The sunk cost fallacy

In economics, a sunk cost is any past cost that has already been paid and cannot be recovered. For example, a business may have invested a million dollars into new hardware. This money is now gone and cannot be recovered, so it shouldn’t figure into the company’s decision-making process. Such business management gems are something the Government of India seems impervious to. After a mismanaged process burning through thousands of crores, the great discovery of a unique identity number for each Indian remains a pipe dream. 

The main uses of the unique ID, also called Aadhaar, were supposed to be two: biometric data of bonafide Indian citizens (that could have been used by a number of government agencies) and possibility of direct cash transfers. The Aadhaar essentially has become a badly produced photo-ID card with strange QR codes and extremely personal biometric data which has absolutely no extra value than a driving license or passport. It’s not even as useful as a ration card or a voter ID card because they have specific purposes. The Standing Committee on Finance, chaired by a Bharatiya Janata Party MP, Yashwant Sinha, mentioned explicitly that in view of the large number of concerns surrounding the UID scheme, particularly concerning the manifold contradictions and ambiguities with regards to its implementation, it was perhaps best to review the UID scheme and consider it anew. 

The critics of the Aadhaar card have stridently maintained that the agency engaged in the process, the Unique Identification Authority of India (UIDAI), is tacitly violating people’s right to privacy. Given that the Indian state is not very big on the right to privacy this is not particularly surprising. This despite the fact that the Supreme Court has repeatedly asserted that in order to treat a right as a fundamental right, it is not necessary that it should be expressly stated in the constitution as a Fundamental Right.

Political, social, and economic changes in the country entail the recognition of new rights. The law in its eternal evolving state of youth grows to meet the demands of society. The right to privacy is one such right which has come to its existence after widening up the dimensions of Article 21. The Constitution in specific doesn’t grant any right to privacy as such. However, such a right has been culled by the Supreme Court from Article 21 and several other provisions of the Constitution read with the Directive Principles of State Policy. Notwithstanding the obvious violations of Article 21 created by the Aadhaar card, there are other pertinent concerns surrounding the project. 

According to the National Institute of Public Finance and Policy a full-fledged cost-benefit analysis of Aadhaar is difficult for two reasons: first, many gains from Aadhaar are difficult to quantify because they are intangible; and second, even if in the case of linkages with regards to specific schemes there may be many tangible benefits, the information available on those schemes does not permit a precise quantification of those benefits. So for a project which was intended to be a panacea for all ills, the Aadhaar card has shrunk and become one of India’s several failed policy revolutions. It’s perplexing as to why the present ruling dispensation has chosen to continue a scheme which for all practical purposes is going nowhere. Is the UIDAI project a classic case of the sunk cost fallacy playing out in real time, right before our eyes?