Bryan Caplan  

What Took You So Long?

Hummel Reviews Woods... Poverty vs. the Moon Mission...

At the semester's first Philosophy, Politics, and Economics Workshop, Tyler Cowen talked about the political economy of the Mexican village of Oapan. (For all the details, by his Markets and Cultural Voices). According to Tyler, being the political leader of this village is a burden, not a blessing. As is often the case in rural Latin America, there is strong social pressure on the most economically successful villagers to take a turn at the helm. During his term, the leader is expected to basically burn up his personal fortune to pay for public services. If he persistently refuses, he loses a lot of respect... and maybe more. (Insert thinly veiled threats here).

This set-up is known as the cargo system. As one website explains:

In the context of the religious system that the descendants of the Mayan Indians practice the word "cargo" refers to a burden. These burdens are offices held by individuals within a community that consist of civil-religious duties that are to be carried out by the office holder. Office holders are required to use their own money to cover the expenses involved in carrying out these various duties, and often use all their savings in order to complete their terms.

If you want to avoid this burden in Oapan, Tyler explains that there are several common escape routes:

1. Avoid success. Those who have no money to spare aren't pressured to lead.
2. Be a drunk.
3. Convert away from Catholicism.

Now think about how bad these incentives are. Any villager who wants to get ahead knows that if he does, he will have to either give away most of what he earns, or become a pariah, an apostate, or a drunk. Despite the low level of formal taxation, the effective marginal tax rate in Oapan is probably above Swedish levels. Tyler offered me a rough guess of 80%! With incentives that bad, it doesn't surprise me that rural Latin America remains impoverished - though the localized art boom has turned Oapan into the exception that proves the rule.

Tyler's account immediately reminded me of one of my favorite books, Helmut Schoeck's Envy. If Schoeck's wide-ranging observations are correct, virtually the whole primitive world has something akin to the cargo system. If one member of a primitive tribe starts to be more economically successful than others, relatives, friends, and everyone else usually starts demanding hand-outs. As in the cargo system, this basically leaves two choices: either surrender most of your surplus, or become a hated pariah. And you know what happens to hated pariahs during a hunt! The upshot is that informal social pressure effectively gives primitive societies very high marginal tax rates - and very bad incentives.

I have a strong suspicion that these incentives of village life are a big part of the explanation for why it took so long for economic growth to take off. For hundreds of thousands of years, human beings were stuck in societies with informal norms that choked off creativity and entrepreneurship. No wonder the miracle of modernity took so long. For economic growth to really take off, the individual needed a relatively anonymous society where he could turn his back on his neighbors without worrying if an envious neighbor would sink a dagger into it.

TRACKBACKS (3 to date)
TrackBack URL:
The author at Conjectures and Refutations in a related article titled Proximate and Ultimate writes:
    The ever-interesting Bryan Caplan is working another variation on his favourite theme — “gee, look how daft people are!” Much like the last time I linked to him, he’s giving an analysis which is true enough but doesn’t re... [Tracked on September 3, 2005 10:08 PM]
The author at frog orbits: the blog in a related article titled How not to encourage success writes:
    Bryan Caplan describes the cargo system in the Mexican village of Oapan where anyone who’s successful has to bankrupt themselves trying to pay for public goods, and I was immediately struck by how similar this system is to what successful blacks in R... [Tracked on September 3, 2005 10:26 PM]
The author at Asymmetrical Information in a related article titled Envy in equilibrium writes:
    Earlier, Bryan Caplan wrote an intriguing post about envy in tribal cultures, and how it prevents economic development. Now, he's followed up with a post discussing why this would be an equilibrium: Put yourself into an envious tribal environment. Anyo... [Tracked on September 8, 2005 9:22 AM]
COMMENTS (18 to date)
Mike Linksvayer writes:

Extremely interesting. The description cited seems to emphasize the prestige and potential for accumulation of political power in the system (reminding me of potlatch), while emphasizing the poverty trap aspects in modern times (but the description is obviously not written by an economist).

I wonder what was the relative contribution of envy/high marginal tax rates versus destroying wealth in/for religious activities was in preventing growth?

Another paper you cited a few months ago seems relevant:

Iannaccone (1992) pointed out that religion is a natural organizing node for community
provision of local public goods. Moreover the most puzzling features of religious sects, their
propensity to limit choices (prohibitions) and to destroy resources and options (sacrifices), can
be explained by the internal distortions due to a club’s efficient provision of services to
members. Since club members engage in joint production of local public goods during their
hours of nonmarket time, market work is a distraction with a negative externality for other
members. So efficient clubs should tax market wages. Lacking tax authority they might turn to
prohibitions on consumption as a crude but feasible way of lowering wages. Sacrifices can be
explained as a costly signal of “commitment” to the community, or (less prosaically) a signal of
relatively poor economic options outside the club which are efficient in the presence of
heterogeneity in economic opportunities. A sacrifice is then an initiation rite allowing
membership and with it access to club goods.

"Envy" is on my to-read list now.

Dave Meleney writes:

Some years ago I was trying to help a formerly brilliant guy escape from his drunken existence in a vacant lot where he "rented" a former bread truck-home. Unfortunately the rules of his little homeless village insisted that anyone with $3 buy the wine for all ... until the $ was all gone.

We tried various schemes to evade the power of the system, but to no avail.

Robert writes:

If capital markets do not exist, what else are you going to do with wealth, besides buy prestige? Ironically, in days past these systems likely existed for the benefit of the wealthy, by making positions of prestige expensive enough that only the wealthy could hold them. They only become a burden to the wealthy once there is something useful to do with wealth.

Jim Glass writes:
If Schoeck's wide-ranging observations are correct, virtually the whole primitive world has something akin to the cargo system. If one member of a primitive tribe starts to be more economically successful than others, relatives, friends, and everyone else usually starts demanding hand-outs.

"Hunter-gatherer societies are scrupulously egalitarian, but not harmoniously so. They are violently egalitarian."

-- Dr. Herbert Gintis, University of Massachusetts, in the NY Times, 1/22/02

Sudha Shenoy writes:

How did Mesopotamia, Egypt, Greece, the Roman Empire, the Islamic Empire, China, Britain, Western Europe all develop? Is Latin America a universal archetype?

monkyboy writes:

When I read the title of this post I thought its subject was the federal response to Katrina...hmmm.

No comments on recent events from the guy who promised to bravely stand by while millions of seniors starve to death?

Robert writes:

How did Mesopotamia, Egypt, Greece, the Roman Empire, the Islamic Empire, China, Britain, Western Europe all develop? Is Latin America a universal archetype?

Athens rose to prominence and civilization while retaining such a system. Not only cultural-religious functions, but even the maintenance of the navy, were performed by prominent citizens funding the public good out-of-pocket.

If I recall correctly, the Doge of Venice had similar responsibilities, and the Most Serene Republic remained one of the foremost states in Italy throughout the medieval period.

In ancient societies, I don't see potlatch as a disincentive to wealth. When the variety of goods and services offered by your economy is small, it is easier to experience consumption saturation than it is today, and without capital markets, it is challenging to put one's savings to any practical purpose. Pastoralists can in principle amass ever-larger herds, but the wealthy of urban societies lack even this option.

Potlatch, then, provides an incentive to wealth by making it possible to buy prestige with wealth. It fills an unsatisfied demand: the wealthy wish to signal that their wealth makes them important, and a potlatch system provides them with that opportunity.

John P. writes:

Does this in some way "explain" the spoils/pork barrel system of politics? I.e., part of being in office is being able to regale your cronies with gifts?

Robert writes:

Does this in some way "explain" the spoils/pork barrel system of politics? I.e., part of being in office is being able to regale your cronies with gifts?

Running for elected office does have some features in common with being a hunter-gatherer; in particular, variable vocational success, with yesterday's sucess being no certain predictor of tomorrow's.

For hunter-gatherers, sharing makes sense. If most days I am only marginally successful, but occasionally I have a great windfall, more than I could consume before it went bad, and my colleagues have similar day-to-day success rates, then sharing buffers against the uncertainty of each day's hunt, in most cases enough to overcome whatever moral hazard freeloaders present.

If elected officials feel the same way about running for office, it only makes sense for them to form 'bands' that share the bureaucratic wealth of any one of them experiencing great electoral success.

Robert Schwartz writes:

The system in the Mexican Village sounds a lot like the classical (i.e. ancient greek and roman) system of liturgies.

Ronnie Horesh writes:

Of course the cargo system described here acts as a very powerful discincentive to individual economic success, but it does appear to have some advantages for societies, which may be why it is quite widespread and persistent. Obviously it would restrain the buildup of huge inequalities within society. Such inequalities can arise from the interplay of markets and incentives, but but as we see in our non-cargo societies can be self-intensifying, in that rich people (or corporations) can become richer not through wise productive investment, but by political leverage resulting in subsidies and other forms of corporate welfare.

The cargo system described here would (I'm guessing) foster more social cohesion and perhaps be more adapted to long-term survival. At the price, of course, of a low standard of living today.

El Presidente writes:

Dropping the moral overtones, which are persistent and undoubtedly important, is extremely difficult for me (Am I the only one?). The lesson I gain from this glimpse at the cargo system is, "The devil you know is better than the devil you don't." I am acutely aware of the pitfalls of vast capital markets and their absolution of individual responsibility for any corporate action. Anonymity is a warm blanket for the unscrupulous or lazy investor in our system. It causes me to question the wisdom of freeing a person from the immediate consequences of their actions. The social restraints evident in the cargo system suggest that there is a prominent role for virtue ethics in economics. The community can require that a wealthy member of the community be made (or pressured) to serve the whole community instead of just themselves. This doesn't sound too bad to me. We typically feel that it is invasive or offensive to personal liberty for the community to exercise their will on the property of a member. Maybe we're right, maybe we're wrong. I think the challenge is moderating the proclivity for a popular preference. What sort of checks and balances are present in the cargo system to reign in the ambitious minority who gains and abuses political power within the group? Are we back to using physical force (mutiny/revolution) to resolve disputes?

Mr. Econotarian writes:

For hundreds of thousands of years, human beings were stuck in societies with informal norms that choked off creativity and entrepreneurship.

The anti-capitalist bias of many young people in the US also lead to informal norms that may do the same thing!

El Presidente writes:

Ronnie Horesh,

"Of course the cargo system described here acts as a very powerful disincentive to individual economic success,"

I don't agree. The cargo system doesn't seem to create disincentives. It reorders individual and social priorities. It makes production and wealth creation a team sport instead of an individual act of gluttony, or a random assortment of individual acts. It suggests that the next higher purpose of individual economic success is the welfare of the community, not solely the individual. It encourages individuals to surrender their tangible wealth for a common purpose, not to mention the prosperity and status that may follow when the rites of passage (cargoes) are completed.

To be clear, the cargo system doesn't tell participants, "Don't get wealthy." Instead it says, "Get wealthy, over and over and over again. Then, invest the wealth in something bigger than yourself." Unless, of course, you believe that the cargos themselves are trivial endeavors; punishments for accruing wealth. I'd bet they don't look at it that way.

It's kind of like when the drill sargeant says, "Congratulations, recruit! You have just noiminated yourself for individual training and special attention. Drop and give me 100 push-ups. Sound off!" But when you can do more push-ups than anyone else in your platoon, you see the reward for the hard work and you can laugh about it and be proud of your accomplishments.

Would the invention of specie make the transition from egalitarianism to a more capitalistic society easier? It would seem to make hiding one's wealth much easier, and therefore delay the onset of cargo economic penalties.

dilys writes:

Many years ago in Washington DC I met a Nigerian economist working for, I think, the World Bank. He of course made a nice USA-sized salary. He literally dared not go back to his village, because he would be "required" to divvy up his wealth. I believe he brought his parents to the West from time to time, so as not to lose touch completely.

El Presidente is, I fear, reasoning from a pleasant theoretical no-envy-here trajectory, rather than observation of results. In a hermetically-sealed transparent system (which redistributionists always desire), maybe required "reinvestment" is not a disincentive to acquiring wealth; but it may incentivize other things, like hiding / hoarding, or quickly wasting it.

Actually, it probably does discourage wealth creation. Doesn't Thomas Hobbes note that without the protection of property rights, people will not put out the energy to earn what they cannot keep or use? It's probably a Western participation-mystique fantasy that one would be as as happy to "surrender their tangible wealth for a common purpose" as to allocate for thier own future use what they earn.

I am not an economist, but I suppose the problem here is the immense payoff for the free rider, and the large number of them in my acquaintance's village. It also reflects that the economist had alternative places to spend and invest his money, and that village prestige did not take first priority. For the "insurance" idea to work, the pool would have to contain at least some other equally wealthy members, at least potentially. He apparently did not have that expectation, that a team would arise to participate in ever happier weath-generation.

Incidentally, it's psychologically probable that such gestures don't even buy prestige or independent power. If the contribution is non-optional, then "that's just the way things are." Further, I expect the plenty is consumed right away, that it is expensed rather than capitalized by the recipients.

The Christian tradition has struggled with the idea of the duty of charity to the poor. Thomas Aquinas says something like the gesture instructs the giver in overcoming greed, and the receiver in patience as to the timing and the amount of the gift. G. Herbert's A Country Parson frames charity to be conceived as a duty in the mind of the giver, a free and generous gift in the mind of the recipient. When these attitudes are reversed in an all too familiar loop of envy and resentment, the concept seems, even morally, a bad bargain to those in the position of the Nigerian economist.

El Presidente writes:

(Maybe this is my third strike on this topic. Who knows?)

Why do we presume that free-riding is unhealthy? Maybe it helps to reduce stress and foster good social relations. I think it's interesting that we are all up in arms when we think about the shiftless free-riders your mother warned you about but have no corresponding outrage over windfall profits. Shouldn't a person only get what they have earned just like they should pay for everything they take? In fact, we defend these profits as though they were sacred gifts from the Almighty. Are we invoking religion to defend economics? Please let me know because that's much more familiar territory for me. If it's equity we want then let's have it. How about from now on you can keep every penny you can prove to a jury of your peers that you earned justly. Everything else is your tax bill. It's nice to ride the fence, now isn't it? Why do we insist on this "entitlement" perspective while we dismiss an "entitlement" to things like subsistence and education? Answer: because we can. Clinton, one of my personal heroes, remarked of his infidelity that he did it just because he could and that was the worst reason a person could do anything. I think that's true.

By the way, Hobbes is a favorite of mine but no philosopher can declare omniscience in good conscience, though all of us secretly believe it. Hobbes is useful in post hoc defense of the modern state. He would disagree with the idea of the cargo system from the word go. Not a big surprise that his line of reasoning eventually leads us that way. It's a function of his bias.

El Presidente writes:

I promise this is my last comment.

The Christian tradition has struggled with the idea of the duty of charity to the poor.

You're right that Christians have struggled. But this was no struggle for Jesus.

He told the rich young ruler to sell all that he owned, give the money to the poor, and follow Him. He also said it was easier for a camel to enter the eye of a needle than for a rich man to enter the kingdom of heaven. Not to mention, "[R]ender to Caesar the things that are Caesar's; and to God the things that are God's." He said this of the coin of the realm which bore Caesar's likeness.

Money, property rights, and individual economic sovereignty were not big issues for Jesus. Maybe the Christian tradition has some 'splaining to do. We focus on individual rights while The Man focused on individual responsibilities, much like the Cargo system.

The Old Testament model of taxation among Israelites was tithe and offering. Tithes were obligatory (10% flat tax of gross) and offerings were voluntary for repentance from sins and as thanks for the blessings of God. All were gathered into the storehouse to serve the public.

Aquinas was a smart guy and an adept apologist but I prefer original source citation.

Comments for this entry have been closed
Return to top