Wednesday, June 11, 2014

what's a little irrationality among friends?

An interesting essay about Pakistan's near-total informality, from Harris Khalique. Money quote:
Some friends celebrate the informal and underground economy. Maybe they are right to the extent that the poor are at least able to survive as formal institutional arrangements of our national economy are not only limited, they are also exclusionary and pro-rich. But who is actually making the real buck from the informal economy? The same idle rich class, isn’t it? This class absolves itself of any duty of care for its workers when economic activity takes place in the informal sector.
True. The rich have a way of profiting from every kind of economic relationship. But there's nothing less devious or more caring about the formal economy. Being part of the formal economy doesn't automatically mean owners feel a 'duty of care' for those laboring under them. And, indeed, formalization often takes away some elements of control that workers in System D have over their labor and their lives. Things that are irrational and inefficient in economic terms can also be positive and creative in social and political terms.