“Life in India is a series of bilateral negotiations”

 [[{“value”:”By Rohit Krishnan: Life in India is a series of bilateral negotiations conducted a thousand times a day. And that drives the character of life here. Now, I am seeing the country properly after several years. And it’s a major change. Visible infrastructure has gotten much better. Roads are good, well maintained, and highways are excellent.
The post “Life in India is a series of bilateral negotiations” appeared first on Marginal REVOLUTION.”}]] 

By Rohit Krishnan:

Life in India is a series of bilateral negotiations conducted a thousand times a day. And that drives the character of life here.

Now, I am seeing the country properly after several years. And it’s a major change.

Visible infrastructure has gotten much better. Roads are good, well maintained, and highways are excellent. They built 7500 miles last year, just as the year before. And they’re fantastic…

But:

Living in a country built off of bilateral negotiations for everything is simultaneously the libertarian dream and an incredibly inefficient way to do most collective things. Ronald Coase told us this in 1960.

“if property rights are well-defined and transaction costs are low, private parties can negotiate solutions to externalities without the need for government intervention”

But Indian life is dominated by transaction costs. Every time a driver pokes his car into a turn when the signal’s not for him it creates friction that ripples through the entire system. Every time someone has to spend effort doing a 1:1 negotiation they lose time and efficiency. Horribly so.

…The reason this isn’t an easy fix is that the ability to negotiate everything is also the positive. When every rule is negotiable you get to push back on silly things like closing off a section of a parking garage with rubber cones by just asking. Life in the West feels highly constricted primarily because of this, we’re all drowning in rules.

Here is the full essay.

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