This post will claim that sincerity and hardwork are positive externalities and will be under supplied if left to the market mechanism. Also, lack of sincerity and laziness provide negative externalities which will be similarly over supplied by the market. With the existing incentive structure, we therefore will have a market failure in the supply of our most essential work impulses.
Let us examine the market in sincerity and hard work in Government jobs. Very few will dispute the fact that both these attributes are vital to quality service delivery for any level of activity. A sincere and hardworking Government official does his or her work faster and more efficiently, thereby enhancing the productivity of Government. Further, in keeping with the 80:20 rule, they end up doing the work of the lazier staff too. For example, I am convinced that whatever efficiency Vijayawada Municipal Corporation (VMC) claims, can be attributed to the hardwork and sincerity of 40-50 of its 4000 odd employees. I am sure the case is not much different in other Government organizations.
Sincerity and hardwork shown by any Government employee is of more benefit to the system than to the employee himself. Even with the additional work output and higher efficiency, the employee gets the same returns by way of salaries and promotions. His hardwork and sincerity is indispensable to the Government in getting its work done and also concealing the gaping "effort hole" left by the lazier employees. The sincere and harworking employee thereby acts as Reginald Jeeves to the Bertie Wooster's among Government employees!
Perversely enough, sincerity and hardwork encourages and even rewards free-riding. It incentivizes the lazier and insincere officials to shirk their work, in the sure expectation that it will in any case be done by someone else. The lazier and insincere employees get the same salary and promotions as the more hardworking and sincere ones do, and that too by shirking work!
It is therefore clear that the Marginal Private Benefit of sincerity and hardwork is much less than its Marginal Social Benefit. Further, the Marginal Private Cost of hardwork and sincerity are much more than its Marginal Social Cost, which is closer to zero. Eco 101 textbooks describes such situations as examples of market failure. Market failures call for market intervention to correct the incentive structure. Positive externalities should be signalled and incentivized, while negative externalities should be costed, with the agent bearing the cost. How can this market intervention work? Who should intervene in this market?
Any prescription for correcting this market failure has to surely account for the differential abilities and attitudes of individuals, and put in place an incentive structure that reflects this reality. This would entail introducing the likes of performance based promotions and monetary incentives and penalties.
6 comments:
Had I only read the first paragraph, I would've wondered how it could be true. I understand that you've written it from the perspective of the government servants. There I agree...
while I agree with many of the points about the sincere employees in the Government, the promotions/ rewards are being made only to few people who are normally around the powers that be. Many hardworking/ sincere officers are neglected and lazy, chamcha persons are being rewarded.
A mechanism should be developed to reward the right people which will enable many others to join the sincere bandwagon there by increase in productivity
Natarajan garu,
I too feel like Anon. above that there are problems with your suggestions. Some feel that one affective way is pressure from local people's organizations. I think that Lok Satta tried to organize such activities and according to some World Bank reports it was successful in some cases but I do not know the current status. Regards,
Swarup
I agree with footnotz that my first paragraph did not bring out the specific context of my post. But the hypothesis holds in any general context, involving work. If it is not very evident in the private sector, then it is because the incentive structure takes care of the market failure. Even in case of inherently sincere and hardworking individuals, surely an appropriate incentive structure or positive stimulus can further improve their productivity.
To anon... such cronyism is everywhere, even in the private sector, though with lesser intensity. But at least some institutionalised performance evaluation system and incentive structure exists in the private sector. This is absent in Government, thereby accentuating cronysim.
To gaddeswarup...all external audits, be it through NGOs and watchdogs like Lok Satta or through institutionalize mechanisms like the Right to Information Act, can only get you so far. The important thing is to get the individual agents within any system, to respond to appropriate incentives. The driving agent has to be within, embedded within the actors, and channeling their internal energies. The incentive structures have to target the individuals.
Somewhat offtopic. Here is an interesting example of practice of democracy at a local level in ancient Tamilnadu:
http://www.hinduonnet.com/thehindu/fr/2003/10/10/stories/2003101001421200.htm
Strict vigilance, severe punishments, no tenure for professors eemed to have been used even at a local level
One, there canNOT be a perfect structure that takes care of both performance and rewards. The moment human element as the variable enters any system, one has to accommodate for the 'unexpecteds'.. To a large extent SUCCESSFUL private sector firms have a GOOD reward structure - unlike in the Govt. And, the GREATER success of an organisation depends on how the human resources are handled.
The hypothesis I'd argue fits largely a government organisation/structure (PSUs) and would not hold true largely for the private entities - at least at the levels where performances could easily be measured against parameters.
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