Self Interest, Self Image and Service Delivery

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Self Interest, Self Image and Service Delivery

• Pranab Banerji
• IIPA
• pranab_banerji_at_hotmail.com

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• It is not from the benevolence of the butcher,
  the brewer or the baker, that we expect our
  dinner, but from their regard to their own
  interest. We address ourselves, not to their
  humanity but to their self-love. (Adam Smith)
• In contriving any system of governmentevery
  man ought to be and be supposed to be, a knave
  and, to have no other end, in all his actions,
  than his private interest. (David Hume)

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TWO APPROACHES

• INSTITUTIONAL
• UNIVERSAL UNCHANGING ECONOMIC MAN
• CHANGING BEHAVIOUR THROUGH MECHANISM-DESIGN
• PSYCHOLOGICAL
• MAN ESSENTIALLY EDUCABLE, NOT VILE
• STRESS ON HUMAN VALUES AND PERSON

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INSTITUTIONAL

• APPROPRIATE INSTITUTIONS NECESSARY SUFFICIENT
  FOR SOCIAL WELFARE
• How do we account for the persistence of poverty
  in the midst of plenty? We must create
  incentives for people to invest in more efficient
  technology, increase their skills, and organize
  efficient markets. Such incentives are embodied
  in institutions. (WDR 2002)
• Markets, Private information, transaction costs

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MARKETS

• COMPETITIVE MARKETS REDUNDANCY OF GOVERNMENT
• IMPERFECT MARKETS GOVERNMENT FAILURE
• CREATING MARKETS MARKET-LIKE ARRANGEMENTS
  Privatisation, Contracting-out,
  Franchise-auctioning, property rights
• (Markets) REDUCE THE ROLE FOR COMPASSION,
  PATRIOTISM, BROTHERLY-LOVE AND CULTURAL
  SOLIDARITY

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INFORMATION and BEHAVIOUR

• SELF- INTEREST WITH GUILE
• ASYMMETRIC INFORMATION INCOMPLETE CONTRACTS
• CASE OF ADMINISTRATIVE CORRUPTION
• INCENTIVE SYSTEM DESIGN

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Agency model of corruption

• Expected gain
• (1-p)(wb)p(w0-f)
• Expected loss w
• (1-p)bp((w0-w-f)gt0.
• p probability of discovery
• w current wages
• w0alternative wages
• f penalty

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Policy Implications

• Efficiency wages
• wewo(1-p)/pb
• Institutional controls
• Legal remedies

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TRANSACTION COSTS INSTITUTIONS

• UNTRUSTWORTHY INDIVIDUALS
• UNFORESEEN CONTINGENCIES
• VARIOUS CONTRACTUAL ARRANGEMENTS
• NEED FOR NON-MARKET INSTITUTIONS, CHOICE OF
  CONTRACTS

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Matching governance structure to frequency and
asset specificity of transactions
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Prior Conditioning
Opportunism
Opportunistic Behavior
Benefits from Opportunistic Behavior
Cost of Opportunistic Behavior
Feeling for the entity
Hierarchical Governance Mechanisms
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Institutional constraints

• Design Expertise/Imitation
• Conditional Design-Objective-Design Specificity
  Complex Objectives
• In-built incentives gaming of system
• Explicit Incentives Monitoring Enforcement.
• Who designs? Who monitors? Monitors of monitors.
  Multiplicity of oversight bodies.
• Ahistorical, apolitical, asocial Learning
  Culture
• Mismatch of Values Institutions.

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Alternatives?

• Screening Filtering Self-section
• Aculturalization/ Training
• Armed Forces
• Religious organizations.

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Identity models

• Economists current picture of organizations and
  work incentives has no place for the West Point
  program and the motivations it seeks to inculcate
  in recruits. (Akerlof Kranton)
• Worker identity insider/outsider
• Workers utility f(y,ec)
• Where yincome,eactual effort c social
  category
• U(y,ec)In y-eIc-tc(e( c)-e)

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Decision making

• Earlier modelsrationality
• Role of emotions
• How the brain decides recent studies
• Evolution and intelligence
• Freedom and intelligence?

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VALUE-BASED or PSYCHOLOGICAL

• ALLOWS FOR THE POSSIBILITY OF DEVELOPMENT OF THE
  NARROW SELF- CENTERED INDIVIDUAL TO ONE
  PROGRESSIVELY ENDOWED WITH HUMAN VALUES
• QUESTIONS ASSUMPTION OF SUFFICIENCY OF
  INSTITUTIONAL MECHANISM TO ELICIT DESIRABLE
  BEHAVIOUR

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VALUES AS INSTITUTIONAL FOUNDATION

• IMPOSSIBILITY OF SEPARATING VALUES FROM
  INSTITUTIONS CASE OF ADMINISTRATIVE CORRUPTION
• ETHICAL TYPES BIVARIATE DISTRIBUTION OF POWER
  AND ETHICAL TYPES

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Values in organizations?

• Leadership inner leadership
• Be and make
• Respecting others
• Helping self development
• Defining and reinforcing values
• Organization as a society

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Case of Swarna Jayanti Shahari Rojgaar
Yojana Community Organisations Functioning
POLITICO-ADMINISTRATIVE MILIEU SMALL IS
BEAUTIFUL Size benefits, Social capital,

Earlier programmes, Leadership ORGANISATIONAL
INCENTIVES Collective Action, Group Size,
Programme incentives, RCVs, COs CAPACITY
BUILDING 2 Day Basic RCV training,.
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If power is to be devolved to the grass-root
level, if conciousness is to be spread among
women to ensure their participation in all social
activities, then it must be admitted that there
is no alternative to the Swarna Jayanti Shahari
Rojgar Yojana.
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Thank You !