The Prime Minister, Dr Manmohan Singh, when he was teaching at the Delhi School of Economics, was a preferred tutor. Reason: he would never give you a C on your tutorials. Instead, he would make you re-do it till he could give you at least a B.
That fundamental kindness would often be mistaken for weakness by some students. Something like that seems to be happening now. He is being cruelly misjudged by persons who have no idea of the difficult choices prime ministers have to make.
So, as a form of guru-dakshina, here is the perfect suggestion for him — he should ask Dr Kaushik Basu, the Chief Economic Advisor, to give him a short lecture on the Gibbard-Satterthwaite theorem.
It will not provide a one-to-one mapping but it will be close enough to suit the Prime Minister's purpose. At the very least, it will show him a way out of his present dilemmas.
The democratic dilemma
The theorem says that even in the most democratic systems, in the end, someone has to impose a decision that is basically dictatorial.
If not, no good outcomes can ever be reached because with tactical voting, people can vote in ways that do not reflect their true preferences.
Even though the Gibbard–Satterthwaite theorem is in reference to voting for candidates in elections, it should hold largely true for policy choices also.
Indeed, because the RBI unconsciously follows this theorem, it has been largely successful with monetary policy.
The Governor listens to everyone and then decides. What the price of money will be is his decision alone, and he imposes it. One of the most appealing things about the theorem is that it actually forbids certain candidates from winning. The counterpart for policy-making would be that some policies are never to be considered.
But, in real life, this can never be so. Since you can't really forbid certain policies, or be fully dictatorial in the ‘my way or highway' manner, we end up in situations that suit no one at all or, at best, suit very few.
Kenneth Arrow, the 1972 Nobel winning economist had talked of the ‘non-dictatorship rule'. This rule says that social choices cannot be a single person's preferences. Everyone's preferences have to be considered.
Needed, a dictator
This sounds fine, except that these preferences then have to ordered in ascending or descending order.
But even after that is done, the problem doesn't go away: someone has to make the final choice but that final choice is invariably dictatorial!
There are several other theorems in the theory of collective decision-making that lead to unhappy outcomes which leave everyone unhappy.
Together, they constitute one of the biggest ironies of all decisions taken according to democratic rules.
This irony is precisely what is happening to the PM. If it is of any comfort, it happens to all Prime Ministers and Presidents, everywhere. It is the nature of the job.
How well or badly incumbents tackle it depends on their personalities.
But however gentle and consensus-seeking that may be, the final answer perhaps lies in adopting the least onerous of the Gibbard–Satterthwaite rules — namely, that someone must act like a dictator with a strong will.
Or, to put it differently, Dr Singh needs to say what a famous editor said at one editorial meeting. Someone asked him to define the pecking order and he said: “Oh, that's simple. There's me and there are the rest of you.”
Dr Singh's problem, of course, is that both Sonia Gandhi and Rahul Gandhi are saying the same thing. But that is only where politics is concerned. They don't interfere in economic decisions. That privilege is left to some corporates.