On the nuclear liability issue, I think you and I agree: the cap will have to be based on the business model of the interested MNCs. My guess as to why the government didn’t examine this model is that the MNCs did it themselves and declared they weren’t going to pitch up with a higher cap. I wonder if this liability bill has called the MNC bluff (assuming it is a bluff)? According to the media, the issue is still kicking around in Indo-US talks…

That’s an interesting example. Could you give us any examples in India of an over-reliance on numbers and data?

Cheers,
Prashant

The problem, I believe, in policy making in India, on the contrary, is an over-reliance on numbers. Numbers can be quite tyrannical at times and I think it may serve us well to bring politics back into policy, especially on issues such as poverty analysis. For instance you have a multi-dimensional poverty index that has been introduced to reflect the deprivation of the poor from a more holistic perspective. Yet, it continues to remain as far-fetched in its indication of the deprivation as its preceding models.

I suppose the key is to arrive at some sort of balance between ideology and hard facts, but I think at times there is excessive importance placed on numbers, which has a tendency to shift the focus from what is actually socially relevant.

Thank you for that insightful comment.

You give me too much credit in your comment! I was aiming for something a lot more simplistic.

My point in regards the SC/STs and OBCs reservations was only in regards the percentage of reservation that they should be given in educational institutes and jobs. If caste is not a component of the census how do we figure out the actual percentage of SCs in the population? The corollary being, if we don’t have accurate percentages, how do we end up fixing arbitrary 27% reservation for these groups? The OBC calculation is a lot more complicated because of different criteria and this maybe the reason for the huge difference in the different surveys conducted by different organizations. Given the population explosion in the last 3 or 4 decades it makes little sense to fix quotas on the basis of antiquated data. From what I understand the Mandal Commission based its findings on pre-independence data. Similarly the SC/ST quotas have remained unchanged from the time of independence. If a politician wants to ensure equity he needs to have the right data to determine what is equitable. In India however we keep ending up on unreliable outdated data.

In regards the nuclear liability case, as uncomfortable as I am in arguing economics with an economist, I’ll still throw in my two cents worth. I think the very purpose of capping liability is an admission that private industry cannot meet the full costs or even half the costs of an accident. The actual cost of the accident is therefore only tangentially relevant. In such a case I presume you should start work the other way round and see how much the industry can afford to pay while remaining competitive instead of calculating how much the insurance companies can themselves afford to insure, which was the case with the Indian bill. The entire point of a cap is to ensure the profitability of an industry, right?

Regards,
Prashant

You say that we must base our policy on hard numbers. I wish it were so easy. In your example of SC/ST reservations, what would hard numbers tell you? Presumably, you mean a cost-benefit type study of the equity gains and efficiency costs from introducing quotas into, say, higher ed institutions (?). The results of such an analysis (aside from immense technical problems and huge assumptions involved in conducting it) would still depend on how politicians and policy-makers define the equity gains they want to achieve. Or what they intend to benchmark these “efficiency losses” against – entirely a political/policy question.

Nuclear liability is an interesting one. The model used to determine insurance premia and liability caps ideally shouldn’t have anything to do with the cost of power generation, but should be driven by the probability of a disaster. But what is the probability of a nuclear spill? Our actuarial hard numbers consist of Chernobyl and little else (thankfully). If, as a policy maker, you really, really want to open up the nuclear power sector, then you can only set the liability hurdle as high as possible without discouraging all private investment. It requires taking a leap of faith.

Of course, I can’t disagree with the substance of what you’re saying: more information is always better than less. But, in my opinion, while numbers can inform government, they can’t substitute for clarity in political and policy objectives.