THE State Bank of Pakistan underwent major changes in the early 2000s. It became independent, went through a major reformation, gained in stature and prestige, managed to get some really good researchers and bankers on its payroll and started performing its functions well. But over time, the bank has gone back, almost, to the kind of institution it was previously. Most good people have left, institutional independence, and with it integrity has been surrendered, Governors have been forced to resign, and new governors have been appointed on the basis of loyalty it seems, instead of competence.

The tale of regression to the mean, where in Pakistan, for most institutions, the mean, or the average, represents a fairly incompetent, corrupt and nepotism-ridden structure with plenty of built-in slack, seems to be an almost inevitable outcome. Sometimes institutions are reformed, and initially they perform well. But then, over time, they regress to this mean. At other times, new institutions are built and whatever their initial trajectory, over time they too regress. There are plenty of institutions and organisations that tell this sad tale. There are few, if any, that defy it and prove to be the exception.

A new university gets created around a small core of very competent, highly motivated and committed faculty and administrative staff. Over the next few years, it sets a high standard in its field. This results in various kinds of pressures on the institution. The pressure to expand comes from parents who want quality education for their children, from trustees and board members who want the university to play a larger role in national life, and from prospective faculty and staff who want to join a good institution. As the pressure mounts, the university responds by expanding.

Short of a major shake-up, can we ensure the presence of quality-assurance mechanisms in institutions?

Compromises start in the hiring of faculty and staff, in teaching and research standards and, often, in admissions. As expansion proceeds, the quality suffers. With expansion, the initially set-up culture of the place starts getting diluted. At some point, with more people, the balance of ‘power’ shifts to newcomers, and the older core becomes less effective. Regression to the mean, that started with compromises, is almost complete. As power shifts, people start looking for outside options. Who are the first to leave? Those who can, ie those who have the ability and the reputation to be able to find better options. Who are the ones who stay? Those who cannot find comparable or better opportunities. Over time, those who are left behind assume positions of power and decision-making. The shift is then complete. The next lot of hiring is done by the new set and the regression story is complete.

NUST, the Ghulam Ishaq Khan Institute, Quaid-e-Azam University, and even various departments within these and other institutions seem to have gone through such cycles. The same has happened in some universities in the private sector. But this is not just a phenomenon that happens in universities. Nor is it one that is restricted to institutions and organisations in the public sector.

The Daewoo bus service introduced a new standard in intercity travel in Pakistan. Over time, we saw its service slip: the buses got older, the interiors got grimier, uniforms got shabby and courtesy levels changed. Other companies entered the industry and closed the gap too, but, to an extent, Daewoo also let its standards and quality slip.

In banking, at one point, our service standards were pretty poor. The entry of foreign banks, with different cultures, created a dual system and a good competitive environment. Over time, the gap in service quality between local and foreign banks started to narrow. Today, there is little differentiation left and all banks, more or less, have the same quality of service. And it is not a very high quality of service.

Can an institution resist regression to the mean? This is a harder problem to think through. People usually give the example of the Motorway Police as an institution that has been able to resist pressures and that enjoys a good reputation. Though some quality slippage has occurred with the Motorway Police as well — one sees too many cars speeding, everybody driving on high beam, too many government cars being allowed to go too fast, and some deterioration in courtesy standards — clearly the regression is not to the mean even today. It might well be the relative isolation of the Motorway Police from the police department in general and from the political and social pressures that local (geographically located) police personnel have to contend with, that have helped in keeping the Motorway Police away from complete regression. It will be interesting to see how the Motorway Police progress as the motorway network is expanded.

If isolation is not possible, and it is not for most institutions and organisations working in a society, are there other ways of ensuring resistance? Deep shake-ups and mission-renewal exercises seem to provide another avenue. In some cases of renewal, institutions underwent very significant shake-ups to ensure a return to higher standards. This seems to have happened at the State Bank when it underwent a large change in the early 2000s. But this is not an easy thing to achieve. As bureaucracies, within institutions, develop and people get more entrenched, shaking up an organisation becomes harder. It requires a lot more political capital and it is a high-risk strategy for those arguing for change: they can easily lose their positions if they are unsuccessful.

Short of major shake-ups, are there ways of entrenching quality-assurance mechanisms in service-providing institutions and organisations that automatically ensure quality maintenance? I have not seen many in Pakistan. Most games, in the quality and standards area offer multiple equilibria. There seems to be a strong tendency in Pakistan to get stuck in low-level equilibria. The movement from the higher to lower level also seems common. But what is the dynamics of moving to high-level equilibria and staying there?

The writer is a senior research fellow at the Institute of Development and Economic Alternatives and an associate professor of economics at Lums, Lahore.

Published in Dawn, January 1st, 2016