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A behavioural theory on why productivity declines

August 19, 2014 15:47 IST

The impact of 'family first' on productivity in developing societies is yet to be modeled, says Agnikalam.

Historically, social scientists, in particular economists, have been deeply concerned with how to ascribe development. The long accepted common sense approach uses gross domestic product (GDP) and GDP per capita.

A variation is to use Purchasing Power Parity. The Leftist postulate has been exploiter versus exploited. A more recent boutique approach has been the Happiness Index that eschews cardinal measurement and selects an ordinal index that ranks how joyful a people are.

Here, a distributary of traditional microeconomics, called behavioural economics, has made inroads by including social behaviour through new analytical techniques. I am sympathetic since it is leading to successful outcomes by moving away from traditional methods of investigation and instead using actual behaviour as observations.

Through this process the scope and coverage of economics is imperceptibly expanding and growing. In sum, economists increasingly believe that many, if not all, aspects of human behaviour can be successfully explained through techniques that they have developed or will develop.

One observed behavioural difference between developed and developing countries is a family's grasp over its progeny. A societal value system that generally prevails in the former is to leave children be after a certain point in their nurturing and to let them choose their life path through their own trials and tribulations.

In other words, let them experience life in its fullest and find their calling before settling down in the straitjacket of life. Many may fall by the wayside in this process while several others explore and experience, traversing distance and time to find their niche. Discoveries and inventions and resultant economic advancements of galactic proportions have occurred, continue to occur, and will occur in the process.

The vast majority of those populations enjoy the fruits over time including the advantages of lowering prices for access to advanced technology in its myriad manifestations from electric knives and surround-sound TVs to mobile phones, laptops and notepads.

Thus, some would become couch potatoes but society can, by and large, afford to mollycoddle them since, heuristically having accepted that everyone has risen to his or her level best in the encounter with life, broadly acceptable redistributional policies take care of those who may be otherwise left behind. The larger world also enjoys positive externalities from such technological progress.

I remember well being treated to a rock concert in 1991 by the secretary (minister) of finance of the state of Sao Paulo after a long day of meetings when, to my astonishment, he proudly declared that the rock star was his son.

Neither can I forget a 1973 luncheon in a Miami Spanish-style hacienda with what seemed like a billionaire family. I was proved correct by the gait, poise and confidence of the hostess who floated in with that certain flair to welcome her guests.

Soon thereafter, a gaunt woman in a yellow and orange uniform sauntered in and was introduced as her daughter. Quite unable to contain my curiosity over their apparent difference in appearance, I waited anxiously until, in the conversation, it emerged that the daughter was a crane driver at a construction site. Yet parents and daughter seemed in the best of terms and spirits and shared the same dining table for lunch with their foreign guests.

Such events remain etched in memory since they stand out from one's usual experience in India. To begin, children are driven to take up a field of specialisation of their elders' choice. Many children as a result can never dream of independently taking up a profession, becoming someone they want to be, since they know they will finally have to abide by the wishes of others in their selection of a lifetime occupation or lifestyle.

There is another deleterious impact of this.

The child may not develop responsibility to self, reflecting his knowledge and comfort that it is someone else who should answer for failure along, not only the course of education, but oftentimes through life.

Thus, there is a further outcome. Parents feel obligated and remain perennially interested in pushing their children to find "stable" jobs, and are forever seeking jobs for them by pressing family, friends or strangers. I can safely surmise that, in my circle, I can think of only three friends or family who have steered clear of this erroneous policy on behalf of their children.

In such an environment I myself do not refrain from lending a helping hand when besieged, with the excuse that I should not be stone-hearted at an individual level until society changes itself, thus setting aside a basic principle of economics that macro-society - economy - is a blow-up of micro-individuals - economic agents - and not vice versa. Interestingly, my generation, by and large, did not receive such beneficence.

Nor do I encounter this behaviour pattern in the West even today with one mega caveat, though thankfully only occasional, in their highest rungs of society whereby mediocrity unabashedly get into the best universities on the back of huge donations.

Alarmingly, such people have risen to their highest offices and, given their global reach, with unimaginable ramifications on populations far and beyond.

In India in the meanwhile, every aspect of life has descended to a family business, a phenomenon that did not reveal its fangs so clearly until the 1980s but then spread unabashedly.

Efficient and productive politicians bring in their children, deemed children, and family, visibly irrespective of the latter's qualifications for the job. The productivity quotient for the unit crumbles compared to that of the single original if one uses a simple average as an index.

The film world commits the same error, and even the music world with ghastly consequences on the audience, thankfully ephemeral. Second- or third-generation industrialists, more often than not, do not reflect their forefathers' brilliance. And, in society at large, overall productivity declines since few people appear to be in an occupation of first choice or ability where they could have excelled.

This marks a developing country where family comes first at all costs and country remains in the background, on the back burner, so to speak. This behaviour difference between developing and developed societies and its impact on productivity and growth remains to be modelled as yet by behavioural economists.