A Nobel for incentives The importance for India of Jean Tirole

It is a common complaint about modern economics, particularly theoretical economics, that it is too far removed from the real problems of economics. In the West, this takes the form of the accusation that most economists failed to predict or warn about the possibility of the 2008 financial crisis. In India, there is concern that economic theory developed in the West fails to provide the tools required to analyse the pressing public policy problems in India. In many ways these are unjust criticisms. By awarding the 2014 NobelMemorial Prize in Economics to Jean Tirole, an economic theorist based out of the University of Toulouse in France, the Royal Swedish Academy of Sciences has in fact demonstrated just how unjust they are.

Prof Tirole is one of the most quietly influential of economists. He may not be a public intellectual like Paul Krugman, with a wide-ranging audience for his newspaper columns; unlike Larry Summers, he may not have taken up a major public position; and he has not positioned himself, like Joseph Stiglitz, as a prominent critic of globalisation. Yet his work has been as influential as that of any of the others. As the Nobel committee points out, it spans several different sub-disciplines of economics; but in each case it focuses on rigour and the careful analysis of strategies and incentives. Modern "industrial organisation" - the theory of the firm, of pricing strategies, of regulation and of monopolies - has developed more thanks to Prof Tirole's work since the early 1980s than anything else. By organising a deeply disorderly field, and by ensuring that properly rigorous models are used, he has taken the study of the firm out of the fuzziness common to "management studies" and into the greater clarity of the economics profession. The consequences have been considerable. One the Nobel committee mentions is the demonstration, through mathematical modelling, that monopolies in one field can be extended into another through vertical integration. A question that Prof Tirole famously asked is: "What is worse than a monopoly?" And he answered it thus: "A chain of monopolies." This insight has changed the way that regulators behave - the various antitrust actions against Microsoft earlier this century were not unrelated to this development.

Rigour such as Prof Tirole brings to basic questions of incentives is clearly missing in the debate on Indian corporate bodies, as well as on public policy. One of the few theoretical papers of quality to focus on the incentives behind public-private partnerships or PPPs, for example, was authored by Prof Tirole together with a frequent collaborator, Eric Maskin. One of the things that they discover: "PPP contracts [between a bureaucrat and a company] need to be carefully reviewed by independent authorities that can expose hidden rent backloading... PPPs can be expected to entail higher transaction costs." It is worth noting that this paper has been available since June 2007. This insight is something that Indian policymakers are only now accepting after considerable pain - though a clear independent authority is still not even on the anvil. More than most Nobel prizes in economics in the recent past, Prof Tirole's work is relevant to Indian public policy. It is to be hoped it leads to a revolution in rigour and formal modelling in Indian economic circles.

CONGRATULATION TO ALL THOSE WHO CLEARED THE IAS PRE EXAM.SAMVEG IAS,DEHRADUN

CONGRATULATION TO ALL THOSE WHO CLEARED THE IAS  PRE EXAM.
IT IS JUST A STEP ,DO HARD AND INTELLIGENT WORK TO ACHIEVE GREATER HEIGHTS  IN MAINS.BEST OF LUCK FOR UR mains exam.

Those who did not qualify,donot get demotivated.analyse ur weaknesses and errors that u made in exam,prepare strategy to overcome them in next attempt.civil services exam requires devotion from heart ,mind and body.synchronise all your energy to achieve your target in place wasting time in thinking.do lots of practice to make flawless attempt next year.

we are here to listen u,to help you always.
SAMVEG IAS.DEHRADUN

IAS-2014 PRE RESULT OUT,SAMVEG IAS,DEHRADUN,UTTARAKHAND

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Delhi-Agra semi-high speed train to be named Gatimaan Express

The semi-high speed train that proposes to reduce travelling time between Delhi and Agra to 105 minutes will be named Gatimaan Express and will have LCD TVs installed behind each seat and emergency braking system.

To be flagged off from New Delhi station next month, the train’s name has been chosen because of its capability of running at 160 km per hour speed, the maximum till date in Indian Railways, a senior Railway Ministry official said.

Equipped with comfortable seating arrangement, there will be eight-inch LCD TV screens installed behind each seat, the official said, adding there will also be automatic fire alarm with emergency braking system and passenger information system.

However, in the initial days, the passengers of Gatimaan Express will have the opportunity of watching pre-recording programmes only as the live feed will be provided later on.

The first semi-high speed service of the Railways is considered to be a boon for tourists visiting the city of Taj Mahal.

“We have sought safety certificate from Commissioner Railway Safety to run the semi-high speed train next month as all necessary preparations are being completed now,” Railway Board Chairman Arunendra Kumar told PTI.

Asked when the train is scheduled to be flagged off, he said, “The date will be decided after getting the safety certificate but certainly before November 30.”

Railways has already conducted two trials of the train in the past and all other arrangements like fencing off certain areas along the route and upgrading of signalling system are being carried out.

Equipped with a 5,400HP electric locomotive, the train will run at maximum speed of 160 km per hour and is expected to cover the 200 km distance in about 105 minutes.

There are 14 new LHB AC coaches manufactured at Rail Coach Factory at Kapurthala for the train and expected to roll out by month end, said a senior Railway Ministry official.

While 12 coaches will be used for daily running, two will be kept as spare ones, the official added.

The train will have Executive Class and Chair Car category of seats and also catering facility.

Railway authorities are also planning to launch similar trains in eight more routes including Delhi to Kanpur and Delhi to Chandigarh.

Countdown for IRNSS 1C launch commences at Sriharikota

The Indian Space Research Organisation (ISRO) began a 67-hour countdown at 6:32 a.m. on Monday ahead of the launch of the third regional navigation satellite, the IRNSS-1C.

The 1400-kg-plus spacecraft is slated to be flown on October 16, Thursdsy, at 1.32 a.m. on the PSLV-C26 launch vehicle from the space port located in coastal Andhra Pradesh. It is part of a seven-satellite IRNSS constellation that is being put in orbit over the next two years.

The Indian Regional Navigation Satellite System (IRNSS) is designed to provide precise location- and time-based services to a variety of users on land, sea and air across the Indian region - akin to the global services of the U.S. GPS.

The earlier planned launched on October 10 was postponed due to some technical reasons.

IRNSS 1C with a lift-off mass of 1,425.4 kg would be shot into a sub Geosynchronous Transfer Orbit (sub GTO).

As part of its aspirations to build a regional navigational system equivalent to Global Positioning System of the US, ISRO plans to send seven satellites to put in place the Indian Regional Navigational Satellite System.

For public health as political priority

A systemic reform of the health sector in order to meet the key objectives of equity, efficiency and quality is long overdue. In this, the Central and State governments need to make interventions intelligently, decisively and strategically so that the poor reap the benefits

How does Prime Minister Narendra Modi’s focus on population, health and subjects like public hygiene, the facilitation of toilets and ensuring preventive health through yoga fit in with his party, the Bharatiya Janata Party’s manifesto; one which promises a National Health Assurance (NHA) mission, with its aim of providing cashless hospitalisation in order to reduce out-of-pocket expenses? Why do these concerns seem contradictory? Does pursuing one necessarily hurt the other? These are legitimate questions and concerns. This must be looked at in a global context where there is discussion on Universal Health Coverage (or National Health Assurance) widening inequity in the short and medium term.

In seeking the maximisation of the health and well-being of every individual, the NHA subsumes the essentiality of access to those elements that constitute the foundation of good health — tap water (where conveyance of contamination is reduced by 99 per cent), a toilet and sewerage system, environmental hygiene, nutrition and basic primary care — and in the process, reduce 90 per cent of all morbidities and a substantial proportion of mortality. Evidence of efforts in the United Kingdom to contain tuberculosis by ensuring better housing and nutrition, the successful eradication by India of guinea worm infestation using improved water systems, or eradicating polio through improved sanitation and universal immunisation are some useful reminders of the interconnectivity between disease and environment, and between public health and clinical science.

Addressing inter-State disparities

In India, public health has been severely neglected with about 44 per cent of the population having access to tap water and toilets, 42 per cent of children being malnourished and a majority of people being treated by quacks. Setting right these issues requires an expenditure of an estimated Rs.10.7 lakh crore (recurring and non-recurring) against which the 12th Plan has allocated Rs.3.8 lakh crore. The most challenging of these is in bridging inter-State disparities, with 70 per cent of this investment required by the northern States that have restricted fiscal space, three quarters of the disease burden (preventable with effective primary health care) and weak implementation capacity, making inadequate funding not the only constraint. For example, in Bihar, 2.5 per cent of its rural population has access to tap water, 23 per cent of its people to toilets and a battered primary care system. Should such a State then invest in providing these basic services or in buying expensive care from private hospitals through insurance? What are the moral and ethical imperatives that must guide State action?

The Andhra Pradesh experience

In this regard, a review of the impact of the Rajiv Aarogyasri Health Insurance Scheme (RAS) in former Andhra Pradesh is illustrative of how the State consciously chose to abandon primary care for universal coverage of a select set of tertiary and secondary care conditions.

In 2007, RAS, a State sponsored health insurance scheme (covering 85 per cent of the population, with sum assured of Rs.1.5 per family for cashless treatment in 486 hospitals involving 938 procedures) was launched to provide risk protection against catastrophic illnesses that “have the potential to wipe out a lifetime savings of poor families.” The justification was that there was effective demand for treatment for non-communicable and chronic diseases, low investment in public hospitals and a burgeoning private sector, unaffordable to most.

RAS was perceived to be a popular programme. But there is a thin line between perception and reality. Several commentators have critiqued it as having boosted the revenue streams of private corporate hospitals without necessarily reducing health expenditures or improving health outcomes.

 Scaling-up the National Rural Health Mission’s efforts to revive the primary health-care system would be far cheaper and more sustainable than buying care from private hospitals. 

While there are no systematic evaluations to assess the impact of RAS, a recently conducted household survey in Andhra Pradesh by Access International covering 8,623 households offers interesting insights. While it showed an overall reduction in out-of-pocket expenditure and increased hospitalisation, it had limited impact in reducing impoverishment or indebtedness among the two lowest quintile groups. For example, while per capita expenditures for inpatient treatment nearly trebled from Rs.391 in 2004 to Rs.1,083 (2012) for the poorest quintile, it was down to Rs.1,174 from Rs.1,819 for the fourth quintile group. Likewise, while the proportion of those incurring catastrophic expenditures more than doubled from 1.1 per cent to 2.8 per cent and 1.2 per cent to 3.4 per cent for the two lowest quintiles, the richer quintiles faced reductions. Such wide disparities are attributed to the concentration of half the accredited hospitals in seven districts (towns) resulting in an inequitable distribution of and gross deficiencies in the supply side, making access difficult and unaffordable for those residing in backward districts.

Impact on poor

Second, 49 per cent of reimbursement was for cardiac, cancer and kidney failure (38 per cent of patients or 0.5 per cent of population), while the two bottom quintiles suffered impoverishment, premature mortality and disability due to lower respiratory infections, diarrhoeal diseases, tuberculosis (TB), ischemic heart diseases and malaria — conditions eminently preventable and treatable with effective primary care.

Besides, partaking RAS benefits implies forced hospitalisation for outpatient care, increasing the risk of hospital acquired infections and higher indirect expenditures that the poor cannot bear.

Third, the primary health-care system that the earlier Telugu Desam Party government had accorded high priority to has all but collapsed. Among 19 major States, Andhra Pradesh incurred the lowest expenditure of Central grants (National Rural Health Mission and disease control programmes) as proportional to its total health spending during 2011; 16 per cent against 31 and 28 percentages by Maharashtra and Karnataka respectively and the only State to slash its primary care budgets from 53 per cent to 46 per cent and allocate just 9 per cent for secondary care down from 12 per cent during 2007-12. In comparison, RAS was provided 23 per cent of the health budget for less than 1 per cent of the population (not necessarily poor) or 11.3 per cent of total hospitalisation. In the absence of cost containment measures and generous pricing, costs are likely to escalate further, impinging on the fiscal space of the two new States of Telangana and Andhra Pradesh. RAS reimbursement rates, say for hysterectomy, laparoscopy, appendectomy or coronary bypass are higher when compared to other schemes in the country. Prices set through negotiations with private hospitals by committees without professionals — like chartered accountants, health economists or systematic unit costing methodologies — can only be arbitrary. Further, package rates provide scope for gaming the system. In the absence of standards to measure quality and regulations to control provider behaviour and fraud, perverse incentives are created, as reflected in unnecessary diagnostics, procedures and surgeries.

RAS was a bold initiative to address the problem of impoverishment that has been partially addressed. Contrary to Tamil Nadu, which witnessed a 10 per cent shift in institutional deliveries from private to public sector, the increase in Andhra Pradesh is in the private sector, resulting in huge borrowings. Access to social determinants and the substantial load of preventable diseases like diarrhoea, TB, sexually transmitted diseases and HIV, are bouncing back due to policy neglect and mismanagement and continue to be issues requiring attention.

Policy corrections

The Andhra Pradesh story shows that lessons need to be learnt in order to reboot health policy along a more sustainable path. Scaling-up the NRHM’s efforts to revive the primary health-care system; incentivising lifestyle changes; universalising access to social determinants; revamping and embedding the primary care system within the community; increasing investments in public sector hospitals, along with improving incentive structures, employing requisite staff and upgrading infrastructure would be far cheaper and more sustainable than buying care from private hospitals for services that are available in the public hospitals at a third of the price. Private care must supplement, not substitute public care. Finally, in order to ensure patient well-being and value for money, standard treatment protocols and guidelines need to be developed; costing of procedures undertaken, monitoring systems for quality such as rates of survival, hospital acquired infections and readmissions developed and regulations enforced alongside establishment of grievance redress systems, with fair compensation and penalties against malpractice.

A systemic reform of the health sector in order to achieve the three principal objectives of equity, efficiency and quality is long overdue. This will require skilful political management and stakeholder negotiations. Governments at the national and State levels need to give up rhetoric and knee-jerk responses as substitutes for real action. Instead, they need to make interventions intelligently, decisively and strategically to ensure that solving one problem does not give rise to another. They also need to stay focussed on doing the simple things right in the first instance so that disparities reduce and the poor reap the benefits in real terms.

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