Monday, Feb 06, 2023

It’s not the market

A political or economic crisis often unhinges many entrenched assumptions. The current economic crisis, for instance...

A political or economic crisis often unhinges many entrenched assumptions. The current economic crisis, for instance, has reopened the debate about the relationship between states and markets in unprecedented ways. It is often equally important, in responding to a crisis, to ensure that one dogma is simply not replaced by another dogma. Both markets and states are subject to failures. The more probing question is under what conditions each is likely to succeed or fail. This is a complex question. But in recent discussions there is a striking absence of two issues that are enabling conditions for both markets and states to succeed. Both of these issues were very much part of the consciousness of all great theorists of modernisation from Adam Smith to Durkheim; and they were very much part of public discussion in the work of, say, Radhakamal Mukherjee. These two issues are as follows.

The first issue is the role of the professions (law, medicine, accountancy, management, academics etc) in providing the enabling conditions for a society to flourish. Beyond the state and market, these professional groups, with their own norms and identities, are absolutely central to the functioning of any modern society. It could be argued without too much exaggeration that these groups are the principal source of a functional and institutionalised morality in modern societies. These groups are not defined by self-sacrifice, far from it. Rather, they are in principle defined by certain activities. They participate in civic life and contribute to society, through their profession. Well-functioning groups will be driven by a respect for the norms and standards of the activity. So, to simplify, lawyers will act as “officers of the court”, doctors will be in business of saving lives, accountants exposing fraud, etc. The existence of professional communities in which norms and standards are maintained are crucial in two respects: both states and markets rely on them, and it is largely professional communities that can create compliance to norms.

The biggest crisis we may be facing is not that of the state or market, but in the idea of professionalism. At a mundane level, the Enron debacle in the US was traced to the perfidy of accountants; and when the full history of the current crisis is written, the conflicts of interest of academics and other “professionals” will play a prominent part. But in India, arguably, the crisis of the professions is the dirty open secret we never discuss. There are good individual lawyers and law firms, but the legal profession is in a serious state of professional breakdown. This is not just manifest by high profile cases like R.K. Anand. This breakdown is often manifest in daily practice in big and small ways; the bar association is hardly the purveyor of professional standards.

Take one small example. During extensive interviews about the legal profession I was struck by the fact that only a miniscule of prominent lawyers thought it was their obligation to give their clients “objective” legal advice. Of course lawyers should defend clients if asked to, but in the first instance, particularly in civil matters, clients ought to be given an objective assessment of the plausibility of their claims. My colleague Jishnu Das, along with Jeff Hammer, produced one of the most rigorous studies of the quality of medical advice rendered by doctors in Delhi. While some were dedicated and excellent, the results were startling: the quality of advice, particularly where poor patients are likely to end up, was poor. Similarly, there are huge conflict of interest issues in prescribing certain courses of treatment and so forth. One could go on in other professions as well. The extent of malaise within and across professions varies, but to deny it exists would be setting oneself up for a serious disaster.

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The cause of this crisis of the professions is complex: it has to do with everything from the type of education to the internal political economy of these professions. But as we focus on states and markets, let us not forget that society is held together by and depends upon this whole plethora of intermediate professional groups, and their state of disrepair will subvert any aspirations we have for the state and the market.

The second issue pertains to the professions, but also more generally to the crisis in government. It is a commonsense proposition that incentives matter to people. And much of the discussion of institutional reform, whether of bureaucracies or professions, now has a simplistic mantra: get incentives right. Indeed institutions are pretty much now reduced to incentives. But, as Adam Smith knew, there is something paradoxical about the idea that we can create integrity only by incentives. By definition, an individual who responds only (and I repeat only) to incentives, lacks integrity, because their commitments to ends and norms are entirely externally driven; it is as if they can be honest only when they are paid for it.

Societies cannot be held together only by coercion (state) or money (markets). Something more is required. In a broader sense, it requires internalisation of norms and values that set limits on what can be bought and sold. It requires the thought that not everything is merely instrumental. But in a more narrow sense, the idea of a professional identity was precisely the mechanism by which the gaps between norms and incentives could be filled. Unless professionals have a sense that the norms of their activity ought to have some presumptive claims on what professionals may or may not do, no amount of incentives will work. Again, paradoxically, market societies need an even stronger idea that our professional norms are not something that can be always sacrificed to calculations of interest. But if a society sends signals that only incentives matter, it will undermine its own foundations.


Many studies have argued that clarity over the purpose of one’s profession, and a sense that society values that profession, is far more promoting of integrity than merely incentives. One of the crises the bureaucracy is facing is precisely that there is no sense of what it is for: no clear articulation of the ends it is meant to serve, no clear professional identity in the true sense. There is a lot of false lament over how the middle classes lack social and civic commitment. But this task is not well served by exalted calls for self-sacrifice: it will be better served by myriads of doctors and lawyers and accountants and journalists restoring moral clarity and romance to their professional practice.

The writer is president, Centre for Policy Research, Delhi

First published on: 20-10-2008 at 00:57 IST
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