— Article 19 Correspondent
On Sunday 22nd August, Professor Vipin conducted an interactive webinar on The Economics of Caste, Merit and Discrimination as a segment in the All-India OBC Students Association channel. The following article is a brief summary and excerpt.
The webinar begins with an attempt to challenge some of the common assumptions regarding the relationship between reservations and the productivity of an organization. People generally believe that implementing reservations lead to a decrease in productivity. However, Ashwini Deshpande, Professor at the Delhi School of Economics, and Thomas Weisskopf, Professor of Economics at the University of Michigan, measured the impact of reservation for Scheduled Castes and Scheduled Tribes on productivity and efficiency in the Indian Railways between 1980 and 2002. To much surprise, it showed that reservations did not hinder productivity and in fact, may have marginally improved it in certain areas.
Where does this discrepancy arise?
There is a preconceived notion that when we impose constraints on production, reservations in this case, then the organization may not be as efficient. It is also presumed that reservations force an organization to employ people who would not have made it otherwise. The reason why both of these do not hold good in this context is because it assumes that an organization was completely efficient before the imposition of the constraint.
During the hiring process, incentives faced by a bureaucrat may not align with the goals of the organization. A bureaucrat in a government organization does not substantially benefit from pursuing the goals of the organization but rather from a preference expression. The speaker then explores the different ways these preference expressions can manifest in higher educational institutions.
To begin with, how does an organization choose the field of research. Do they respond to the students’ demand or do they choose a person based on caste then justify their selection? Since most hiring decisions involve a qualitative evaluation, this leaves space for preference expression in deciding what questions to ask and whom to shortlist subsequently. It also depends on the identities and interests of those who are assigned the task of making these decisions. As an adage goes, much of the hiring decisions are made when you choose the committee.
In this backdrop, how to align the incentives of a bureaucrat with the objectives of the organization?
The primary idea is to make the bureaucrat face the cost of his/her preference expression. When the cost of discrimination is high, one is less likely to follow discriminative practices. One way to do this would be the residual income claims. If the size of the residual income available to an individual depends on their ability to resolve the incentive problem, then the cost of preference expression increases. Such rules should be framed bottom-up in organizations and institutions. It is also important to note what is the environment in which an organization is least likely to discriminate.
The speaker proposes an idea of contestable markets i.e., markets in which there are no barriers to entry or exit. If you divide a market according to degree of contestability, you are likely to see least discrimination in highly contestable markets.
However, there are two circumstances when this doesn’t hold good. Firstly, if the consumers want a good that is produced by members of a specific caste, gender or religion. Secondly, if the workers display strong preference for working with their own caste or identity group. Nevertheless, the speaker argues how contestable markets can increase welfare even under these circumstances.
Let us assume a bread factory with employees from two identity groups A and B where A discriminates against B. If the demographic distribution is such that A is 90 percent and B is 10 percent, then the employer is forced to hire group A whereas the welfare of group B drops. In an alternate scenario where B is 80 percent of the population, employer hires group B and A experience a reduction in benefits.
How to translate these reforms into the educational sector?
The speaker suggests reforms that can be implemented on both the demand and supply side of the issue. In case of the supply side, it should be more opened up and the barriers to entry must be reduced to a large extent. It should be easier for people to start schools or educational institutions without regulatory hurdles. On the demand side, the speaker urges the government to fund students rather than schools. If this is done, then the grant travels with meritorious students regardless of which Institution they proceed to study in.
In the last section of his address, he talks about the recent proposal in the Parliament that asked for the IITs to get an exempt from following reservations. This request was made on the grounds that IITs are institutes of national eminence and they need to be at par with global universities. The affirmative action programmes are handicapping them in this process. As a response to this, he reiterates how there is little to no incentive for the IIT faculty to hire on the basis of merit even in the absence of reservations. He also poses a very important question. IITs thus far have not implemented reservations properly, yet they have been unable to compete on a global level. This would not have been the case if the earlier assumption had been true. Why did we not compete this far? Who will question the mediocrity of the upper castes?
The webinar was followed by an interactive question-answer session.
Q: Can we conclude that IITs and HEIs in India are working against the majority of the Indian population?
It’s a difficult question, the purpose of these institutions when they were set up was to act as drivers of economic growth and I don’t think they really did. These institutions were transformed from their original purpose of being workshops into places for the elite, something that economists call elite capture.
When one votes in India, it is done with different parties placing various agendas and incentives on the table. But within the IIT council and their respective IITs, the decisions are mostly made by UCs who often have personal interests (although not consciously). This disenfranchisement may cause interests to not be met.
Q: Does the emergence of liberal arts universities such as Ashoka welcome a positive change in the supply side of providing contestable education?
Such institutions are far and too few for the massive youth population we possess. It has to be thought of in terms of the entire system at hand. Are the entry and exit barriers of the market low in the market? But there is an elite that is able to pull strings to become institutes of excellence.
The entire event was streamed live on the AIOBCSA Facebook page.
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