On social assets and liabilities

Social capital (SC) is yet to figure in textbooks; but a burgeoning literature has underlined its importance in all social sciences. The concept includes non-market factors like social bonding, trust and codes of conduct.

While the welfare enhancing role of SCs like self-help-groups (SHGs), peer pressure and rule of law can be large, SC may also take the form of fundamentalist groups, police-criminal collusion, or practices like sutee and castism.

Given their deep historical roots, social institutions and norms are often treated as exogenous and the focus in most studies is on their salubrious or deleterious effects. But this fails to explain wide temporal/spatial variations in SC and has little policy relevance: trust and tax compliance are social assets (SAs) while corruption is liability; so what? Hence the need for analysing sources of SC.

A fruitful way of examining the issues is to start a la economists from individual behaviour. However, of its three major determinants "" self-interest, environment and sense of justice "" economists rely primarily on the first. Provision of insurance and reduction in transactions and enforcement costs make SHG-type bonding mutually beneficial.

Norms or institutions like joint family decay when they become costly to individuals. Business-politician and police-criminal alliances magnify size of the loot. Taxes are paid only if penalty and probability of detection are high enough to make evasion costlier than compliance.

Self-interest, though undoubtedly important in driving SC, does not explain why practically nobody robs a blind beggar in a deserted alley; a busy man helps hospitalising a wounded stranger; or practices like keeping girls illiterate and honour killing persist.

Social environment is the proximate reason behind some of these acts; but unlike self-interest it is not a primitive hypothesis and begs many a pertinent question. We need something other than self-interest and social compulsion.

Recent experiments with samples of Harvard students confirm how notion of fairness affects individual behaviour. It is quite common for people to support NGOs doing good work and incentive systems rewarding the deserving.

But an honest tax payer is made to feel unjustly treated if (i) filing returns and getting refunds of excess payments involve considerable harassment; (ii) the corrupt not only go scot free, but rapidly climb the social ladder and acquire enormous clout; and (iii) a large part of government revenue is wasted or siphoned off by politicians and bureaucrats.

This sows the seed of tax evasion. Note that though sense of justice often varies enormously across societies, its change is crucial in altering existing SCs, for better or worse. Only when an increasing number of people, especially the persecuted, came to realise how unjust systems like imperialism or castism were did they become increasingly difficult to sustain. Spread of bigotry and corruption in recent years may also be traced to such changes.

For explaining evolution through interplay of self-interest and sense of fairness, distinguish between five categories of individuals: unfailingly altruistic (UA); inveterately selfish (IS); those with a distorted view of fairness (DF); conscientious ignoramus (CI); and conscientious cognoscenti (CC). UA are rare. IS are more numerous, but still relatively small.

DF and CI are the largest groups. DF are articulate and fairminded, but have a jaundiced view of justice, caused by subconscious self-interest or ideological commitment? Many judge a system's fairness by their own position relatively to that of their peers or superiors, not of the more disadvantaged.

Most Bengali bhadraloks see nothing reprehensible in seeking subsidised housing and absurdly low municipal rates since otherwise (horror of horrors!) Calcutta will be inhabited only by the affluent. Arguments favouring inequality of income, educational opportunities and healthcare, advanced by some highly placed intellectuals, also illustrate plasticity of the notion of fairness.

Distortions caused by transcendental ideologies where human suffering is secondary are the most damaging, as devastations caused by 'civilising' campaigns, religious beliefs, nationalism, fascism and communism suggest. Such ideologies tend to preclude doubt; accord top priority to the ideal; and make people believe that human misery, however great, should not stand in the way of its pursuit.

Again, many believers, armed with a sense of moral superiority, have no qualms for their disregard of other norms: instances abound of devout businessmen giving bribes or selling spurious drugs; free market votaries using official clout; ardent Rightists and Leftists promoting incompetent teachers subscribing to the 'right' ideology; people seriously believing that there is little point in discharging normal duties until society is radically transformed.

CI are conscientious; but suffering from mental block or inertia, they fail to realise the rationale or inequity of many norms, and follow them mostly because of social/legal sanction. But a norm becomes highly fragile when its violation serves self-interest, but does not seem to harm others "" something which I was reminded of while travelling in a state bus in North Bengal.

From most passengers the conductor accepted a fraction of the fair without issuing tickets; but he had no guilty feeling whatsoever, was extremely pleasant and gave free ride to some obviously poor persons. Mental inertia is not uncommon among the 'intelligentsia' either: students of Presidency college were oblivious of social consequences of their participation in mass copying during the Naxalite movement; and so are most university teachers of classnote-based teaching CI. Again, cutting across the income-education divide many CI display herd behaviour and follow role models.

CC can appreciate rationale of social rules, have no distorted notion of fairness, but (unlike UA) not selfless. SC evolves over time through external shocks and social interaction which also affect composition of groups. Some social movement or state intervention may trigger off a virtuous or vicious dynamics.

In the absence of such events, evolution displays what may be called Gresham's law of SC: good conduct gives way to bad ones. In most societies IC constitute the largest group followed by DF and CC. Interaction among behaviour of the three groups determines evolution of SC through changes in norms or even composition of the groups. Though the revolution may take various courses, one or two outcomes seem highly plausible.

The first is replacement of good by bad conduct, or Gresham's law of SC. Thus self-interest sans guilty feeling promotes tax evasion among some CI; officials belonging to IS or DF receive larger bribes; further evasion by other CI follows making not only DF lent some CC also to evade tax with a clear conscience.

Bigotry (or other social ills) may also have a similar dynamics so in this case infection occurs first in DF and spreads to CI and IS, while CC may remain immune. It is also clear that some serendipitous even, social movement or strategic state intervention may produce a virtuous dynamics.

Finally for some moral. Any policy for promoting SAs or reducing SLs has to take into account the two mainsprings of human behaviour, self-interest and notion of fairness. The conventional case for institutional checks on arbitrary power, good easily enforceable laws, and organisational transparency is in tune with this view.

More fundamental are making people aware of rationale or injustice of norms and institutions; and use human well-being as the touchstone for judging fairness of ideals and systems.

Though this is more easily said than done, any programme toward this end must include (a) wide exposure of people to alternative codes of conduct and value systems; (b) open discussion on contemporary relevance of SCs on whether they foster congruence or conflict of interests of various groups; and (c) experiments with alternative institutions and rules for harnessing the twin engines of human action. Intellectual certitude, conformism and discouraging candid comments on widely held beliefs are the surest way of enlarging SLs.

proj_monfin@hotmail.com

(The writer is ex-professor, Presidency College and Indian Statistical Institute, Calcutta and currently director, Monetary Research Project at ICRA)