My mini Copenhagen

Mumbai is facing an unprecedented water crisis. Rainfall this year was scanty and the city authorities have already imposed harsh water cuts in most areas. The reservoirs that slake the city’s thirst have barely 200 days of supply left while the monsoon may not set in for another 350 days at least. The net result is that housing colonies such as ours that have been privileged to get uninterrupted water supply through the day have suddenly had to adjust to dry taps by noon.

The collective action problem is to convince residents that though it is natural that each family wants to stock up on water in the early hours of the day, the end result is that the taps are running dry earlier and earlier. The better option is to use water sparingly through the day. People will buy into this solution only if they are convinced that their neighbours will do the same and not cheat on the deal. That means that free riders should be curbed and some level of trust built.

It is easier to build this consensus in a small housing colony than on a global scale. Consider some possible reasons.

1. There is a high level of trust and even affection in a housing colony set up by a group of Marathi writers while international relations are cursed with deep divisions based on history, geography and culture. Getting the rich and poor countries to accept a common timetable to cut carbon emissions is a tough task.

2. The people who stay in our housing society are a homogeneous lot, coming from similar backgrounds and with similar incomes; climate change talks involved countries with different cost-benefit calculations. For example, the Maldives can do almost nothing to mitigate climate change but will surely be the first nation to bear the full brunt of its effects.

3. There is an incentive to protect your reputation in a housing colony or small community, since residents depend on each other for a variety of reasons. A nation at the bargaining table is more concerned about domestic pressures than protecting its international reputation.

4. A related disciplining catalyst is that people who stay in a small community have a long history of cooperation. Our housing colony is 40 years old and people have memories of cooperation and altruism. There is also the risk that reneging on a water deal right now would affect future behaviour of other residents. None of this is true in global climate change talks.

5. While water is not priced and hence market-based incentives cannot be used to curb usage, the city authorities have already imposed caps on our water usage. This is some sort of external enforcement that can cement a deal. In another context, the World Trade Organization does this for global trade. There is no such external enforcement institution as far as climate change commitments go.

This is not a comprehensive list; nor is it original. I have borrowed and loosely adapted the basic framework from a wonderful talk given by economist and game theorist Partha Dasgupta in January in London, as part of a series of lectures to celebrate the 200th birth anniversary of Charles Darwin.

“The beliefs people hold about one another and about the way behaviour translates into social consequences would appear to be central to the possibilities of cooperation. Alarmingly, societies can tip from cooperation and conflict because of a mere change in beliefs," said Dasgupta, whose speech was titled “Trust and Cooperation Among Economic Agents" (and is available for free download from his personal website).

Despite the fact that it is easier for a housing colony to build cooperation in the face of a collective problem, we are facing immense difficulties explaining to residents that they are not being discriminated against in the supply of water and that it makes sense for them to adhere to some common rules of usage.

Some political theorists and game theorists say that people are conditional altruists, standing between the cold utility maximizers of economics mythology and the saintly altruists of neo-Gandhian mythology. Conditional altruists do have an inbuilt concern for fairness but will follow selfish strategies because they fear that others will take a free ride on their commitments to good behaviour. They behave altruistically only when they are convinced that there are enough others who they can trust to behave similarly.

Such levels of trust take a lot of hard work, a history of reinforcing behaviour and credible assurances. It does not take much to realize that much of this was absent at the Copenhagen talks, which came close to being a morality play between the good guys and the bad guys.

Niranjan Rajadhyaksha is managing editor of Mint. Your comments are welcome at cafeeconomics@livemint.com

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