Tuesday, February 14, 2012

Risk-Return Mechanism of Netas- An economist's View

Any one who has read even a little bit finance or economics will know that the amount of returns you expect is directly proportional to the amount of risk that you take . Greater the risk..greater the returns. Similarly, more the effort..greater the returns( keeping the skill and capability factor constant). So how does this apply to our expectations from a particular profession?? Obviously we accept that a bollywood superstar will be paid ( in terms of financial or other gains ) much more than an IT engineer with modest capabilities. This is because the risk of failure for Shahrukh Khan was much more than the risk faced by an IT engineer. The other factor which determines the compensation benefits for a profession is the demand supply equation. You expect a premium when the supply of a professiopnal service is much less than the demand for it.

Lets say you want to become an engineer. You work hard in your eleventh twelve. Spend a certain amount of your money on tuition and college fees. Study( though not much ;) ) during your engineering days. And then expect a well paying job. During your engineering days your parents can proudly say "mera beta engineering college me hai". Your family, more often than not, supports your ambitions and wants you to dedicate yourself fully to your studies. The risks that you face are negligible. coz if you dont clear IIT-JEE you will atleast get into some other college. Worst case scenario is that you take a drop and get yourself into the worst engineering college in the country. But you will atleast be an engineer with a respected professional degree and a hope to become something in life after doing you MBA.

 Now imagine that you want to be a politician( MP, MLA or PM depending upon how ambitious you are).  
You have to start as a vella volunteer after which you will graduate to chhutbhayya neta or a struggling youth leader. You spend most of your prime days totally broke, walking in rallies which mean nothing, without any respect in the society, ogling at groups of  women with not so manly men, dealing with thugs and gundas, licking the ass of senior leaders, begging for votes for some other leader who you know is an asshole.
The risks that you face in this " dad is ashamed of you " passion of yours is immensely high. You can either end up in jail for few years, or end your political career after you no longer have a chance to enter any other professional education or struggle all your life as chhutbhayya neta helping colony waala uncle in avoiding transfer in his govt job( most people fall in this category).  Also include the tons of money that you spend all this while in hope of reaping a harvest some day. The best case is that you become successful and get a 'ticket' from some leading party and spend the rest of your life fighting media, party leaders, opposition and god knows who.

What do you expect against all this effort and risk( I am stressing on this here bcoz the chances of failure are quite high(like in bollywood) and the downside is immense) ?? A white ambassador and few lakhs which you most probably will end up loosing after your five years tenure?? It makes sense for any rational being to amass as much wealth as possible during the five years of his office so that the future of his family is secured and at the same time he is compensated for loosing the golden years of his life.

Secondly, we never read in newspapers, complains about scarcity of good engineers as often as we do about good leaders. The fact that we always think there are no good leaders in the country suggests that there is a huge demand and supply gap in this profession with demand exceeding the supply by a huge margin. In such a case our Netas do deserve a huge premium over other professions when it comes to financial compensation.

Considering all this, its but natural for a Neta be corrupt and acquire money which he is denied inspite of deserving it. So by expecting  our leaders to be totally honest are we asking for too much??  In the past, kings ruled in the interest of people and dedicated their life for the welfare of the society. But the amount of love , respect, and wealth that they got in return was immense. Are we doing anything for our leaders to command the honesty that we are demanding??

True that the country is lacking good leaders in political structure. But the fact is, we are not doing much to change this. We are not giving enough incentives to well qualified and honest people to take this great risk of entering politics. We have to either lower the entry barrier to this profession and offer more incentives( legal incentives, not the money through scams route). Preferably we should do both so that our leaders don't feel the need of being corrupt and feel the pinch of guilt while engaging in any malpractice.

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