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In standard economics, individuals are rational actors and economic forces undermine institutions that impose large inefficiencies. The persistence of the caste system is evidence of the need for psychologically more realistic models of decision-making in economics. The caste system divides South Asian society into hereditary groups whose lowest ranks are represented as innately polluted. After the historical encounter between colonial powers and South Asia, caste became capable of expressing and systematizing what had been diverse forms of social identity, community, and organization. This paper reviews work that estimates the economic costs of the caste system in particular environments: (1) In North India, discrimination between higher-caste landowners and lower-caste tenants in markets for groundwater for irrigation reduces the tenants' agricultural yields by 45 percent. (2) Making caste identity public in North Indian classrooms reduces the cognitive performance of low-caste boys by 23 percent. (3) Because of lower-caste men's control of working-class occupations, the proportion of lower-caste children enrolled in English-language schools in Mumbai after India opened itself up to the world market grew only one-fourth as quickly for boys as for girls, restricting boys' occupational mobility. Given the benefit of access to caste-based networks, most Indians practice caste endogamy. The caste system is a dramatic example of an institution to which it may pay each individual to conform because others conform. The caste system also illustrates the two-way influence between people and institutions emphasized in psychology: people construct institutions, and institutions shape understandings. Abolition by law of an institution may change neither understandings nor behavior.

Social Development

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social development --- interdisciplinarities --- social sciences

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Behavioral economics recognizes that mental models-intuitive sets of ideas about how things work-can bias an individual's perceptions of himself and the world. By representing an ascriptive category of people as unworthy, a mental model can foster unjust social exclusion of, for example, a race, gender, caste, or class. Since the representation is a social construction, shouldn't society be able to control it? But how? This paper considers three interventions that have had some success in developing countries: (1) Group deliberation in Senegal challenged the traditional mental model of female genital cutting and contributed to the abandonment of the practice; (2) political reservations for women and low castes in India improved the way men perceived women, the way parents perceived their daughters, and the way women perceived themselves, but have not generally had positive effects on the low castes; and (3) reductions in the salience of identity closed performance gaps between dominant and stigmatized groups in experiments in India and China. Spoiled collective identities need to be changed or made less prominent in order to overcome social exclusion.

Culture & Development --- Education --- Social Development

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botanical gardens --- social development --- popular education

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One of the most fruitful advances in modern economics has been the introduction of psychological realism into the model of "economic man." The World Development Report 2015 organizes the evidence about how humans actually think and make decisions into a coherent framework useful for designing development policy. This paper elaborates on the three principles of human thinking that constitute the report's intellectual framework: Human thinking is dual process-automatic as well as deliberative (thinking automatically); it is conditioned by social context and the salience of social identities (thinking socially); and it is shaped by mental models that are socially constructed (thinking with mental models). Behavioral insights create scope for policy interventions that produce "miracles" from the perspective of traditional economics.

Education --- Health, Nutrition and Population --- Social Development