« The growth of European inequality | Main | Ernst Mayr »
Was the Indian caste system efficient?
A new paper looks at some of the efficiency properties of castes:
The caste system in India has been dated to approximately 1000 B.C. and still affects the lives of a billion people in South Asia. The persistence of this system of social stratification for 3000 years of changing economic and social environments is puzzling. This paper formalizes a model of the caste system to better understand the institution and the reasons for its persistence. It argues that the caste system provided a tool for contract enforcement and facilitated trade in services, giving an economic reason for its persistence. A caste is modeled as an information-sharing institution, which enforces collective action. Trade is modeled as a version of the one-sided prisoner’s dilemma game, where the consumer has an opportunity to default. Consumers who default on a member of a caste are punished by denying them services produced in the caste. Various features of the caste system like occupational specialization by caste, a purity scale, and a hierarchy of castes are shown to be equilibrium outcomes that improve the efficiency of contract enforcement. The implications of the model are tested empirically using unique census data from Cochin (1875), Tirunelveli (1823) and Mysore (1941).
In other words, other caste members enforce norms on you and if you don't follow them you are kicked out and you cannot easily join another caste. Sounds like my idea of fun. I have a few points:
1. No way should this paper spend so much time on a formal model.
2. The tests proffered on p.36 are related only tangentially to the paper's main propositions.
3. When it comes to normative issues, the author can do no better than to write: "This should not be interpreted as saying that the case system was free of inefficiencies." And that comes only on p.46. Ha!
4. The paper commits the fallacies of excess functionalism.
5. Virtually any destructive institution which keeps economic transactions on a smaller scale may make contract enforcement "easier" in some regards.
6. This is nonetheless interesting work, and many more people should do research on this and related topics. But in terms of emphasis this paper is way off base.
The pointer is from New Economist blog, which offers related links. Readers, are any of you willing to defend the caste system, if only in part, on economic grounds?
Posted by Tyler Cowen on October 14, 2007 at 06:48 AM in History | Permalink
Comments
I'm not, but Marginal Revolution is full of commenters who approve of inequality. Their economic justification is that it encourages people to work harder. They'll also say that low caste people shouldn't be so concerned about being low status and what others think about them and that they should instead work on trying to make peace with themselves.
Posted by: Dirk at Oct 14, 2007 7:55:17 AM
I view the Indian caste system in part as a form of labour specialziation esp, when new trades like blacksmithery, shloka recitals, street cleaning and business were difficult to learn in absence of today's modern day equivalent of universities and schools.
The deeper question is why did it persist for so long? My guess is that inspite of the maly ills of the cast system it performed as a vital social safety net for fellow caste memebers at a time when there very few ways to mitigate huge supply shocks (like floods, disease,etc) which in the short run lowered the supply of food.
I think the author is onto something with contract enforcement and the more I think about it the more plausible it sounds. The one doubt I have is- if the contract enforcment system worked, why only four castes(why not more, or less). Still this leaves open the question that even though caste was important for contract enforcement who was the intermediary for inter-caste transactions and how has their role changed? My guess is that it was the princely class which co-ordinated trade between castes (warrior class supplying protection in liue of food) and extracted enormous rents for maintaining a dispute resolution mechanism and to provide some public goods. Today those rents are called taxes and the dispute resolution mechanisms as the goverment and it's various arms.
What brought about/will bring about the demise of the caste system? Easier to specialize, easier to be anonymous in todays' big cities, standardization of languages and common customs.
I have a bad feeling that the Indian caste system might support Greg Clark's hypothesis. I mean I don't want to be a racist pig and all that but lower caste people in India are represented disproportionately in below -median IQ scores. Segregation of castes along personal discount rates and IQ might be a good reason as well.
To be sure, the caste system is pretty alive and well today as well. We just know it as class and is more likely to be determined by ones educational credentials and family background in today's world.
Posted by: sa at Oct 14, 2007 8:02:53 AM
Is there a difference between class and caste? Only one of degree. Humans naturally self-segregate. It's equality that is unnatural.
Admittedly general thoughts that don't address the contract question.
Posted by: ricpic at Oct 14, 2007 9:36:28 AM
Tyler,
Re: #1 and #2, isn't this just regular, risk-averse job market behavior? The 80s might be over but formalism still receives a sizable premium in the job market.
Posted by: Bob at Oct 14, 2007 10:06:18 AM
Suppose people take reincarnation seriously, and believe that prosocial behavior in one life leads to being born into a higher social ranking in the next life. In that case, a caste system with low levels of social mobility raises the marginal rewards for good behavior in this life. The greater the caste stratification, the more people will try to make long-term social contributions.
Posted by: Chad at Oct 14, 2007 10:17:25 AM
There is a difference between class and caste. You are born into a caste and stay in that caste for the rest of your life. You are born into a class but through education and hard work you can leapfrog and become upper/middle-class.
The caste system is very much in force today in India - even urban India. It is tabu - though few want it to be abolished.
I'm sure it has been efficient - in the past - back when India wasn't united and it was all "tribal". I'm sure it has stabilised the communities and enforced peaceful coexistence. With no institutions for education the son becomes what the father was etc. Women were predetermined to run the household.
However inefficiences has been allowed into the system - such as keeping people out of the system (untouchables/dalits). And disregarding the possibilities of mobility between castes - thus not encouraging education and hard labour. Keeping the women from entering the workforce and being educated. Not allowing free marriage - again removing incentive to work hard to attract good partner. The system is based on fear - if you violate a rule you lose your friends, family and even parents.
So the question is can you run a country where:
15% of the population is being discriminated - prevented from getting education and no social/economic mobility is possible? (I would look at birthrates and see if this uneducated/discriminated part of population is gonna out grow the general one)
Mobility is limited
You can go to school and if you have the right surname you can become a lawyer (even though you are not so clever) - while the other kid that is clever can only become a carpenter.
Women are discouraged from education and strongly encouraged to become housewifes. Economic loss from lack of their labor in the workforce. And remember they are not needed at home as they have maids. As they say - we don't have a dishwasher.. it's cheaper to have a maid..
Your marriage is predetermined.
You are not free to choose your partner in life. thus your education and work is less important than your surname. Even if you are not getting an arranged marriage from your parents - they will have set up very specific criteria that limits your options to very few people.
Fear
Is it sustainable to the happiness of a country's people that a system based on fear is allowed to exist. Especially under the increasing threat of outside concepts as individual freedom, no sectism, women rights, sexual freedom etc. Indians are increasingly being hurt by this fear as they know what they are doing is unethical - however they are forced to commit to these actions out of fear.
Posted by: peter at Oct 14, 2007 10:37:06 AM
I'd like to hear what Greg Clark has to say about this.
Posted by: michael vassar at Oct 14, 2007 10:55:16 AM
Dirk,
lovely strawman.
Posted by: josh at Oct 14, 2007 11:07:12 AM
Efficieny is by all means relative, so is a caste system "efficient," well that depends on your benchmark. Is it efficient compared to a free market, emancipated populace, I think we see the answer is clearly no. India is no where comparable to the United States, Great Britain, France, etc. in terms of its economic development, and that's very likely due to economic choice models.
Is the caste system efficient compared to despotism, with constantly warring factions vying for "king," yeah probably, because as mentioned earlier with the aid of religion helps to limit competition for the top "caste."
As it relative to relative efficiency 10 compared to 1 is a big number, 10 compared to 100 is still small.
Posted by: Joel B. at Oct 14, 2007 11:22:41 AM
Kripa's elegant equations are charming.But as a person who belongs to the "Kshatriya" caste and as one from her study area "Cochin", I must say that caste is becoming a thing of the past due to sweeping changes in social policies and welfare programmes for the backward castes.Caste system among Hindus is an old story atleast in some progressive states.
A hidden caste system operates among the Christians also..for example, the Latin Catholics and converted Christians are considered as lower castes by forward Christians.
Posted by: GVV at Oct 14, 2007 11:49:21 AM
Dirk thinks income inequality and caste are the same or similar phenomena. That informs us on Dirk's qualities as an economist. Maybe he should take lessons with Peter on the subject.
Posted by: Badger at Oct 14, 2007 11:55:18 AM
In what sense can an institution be efficient that denies dalits of high ability the chance to improve their position in society whilst the dim-witted brahmin is allowed to maintain his high social status? Moreover, the issue with caste is not economic efficiency - it is individual personal liberty.
Posted by: RAEM at Oct 14, 2007 12:01:18 PM
Back to basic economics people. Prosperity comes from productivity. Any system that prevents any group of persons from maximizing their personal productivity hurts all of us world wide. How many cures for cancer may have been lost to dalits designation to menial jobs?
I can't believe any economist would waste time exploring the efficiency of anything that is so obviously inefficient on its face.
Posted by: Tom Kelly at Oct 14, 2007 12:12:21 PM
// Segregation of castes along personal discount rates and IQ might be a good reason as well.//
Well, this is bull shit. There is excellent data to prove this, in the state of Tamil Nadu, where reservations are entrenched for over 20 years. The state sets aside 69% of places in state-run institutions of higher education (Medicine, Engineering being the most competitive) for the backward (BC), most backward (MBC), scheduled caste (SC) and scheduled tribe (ST) communities. The remaining 31% is admitted from the open category or pure merit list. Every year for the past 10 years, at least 80% of these places are garnered by students from BC, MBC, SC & ST. Last year it was more than 90%. The upper castes (called OC/other communities) are so under represented that they are now fighting to convert the open category into a reservation for OC.
Posted by: at Oct 14, 2007 12:48:13 PM
I can't believe any economist would waste time exploring the efficiency of anything that is so obviously inefficient on its face.
Chalk it up to the desperate search for counterintuitive results.
Posted by: Kieran at Oct 14, 2007 12:52:31 PM
I like being a Beta. Alpha's work too hard, and Gamma's are stupid.
Posted by: M.D. Fatwa at Oct 14, 2007 1:47:08 PM
I cannot & will not justify the caste system on moral or economic grounds. The only argument in favour of it's perpetuation is that sited for Russian communism or South African aparthied - that dismantling them would (did) create short-term upheaval & conflicts. Nevertheless, all three systems were wrong and deserve(d) to go.
That said, where the infrastructure of a country is so poor, vested interests so powerful, and corruption as rife as it is in India, there is no guarantee that change will be an immediate improvement. That's not an argument for the status-quo, but a cause for caution when implementing much-needed change. The tribulations of Russia's economic liberalisation teaches us that doing the right thing 'too quickly' can be sub-optimal in the wrong circumstances. All the Indian 'affirmative action' legislation I've seen proposed is too one-dimentional & clumsy to make a real difference in the right direction.
There's a lively & fascinating debate in India at the moment about the nature & quality of leadership required in such a vast, disparate & rapidly evolving nation (s.f. the Time of India's 'Lead India' campaign) - I wish them well in their quest to find the answers to the conundrum, and continue to watch with interest.
PS I basically agree with what Tom Kelly says in the post above, but still believe that it's worthwhile to study the efficiency of such a clearly inefficient system. The system (of castes) has survived in the face of economic reality, and it's important to understand why such anomalies persist - there must be an underlying reason.
Posted by: nick at Oct 14, 2007 3:22:52 PM
"I can't believe any economist would waste time exploring the efficiency of anything that is so obviously inefficient on its face.
Chalk it up to the desperate search for counterintuitive results."
and
"The only argument in favour of it's perpetuation ...that dismantling them would (did) create short-term upheaval & conflicts."
What's counterintuitive is that it seems to be a) inefficient and b) persisted for 3000 years. And surely there's been a lot of instances of short (and long) term upheaval and conflicts in Indian history which would've made it possible to scrap the whole thing.
Someone else mentioned Greg Clark. Well, if you're in a Malthusian world where all that matters for standards of living is fertility and mortality, then the caste system is NOT inefficient, or if you'd like the inefficiency doesn't matter (though then why such high population growth?). In the same way that in that type of the world confiscatory kings and monopolies didn't matter for standard of living.
Posted by: notsneaky at Oct 14, 2007 4:03:17 PM
@Joel B: be very careful about making such direct comparisons.. Remember that India has been ruled by foreign powers for hundreds of years.. what has been the economic loss of foreigners leeching on your countrys resources? and who has benefited?
notspeaky: my point is exactly that it have been efficient.. but perhaps it no longer is.. just as arranged marriage has been efficient.. and in fact this is closely related to the caste system.(I do believe it is no longer efficient and perhaps haven't been for at least some hundred years or so..)
Remember that not many hundreds of years ago the "western" world had very similar systems in place (if not worse and more centralised systems)...
If you wonder why the caste system still exist I would look at the indian people being protectionistic about their own culture for many hundreds of years as they were under threat of foreign cultures and religions. thus most indians are quite conservative and sticks to tradition.
Posted by: peter at Oct 14, 2007 5:34:36 PM
Peter,
"What has been the economic loss of foreigners leeching on your country's resources?"
It seems like to me that being the colonizing power requires an enormous amount of economic efficiency to operate properly. That Britain had the efficiency to not only efficiently operate itself but its far-flung colonies indicates its great efficiency. It seems by no means clear that the colonies are not the leeches on the mother country.
Posted by: Joel B. at Oct 14, 2007 6:25:32 PM
Why is it so counterintuitive that inefficient systems can exist for thousands of years? Have people lived in a marketplace of social structures where social structures that don't maximize global efficiency are doomed to collapse due to the nature of the competition? Huh? Exactly.
If you wanted to understand the longevity of the caste system you would have to look at the margins of social systems, see what causes them to change and what allows them to perpetuate themselves.
Posted by: LN at Oct 14, 2007 6:34:14 PM
It seems to me that the paper is much more modest in its aims than indicated in the New Economist Blog. It says in the beginning (see also the conclusion):
"The model of caste system in this paper is more appropriate to pre-colonial India, or more specifically before the introduction of British law courts". But even this is a big assumption. According to Bernard Cohn in "Colonialism and its forms of knowledge", some of the more enlightened British administrators felt that there was system of law operating in India (differently for Hindus and Muslims)and tried to find ancient texts to codify it. Thet recruited twelve pundits in Bengal and slowly identified Manusmriti as one of the texts and later found that many in the Madras area were not even aware of it.
About the British role http://en.wikipedia.org/wiki/Caste says:
""Caste" became an important element of Indian politics after the British imperialists used "caste"-based classifications as the basis of classifying the colonized Indian population, especially the Hindus, in the population censuses of late 19th Century. This became more specific in the 1901 Census, because the Indian population, not being aware of what the Brahmins thought of them, by and large did not understand what was meant by "caste" and gave their occupation, religion, education, etc. as their "caste".[2]. This time the census enumerators insisted on slotting the population into the four varna categories, even if it meant a loose fit. Thus the British succeeded in melding the empirical reality of jatis (communities) with the Brahmin's theoretical construct of varna (categorization of occupations), as "caste"(inherited social status), causing the popular modern perception of Indian society having been "always" divided into the four "hereditary" "caste" groups from "time immemorial"."
I wonder whether it is a bit like water dynasties(http://en.wikipedia.org/wiki/Water_Dynasty)before the British.
I feel that Kripa's article is a very interesting attempt which may apply to some regions before the British rule. There are vigorous discussions on caste matters in Indian blogs and MR is in blogroll of many of these blogs; I am surprised that very few Indians seem to be participating in the discussion and that many interesting papers are coming from USA.
Posted by: gaddeswarup at Oct 14, 2007 6:47:08 PM
Nice. I'm enjoying the mean and mad Tyler.
Posted by: Daniel Klein at Oct 14, 2007 6:58:56 PM
Joel: Think we are straying from the topic at hand.. I was just pointing out that comparing the current economic development of UK with India, and saying that UK has a superior system(for a reason like no caste system) is difficult as UK have derived economic benefits from India for hundreds of years.
If you want to argue a "Nash equilibrium" and that both UK and India were better off by UK ruling India.. well please point to some evidence.. I certainly see a science and technology transfer taking place.. mostly in the direction towards India.. But economically I doubt it..
To the topic of caste.. UK might just have reenforced the existence of the caste system directly and indirectly.. Just as we see UK politicians being very hesitant on criticising India for it's mistreatment of Dalits in the EU parlament..
But I see few possible ways of getting evidence for either claims.. what stands clear is that UK has historically derived economic value from India thus making simple comparisons of the two countries' economic systems and performance very difficult and complex.
Posted by: peter at Oct 14, 2007 7:09:00 PM
Many people covert to budism to exit the cast system.The risk their life doing that, their IQ is not low then
Posted by: at Oct 14, 2007 8:43:50 PM
