By Kumar Anand

Dear Mr. Kejriwal

Please accept my heartiest congratulations on your party’s historic win in the Delhi Assembly Elections against all odds.

It is clear to everyone now that Aam Aadmi Party (AAP) is a force to reckon with and has a mandate that will see them as either a part of next government or as the principal opposition party in the Delhi legislative assembly. Basically, you have graduated from being an anti-corruption activist to being a LAWMAKER. Congratulations once again.

Many of my friends and relatives are big supporters of your party. I must confess, until recently I have only known AAP as a crusader against corruption. It was only last week that I happened to go through the summary version of your election manifesto on your website to understand your agenda on various issues. There are many path-breaking initiatives that are praiseworthy. Some of them make me very hopeful – your plan to curb corruption in public offices, initiatives to increase security measures, devolution of power to local bodies like gram sabhas, etc.

However, I must admit that there are some pertinent questions being raised in my mind – questions on aspects of your proposed initiatives that contradicts many of the fundamental lessons I have learnt in my study of economics.

Let us assume that all the members of AAP are honest and hard-working people. We also assume that they succeed in implementing their manifesto. The unintended consequence of such policies will be:

“For increasing employment AAP shall fill all vacant government posts.”

As you have correctly identified, unemployment is indeed on the rise. However, I am not sure that filling up all vacant government posts is appropriate response. Your party should endeavour to make conditions conducive for private businesses to set up in Delhi. There are already many advantages this city enjoys – home to the best airport in the country, possibly the best public transport (Delhi Metro) and the best infrastructure in the country (you must not forget to thank all the taxpayers of the country who have paid for all these great facilities that Delhites have come to enjoy), and other benefits that comes automatically from being the political capital of the country.

You must endeavour to keep the size of the government at bare minimum to run a tight and efficient administration. Please remember, as Ronald Reagan has said, “You can’t be for big government, big taxes, and big bureaucracy and still be for the little guy.”

“No contractual jobs for work that is required 365 days a year; ensuring implementation of minimum wages. … regulating wages and working hours of domestics workers”

You seem like a smart, educated, sincere and considerate guy, unlike most of our politicians. And therefore I believe you will be willing to consider ideas that may prove your stand on a particular issue wrong, but which are correct and beneficial for people of Delhi, your constituents.

I am afraid that your plans to dictate terms of contract between two parties involved in voluntary exchange – as your plan to ban contractual job that requires work round the year and regulating wages does – will backfire. I am sure this plan is founded on good intentions (presumably, providing safeguards to migrant-labourers and others working on daily wages who are routinely exploited), but the likely effect and an unintended consequence of your proposed plan is higher unemployment. When laws are so written that it becomes difficult to hire and fire people based on mutual agreement, and wages are determined by the government, the natural response of entrepreneurs will be to replace labour with capital. Delhi, as India has a natural advantage in terms of availability of cheap labour. What we lack is capital. Your plan is going to make businesses adopt capital-intensive techniques of production, disregarding our natural advantage which only hurts the common man you seek to protect and benefit.

Your party should focus on enforcing contracts and in sprucing up legal system such that no one is defrauded and timely resolution of conflicts take place.

“Government schools to be made as good as private schools. …Government health care facilities would be improved (and made as good as private hospitals) so that all citizens of Delhi – rich or poor – have access to high quality health care.”

It is heartening to see that you have noticed that private schools and hospitals provide superior service than their government counterparts. It is also commendable that you would like to improve government schools and hospitals.

However, I am disappointed to see that you have stopped short of asking a more fundamental question as to how private schools and hospitals are able to provide better service at lower cost. It is due to the “role of incentives”. The only meaningful way through which you could hope to accomplish your goals is by bringing in choice and competition in the operation of schools and hospitals. Provision of education and health services through vouchers may just be the answer you are looking for – an idea that many of the Nordic countries have used to great effect. Voucher is an idea that gives choice to customers (students and patients in this case) by giving them the option of choosing service provider (schools and hospitals) of their choice, private or public.

“A law would be introduced to regulate high fees and donations in private schools and colleges.”

Yes, you have rightly identified the problem of sky-rocketing fees charged by private schools. But you must also ask why things have come to such a pass.

First principles of economics tells us that it is because of the mismatch in demand and supply. Regulating high fees charged in a voluntary exchange (in this case between school management and parents) will not solve the problem of limited supply of seats in private schools. But you can certainly help with easing up the norms of opening a private school. You can begin by amending the Delhi RTE rules and relaxing the onerous requirement of infrastructure that have imposed prohibitive entry barriers for opening a private school. This will increase the influx of low-fee private schools that exists only because they are patronised by students and parents.

“Opposing FDI in retail Industry … strict action against hoarders.”

There is no one best price that the government can and should try to find and dictate. Creating conditions for ensuring market prices can be the only best response of the government that will help ensure the most efficient allocation of resources.

You cannot stand for making things affordable for the common man while at the same time oppose FDI in retail. Competition among various kinds of retailers will help ensure that. Also, strict action against hoarders will not help curb occasional jump in prices of certain commodities. Removing trade barriers will. Howsoever we may like to, we cannot legislate away scarcity.

As a common man trying to make a living in Delhi, these are some of my areas of concern which I hope you will take note of and find ways to address.

At the very least, you have certainly raised the level of debate in this country and brought some serious competition amongst a field dominated by age-old political parties. For once, no one wants to identify with a politician with a criminal background. You have certainly raised the bar of expectations that we as the common man have from public offices. We very much appreciate your efforts to that end.

Yours sincerely,

Ek Aam Aadmi

About Kumar Anand

Kumar Anand is an economist with over ten years of experience working with for-profit companies, government ministries and not-for-profit think tanks. Kumar has previously worked with National Institute of Public Finance and Policy (NIPFP) where he was part of the research team that assisted the Financial Sector Legislative Reforms Commission (FSLRC). Before joining NIPFP, he worked with Hong Kong-based Asianomics Limited, where he kept a watch on the developments in the Indian sub-continent markets. Before his present role, Kumar worked with Centre for Civil Society in New Delhi, where he created an online library of Indian liberal works to preserve and revive the rich Indian liberal and free market tradition. Currently, Kumar leads the research team at Nayi Disha in Mumbai, where he is exploring the right set of principles-based rules that should govern a city and a nation and the ways to create a popular demand for such a change. Kumar's research interests are in Indian economic history, urban economics and public choice economics. He is a graduate of Gokhale Institute of Politics and Economics, Pune.

Spontaneous Order

An Open Letter to Aam Aadmi Party