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Photo: Anshuman Poyrekar/HT
Photo: Anshuman Poyrekar/HT

Social capital in Latur

Economists generally believe that people cannot come together to produce public goods because of the free rider problem

Dashrath Manjhi famously cut a road through a mountain over 22 years of hard work. He earned the sobriquet of Mountain Man for his stunning achievement.

What is happening in Latur right now is perhaps less spectacular but equally interesting. This parched town in central Maharashtra has received nationwide attention because of the daily emergency water supplies being provided by train. However, there is more happening in Latur than just despair. Its residents have decided to take matters into their own hands, so that the town is not dependent on emergency water supplies from next year.

A report in this newspaper by Abhiram Ghadyalpatil drew attention to the response by the citizens of Latur to the water crisis. They have formed a public trust to raise 7.5 crore to widen and deepen the Manjira river that flows through their town. Around 3 crore is already in the kitty. The people of the nearby Renapur tehsil have also raised 1.23 crore to rejuvenate their local river.

There have been other stray examples of such attempts to fund infrastructure through crowdsourcing. In the 1980s, residents of two villages in Maharashtra had raised money through the sale of sand to fund the Baliraja dam in the Sangli district of Maharashtra. If the Rashtriya Swayamsevak Sangh is actively involved in the Latur project, it was a small communist organization called the Shramik Mukti Dal that brought peasants together for the Sangli project.

There is a similar example in another part of India. Citizens of nine villages in Haryana collected money to build a bridge across the Ghaggar river so that it becomes easier for them to bring their farm produce to Sirsa town. They built their own bridge after the state government failed to do so.

Economists generally believe that people cannot come together to produce public goods because of the free rider problem. There is a deep collective action problem. Why should I pay for widening a river or building a bridge when I will anyway have access to its benefits? One classic illustration of this problem is what game theorists describe as the public goods game. This is how it is structured.

The players in this game are given money. They are then allowed to decide how much money they want to put into a collective pot. The rest of the money remains in their pockets. The administrator of the game then doubles the money put in by the players, and then distributes the doubled amount equally among the players.

The optimal strategy should be for all players to put all their money in the pot, and then get double the amount back. But each player thinks that it is best that he keeps all his money plus get some money from the collective kitty later on. So everybody holds back in the belief that he can get a free ride. The Nash equilibrium of this game is that there is no money in the pot to double.

This is precisely why governments step in to tax people to build public goods. The voluntary action that one sees in Latur is highly unlikely. Why would a doctor or trader in that city give money to deepen the river if the benefits are to be shared with other people who have not put in a single rupee?

However, there are variants of the public goods game that sees trust being built up as the game keeps getting repeated. Social capital kicks in. This is perhaps what is happening in Latur. This is only a hypothesis. It requires a game theorist or an anthropologist to go down there to better understand what is happening.

The examples of voluntary collective action described in this column are the flip side of state failure. The Indian state has been better at funding populism rather than building public goods. The national institutions may be sound but there is a deep rot at the lower levels—thanks to everything from corruption to incompetence. Lant Pritchett of Harvard University has famously described India as a flailing state.

Social capital is more likely to be strong among smaller groups of people who interact on a daily basis. The shared experience of drought may be a catalyst for cooperation in the case of Latur. So, such crowdsourced infrastructure may be more possible in response to local challenges rather than national ones. But that does not reduce their importance as social innovations.

It is usually assumed that social capital in India is locked in notions of caste loyalty rather than in common citizenship. Do examples such as the response of the people of Chennai to the recent floods or the way the people of Latur have come together to deal with drought suggest that there is a wider base for social capital as well as voluntary collective action in India?

(This column owes a lot to a discussion with Mandar Kagade of the Bharti Institute of Public Policy at the Indian School of Business.)

Niranjan Rajadhyaksha is executive editor of Mint.Comments are welcome at cafeeconomics@livemint.com. To read Niranjan Rajadhyaksha’s previous columns, go to www.livemint.com/cafeeconomics

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