BOOK
REVIEW
AUTHOR:
KAUSHIK BASU
TITLE:
THE REPUBLIC OF BELIEFS-A NEW APPROACH TO LAW AND ECONOMICS
PUBLISHER:
PRINCETON UNIVERSITY PRESS, 2018
Law And
Economics Must Meet At The Crossroads
Kaushik Basu currently teaches Economics and International
Studies at Cornell University in the US. He has had an illustrious career, with
distinguished stints as chief economist and senior vice president at the World
Bank, and later, in this neck of the woods, Basu was chief economic adviser to
the Government of India during UPA rule.
Basu mostly leans Left in his economic ideas, and is a former
student, amongst several others, of Nobel Laureate and “Welfare” economist
Amartya Sen - who is also from India and a fellow Bengali too.
This latest, extensively researched book, that quotes many
thinkers to illustrate his points, has Kaushik Basu exploring the co-relationship
between laws and economics. It tries, to an extent to speak to the ordinary
reader, but is, in fact, quite an academic tome. Still, some of its basic premises are readily
graspable.
Why are some laws both obeyed and enforced, he asks, while
others stay quite ineffective on the statute books? In India, he points out,
there are, in fact, many laws that are rarely used or enforced. Basu writes, that in order for a law to be properly implemented and used, it must
intersect at a “focal point” with society and its economic ideas.
In other words it must make sense both to the enforcers of
the law and the people it is intended for. Otherwise, both are likely to
collude in its subversion or leaving it on the shelf.
“The most important ingredients of a republic, including
its power and might, reside in nothing more than the beliefs and expectations
of ordinary people going about their daily lives and quotidian chores. It is in
this sense that we are all citizens of the republic of beliefs,” writes Kaushik
Basu. He goes on to write: “The focal point is a somewhat mysterious concept
that emerged from modern game theory”.
This concept of intersecting beliefs however, is the main point
of this book, and Basu’s suggestions towards a more effective socio-legal
environment essential for orderly progress, are predicated upon it.
Basu believes one of the purposes of law, which is an
instrument of the State as a collective, is to influence and alter the collective
behavior of its people towards preset objectives. In this he goes beyond the
more usual objective of an “orderly society” so that economics can do its stuff
in peace. He actually wants to influence the populace via the laws adopted. He
writes, “The focal point approach relies on the expressive function or suggestive
power of the law and not on any human irrationality. It is purely a device that
uses suggestion to facilitate coordination”.
Basu clarifies further: “What the focal approach to law and
economics does is to take on the full economy game, including the police and
the judge, and then tries to explain how and why the law works”.
In other words, you need all the ingredients to be in some
form of tacit agreement on the premises assumed by both the given law, and the
economic context it operates in, for it to be widely adopted and used.
But, quite often, “It is not evident what constitutes a
focal point for different groups of people”. In a highly diversified country
like India this becomes doubly relevant
and even more difficult to arrive at.
Traditional laws, he says, were less inclusive in their
approach, and usually were made up based on the consensus of a few, and then,
sometimes imposed, when they were vigorously enforced, upon the many. He states
that is why they often did not work, even though his outright demoting of the
traditional approach without very much ado, is less than convincing.
However, for a left-leaning thinker, inclusiveness must
appear far more attractive as a basis to build upon, rather than a top-down approach
to economic order and law-giving. Even if the latter method goes back to the
Hammurabi Code and Moses’ Ten Commandments.
Basu is an admirer of the ancient Greek City States, and
the way they went about their business. He wants to see the principles
enunciated then, spread across a 21st century global canvas to the
extent possible. But this tends to be an impossible seduction, as the many self-contradictory
effects in Democracy show. The idea is
pleasant, but it is not easy to remain democratic in a so-called Democracy!
Focal points can be arrived at via custom, and tradition,
writes Basu, as in the “tenacious” Indian caste system. They can also be
arrived at by discrimination. That is, by giving advantages to a specific group
over another or several others. But predictably, Basu is not for allowing free
play to it with its overtones of apartheid.
He writes: “The popular view is that if you leave it all to
the market, with no government regulations and intervention, discrimination
will go away, is not valid. Discrimination arises from a free market. If you
want to stop discrimination, you may, in fact, need regulation and conscious
affirmative action”.
Kaushik Basu is certainly not for rank Capitalism. He
writes: “Once we move beyond payoff-focused critiques to generalized ones, many
challenges open up. Human beings are guided not just by their own payoffs but
also by habit, fairness, altruism, empathy, envy and many other emotional and
psychological proclivities….Conservative economists, who condone selfishness
by believing Adam Smith’s concept of the invisible hand will invariably lead
such a society to optimal results, end up creating failed societies”.
Is Basu right? That
depends on your own politics and economics. But he certainly puts out an
entertaining variation on Nash’s Game Theory to support his plumping for the
old economic concept of the Focal Point.
Is such a thing rather theoretical when it comes to Law and
Economics? My view is that it certainly is. And also it is not the job of Law
so much as Justice to set Society on the right track. Economics marches to its
own drummer.
Recent progressive Supreme Court judgements on Homosexuality,
Triple Talaq, and women between the ages
of 12 and 50 being allowed to go to a
revered temple that kept them out for millennia, are all cases in point.
(1,024
words)
October
2nd, 2018
For:
The Sunday Pioneer, AGENDA, BOOKS
Gautam
Mukherjee
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