A few weeks ago, I wrote in these pages about the tragic costs of open defecation in India (“Let the toilet revolution begin”, July 28). More than 50 per cent of households in India defecate in the open, without using a toilet or latrine. As many as 60 per cent of people worldwide who defecate in the open live in India. Germs from faeces significantly cost India health, human capital and economic productivity.
So, ending open defecation is a policy priority. That means we have to ask about the incentives of the people who implement India’s sanitation policy. Does sanitation policy give the village chairmen, block development officers and district staff throughout rural India incentives to end open defecation? Or does it give them incentives to do something else?
Newspaper reports and government documents often focus on the number of latrines that have and have not been constructed. But latrine construction – all by itself – does not make children healthier, taller or smarter. That requires latrine use, the real goal of sanitation policy.
An old saying claims, “You get what you pay for.” Unfortunately, this isn’t always true: sometimes sellers can pass off bad apples as good. So, perhaps the saying needs an update from economic theory: “You get what people think you will pay them for.” My revised version is not as pithy, but it sums up a key lesson of economics: people respond to incentives.
The Nirmal Bharat Abhiyan – the new version of India’s rural sanitation policy – is admirable for its commitment to investing in rural sanitation. Yet, this investment primarily takes the form of an increase in the construction subsidy to about Rs 10,000 a latrine. This will almost surely result in more construction, but it will also attract greedy attention to the programme — and, by itself, it does little to ensure that constructed latrines will be used.
An alternative is possible, based on a far-sighted programme that the government already implements: the Nirmal Gram Puraskar. This “clean village prize” offers a cash incentive to villages that become open defecation-free. But this incentive – around Rs 1 lakh for an average village – can no longer compete with the new, larger subsidy. It is far easier to earn Rs 1 lakh by constructing 10 latrines than by eliminating open defecation. A different approach to rural sanitation could improve local governments’ incentives by combining the investment of the new Nirmal Bharat Abhiyan with the ex post reward of the Nirmal Gram Puraskar.
Instead of a subsidy for every latrine constructed, villages could be offered a series of large block grants. The first grant, available to any village that signs up to receive it, would be an unconditional lump sum of cash. Although this grant is intended to meet the costs of latrine construction and of motivating latrine use, the village would be free to use the money however it wished.
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The next grant – and any subsequent grants – would be conditional on achieving explicit goals. For example, if in a surprise inspection a year or two later, everybody in the village were disposing of faeces safely, the village would receive another block grant. There are important details to work out about these evaluations – not least how to ensure that monitors have an incentive to tell the truth – but this is possible, and good survey organisations do it all the time.
This approach has four advantages over subsidies for construction. First, it is what economists call “incentive compatible”. This means that local officials and bureaucrats would have a clear monetary incentive to achieve the important goal of latrine use, and ending open defecation.
Second, the lump sum block disbursement eliminates the perverse incentives caused by subsidies per latrine. If local leaders are no longer paid for every reported latrine, there is less motivation to falsify administrative records. Corrupt local leaders could steal the initial block grant quietly and turn their destructive attention elsewhere; local governments that don’t want to bother with latrine construction should be happy with that.
Third, giving villages the freedom to decide how to spend their initial block grant is a recipe for learning and experimentation. Different places would take different approaches, and everybody would benefit from the knowledge that results.
Fourth, after the initial unconditional block grant, the government and taxpayers would have the satisfaction of knowing they are getting something for their money. Further spending would be conditional on further results. Of course, much of the initial grant would be wasted, but this is already true of most programmes in many countries.
Such a programme would require special commitment and exceptional statesmanship from political leaders. It is urgent to invest in sanitation policy that can achieve results for India’s children and future workers. The Indian government cannot end open defecation until it offers its thousands of rural implementers an incentive to do so.
The writer is in the economics department of Princeton University