Games Indians Play Read online

  ‘Raghunathan writes really well…there are rare instances where a reviewer thinks, I wish I could write like that. This is one of those instances’ — Bibek Debroy in Indian Express

  In a rare attempt to understand the Indianness of Indians—among the most intelligent people in the world, but also, to a dispassionate eye, perhaps the most baffling—V. Raghunathan uses the props of game theory and behavioural economics to provide an insight into the difficult conundrum of why we are the way we are. He puts under the scanner our attitudes towards rationality and irrationality, selflessness and selfishness, competition and cooperation, and collaboration and deception. Drawing examples from the way we behave in day-to-day situations, Games Indian Play tries to show how in the long run each one of us—whether businessmen, politicians, bureaucrats, or just plain us—stand to profit more if we were to assume a little self-regulation, give fairness a chance and strive to cooperate and collaborate a little more even if self-interest were to be our main driving force.

  ‘Read this absorbing book to figure out why we are “like that only”’ — Debashis Basu in Money Life

  ‘What makes Raghunathan’s approach unusual is that his argument isn’t a moral diatribe: He employs game theory…and related concepts such as prisoner’s dilemma, to present his case’ — Knowledge@Wharton

  ‘The book goes a long way in showing us why we are wrong; we should be able to figure out how we can set it right’ — Subhasis Gangopadhyay in Business Standard

  ‘A saddening but delightful book’ — DNA

  PORTFOLIO

  GAMES INDIANS PLAY

  V. RAGHUNATHAN was a professor of finance for nearly two decades, at IIM, Ahmedabad. In 2001 he joined the corporate world as president of ING Vysya Bank. At present he is a member of the top management in the GMR Group, an infrastructure major. Since 1990 he has also been a Visiting Professor at the University of Bocconi, in Milan, where his teaching interest in recent years has been behavioural finance.

  Raghunathan has written over 400 academic papers and popular articles, and five books in the field of finance and investments. He also writes a regular guest column for the Economic Times.

  Raghunathan boasts of what is probably the largest private collection of ancient locks in the country. He has also been a cartoonist briefly with a national daily, played chess at the all-India level and sketched competitively in the year gone by. To relax, he fixes mechanical clocks. He lives in India and can be contacted at [email protected]

  PRAISE FOR THE BOOK

  ‘Raghunathan tackles the peculiarities of Indianness using game theory and behavioural economics. Using everyday examples, he probes the reasons behind our conflicting tendencies.’

  —Deccan Chronicle

  ‘Raghunathan bluntly challenges the reader to stand up to scrutiny… He replays the fine art of unspoken “inetiquette” refined in India’

  —Soumya Sitaraman in Deccan Herald

  ‘An incredibly interesting read’

  —First City

  ‘The book takes the reader through some powerful insights into why we Indians need to introspect…’

  —The Analyst, The ICFAI University Press

  Games Indians Play

  Why We Are the Way We Are

  V. RAGHUNATHAN

  Foreword by N.R. Narayana Murthy

  PENGUIN BOOKS

  Published by the Penguin Group

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  Penguin Books Ltd, Registered Offices: 80 Strand, London WC2R 0RL, England

  First published in Portfolio by Penguin Books India 2006

  This paperback edition published in 2007

  Copyright © V. Raghunathan 2006

  Foreword copyright © N.R. Narayana Murthy 2006

  All rights reserved

  ISBN 978-01-4306-311-7

  This Digital Edition published 2011. e-ISBN: 978-81-8475-002-7

  Digital conversion prepared by DK Digital Media, India.

  The views and opinions expressed in this e-book are the author's own and the facts are as reported by him which have been verified to the extent possible, and the publishers are not in any way liable for the same.

  This e-book is sold subject to the condition that it shall not, by way of trade or otherwise, be lent, resold, hired out, or otherwise circulated without the publisher’s prior written consent in any form of binding or cover other than that in which it is published and without a similar condition including this condition being imposed on the subsequent purchaser and without limiting the rights under copyright reserved above, no part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise), without the prior written permission of both the copyright owner and the above-mentioned publisher of this e-book.

  Contents

  Copyright

  Foreword

  Preface

  Prologue

  Why Are We the Way We Are ?

  On Intelligence and Rationality

  Simple Prisoner’s Dilemma and We the Squealers!

  Iterative Prisoner’s Dilemma and the Gentleman Strategy

  Can Competition Lead to Cooperation ?

  Self-regulation, Fairness and Us

  Are We the World’s Biggest Free Riders ?

  Systemic Chaos

  Veerappan Dilemma : The Poser Answered

  Game Theory and the Gita

  Epilogue

  APPENDIX 1

  APPENDIX 2

  ENDNOTES

  Foreword

  N.R. Narayana Murthy

  Games Indians Play, Dr Raghunathan’s new book, is timely, and is an absorbing, illuminating study of the life and behaviour of Indians in the public sphere. It presents an economist’s view on what it means to be an Indian today. I consider it a pleasure and a privilege to write the foreword for this book.

  India is, now, sixty years as a free country. Yet, today, many of the goals set during the time of India’s independence have not been realized. Our country faces multiple, urgent challenges of poverty, corruption and emerging social crises in health, education and population growth. Twenty six per cent of Indians remain below the poverty line, and 39 per cent of the country is illiterate. Public infrastructure in India remains either weak or non-existent—a large segment of India’s population lacks access to the most basic resources. Over one-third of Indians lack access to clean water or proper sanitation facilities, and 30 per cent of the Indian population remains unconnected by a proper road. Corruption is pervasive in India’s institutions—close to one per cent of the country’s GDP today is lost to bribes alone.

 
In his book, Raghunathan takes a novel perspective on India’s myriad economic and social challenges. He asserts that, while the resources to address India’s problems are available, serious problems persist due to apathy and a ‘lack of public conscience’ among the Indian population. This, he notes, holds true for Indians across all walks of life—be it the political field, the bureaucracy, the business sector or the salaried and working class.

  Raghunathan examines Indian social behaviour through game theory and behavioral economics, and he relies particularly on the work of game theorists such as John von Neumann, Oskar Morgenstern and John Nash. For example, he uses the principle of prisoner’s dilemma to analyse the benefit of selfish versus cooperative strategies among individuals and to discuss the lack of concern among Indians for public infrastructure and facilities. Raghunathan points out that Indians view their fellow citizens—including the authorities—as apathetic (or ‘selfish’) towards public infrastructure, and consequently see maximum benefit in being apathetic as well. The ‘cooperative strategy’ of maintaining infrastructure for good public use becomes increasingly unprofitable, as more and more people are seen as selfish. In such an environment, all people eventually pursue ‘selfish strategies’, and pursue routes that maximize personal gain at the expense of public good. Such an attitude has led, in the long term, to the present situation of public apathy for law and order, the fractured sense of public good and corruption across all sections of Indian society.

  Raghunathan gives us a strong appreciation of how and why Indians have cultivated behaviours that are so destructive to the fabric of the larger community. His book is filled with revealing insights on how our social attitudes impact our ability to address the economic and social challenges that face the country. Raghunathan’s writing is humorous and filled with anecdotes that are both amusing and thought-provoking. For instance, he notes the irony of having to pay a bribe in order to pay land registration fees in India, essentially paying a bribe to give money to the government! However, this has become so commonplace that most Indians no longer think twice about making the payment.

  India, thanks to its emerging economic and demographic advantages, has the opportunity to grow into a developed, prosperous economy over the next two decades. However, to enable growth that is both sustainable and equitable, Indians have to recognize the challenges we face as a society, and address them with courage and a commitment towards reform. A stronger understanding of ourselves and of our social structures is essential to enable this. Games Indians Play is an intelligent, insightful effort in this direction.

  Preface

  My interest in the question ‘Why are we (Indians) the way we are?’ originated in Italy—in the lovely city of Milan, to be precise. The question kept popping up in my mind as I started teaching an elective course on game theory and behavioural economics at SDA Bocconi, in their Master’s in International Economics and Management Programme. While preparing for the course, I went back to a splendid series of articles by Douglas R. Hofstadter in the Scientific American that I had read in the 1980s. In fact it was one of Hofstadter’s wonderfully written essays on prisoner’s dilemma that had first awakened my interest in game theory, which in due course led me to behavioural economics, and later into using this framework to look into the Indianness of us Indians. While I did attain some nodding familiarity with the works of true game theorists such as John von Neumann, John Nash and others, to me they came after Hofstadter. I would forever have remained innocent of their works, or at any rate would not have got as interested in their works as I subsequently did, had it not been for Hofstadter’s easy and highly readable interpretation of game theory.

  Over the years, the prisoner’s dilemma framework helped me understand a wee bit better the characteristics of human rationality, irrationality, egotism, selfishness, antagonism, competition, collaboration and cooperation among us Indians vis-à-vis the rest of the world in countless day-to-day situations. In addition, the works of Daniel Kahneman, Amos Tversky, Richard Thaler and many others who developed the whole new field of behavioural economics in the last twenty-five years or so have also helped me get some degree of understanding of ourselves as a people. I have used the material of many of these illustrious researchers and scientists in preparing a window through which to view our Indianness.

  I am eternally thankful to them all for the insights they have provided me into human behaviour.

  In writing this book, occasionally I have borrowed from a few of my own writings from a monthly guest column that I write for the Economic Times. I thank the ET for their indulgence in allowing me the liberty.

  Krishan Chopra, the highly exacting executive editor of Penguin India, has been the biggest value-adder to this book, with his incisive, aggressive comments on draft after draft. Equally valuable has been the contribution of my copy editor, who helped transform a rather flippantly written manuscript into a book in its present form. She has had a hard job—believe me. Meena, my best friend and also incidentally my wife, has edited the manuscript at every stage and in doing so has helped improve the book substantially. Shweta Parekh, another very dear friend of mine, made some useful and critical suggestions after going through the first draft of the book. I have incorporated many of them. Mr M.P.V. Shenoi—a friend of my late parents, and now mine—gave valuable comments in the early stages of the book; Pramod Nair, my erstwhile executive assistant and my very dear friend as well, was, as ever, extravagantly encouraging with his comments on some of the draft chapters; Samir Barua, my friend of twenty-five years from IIM, Ahmedabad, helped me clarify a problem involving probability theory, while dealing with the ‘Luring Lottery’. Stuthi Shetty, another close friend, gave me her legal advice on a few chapters; and Saee, my former student from IIM, Ahmedabad (1994–96), and now a good friend, made incisive comments on some of my early chapters, which helped me clarify how I wanted the book to progress. Manish Sabharwal, my neighbour and a very good friend—among the best-read persons I know—was the source of the latest books on behavioural economics. But for him my fund of reading would have been substantially poorer. And Sudhir Kamath, my batchmate and pal since our doctoral days, not only gave me encouraging feedback on the initial chapters but also supplied some very apt anecdotes on dilemmas for inclusion in the book. And finally, Mamata Pandya, a great friend of my wife’s, and through her mine as well, did that final reading of the manuscript, and corrected many of those little errors that invariably slip in.

  It’s touching how much good friends do for you, especially in India. I am deeply grateful to them all (with the usual disclaimers with regard to shortcomings of the book!).

  In the book, I have settled for ‘he’, ‘him’ etc. for the third person rather than ‘she’ and ‘her’, though I think I am reasonably gender sensitive. I find the use of the feminine form somewhat contrived; the use of he/she or him/her rather stretched; and the use of plural, as in ‘they’ and ‘their’, not always user-friendly.

  My father-in-law, Dr A. Nagarathnam, an outstanding scientist and scholar, has always helped me with editing the manuscripts of my books. With some 300 scientific papers to his credit, his value addition to a manuscript was always significant. This time too, he was enthusiastically looking forward to working on my manuscript. In fact, so was I. Unfortunately, around February 2005, he met with an accident, resulting in a head injury, and passed away towards the end of 2005, after having been completely bedridden for nearly nine months, with only occasional snatches of consciousness. It would forever be my regret not to have had his comments on the book. My hunch is he, with his British English, may not have quite approved of my somewhat relaxed language. I know the book has lost much for lack of the benefit of his inputs.

  Appa, I dedicate this book to you.

  Prologue

  Notorious forest brigand Veerappan was shot dead by Tamil Nadu Special Task Force late tonight in the Hogenekal forest area in Dharmapuri district.

 
Tribune, 18 October 2004

  THE VEERAPPAN DILEMMA

  I think Veerappan was a big-time robbing-hood even by Indian standards, where such hoods abound at all times, in all forms and at all places. Quite probably he is listed in the Limca Book of Records for carrying the highest-ever prize (Rs 50 crore) on his head announced by a single state government of India. For most of us, that is serious money. So I wasn’t surprised to read in the Times of India one morning (20 November 2004) that ‘cooks, cleaners, dhobis, current STF [special task force] men, Chamrajnagar District Police, Mysore District Police . . . from those who served the STF many years ago in minor capacities to policemen who served in the districts on fringe [sic] of what was once called Veerappan country’ and the pussy cats, poodles and parrots of all those mentioned have all been staking claim to the award.

  As I write this prologue, the number of claimants is already close to 850 and still climbing. And why not, with such booty available for the asking?

  The news item has inspired me to present you a poser. I have adapted it from Douglas Hofstadter’s treatment of ‘Luring Lottery’. 1

  Suppose the Karnataka chief minister is in a quandary about whom to give or not give the award, given the stampede under way to claim it. He is afraid that if he does not take a decision one way or the other, it may not be long before half the country stakes claim for its role in leading Veerappan to his death. The chief minister has one more problem. While he has announced the reward of Rs 50 crore in a moment of bravado, vying with the Tamil Nadu chief minister, he is not sure his state coffer has that much loose change. With all this in mind, and the help of his clever additional chief secretary, he has devised a special scheme to give away the award. He has decided that the entire sum must go to a single individual.