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Having a formal understanding of what various institutions represent should be important. Thereare few economic variables which can accumulate over time and give us what i call as -stateutility-. All these institutions, like education, health, social like caste system, dowry etc., do ischange the way these state variables evolve.Government affects these institutions by investing in them which changes the rate of evolvementvia advances in technology or infrastructure or formal laws etcThere are no -good- or -bad- institutions. There are institutions which are -in-line- with thepeople-s preferences and there are the ones who are -mismatch- with what people want.As economist, we may think that since caste system etc. are not beneficial in -monetary- terms,they are bad for growth. But comments like -i PREFER being hungry than borrow money fromsome lower caste person to start new business- should make us realize that these institutionsare not like some mysterious forces. They represent the aggregate level mechanism by whichpeople let their preferences known and how these preferences evolve.We should not force the kind of development i.e. kind of institutions, we policy makers wantthem to have. May be that is not what people want. Hence, having a formal understanding ofthese institutions and the mechanisms through which government can know about these-preferred- institutions becomes important.

Item Type: MPRA Paper -

Original Title: Inequality: An explanation using State-Utility and Information Asymmetry-

Language: English-

Subjects: D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and MeasurementD - Microeconomics > D0 - General > D02 - Institutions: Design, Formation, Operations, and ImpactD - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism DesignZ - Other Special Topics > Z1 - Cultural Economics ; Economic Sociology ; Economic Anthropology > Z13 - Economic Sociology ; Economic Anthropology ; Social and Economic Stratification-

Autor: Gupta, Abhay


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