23 May, 2015

The "per capita" fallacy

Most policy-making models are based on estimating demand and production in terms of "per capita" units, where an individual is the unit of resource consumption or production.

This foundation is used to make major strategic decisions, like say how much water will a town or city use, how much garbage will it generate, and so on.

However, it is easy to see that in reality, the unit of consumption is rarely the individual. Consumption and production are primarily driven by systems of individuals like households, companies and other forms of organizations. Let me use the generic term "organization" to refer to all of these.

In a small place that is (say) primarily driven by agriculture managed by families, the relationship between the number of individuals and the number of families (which are the elements that drive major consumption) remain fairly static.

However, as the population grows, the relationship between individuals and organizations is not static. Individual affiliation to organizations are fluid, and the proclivity of new organizations being formed are also high.

A large city will attract the formation of more restaurants, clubs, theaters, malls, etc. and affiliation to individuals to these organizations are not tightly defined as with families.

So, for a city of N people, how many different organizations can be formed? This is like asking, how many subsets can be formed from a set of N elements. This comes to 2N-N-1 or asymptotically, this is called as "exponential growth".  The number of ways in which people organize themselves grows much more rapidly as the population keeps increasing.

To make matters worse, the presence of organizations sends out a message that there are opportunities for careers and livelihood. This ends up attracting more people to the city and increasing the N even further, making the consumption accelerate even more.

And ironically, when we say that a city gets enough rainfall to cater to per-capita water needs and promote "eco-friendly" measures like Rain Water Harvesting (RWH), it sends out a false sense of security, as though, the water problem is solved. Thus reducing the reluctance for people to enter or dwell in the city.

Note that I am not saying that RWH is bad. Nor am I saying that we should not invest in RWH. But the way it is portrayed as a solution to water related woes, is only going to make matters worse. It is no systemic solution. It is more in the nature of a pain balm, rather than a life saving drug.

The same thing is true of garbage production. By trying to reduce garbage production by individuals and families, we are barking up the wrong tree. The amount of garbage that is produced is exponentially proportional to the number of people in the city.

There is a dire need to invest in large mechanized facilities to handle the garbage production.

And no, the presence of mechanized facilities will not drive more consumption -- any more than having a functioning kidney will make us eat more.

More consumption is driven by the presence of opportunities, or more specifically, the relative presence of opportunities in a place compared to other places. To prevent overcrowding of a city, the way to go about is to promote alternate growth centers.

Development in pairs, which I'd written about earlier, might be an interesting strategy to consider. 

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