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Sunday, January 15, 2006

The Demolitions Must Continue

Recently we have seen the courts order demolition of illegal structures in Ulhasnagar near Mumbai and in Delhi. The politicians (across party lines) as usual without going into the merits of the case are busy putting together ways and means to save these structures.

Firstly, let me admit that if indeed the court orders are followed (i.e. there is no appeal or there is no legislative process put in), then it would cause immense hardships to the people living/conducting business in those structures. Imagine one fine day someone comes and pulls down your house, its not a pretty situation to be in. Hence, the reaction of the politicians is entirely understandable.

However, notwithstanding the immense loss it would cause to lots (thousands of people, considering that in Ulhasnagar alone more than 800 buildings have been ordered to be pulled down) I think that these buildings be indeed brought down and not a single rupee in compensation be paid to these people in any sort by the government. Am I being harsh, insensitive, maybe - but thats what is needed.

Here is the way I see this situation. Illegal structures, encroachment on reserved lands, roads etc is not something unique to either Ulhasnagar or some areas of Delhi. It is common knowledge that this is a malaise which pervades the entire country. Given this backdrop the question to be asked is why are we in this situation?

And the answer is simple, most of the people involved in this menace know it perfectly well, that what they are involved is illegal. However they still proceed with their operations - why? becuase they assign a very low probability of their being caught and if at all they are caught, they assign a low probability to the actual costs they would incur. Thus simply, the benefits of violating the law exceed the costs associated with getting caught.

Thus the only way to get out of this situation is to increase the costs associated with this illegal operation. This involves, making detection of such people much more liklier and further having detected, making them pay more heavily.

And our experience in doing so is pathetic. We periodically see what happens with slum demolition. The cut off date for grandfathering existing slums gets pushed ahead every few years with the effect that allows new slums to be set up, a few years later and an agitation or two will get your slum grandfathered and you are protected.

A similar problem exists with black money. No one argues that there is tremendous amount of black money in the country. But every few years we get a 'Voluntary Disclosure of Income Scheme' or a clone of its where by evaders of tax can declare their black money and get away paying significant low amount of fines and penalties. What does this do? Well, its an open invitation for people to continue to evade taxes, hide their wealth and a few years later disclose it in some scheme and get way vietually scot free!

The problem lies not in the fact that we don't have laws, the problem lies in the fact that no body believes in their implementation. No body believes that when the law says that you should not do this, people who actually do so will actually be dealt with.

In my view, if there is a serious problem pervading in the country, then to get rid of that problem one needs to do two things. Punish the perpetrators of that crime disproportionately and secondly make the punishment as public as possible. What this would do is that it would raise the stakes of breaking the law in the minds of those others involved. Yes, it is harsh on those who get caught and get disproportionate and public treatment. It may be humiliating also, but thats a small price to pay at the country level to get rid of a problem.

Its game theory at work here and as protectors of law one is playing a simple game with those breaking the law. You have to play the game strategically and work on their mind.

However, in this case, just bringing down the structures will be just the beginning. The people who have built these buildings are in a sense at the bottom of the pyramid and are the least at fault. If the only way you could do business is by violating the law and thats the way everyone around you is doing business, then its 'rational' on your part to violate the law.

Thus the real people, the contractors, the architects and the politicians must be caught and treated in the similar manner described above - punishment must be disproportionate and public. Thats the only way you can raise the stakes of breaking law!

Thats it for now...

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