 2010. And,
  read Larry
  Summers in the New York Times on the key ingredients of
  the university of the future.
  
  


• Andre
  Beteille on private and public education, 27 August 2008.
  
  


• Pratap
  Bhanu Mehta in the Indian Express, 26 August 2008.
  
  


• Don't
  play Arjun Singh's game by me in the Business
  Standard, 7 June 2006.
  
  
  

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Education in India at the crossroads

The debate

Roughly one decade ago, there was a strong debate in India about
how we should tackle the problem of education. There were two
views:

Intensification

On one side were those who felt that
nothing was fundamentally wrong; all that was needed was more
money. So we should just continue building more government schools
and hiring more civil servants to act as school teachers, and we'll
be fine.

Reform

On the other side were the reformers, who argued
that the basic incentives in Indian education were wrong. Putting
more money down a dysfunctional system was pointless.

The Intensifiers won this debate. An informal coalition of
educationists (i.e. the incumbent education system) and leftists came
together, supported by the World Bank, which pushed for mere
enlargement of Indian education, without questioning the
foundations.



All of us are involved in this story at many levels. At the
simplest, we are the customers of the education establishment. We pay
income tax and VAT and a few other taxes. On top of this, we pay the
2% education cess. In return for this, we get certain educational
services. These influence our kids, and they influence all the young
people that we encounter in this young country. Trillions of rupees
have been spent, and more than a decade has gone by. It is time to
assess the performance of this strategy.



Three blocks of evidence are now visible, which tell us that the
Intensifiers were wrong. The old strategy, which was invigorated by a
vast rise in spending, was the wrong one.

Evidence #1: OECD PISA results for India

This story is well told in a
recent blog post by Lant Pritchett. Bottom line: The first
internationally comparable measurement of what children learn has
been done. The sample correctly includes urban and rural children; it
correctly includes children going to private or public schools; there
are no first order mistakes in what was done. It tells us that Indian
education policy has failed miserably: the results have come out at
the bottom of the world.

Evidence #2: ASER 2011 results

Pratham has been running surveys which measure characteristics of
children and schools in rural India (only). Their latest survey
results, for 2011 show the following facts.



First, rural kids learn less at public school. Here's a simple
example of what the evidence shows. Surveyors ask kids in class III to
recognise numbers upto 100. Here are the numbers, for the proportion
of kids in class III who cannot recognise numbers upto 100:

In 2008, the failure rate with private schools was roughly 17 per
cent. Government schools were much worse at over 30 per cent. A short
three years later, conditions had deteriorated sharply in government
schools. The failure rate had gone up to 40 per cent. Private schools
had also worsened slightly, to a failure rate of 20 per cent. By 2011,
a big gap had opened up between the two: private schools are failing
to teach 20 per cent of the kids while government schools are failing
with a full 40 per cent of their kids.



Parents in India face the choice between sending their
children to a government school, which is free and serves a mid-day
meal, versus sending them to a private school where they pay
fees. Yet, an increasing fraction of parents choose to send
their children to a private school, paying tuition fees from their own
pockets, while government schools are free. The relationship between a
parent and a private school is a transaction between consenting
adults. The relationship between a parent and a government school
involves all of us, because we are paying for it.



Given the low income of parents in India, their use of private
schools is a striking indictment of what the Intensifiers have
wrought:

At class II, the fraction of rural children in private school went
up from 19 per cent (2007) to 23 per cent (2011). At class VII, this
rose more slowly to levels slightly above 20 per cent.

Evidence #3: CMIE household survey

CMIE has data for the year ended March 2011 about the behaviour of
169,492 households, about their expenditure on school/college fees and
tuition fees. Here's the
picture for the quarter ended September 2011; all values as
percent of overall expenditure:

Income class	School/college fees	Private tuition fees
Rich - I	4.79	0.66
Rich - II	3.79	0.51
High Middle Income - I	3.54	0.63
High Middle Income - II	3.12	0.65
High Middle Income - III	2.44	0.68
Middle Income - I	1.93	0.59
Middle Income - II	1.62	0.45
Lower Middle Income - I	1.38	0.49
Lower Middle Income - II	1.05	0.60
Poor - I	0.76	0.58
Poor - II	1.13	0.28
Overall	2.10	0.57

If parents chose to stay within public sector schools, their
expenditure on fees would have been zero. The table shows that across
all income groups of India, there is movement towards private
provision of education, both by paying fees at schools and by paying
for private tuition classes. These two elements add up to 2.67 per
cent of overall expenses of households. (The CMIE household survey
separately measures expenses on books, journals, stationary,
additional professional education, education overseas, hobby classes
and other education expenses. This helps us gain confidence in the
extent to which the two fields in the table above narrowly pin down the
feature of interest).



These decisions of well intentioned parents are the strongest
indictment of education policy in India. The product being given out
by the Intensifiers is such a terrible one, the parents of India are
walking away from it even though it is free and the alternative is
not and the parents are poor.

Implications

For more than a decade, the Intensifiers have controlled Indian
education policy. They have said: Leave education to the education
establishment, do nothing radical, just give us more money, we will
deliver results. Now we know that they were wrong. They took the
money, but failed to deliver the results.



Kapil Sibal has said that his ministry should not be held
responsible for the stream of bad news that is coming out. To me, this seems to be dodging accountability. His ministry is responsible for
Sarva Shiksha Abhiyaan, for the Right To Education Act, for blocking
OECD PISA from being done in India, etc. The bureaucratic consensus of
his ministry represents the education establishment.



The key phrase that needs to be emphasised today is accountability. If a contractor took money from
you, and failed to deliver on building your house, you would sack
him. (You would also take him to court, to recover the money that was
paid to him, for services not delivered). In similar fashion,
education is too important to be left to the educationists. We need to
start over.

What is to be done

• We need to start over in the field of education, with a fresh
  management team, one that is not a part of the status quo, one that is
  rooted in the worlds of incentives, public policy and public
  administration.
  
  


• In 2004, we were told that in return for a tax rate increase of 2%, in the form of an education cess, we would obtain improvements in education. We now know that those improvements did not come about. Hence, that tax rate increase should go. (Even if sharp improvements in educational outcomes had been obtained, the education cess was a mistake in terms of basic public finance, and needs to go. Public expenditures on education should simply come out of general tax revenues; there is no need to have a cess.)


• The flow of public money into the status quo needs to go down
  sharply. There is no reason to put money into something that fails to
  deliver the goods. First we must prove that a mechanism
  delivers results, and only after that should we put money into
  it. This is the common sense that a housewife would apply. She would
  not spent gigabucks on promises from people who have failed to
  deliver.
  
  


• OECD PISA measurement needs to take place every year at every
  district. The production of this data is a public good that the government can and should do. It can be fully contracted out to private firms so as to avoid the problems of public sector production. Datasets about student characteristics and school characteristics should be released, covering every district and every year, so as to enable research.


• Civil servant teachers, who have tenured (permanent) have no
  incentive to teach well, regardless of their qualifications or high
  income. We can't sack them, but what we need to do on a massive
  scale is to stop recruiting them. The existing stock can be
  reallocated to other civil servant functions where staff is in short
  supply. Through this, it would become possible to whittle away at
  the accumulated stock over the coming 20 years.
  
  

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A fueling fable: Consumer protection issues with payments

by Naman Pugalia and Viral Shah.



On 22nd December 2011, we purchased petrol worth Rs.100 from an Indian Oil fueling station in Bombay using an ICICI Bank debit card. The receipt suggested that we could have saved a fuel surcharge of 2.5% had we used an Indian Oil Citibank credit card. Upon seeing this message, we asked the cashier at the petrol pump if we would be charged 2.5% over and above the Rs.100 that we paid for the fuel. The cashier assured us that only Rs.100 would be debited from the account linked to the card. The chargeslip and the receipt were:

The chargeslip

The receipt

A couple of days later, we viewed the account statement online and found that the relevant transaction had been recorded. A full week later, we observed that an additional charge of Rs.11.03 had been

debited from the account for the same vendor. Not only was the entry unusual, the charge did not match the 2.5% figure which was mentioned on the transaction receipt:

The statement

We wrote to the bank asking them to explain the transaction. The bank explained that for fuel purchased at non-HPCL petrol pumps, a surcharge of 2.5% of the fuel cost or Rs.10 (whichever is higher) would be levied. A service tax would be levied additionally.



There is a consumer protection issue here. After the account had been debited, and up until we sought a clarification from the bank, we were not made aware of the surcharge. The chargeslip gave a false impression of the amount being paid.



Upon delving further, we find various websites where people have complained about this surcharge being confusing. Further investigation revealed an interesting combination of participants:

1. The surcharge on fuel is mentioned in the fine print in Terms and Conditions of a debit card.
   
   


2. The bank that deploys the POS machine (acquiring bank being Citibank in our example), at the end of day, surcharges the higher of 2.5% or Rs.10 and sends it to the customer's bank (issuer bank being ICICI Bank in this case).
   
   


3. The issuing bank then creates a separate debit in the customer's account for the surcharge
   
   


4. The acquiring bank shares much of this surcharge back to Oil Marketing Company (Indian Oil in this example).
   
   


5. Contrast this with typical debit card processing fees in India around 1.5%. In most cases, merchants will inform a customer before surcharging, and the value on the chargeslip is what the
   
   customer pays.
   
   


6. Many banks apply these surcharges weeks or months after the transaction actually occurs, which helps ensure that most customers do not understand what is going on.
   
   

When paying for fuel in India with a debit card, the customer pays the
surcharge by being misled, the Oil Marketing Company makes higher
profits, the charge is administered in a non-transparent way, and is
posted late when the customer may not even recall the
transaction. Thus, Government owned companies and banks have created a
perverse incentive, whereby customers prefer to use cash rather than
pay electronically.

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Author: Viral Shah

• New moves in regulation of debt card payments, 4 July 2012.
  
  


• Transparency in the LPG subsidy, 2 July 2012.
  
  


• Developments on implementation of the GST, by Viral Shah and Ajay Shah, 23 April 2012.


• An election rally in Amethi, Uttar Pradesh, with Naman Pugalia and Ajay Shah, 12 February 2012.


• A fueling fable: Consumer protection issues in payments, with Naman Pugalia, 23 January 2012.


• Excitement in electronic payments, 18 January 2011.


• Interpreting the 4th fastest supercomputer in the world, 19 November 2007.


• Should IST be broken up into two? Should India do DST?, 23 August 2007.

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Accountability in education

by Jeff Hammer.

I was shocked
by Lant
Pritchett's note on the appalling performance of India's best
two states on the international PISA assessment. Actually, I was
not really shocked; I didn't expect anything else as I've been
listening to Lant for years now. By the same token, I agree with
Jishnu Das that
we really don't know much about what works in education (other than
that good teaching makes a difference) and that our bean-counting of
inputs into education may be completely wrong headed. From
conversations with him (also over years) I surmise that the only
thing we really know about what leads to more learning is that it is
correlated with how many years children stay in school. What that
suggests, though, is that attention be directed towards the choice
of parents and students to stay in school.

In my opinion people choose to do things if it is worth it to them.
This is a common assumption for economists. While challengeable in
some circumstances, does it make any sense to think that people send
their children to school if they don't think it's worth it? If it is
compulsory: sure. With compulsion, attention of policy makers and
carefully watchful observers such as Pratham should be to make sure
school is worth the year of children's attendance since people would
not be able to decide for themselves. Until we see compulsory
schooling enforced, though, years of education remain a family's
choice and we have to understand how and why people make that
choice.

Unless we think parents are utterly clueless about the value of
education and totally incapable of telling if teachers are doing
anything or their children are learning anything, the effectiveness of
teaching and the amount of knowledge imparted must be a major factor
in their decision as to whether school is worth it. Don't get me
wrong, I've met dozens of educators and education officials in India
who believe parents are, indeed, clueless and such decisions should be
out of their hands. But they are the very people who gave us the PISA
ratings and are indeed throwbacks to the License Raj where only
bureaucrats were assumed to know anything. Further, with the explosion
of private schools, even in rural areas, it is laughable to think that
there are so many parents who value education so little. They are
willing to forego free public education in order to pay for something
more worthwhile.

Which brings us to accountability.

What could parents be looking at, that makes them think school is
worth it? It must be based on performance: parents don't really see
the inputs, they mostly just see their children learn. Or not learn as
is the case. So how can they translate their concern for learning into
actual learning? They have to be free to pick the educational
context that they see is working for them or their
neighbors. That's where accountability comes in.

A provider of any good or service is likely to be most accountable
when their livelihood depends upon attracting customers. If what they
provide is worth it, people will take the service, and the provider
can make a living. If not, parents won't pay and teachers won't get
paid. As of now, there is no mechanism to allow families to make that
choice. There is no such compulsion for teachers to provide a service
worth paying for. No doubt there are many teachers (probably most) who
are doing the best they can regardless of how they are paid. But with
over 24% absenteeism, large numbers of teachers observed to be doing
anything but teaching, and many sub-contracting their position to
under-qualified replacements at a fraction of government salaries,
there is substantial room for improvement.

Further, if we are going to get more students (and, hence,
teachers) into classrooms, the dedicated teachers may be the ones who
are already on the job. People induced to enter the profession may not
be as dedicated and, hence, need some other way to hold them
accountable than internally felt professional ethics.

I am an educator (of sorts) but have no opinion about what the
bottleneck in children's learning really is. Jishnu says the most
successful headmasters all say different things (after good teachers -
but then, don't we judge the goodness of teachers by whether their
students actually learn? It's an output based judgment, too.) I know
little of pedagogical theory. But I know just as little about the
inner workings of most complex things I use -- computers and the
Internet, water systems, bicycles. I can tell when they work and when
they don't, though. Similarly, I know that my sons learned to read and
write, become responsible citizens and to develop and exercise
critical intellectual capacities (sometimes way too critical for my
taste) even though I have no idea how they learned them. I did know
that their teachers were in school almost every day and doing things
that sounded like teaching to me. I did not have to be an expert on
pedagogy to hold the schools completely accountable for my children's
education.

I was also fortunate enough to be able to take (or threaten to
take) them out of government schools if I thought otherwise. Funding
for government schools (in the U.S.) follows enrollment, if not so
directly and obviously as for private schools. So my threats about
shifting my children out of government school directly mattered to
their teachers.

There is no reason why Indian parents can't do the same. They, on
average, may not have my education but after talking to hundreds of
families in rural areas, tribal villages, urban slums and SC hamlets,
I hear no less concern for their children's future than I have for
mine and no less ability to tell if a teacher appears to be doing his
job. They may be more capable than me since they are more likely to
see the teachers themselves -- I needed to ask my children.

In many rich countries, the issue of vouchers to pay for schools is
emotionally charged. Historically, free compulsory public education
was a result of fights between church and State (even in Japan where
`church' doesn't quite fit -- but religion and State does). Children
were already attending school in high percentages and there was a
fight for their hearts and minds. In rich countries currently,
suggestions to provide vouchers instead of State-run schools re-kindle
this old antagonism against religious instruction.

India never had this fight nor this evolution of public
provision. Our view of schooling here in India was imposed based on
the final result of universal free education seen in rich countries
without the history from which that final result evolved.

India needn't go through the phase of fighting over who gets to
teach students who are already highly motivated to learn and have seen
learning take place. If India wants to see all children educated, she
can certainly pay for the cost of education (in fact, the job can be
done for much less per student is presently spent) so that families
don't have to. But the government doesn't have to provide it directly
(though government schools should be free to compete for this money if
it can). The fight is the State against society (families), not
against the church.

What the State can do is make as much information known to parents
as possible. What should children know after how many years of school?
How do you know if your child is keeping up? How do you know what
you're paying for is worth it? As of now, this information is
certainly not given to parents. Maybe State run schools don't want
parents to know (and, unfortunately, most Indian parents will not know
about PISA). And as of now, there is nothing parents (particularly
poor parents) can do about it anyway.

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