Decision Making as Output and Bounded Rationality

  The classical economics theories proceed on the assumption of rational agents. Rationality implies the economic agents undertake actions or exercise choices based on the cost-benefit analysis they undertake. The assumption further posits that there exists no information asymmetry and thus the agent is aware of all the costs and benefits associated with the choice he or she has exercised. The behavioral school contested the decision stating the decisions in practice are often irrational. Implied there is a continuous departure from rationality. Rationality in the views of the behavioral school is more an exception to the norm rather a rule. The past posts have discussed the limitations of this view by the behavioral school. Economics has often posited rationality in the context in which the choices are exercised rather than theoretical abstract view of rational action. Rational action in theory seems to be grounded in zero restraint situation yet in practice, there are numerous restra

Jaishankar's Sermons

There was an India Ideas Summit organized by US India Business Council which saw addresses by the top signatories including PM Modi and EAM Jaishankar.  The theme was ‘Preparing for the Better Future’ and thus the address was expected to revolve around the same. The state of the pandemic originating in Wuhan along with the border tensions with China seemed an appropriate setting for India to woo US and make its shift to the US camp more explicit. As the world confronts a possible long Cold War between US and China, India has very little opportunity to pretend neutrality. As a matter of fact, India will be in the frontline of the conflict and possibly along with Japan or Korea may be facing the first line of attack from China. The recent manoeuvres from China along the Ladakh border are intimidation tactics to warn India of keeping itself away from the US camp.

 

The Prime Minister talked about India and US being natural partners and invited the US MNCs to invest in India. India is wooing hard to make companies shift their operations from China to India as tensions rise between US and China. The US, Japan, Australia and some European governments are encouraging their firms to shift their operations from China to other countries. As leading officials have indicated, India could be an option for the firms since they believe it to be natural alliance and trustworthy partner. India finds itself an opportunity which might not come again if wasted. Incidentally, the PM quipped he was giving a free advice on investment and the advice was this was the right time to invest in India.

 

Before the PM spoke, there was an address by the External Affairs Minister S.Jaishankar. He too touched upon various dimensions. Yet, one point has caught the attention of many an analyst. He quipped that US needs to prepare itself for multipolar world and needs to go beyond the alliances. He elucidated that while trade is bread and butter in any bilateral relationship, India and the US need to go beyond the complaints that have dominated their trade equations and resolve them and set higher goals in their partnership. He contended that US needed to understand much better the post-Cold War era and seek more plurilateral arrangements and implied in his assertions were it was time to US to go beyond its traditional alliances.

 

The address of the EAM particularly in reference to above seems to have perplexed many. There are many analysts and pretender analysts who believe the time has come for India and US to become military allies and enter into a partnership something akin of the Indo Soviet treaty of 1970 in the run up to the Bangladesh War. They feel that the EAM was unnecessarily moralising to the US. The moral lectures, in the opinion of the few was akin to the ghosts of NAM hanging around the Lutyen’s corridor. To them, the sermons could have been postponed for a future date given the current priority being pushing China backwards as it seeks to engage in creeping acquisition in the India’s northern borders. Yet it is too simplistic a reading of the statement. For all the uninitiated, it must be stated the S. Jaishankar was probably one of the most pro-US officers in the Indian Foreign Service over the years despite his father being vocally against the US especially its stand on nuclear issues. Secondly, there was opposition to Jaishankar being appointed as EAM since he was found to be too pro-US by the RSS and others. Thus, it would be wrong reading to attribute NAM motives to his assertion given he himself said that NAM was something for a particular era and cannot be replicated each time.

 

This brings to the fore on what perhaps made the EAM utter those comments. Were they unnecessary, provocative and could they have been avoided? The wordings might be subject to debate, yet little fault can be found in the broad assertion. The US has been used to certain nature and structure of alliance formation and sustenance. In the immediate aftermath of the Second World War, the action shifted to the ideological Cold War between US and Soviet Union with Europe as the playground. In the scheme of things in NATO, it was the US which was the dominant and net security provider for the member countries. In return, the member countries were expected to provide their forces for missions undertaken by US in different parts of the world in its bid to halt the conquest of Communism. This was evident in Vietnam though it was predominantly US led war. It however gained prominence in the Gulf War as the multinational forces sought to liberate Kuwait and was again witnessed both in Afghanistan in 2001 and Iraq 2003. The US policy calculus is perhaps thinking on a similar lines with reference to China. Partly, the current aggression with reference to China is due to the elections to be held in November.  To Trump, he needs to find a villain for his constituency and China is a perfect candidate. It is moot to argue whether US will see China in a similar way post elections irrespective of who the winner is. Given Trump’s mercurial nature, it is quite possible, he might seek rapprochement with China in his second term. Of course it must be to the credit of Trump he has been aggressive on China through his first term something of a rarity among the US Presidents in recent times.

 

Therefore, the Foreign Minister must be having this at the back of the mind. Also could be the possibility of US seeking Indian involvement in Afghanistan in exchange for support on China. India would like tread very cautiously on Afghanistan given there are no independent routes to Afghanistan barring one through Pakistan and Iran, both hostile. The Quad might be emerging its own, but perhaps US is looking it as new NATO while India is seeking to fashion in a different terms of perhaps equals rather than US being first among equals. There are of course differences in perception in the structure and the shape and hierarchy of the new alliances. The hesitations of US policy makers might be at the back of Jaishankar’s mind. As he pointed out, the US and India can play far greater role in shaping together a new post-COVID world. Yet, behind the scenes, there would be a lot of hard bargaining going on and this was what conceivably behind the apparent sermonizing remark by the EAM. Therefore, on the whole, there is nothing to get excited or angered by his speech.


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