The individual, and not the group should be the unit of State policy

WHO ARE THE POOR? - Individual versus collective backwardness Bibek Debroy THE TELEGRAPH Wednesday, June 21, 2006 The author is secretary general, PHD Chamber of Commerce and Industry

Arun Shourie’s new book, Falling over Backwards, is both engrossing and disturbing. It is a book against reservations and against judicial populism. Here is a quote from the book: “The individual, and not the group should be the unit of State policy.” And the crucial point is that you can target individuals, you cannot and should not target groups or collective entities...

The moment we interpret poverty and backwardness as a collective concept, including a geographical one, there are two kinds of errors we can commit, reminiscent of Type I and Type II errors in statistical hypothesis testing. By excluding poor individuals who don’t belong to the collective, we commit an error of exclusion. By including rich individuals who belong to the collective, we commit an error of inclusion, the so-called “creamy layer” idea. If one switches identification from collective groups to individuals, neither of these errors need be committed. Indeed, in every country that has a decent anti-poverty programme, individuals have special identity cards — call them social security cards, if you will.

What causes poverty or backwardness? Opinions may differ. But figuring prominently in the list of variables will be lack of physical infrastructure (roads, electricity), inadequate access to social infrastructure (health, education), inadequate access to land and credit, and so on. We tend to think that these are public goods (and services) and must be provided by the state. Economists have a definition of a public good, a public good being one where my consumption does not reduce your consumption (perhaps clean air) and you can’t prevent me from consuming the good (perhaps law and order). Interpreted thus, none of the items listed are public goods. They are all private goods. They may be merit goods in the sense of requiring subsidies by the state, but they are not public goods. Nor does state subsidization necessarily imply state provisioning.

Having said this, whether it is state provisioning or state subsidization, in how many of the variables just listed are we talking about collective private goods? With the exception of physical infrastructure, where there is a collective or geographical entity that is backward and deprived, none. The deprivation is individual-based, not community-based. Yet, we stick to the community-based identification, because it is easier to handle. Not only easier to implement, but also easier to handle politically because community-based vested interests can be pretty powerful. It is not very surprising that despite having done several things in the name of the poor, the lot of the truly poor hasn’t changed. The benefits have been reaped by the so-called “creamy layer”, not only in reservations, but elsewhere also.