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Constitutions Matter in our Daily Lives

Regular readers of this blog know of my interest in constitutions and how they affect the prosperity, or lack thereof, of nations. A recent conversation with a friend prompted this line of thinking about constitutions and how they matter in our everyday life even though it may appear that constitutions are rather remote and cannot possibly be relevant in our lives.

People act, individually and collectively, within institutional constraints. These institutions are created by and embody rules that have developed historically partly through some social evolutionary process, and partly through some correctly or incorrectly conceived constructed processes.

How people play a game depends on the set of rules that the players know, observe, and rationally expect others to follow. The extended social order in which people live and work is also a game played according to a set of rules, not all of them explicitly set down on paper or deliberately constructed through some directed rational process.

In some cases, the broadest set of rules — the supreme law of the land — are written down and used as the superstructure within which all other more detailed rules are framed. The classic example of this is the US constitution which went into effect around 1789. Another example is the “Government of India Act 1935″ which the British created to rule India and which forms the core of the later constructed Indian constitution.

The prosperity of a nation depends ultimately on the aggregate behavior of the people constituting it. People’s behavior, in turn, is determined by the rules and regulations that constrain and motivate behavior. Thus, the constitution in its role as the set of meta-rules has an unavoidable impact on everything that takes place on the ground.

The constitution is to a nation what character is to a person. A person’s nature or personality determines how a person behaves or responds to circumstances. Under similar situations, people respond differently based on their personalities. In a sense, the constitution defines the character of the collective we call a nation. Individuals act in response to the incentives they face, incentives that are created by the institutional settings which are ultimately derived from the constitution.

At the highest level, the constitution determines which of our activities will fall within the economic sphere and which in the political sphere. In the economic sphere, the production and consumption of goods and services are determined by voluntary exchange in markets. In the economic sphere, competition is between and among producers, and consumers choose what and how much they will buy. Activities that are removed from the economic sphere have to be allocated to the political sphere. When the government assumes control of production and distribution, consumers have to resort to political action to obtain what they want. Who gets how much of what then is a political question, not economic.

It may seem like a stretch that the choices we make in our day to day living are somehow related to a constitution that was framed decades ago (1935 for India) or even centuries ago (as in the case of the US.) But it is nevertheless true. For example, we behave differently under scarcity and abundance. If telephone services are scarce, people respond rationally by bribing the telephone provider. Whether something is scarce or not is partly technologically determined but more significantly determined by government policy. Government policy to restrict telephone services to monopolies (public or private) is constitutional, which then results in high prices and limited supply, is a consequence of the constitutional mandate to the government to interfere in the economy.

What citizens are allowed or prohibited to do is constrained by the policies that the government enacts, and the policies have to be consistent with the constitution. If the constitution were to change, the ultimate rules of the game would change, the policies (the derived rules) will change, and thus the action on the ground (the play of the game) will change, and therefore the outcome will change.

One important example. Suppose the constitution were to change so that the government was prohibited from restricting entry into the education sector. The government would then not be able to prevent for-profit institutions from running schools and colleges. That would expand competition, reduce prices, increase supply and improve quality. It would also eliminate the massive corruption that is currently present. It would also remove all the competition among various groups to get a part of the scarce supply. It would have an impact at the family level: parents and children would not be so desperately stressed.

Of course one may argue that a policy change to allow private sector into education does not need a constitutional change. Unfortunately, that kind of policy change is unlikely to happen because those in government have an incentive to prevent private sector entry. If they allow private sector entry, it will remove one of the most profitable source of bribes that they currently enjoy. Only a constitutional change will bring about policy change.

Prosperity has evaded India even after 1947 and “self-rule.” It can be argued that this is because India is not really free since it is still governed by a constitution that is primarily a set of rules designed by a colonial power to rule over its subjects. A change in the constitution is a necessary precondition for altering the rules of the game, and therefore the game itself and its outcome. The link between the constitution and what happens on the ground every day is robust and observable.

Atanu Dey on India's Development

Atanu Dey
Chapters
PJ O’Rourke: Every government is a parliament of whores
The Amazing Power of Technology
Swami Vivekanand: To the 4th of July
No True Islamic State
Herbert Simon — Information consumes attention
Yoga has no Religion
Hayek on “The Mirage of Social Justice”
An Open Letter to PM Shri Modi
Prefer a Functioning Economy
Political Discrimination is Socially Harmful
Markets & Competition
Ministry of Power, Coal, and New and Renewable Energy
John Stuart Mill on the Liberty of Thought and Discussion
Reading Ronald Coase
Universal Literacy
Man versus the State
What Comes Before
An ad from 1947: “The Uphill Task Ahead”
Pohela Boishakh, Vishu, and Puthandu Greetings
Rich People Spend More
Goodbye, Mr Lee Kuan Yew
Friday the 13th, Pi Day the 14th & Beware the Ides of March
Money is the root of all Evil
Warren Buffet’s Letter to the Shareholders
The Man Lee Kuan Yew Admires the Most
An Informed Citizenry is the Bulwark of a Democracy
Problems and Solutions
People I Admire – Part Doh
Nelson Mandela on Education
Criticizing Modern Indian Holy Cows Considered Dangerous
Richard Dawkins on the Monotheistic God
List of Pages on Teresa the Merciless
People I Admire
Lee Kuan Yew is under Intensive Care
On Monkeys, Cats & the Generality Principle
The Great Indian Bamboozle has to Stop
2400 hours of electricity for Delhi — every year?
Make India first to “Make in India”
Republic Day Thoughts on Reading the Constitution
A Day of Shame and National Mourning for India
The most dangerous man to any government
Socialism, Competition and Politicians
Open Thread: Ask me anything
Aakash, the “iPad Killer”, Vaporware has Evaporated
The Dreamer and the Dream
Circular Firing Squad of Flying Attack Monkeys Target Rajiv Malhotra
We need more Anandamide, not Jihadamide
Constitutions Matter in our Daily Lives
The Only Home We’ve Ever Known
Adam Smith on the Division of Labor
The Passing of Former President Mr APJ Abdul Kalam
Socialism Works its Wonders in Venezuela - also in West Bengal
Why the terrorists killed the satirists of Charlie Hebdo
Islam Poses an Existential Threat
The Wisdom of the Crowd
On Knowing Enough to Know that You Don’t Know
NITI — New Initiatives for Transforming India
Will India Recover?
The Unbearable Stupidity of Controlling Prices
Nov 14th as the “Day of Shame and Lamentations for India.”
The Indian Constitution — Part 2
Hayek on Valuing Individuals
Mr Modi goes to Washington