LUCID AND PROFOUND
Kaushik Basu questions the moorings of Law and Economics to show that political groups with retrograde ideas cannot further the cause of justice
Two recent (and continuing) developments – the fall in the value of the rupee and the hike in petroldiesel prices – have exposed the double-speak of politicians on economic issues in India. Many will agree that the arguments being made by the ruling party and the opposition are exactly the same as to what was being done under the previous government, except the parties have interchanged positions during this period. Not all issues are as simple though. The previous government paid a big price for being perceived as corrupt, thanks to various scams which erupted under its watch. There are accusations of an increase in hate crimes such as lynching, under the present dispensation. The previous and the present prime ministers have both publicly disapproved of such acts. Yet they did not/ have not stopped. What explains this?
The typical knee-jerk reaction will tend to rely on conspiracy theories. Kaushik Basu, a professor of economics at Cornell Univer- sity, who has had a great deal of exposure (including in India) to how economics negotiates its way outside the abstract world of textbooks and models, thinks differently. In his latest book The Republic of Beliefs, he has gone back to revisiting and questioning the fundamental moorings of the discipline of Law and Economics. He broadly argues that we do not yet know what kind of laws can provide the perfect incentives for various agents in a society to achieve desired outcomes such as no scandals and hate crimes. Of course, the book also tells the reader a lot about what we do know. Here, Basu has pushed the envelope beyond the established notions (what he calls neoclassical) of the discipline.
Those who are not familiar with the discipline might baulk at the idea: the law of the land should be sacrosanct; why should there be incentives for it to be implemented? At most, the question of deterrence can be debated, they would argue. But then, do we not see that rape cases, including those of minors, have not stopped despite the introduction of the death penalty? And do we not know that, no matter the amount of vigilance, some errant driv- ers manage to escape being fined by bribing the traffic police.
The reason all this happens is not because there is a lack of willingness to prevent corruption or crime. In fact, Basu is unequivocal on this. “It is a common belief that all one needs to end corruption is grit and determination. In reality, corruption is a complex phenomenon in which economic incentives intertwine with social norms, customs, and strategic considerations and explains why man’s genuine efforts end up in failure”, the book says. In another place he argues that “…the freedoms and the lack of freedoms that are made possible or not possible by the law can be replicated without the law, by social pressures, norms, the use of ostracism, and punitive action across individuals”.
These are strong and perhaps provocative arguments. The reason why readers, especially economists will take them seriously is that Basu always provides proof in the form of Nash equilibriums to support these arguments. Simply speaking, the Nash equilibrium describes a set of actions where one agent decides on the best strategy keeping in mind what the other one does. This need not lead to bestcase outcomes. The Prisoner’s dilemma, where both prisoners accept a longer prison term by betraying each other while they could have done better by cooperating, is among the most famous examples of this.
While Basu’s continuous use of Nash equilibriums and other concepts of game theory will make the book attractive and a potential repository of future research ideas for economists, it is bound to make the book slightly difficult reading for the average reader, who is not familiar with these concepts. Even then, the book is worth reading because Basu ensures that his formal proofs are explained in lucid yet profound terms to the non-economics reader. For example, chapter five of the book argues that unless a law constitutes a focal point – psychological belief about each other’s actions converging – between the citizenry and the state it cannot be successful. This means patriarchal notions of restrictions on women’s mobility, which are bound to reflect in the police as well, are likely to derail justice when a woman who was out at night is an assault victim.
Basu might have made these arguments to precipitate a debate within the discipline. But they are also extremely relevant politically because they show us that political groups which propagate retrograde ideas cannot further the cause of justice even if they promise to do so.