Sunday, April 05, 2009

Slums of India

Thanks to the Oscar winning movie, the slums of India have become a much discussed topic in socials these days. In big cities like Bombay, slums, though illegal encroachments have water supply, electricity and other public goods. The reason for this is that slum-dwellers are a big vote bank, and no power-seeking politician can hope to win an election by over-looking this group. The economists' solution may be simple!! Evict them, or the government should sell the land to the highest bidder. Well!! Neither is an easy solution, and both will lead to much violence. What if they just gave the slum-dwellers titles to the encroached land? That solution is rife with problems as well. It creates perverse incentives for more slums to emerge. Most slum-dwellers, unlike popular opinion, are hard-working people. They just do not have enough resources to pay exorbitant rents in these cities. The problem thus logically goes to city laws that are unable to protect lessor and lessee.  Thus, lessor's ask for a security deposit equivalent to ten months rent, which is not a small sum for low income individuals.  So, to stop slums from developing and growing, cities just need to change their laws. Any other solutions?


Juris Naturalist said...

Good people have to do something voluntarily and without the use of government. Let them buy the land and sell it to the slum-dwellers. Note: there is no giving going on here. The good people have absorbed all of the negative effects.
This must be the solution to so many injustices. The people who care have to be willing to make personal sacrifices to effect change.
Otherwise, it is just one rent-seeking group against another.

Richard said...

Maybe we who favor free markets can start to play the "externalities" card. To us, these slums are obviously the unintended side effect of well-intended government laws. Government law produces all these externalities, which need to be moderated by market action.