Blindly sending money down leaky pipes

Proposals to spend more on government programs in India are generally criticised on the grounds that this is sending more money down a leaky pipe. In addition to the problem that the pipes leak, there is an equally big problem that we have no idea about what happens at the other end.

In order to build and refine a system, the first foundation that has to be laid is that of measurement. What you measure is what you can manage. In India, all too often, government agencies and programs start out with lofty ambitions, and embark on spending money to get there. But there is little measurement about the extent to which those objectives have been achieved. Under these conditions, there is little chance of programs being designed properly, and of wastage and theft being checked.

I was reminded of this as I read As Dengue fever sweeps India, a slow response stirs experts’ fears by Gardiner Harris in the New York Times. There may be an epidemic of Dengue out there. Or there might not be one. The point is, we just don’t know. The statistical system simply does not measure this.

A public goods perspective

What should government do, and what should government not do? The government should work on the provision of public goods and stay out of private goods. In the field of health, what are the public goods and what are the private goods?

When I have a toothache, and I go to a dentist, and I get better, this is a private good. Yet, most government spending is oriented towards building `primary health centres’ and hospitals and such like. Even if these worked well — i.e. even if they were not characterised by theft and incompetence — they are a bad use of public money as they deliver private goods and not public goods.

A public good is something that is `non-rival’ (my consumption of that good does not reduce your access to it) and `non-excludable’ (it is not possible to exclude me from benefiting from this good). The best example is clean air. My breathing in clean air does not diminish the amount of clean air available for you. When one more child is born, it is not possible to exclude him from benefiting from clean air.

What are the public goods in health? A few examples that come to mind:

  • Statistics. Measurement of what is going on about health in India.
  • Epidemiology. Tracking down and eradicating Smallpox. Mounting a response to fresh strains of the common cold.
  • Running public systems that measure and ensure that medicines are not counterfeited, are properly stored in a cold chain.
  • Running certification systems. Enforcing against quacks that practice medicine.
  • Getting research done on diseases that matter on India, and releasing the findings into the public domain (i.e. unencumbered by patents).
We in India have this essentially upside down. Health policy in India is unfortunately shaped by the views of doctors, and is low on skills in public economics. We like to focus on Primary Health Centres that are run by the government, and we cut corners on all the five critical public goods listed above.
It is fashionable to say that India should spend more on health. I would advocate spending less on the things that the Indian government does in health. Until the pipes are fixed, we should be closing the taps.

An objectives-and-accountability perspective

The Indian State is in a crisis. The two key factors at work are mission creep and a lack of accountability.

Mission creep has set in because in India, almost any do-gooding is seen as the responsibility of the State. We need to narrow the mission statement of the State to a tangible set of public goods. Clarity of mission, and a controlled and narrow mission, is of essence to obtaining performance.

Consider the principal-agent relationship between you and your contractor. If the contractor is failing to deliver, you would narrow down the specifications given to him, and monitor him tightly to make sure the work gets done. That is precisely what we need to do, in the principal-agent relationship between citizens and the State. The State has failed on a sprawling mission. We need to narrow down the tasks given to the State, and tightly monitor the delivery of results.

Government and government agencies will work well when they have narrowly defined functions and strong accountability mechanisms. In the field of health, absent measurement of health outcomes, there is no accountability.


Is there a Dengue epidemic in India? We don’t know.

An information system about the health of the people of India is a public good. It should achieve pride of place in the responsibilities of the State. However, health expenditures in India are squandered on private goods. To add insult to injury, there is theft and incompetence, so even these attempts at delivering private goods do not work so well. But the main point is that running PHCs and hospitals should not be done, even if the Indian State had the ability to run these things well.

In order to reconstruct the Indian State, we need to push on the combination of narrowing the mandate (focusing on a few core public goods) and strong accountability mechanisms.

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