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.

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.

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.

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.

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.

Author: Viral Shah

On this blog:

• Elections in Maharashtra: Have the fires of nativism subsided?, 18 October 2014.
• Scientific management for election campaigns in India, 10 October 2014.
• Technology and institutional machinery that will save Rs.75,000 crore a year, 15 September 2014.

• 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.

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.