Mukesh Eswaran

Professor Emeritus
Canadian Economics Association, Fellow
Bureau of Research and Economic Analysis of Development (BREAD), Senior Fellow
Theoretical Research in Economic Development (ThRed), Associate

I am a professor emertius in the Vancouver School of Economics at the University of British Columbia in Vancouver, Canada. I am Senior Fellow of the Bureau of Research and Economic Analysis of Development (BREAD).

My research interests are in the application of economic theory to understand economic phenomena. Primary areas of my interest are economic development and the economics of gender. Other areas of interest are evolutionary economics and, more recently, the economics of religion.

BOOKS

Why Gender Matters in Economics
Princeton University Press, 2014

Please click on paper titles for abstracts and full text downloads.

RECENT PAPERS   

The socioeconomic condition of Indigenous Peoples in North America is the worst among all ethnic and racial groups. I propose a theory that attributes their health condition to the steady erosion of their culture and the attendant damage to their identity. The analysis, instead of positing a preconceived neoclassical view of Indigenous Peoples’ objectives, attempts to capture what they themselves consider to be the essence of their culture that is based on a deep attachment to their land. In a simple model of an Indigenous economy that produces food and a cultural good, I show, surprisingly, that a band’s wellbeing can be higher with communal property than with private property, despite the standard free-riding problem associated with communal property—a result that is consistent with the Theory of the Second Best. Drawing on studies in psychology, psychiatry, and neuroscience that characterize the effect of trauma on behavior, I then set out a very simple intertemporal model that illustrates the wellbeing and health consequences (like lifespan and suicide rates) to contemporary Indigenous Peoples of the unremitting assault on their identity over centuries. 

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Religion, ethnicity, and political ideology all lend themselves to the perpetration of mass atrocities by creating a sense of identity that sets up an Us/Them dichotomy. Atrocities here are seen as arising from the motive of acquiring territory but augmented by other-regarding preferences that capture the role of identity. My empirical results using data for the period 1800-2020 confirm that all these identity-driven motivators are associated with mass atrocities, with religion being more powerful than ethnicity. Monotheistic religions (except Judaism) are seen to be responsible for more mass atrocity deaths than (polytheistic) Hinduism, lending some credibility to Hume’s (1757) view on the intolerance of monotheism. While democracies commit fewer mass atrocities than autocracies, Christian liberal democracies do not. This analysis offers no statistical evidence for the popular presumption that Islam is more violent than Christianity. In fact, in the post-World War II era, Christianity has been associated with the most mass atrocity deaths among the major religions. The results offer tentative answers to some counterfactual questions that bring out the role of ethnicity and religion in mass atrocities.

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We empirically evaluate whether capitalism is implicated in the deaths of individuals during the COVID-19 pandemic using data from January 2020 through March 2021. We separate out the effects of the economic regime (extent of capitalism) from that of the political regime (extent of democracy) and control for a whole host of relevant factors. We find a significantly positive and robust correlation between the extent of capitalism and COVID-19 fatalities, which rises over the 14 months of the pan-demic. In terms of mechanisms, we show that capitalist governments are less likely to impose stringency measures that potentially hurt profits. Further analysis shows, however, that stringency measures alone are unlikely to explain the fatalities. Thus, we then isolate a number of factors that magnify the deleterious effect of capital-ism on pandemic deaths and some that attenuate them. Among the former, income inequality proves to be a factor that greatly enhances the effect of capitalism; also, globalization, the deregulation of labor markets, and military spending are enablers of capitalism. In contrast, strong kinship ties in society dampen the harmful effect of capitalism. In sum, to our knowledge this paper provides the first rigorous statistical evidence to substantiate the concept of social murder that Engels coined 175 years ago.

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In this paper, I investigate how for-profit business can address what is arguably one of its greatest challenges: lifting the poorest of the poor in developing countries out of their poverty. In the proposed framework, the core principle is that, to succeed, for-profit businesses needs to embrace the idea of “shared prosperity,” in which the standard of living of its clientele is raised while the business makes profits. Multinationals, which are capable of performing R&D for products and technologies appropriate for the poor, need to team up with local enterprises to provide marketing and distribution. I show that partnerships of purely for-profit MNCs with NGOs dedicated to poverty alleviation are more effective than even mergers with local for-profit firms because the NGOs elicit trust more readily from the target clientele and so make marketing easier. Using a formal mathematical model, I derive testable predictions on when MNC partnerships would obtain with NGOs as opposed to local for-profit firms. I provide some simple examples of MNCs that have managed to alleviate poverty in the manner proposed. My framework does not invoke any notion corporate social responsibility.

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Why is religiosity in contemporary America exceptionally high relative to those in other rich countries? I develop a simple theory that hinges on the sense of security of immigrant-identity, which is informed by both religion and ethnicity. Commitments to religion and to ethnicity are complementary in the determination of identity, and immigrants consciously invest in the endogenous component of their sense of identity through the actions they choose (like socializing with an ethnic group or performing religious activities). I demonstrate that the level of religiosity increases with the extent of ethnic fractionalization in the society. I offer some empirical evidence for the theory using contemporary cross-sectional data from the 50 states of the U.S. I test this theory against two alternative theories that have been offered to explain the high American religiosity. I find a robust positive and statistical significant correlation between religiosity and state-level ethnic fractionalization. When tested with world data, the model is rejected—lending further support for the claim that America’s religiosity derives from its unique history of exceptionally high and ethnically diverse immigration.

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I briefly review here how ethnicity and religion have played an important role in the adaptation of immigrants to America historically and also in the recent past. This review has to be necessarily very terse to keep the length manageable.

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In Canada it is estimated that only about 5% of sexual assaults are reported to police and less than 1% of assaults result in convictions. The reasons for this are discussed in this commentary using results from a formal model in economic theory (Eswaran, 2018). In this model, if police over-estimate the probability that women's reports of assault are false, as the evidence clearly documents, they under-investigate. This in turn reduces the reporting of actual assaults and reduces the conviction rate. The attrition rate of active files (as women drop out due to the challenges within and outside the system) may further reinforce the incentive effects of police disbelief. These effects are compounded by the fact that, in Common Law, the Crown prosecutor does not represent the victim but rather the society at large. Policy recommendations that stem from the model include an emphasis on victim advocates, who can increase policy belief and hence spur police efforts, as well as reduce attrition rates, leading to more reports and convictions, and fewer assaults. In considering punishments for false reports, it is agued that due consideration must also be given to the effect such a punishment may have in reducing truthful reports and hence in increasing the number of assaults.

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In this paper, I make an attempt to understand the efficacy of some of the current fiscal stimuli being implemented to deal with the ongoing economic disaster precipitated by COVID-19. The focus is on pecuniary externalities working through the demand side, for they seem crucial for recovery. I use a well-known model of the Big Push of the economic development literature for this purpose because it lays bare the essential multiplier process involved. This enables an examination of the role that traditional maternal child care plays in the efficacy of the fiscal policies intended to support the economy and to facilitate recovery. This works through the maternal contribution to human capital during the childhood of the current labor force. Based on the reasoning developed here in the context of COVID-19, I argue for universal and subsidized child care under normal times in view of its long-term macroeconomic consequences. This argument is independent of whether the subsidy elicits greater maternal labor supply.

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In this paper I investigate why, despite rampant sexual assaults against women, it is an adamant fact that only a minuscule fraction of their male assailants are convicted. The model embodies the crucial aspect of the criminal justice system based on common law that prosecutors are not the victims' advocates but, rather, prosecute to serve the public interest. In a simple sequential game framework, I examine the effects of a pervasive feature of sexual assault cases: the police's exaggerated belief, contrary to facts, of the falsity of women's reports of assault. This distortion in beliefs adversely affects their endogenous investigational effort on the assaults and on the suspects. Along with the victims' lack of private representation in the court system this, in turn, generates a self-confirming equilibrium in which women's reports are largely disbelieved, police disbelief ironically encourages some false reporting, few victims choose to report the crimes, and the conviction rate on those cases that are reported and proceed to trial is low. A second feature of sexual assault cases, namely, the sharp attrition in active files as they pass through the criminal justice system (to the extent that it is exogenous) is shown to worsen the outcome-again, through an endogenous investigational response of the police. When the police are allowed to also investigate victims (either in order to discredit them or to prepare for trial), I find that police disbelief of women's reports induces a de facto substitution of the investigation of victims for the investigation of suspects, worsening the already appalling miscarriage of justice. An attempt to reduce the alleged false reporting by punishing women who are deemed to have lied is shown to be counterproductive. In fact, the attempt is likely to reduce the already-low reporting by genuine victims, inducing a further decrease in conviction rates and an endogenous increase in the frequency of sexual assaults. I finally discuss the policy implications that arise out of the analysis.

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This paper offers a theory of decentralized, non-state-sponsored terrorism that is characteristic of contemporary reality, and that explains the rise of homegrown terrorism. We argue that the sense of social identity is a prime motivator of non-strategic terrorist activities, and we investigate its consequences and implications for defense against terrorism. Terrorist responses to perceived affronts to identity increase with altruism towards in-groups and with endogenous intensity of hate towards out-groups. We show that, while out-group spite is the more essential feature of identity pertinent to decentralized terrorism, the intensity of terrorist actions is magnified by in-group altruism because it plays an important role in overcoming the potential free-riding of terrorists. This makes individual terrorist activities possible without coordination. We use our formulation to provide an alternative explanation for why counter-terrorism measures often fail, and frequently can have a backlash effect of increasing terrorism. Our results point to the need for western democracies to reformulate their foreign policies to take account of the role these policies play in instigating contemporary terrorism.

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We analyze recent proposals from social scientists suggesting that when sacred values are involved in conflicts, progress towards negotiation can be made if the contending parties make symbolic gestures acknowledging the sacred values of their rivals. We incorporate this possibility in a model in which the allocation of a sacred good can be resolved either by direct conflict or by negotiations made possible through (costly) symbolic gestures. We identify conditions under which a negotiated outcome may obtain. Extreme asymmetries in military power and bargaining strength are shown to militate against the possibility of negotiation.  Furthermore, for a negotiated solution to be feasible, perceptions regarding the preferences of the organization mediating the negotiations are very important. While isolating some of the root causes for the recalcitrance of conflicts over sacred goods, our model provides cautious optimism for the role of symbolic gestures.

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Countries world wide face an imminent global health crisis. As resistant bacteria render the current stock of antibiotics ineffective and the pipeline of back-up drugs runs dry, pharmaceutical companies are abandoning their research in antibiotics.  In this paper we ask: Why are pharmaceutical companies closing antibiotic research labs when the stakes are so high? Implementing a simple dynamic framework, we show that the environment for new antibiotics is relatively hostile, compared to other medicines, due to market failures that result in excessive use and acceleration of natural selection. The analysis reveals, however, that increased competition between drugs can actually slow down the rate of resistance without, in some cases, diluting research incentives. This result, which is bolstered by scienti…fic evidence, arises from a fundamental interplay between economic and biological externalities. We propose a patent-antitrust regime for aligning drug research and usage with those of the social planner, which implies an alternative justi…cation of the patent system.
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Though economics claims that sunk costs should not figure in current decision-making, there is ample evidence to suggest that people squander resources by honoring bygones. We argue that such wastage of resources was tolerated in our evolutionary past by Nature because it served fitness-enhancing functions. In this paper, we propose and model two such functions: the first in a non-strategic setting and the second in a strategic one. In the former, we demonstrate how the honoring of sunk costs could have arisen as a commitment device that Nature found expedient when the emotional and rational centers of the brain conflict over temptations that may sabotage long-term investments. By applying this idea to the self-concept, we argue that this model provides a rationale for cognitive dissonance, a well-established phenomenon in social psychology. The strategic reason we offer for the salience of sunk costs is that it provides the producers of goods an edge in contests over their output with potential interlopers. In either scenario, we show that Nature would have hardwired a concern for bygones.

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We propose a theory of the origins of India’s caste system by explicitly recognizing the productivity of women in complementing their husbands’ occupation-specific skills. The theory explains the core features of the caste system:  its hereditary and hierarchical nature, and its insistence on endogamy (marriage only with castes).  Endogamy is embraced by a group to minimize an externality that arises when group members marry outsiders.  We demonstrate why the caste system requires gender asymmetries in punishments for violations of endogamy and tolerates hypergamy (marrying up) more than hypogamy (marrying down).  Our model also speaks to other aspects of caste, such as commensality restrictions and arranged/child marriages.  We suggest that India's caste system is so unique because the Brahmins sought to preserve and orally transmit the Hindu scriptures for over a millennium with no script.  We show that economic considerations were of utmost importance in the emergence of the caste system.

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In this paper we propose an explanation for how the sense of ownership may have evolved in humans. We see it as an evolutionary response to a fundamentally economic problem: survival under competition for scarce resources. We suggest that natural selection contrived a sense of ownership over first possession or over the fruits of one’s action—an entrenched characteristic of the innate sense of self—in order to provide a strategic advantage in confrontation with others seeking to appropriate them. Our results show that, in the evolutionarily stable equilibrium, the value placed on the ownership of property is not the same across individuals: it depends on the role of the individual in the interaction. Specifically, a person who has either acquired first possession of a resource or has produced the output values it more highly than one who seeks to appropriate it. We show that this nuanced sense of ownership increased the incentives to undertake productive investments. The legalization of ownership is, in historic time, a relatively recent institutional contrivance for codifying and fine-tuning the problems pertaining to ownership. It is our contention that evolution has shaped this instrument, albeit more bluntly, in humans in the Pleistocene and probably much earlier. Furthermore, our results provide novel explanations for the endowment effect in the psychological literature. Furthermore, they have important implications such as the impact of Protestantism on the economic growth identified in empirical studies.

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We propose that the experimental findings informing the recent arguments for a Universal Moral Grammar can be explained through the concept of awareness of culpability of the self in an evolutionary context. We argue that the doctrine of double effect, which is usually invoked to explain such findings as those in trolley experiments, is really a derivative principle. By incorporating the tacit but crucial role played by the awareness of culpability of the self of the decision-maker in these dilemmas, we are able to understand why this doctrine carries force. In addition, we provide an argument to show how and why moral codes can differ across societies. One conclusion our argument points to is that moral behavior is the result of a special feature of the general-purpose evolutionary vehicle of self, namely, its proclivity to minimize its culpability. Finally, by explaining some puzzling anomalies that arise in the context of the doctrine of double effect, our analysis arrives at a theory of the origin of morality: the evolutionary imperative to temper self-orientation.

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