Economic facets of Gandhian philosophy

The Contemporary Discipline of Identity Economics With the publication of 'Economics and Identity' in the Quarterly Journal of Economics in 2000, followed up by the book Identity Economics in 2010, a new way of thinking about homo economicus (the economic human) emerged (Akerlof and Kranton, 2000; Akerlof and Kranton, 2010). In the introduction to their book, the authors Akerlof and Kranton took pains to set their thought processes and insights within the framework of economics scholarship. As they point out, 'Modern economics follows Adam Smith's attempt in the eighteenth century to turn moral philosophy into a social science designed to create a good society. Smith enlisted all human passions and social institutions in this effort' (Akerlof and Kranton, 2010). They go on to add: 'Fairly recently, behavioural economics has introduced cognitive bias and other psychological findings. Identity economics, in its turn, brings in social context—with a new economic man and woman who resemble real people in real situations' (Akerlof and Kranton, 2010). Identity economics can be described as that branch of behavioural economics which suggests that human beings make economic decisions not only on the basis of monetary incentives, but also as responses to their identity needs. In other words, identity economics postulates that a person's sense of self or identity affects economic outcomes. Interestingly enough, Gandhi would have approved of any study focused on the 'creation of a good society'; he would have wholeheartedly supported engagement with 'human passions and social institutions'. He would have demurred a bit about 'real people in real situations'. While not disagreeing with the need to have firm foundations in the real world, the world of ideals never remains far from the Mahatma, and he would be falling back on St Matthew and St Mark to egg us on towards, at a minimum, aspiring for the ideals posited by Christ, the 'greatest economist of his time' (Parel, HS, 2009; CW 1999, v. 15, p. 275).

Traditional economics views individuals as being selfishly concerned with their own individual 'utilities'. Rather than oppose utilitarianism in a head-on manner, Akerlof and Kranton simply get around simplistic positions by arguing that issues of 'identity and norm' are embedded in the utility functions that economic agents purportedly have. They note: '. . . individuals' behaviour depends on who people think they are' (Akerlof and Kranton, 2010). The parallel that this idea has with Gandhi's thinking is telling. The Mahatma argued repeatedly that the behaviour of rich persons could and would change if they thought of themselves not as owners of wealth, but as trustees of wealth (CW, 1999, v. 50, p. 21). Identity and norms are inextricably tied together. According to the political scientist Jon Elster, norms are the 'cement of society' (Akerlof and Kranton, 2010).

Gandhi was concerned about how the cement held together the members of his various ashrams, who had to adhere to explicitly stated norms (CW, 1999, v. 15, p. 165–175). On a wider scale, he was concerned about the norms needed to cement fellow-Indians, be they Hindus, Muslims, or Untouchables together (Sheean, 2005). When discussing Gandhi's role as an inspiration for modern environmentalists, Ramachandra Guha focuses on Gandhi's emphasis on the negative impact of unbridled consumption (Guha, 2018). I would argue that the doctrine of trusteeship has an equal if not more important contribution to make in arguments dealing with the natural environment. One of the issues that keep cropping up when we talk about the economics of environmentalism relates to the difficulty of protecting a natural resource (a forest or a river or a lake) which belongs to no one. This is known as the tragedy of the commons. Gandhi's answer would be that dharma or the pursuit of virtue will show a way out. The Nobel laureate Elinor Ostrom makes a similar case when she argues that 'norms' embraced by communities can many times ensure that the tragedy of the commons does not occur. 'Norms', as adopted not only by individuals but as collectively subscribed to by groups of individuals, like the inmates of Gandhi's ashrams, would have been welcomed by Gandhi. The oft-quoted free-rider problem, when one individual or a small group of individuals tries to escape the costs borne by the community as a whole, is in fact solved, because they do not want their identity as good citizens and fair members of their communities to be assailed (Akerlof and Kranton, 2010). Gandhi's trusteeship doctrine could provide an impetus to inter-temporal environmental guidelines, which are guidelines needed when we talk of protecting resources over long periods of time, sometimes even after the deaths of the individuals involved. The behaviour of a trustee of a river, a lake or a well is different from the behaviour of an owner of the same natural resource. After all, these resources at one stroke transcend the ownership construct and are seen as being held in trust for future generations. In Gandhi's native Gujarat, there has been a long tradition of wealthy people building stepwells as endowments for the welfare of future generations. Gandhi would doubtless have been aware of this custom.

In recent times, identity has become an overworked word. The discourse in contemporary media tends to be about religion, ethnicity and sexual orientation. It is important to remember that identity spans much more than these items of current controversy. Writing in 1961, the social psychologist Erving Goffman pointed out that age was a significant determinant of identity. Thirteen-year-old children were ambivalent about enjoying rides on the merry-go-round, because they felt that the norms demanded that younger children should primarily use merry-go-round carousels (Akerlof and Kranton, 2010). The unique thing about identity is that it is not deterministic. While it is true that a short person cannot become a tall person, it does not follow that a short person must define her identity only in terms of absolute or relative height. Amartya Sen makes this case when dealing with contemporary pressures on individuals to define themselves in terms of primordial ethnic or religious identities. A person can be a vegetarian, a Beatles buff, a Chelsea fan, in addition to being a white British Anglican or a brown Hindu Bengali (Sen, 2007). Even the norms of aspiration and desired projection of identity, not just as to how one describes oneself but also as to how one would like to be perceived by others, are not frozen inheritances, but matters where human agency can and does have an impact. This was the approach to identity behind James Coleman's questionnaire addressed to schoolboys, where he asked them the following: 'If you could be remembered here at school for one of the three things below, which one would you want to be: brilliant student, athletic star, or most popular?' (Akerlof and Kranton, 2010). Clearly, norms guide people's self-definitions and definitions of how they would like to be perceived. Akerlof and Kranton have brilliantly analysed the role of gender in identity and how this can have practical impacts on labour markets. 'Women are supposed to stay at home and raise children. They are therefore supposed to move in and out of the labour force, whereas men are not' (Akerlof and Kranton, 2010). Akerlof and Kranton have in those two sentences summarized the prevailing misogynist assumptions that lead to lower wages for women.

(Excerpted with permission from Jaithirth Rao's Economist Gandhi; published by Penguin Random House)