A Two Rupee Coin Endowment

She was young, attractive, strong-built and her clothes/accessories along with her body language made it difficult to distinguish her from other ladies in the compartment. Nobody noticed her until she strutted across the compartment clapping the palms of her hands that made a noise short of a clap, gesturing blessings upon us by placing one (right) hand on every passenger’s head and stretched the palm of the same hand on our faces for money.

This transgender could have easily been one of us…travelling by train to work in a bank or a company managing or working with a team of her colleagues or was self-employed, probably earning an income or generating revenues and contributing to India’s productivity and economic growth. Sadly, she does not contribute to anything!

Instead, states in India (like Kerala) are attempting to bear huge costs of providing access to health, sanitation, education, training and employment, through subsidies, loans, etc., to transgender population (like this lady), which we as mainstream individuals would refuse to give them on our own.  And this could probably result into… (Drumroll in the background)...a “Market Failure”!

Gary Becker’s work on the Economics of Discrimination can be considered to explain this probable failure. According to Becker, a firm that discriminates minorities by paying them lesser than the non-minorities could incur huge costs of transaction for achieving higher productivity from the minorities. Thus, the prices of products produced by this firm could be higher than the prices of products produced by non-discriminating firm that encouraged higher productivity among their workers through competition. This essentially would mean that competition (in employment) could lead to less discrimination and in turn enable the prevalence of competitive prices.

In the context of my example, the firm can be swapped as the government while the discriminated-minorities could be replaced as the transgender population. Then as per Becker’s explanations, the government would expend huge (social) costs to accommodate transgender population within our strange society thus directing unequal distribution of resources towards such accommodation. This could create distortions in prices of products/services provided by transgender Population in comparison to prices of products/services provided by similar products/services producing firms.

“What a mess!”, I thought and quickly dug out a two rupee coin from the clutter in my bag pack. When I placed it on the lady’s palm, she pressed both her hands on my head muttering some blessings I could not understand.

But was it empathy or guilt? And, what does it mean to give away a two rupee coin to the transgender? Will that get her the opportunity she was deprived of?

“We humans are inherently flawed!”, vehemently exclaimed Rohit Pandey, a student at MDAE. And he continued to explain how all (kinds of) people cannot be mobilized together unless there was a common endowment in place for us to achieve.

So did he mean I should have given two thousand rupees to the transgender and felt more empathetic and less guilty?

Let me elaborate with an example. In the movie Lagaan, the main protagonist mobilised a diverse team of men (but no women and/or transgender) with specific skills to play a cricket match against the British. This team represented individuals from different ideologies, cultures, traditions, abilities and socio-economic statuses. But when few team members expressed their inhibitions to play (despite being strong, well-built and skilled) with certain team members who according to them represented unfavourable socio-economic status & physical disabilities, the protagonist directed them towards a major endowment that they would probably achieve if they placed their inhibitions aside and let everyone play cricket together after winning the match. That endowment was – No taxes on Returns! [Did the finale of the movie reflect any externality/ties?]

But are endowments enough to free the minorities from their misery, exploitation or discrimination?

Note: This blog was first published on CuriousEconomist.in on March 12, 2016 at http://curiouseconomist.in/economics-of-discrimination/

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