Of Yogis, Grihastis and Institutions

If people were self-sacrificing, self-effacing, other-directed, rational, visionary, benevolent beings — “yogis” — then it would not matter very much what kind of institutional arrangements they lived under: the resulting social welfare of their collective actions would be fairly even regardless of whether they lived in a market-oriented capitalist order or a collectivist socialist order. But unfortunately for all of us, people are self-interested, myopic, irrational, imperfect beings — “grihastis”. Given the reality of living in this material world, the institutional arrangement does matter.

So we need to ask which of the various possible institutional setups maximizes the potential welfare of the collective. It is conceivable that one could arrive at the answer to this question analytically, or at least analysis could suggest which one is likely to be better than the others. Analytical answers have been found. But even if the analytical path had been closed to us, the question can be decided empirically.

As it happens, societies have chosen a variety of institutional setups along the spectrum of possible arrangements, from the collectivist, centralized top-down control at the “left” end, to the free-market, individualistic, laissez-faire at the “right” end. It appears that the right end of the spectrum is more suited to collectives of real people than the left end.

It could be that if people were yogis, then the left institutions might have produced greater welfare than grihastis actually achieve under the right institutions. But we would never know since we have not yet discovered a suitably large group of yogis anywhere in the world.

The great problem for India has been that with a few exceptions Indians are not yogis but have been made to live under a system more suited to yogis. It’s time Indians woke up and realized that we are nearly all grihastis and we should choose our institutions appropriately.

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