Economies of virtue

Economists often prescribe economic incentives for achieving desired results. Want to boost exports? Give incentives to exporters. Want to develop backward regions? Give tax concess-ions for setting up industry there. Want to reduce smuggling? Lower tariffs and custom duties. So, to promote conscientious behaviour, economists would prescribe devising appropriate incentives; altering prices in such a way that it is in one’s self-interest to behave conscientiously. To encourage parents to send their children to schools, economists prescribe free mid-day meal schemes. To check population, they prescribe incentives for a small family. To encourage charity, tax deductions are given. Did you hear that the Himachal Pradesh government is giving fiscal benefits to people who look after their elderly parents!

Economic incentives are indeed powerful ways of achieving many a desired result. But these incentives are no substitute for inducing behaviour invoked by a clear conscience. Educating one’s child, doing charity, looking after one’s elderly parents or adhering to a small family norm need to be done on their own merit. Economic incentives are a poor way of encouraging such activities. Use of incentive will instead encourage perverse behaviour where charity is done or elderly parents are looked after only for getting tax benefits.

A person is honest, kind, courteous and decent because he or she believes in these virtues. Possessing these virtues or upholding these values are for their own merit, irrespective of what others do, and of any monetary considerations. On cost-benefit scale, this may prove costly. Nevertheless, people still possess or uphold these out of conviction.

Some people are honest because honesty had been ingrained in them since childhood. Honesty for them is a habit. But for most others behaving dishonestly pricks their conscience, agitates their mind. Interpreted narrowly, this goes well with the logic advanced by economists. But this doesn’t alter the fact that such people are guided by their conscience.How can one provide genuine help to a poor person without turning him into a beggar or to an unemployed without killing his incentive for a job search? How can you devise a scheme for the needy that will not make the non-needy masquerade as the needy? How can you prevent waste by a person who can afford it? Economic incentives are a poor way of checking such perverse behaviour. Similarly, these incentives are a poor way of encouraging desirable behaviour. No amount of economic incentive can invoke the behaviour that can be invoked by (re)awakening a person’s conscience.

Can conscientious behaviour be induced? In principle, yes. By making people understand the intrinsic worth of pursuing such behaviour. But people who are capable of inducing it are those who are themselves the practitioners of it. In this age of markets and incentives, both the practice and its practitioners are regrettably missing.