[Dec 2007, Volume 4 Quarterly Issue] Pdf File size - The IIPM Think ...

MORE MARKETS, LESS GOVERNMENT
the market price turns out to be higher
than what poorer applicants can bear? If
the government means to help, sellers
can be required to sell at lower price to
some applicants and get the difference
reimbursed by the government. Sellers
will be required to verify an applicant’s
claim to the subsidy as per guideline.
What is the incentive of a seller to do the
extra work rather than pass on to the next
applicant? If a seller is not keen to service
these applicants it will simply lose
some business. Poorer buyers will move
to other sellers.
What do we gain by upsetting the
present system? First, as I suggested
above, is to reduce the space for rentseeking.
It not only reduces the burden
of bribes in an ordinary household’s
budget, but cleans the environment of
governance. As rent-seeking abates, the
grip of politics on service provision too
falls to that extent. The effect on political
life can be easily appreciated. Second,
resource spent on providing this
item will come down close to what is necessary
with present technology of provision
and verification. This gain actually
means saving of resources, which should
be earmarked for supporting loss of government
job and hardship. Private firms
are also expected to innovate processes
in order to increase profit margin. This
would bring in improvement in speed
and quality for service users.
Universal Services Or Public
Goods
Services that are public goods by nature
are thought to be an area where markets
would fail to produce the right amount
at the right cost even if markets are competitive
to the hilt. Because people can
not be excluded from such a service once
it is produced, it is difficult to get them
pay the right price -- that is price commensurate
with the benefit. Knowing
that the service is going to be available
any way, no one would be too keen to pay
the deserving price, however much someone
needs it. If such a service were to be
produced by private sellers, they would
find much less than the true demand in
the market. Production will be less than
requirement. Because there is no way of
getting the right price paid, these services
are usually funded from taxes.
However many services that are traditionally
known as public goods have
ceased to be really so. We now have technology
to prevent using many of these
services even when they are available to
others. Toll gates at the ends of a bridge
are now common. We also have toll gates
at the end of newly-built highways. In
many countries gates are operated electronically
to prevent users from skipping
the toll and employees from stealing toll
money. We have the technology to separate
payers and non-payers in much more
complicated situation than the bridge or
the highway example. In London any vehicle
entering the central business district
with many entry and exit points is
automatically billed for entry in working
hours. This is done without obstructing
traffic flow. As soon as we have a lowcost
way to exclude non-payers, the service
becomes like a private good and we
could be better off by delegating them to
market operation. Several state governments
have invited private firms to build
roads and bridges and collect tolls for a
stipulated number of years. A common
uneasiness about marketisation of these
services comes from the belief that tolls
or similar fees are an encroachment on
our private budgets. “Why should we pay
for using roads and bridges at all?”—it is
asked. The fact of the matter is that we
pay and have always paid for similar services
through taxes. Paying a road charge
at the toll gate is definitely fairer than
that because those who do not use a road
do not have to pay.
Much of this is happening in India as I
remarked earlier. The point here is that
this model can be extended over a larger
variety of government services. Maintenance
of public places, government offices
and buildings, railway stations and
property, tourist routes and spots, places
Majority of the services that are traditionally known as
public goods have ceased to be really so. We now have
technology to prevent using many of these services
even when they are available to others
of historical interest and so on can be
brought under this mode of operation.
The basic toll-gate model of business of
course requires adaptation depending on
the service. Several imaginative improvisations
are already in use in various
countries. For example, in some instances
the government may not want to
charge individuals though it is possible.
The government may decide to waive
tolls along the road to a pilgrimage or
not to charge visitors of historical and
educational sites. In this case the government
itself pays the bill to the business
that produces the service. Users do ‘buy’
THE INDIA ECONOMY REVIEW
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