The Economics of Segregation

To be politically correct, ghettoization is taboo. Yet they not merely exist, they thrive. In colonial times segregation was imposed. Segregation in social economic and political was imposed top down in many societies at different points of history. The apartheid in South Africa, non-entry to Indians in certain clubs or roads during British era etc. were examples of enforced segregation. Yet in many other instances, segregation evolved organically, became an implicit barrier of entry even though there was no explicit barrier or enforcement of the same. The bottom-up evolution of segregation has perhaps interesting roots.

Many times in real life, there is observed a kind of evolved segregation plausibly at subconscious levels. Take a simple example. There are many self-service ‘eat while standing’ hotels in India. One interesting observation is very few women frequent these eateries or ‘darshinis’ as they are called in South India.  It is usually male predominated. In management conferences, there are hardly scholars from other but related areas presenting their works of research even though the themes might be of interest to them. There are certain subjects on which multiple conferences are held each with very different circles participating. There might be a universal set of specialized interests, but differing backgrounds seem to result in numerous subsets but hardly intersections among each of the subsets. At social dinners, there seem to be formation of many clusters almost independent of each other with little interaction between them. Owners are likely to rent out at least residential units to somebody of their caste, region etc. Marriages rarely go beyond the narrowly defined community circles. As the old adage goes, birds of the same feather flock together. If per se there are no barriers, it would be puzzling to find why segregations occur.

In decrypting the furtive, low hanging fruit would be a resort to exploring roots in conflicts whether modelled on caste, race, class, religion or any other variable. Digging deeper, there seems to be little evidence and more rhetoric. In contrast, to Nobel Laureate, Thomas Schelling, segregation was an aggregate manifestation of the innocuous exercise of individual preferences independent of each other. His experiments on simple drawing boards brought this facet with lucidity. It is possible examining his reasoning to numerous applications.

‘Eat while standing’ eateries are customarily a meeting point for local networking. The local real estate guy or an electrician or reporter or salesman normally meet their clients or get their business points in these eateries. Most the business-linked activities are male-predominated. A woman visiting the darshini might be the only one among 30-50 people present over there at any given point of time. The woman possibly would feel unusual in the circumstances. Even there is no untoward incident, there is a fear that she might be subject to something unruly. Therefore, a woman might tend to avoid such situations. Women would visit if they find on average at least 25-30% of customers at any point of time are women. It is an individual woman who perhaps feels that given there are unlikely to any women in the customer base, it might not be safe or at least sound odd to be the only one in the base. Every other woman too would be thinking the same independently and arriving at a similar conclusion.  An individual preference exercised innocuously when translated into aggregate results into a very different outcome, an outcome of some segregation wherein none was intended.

The point is equally true for academic conferences. Each circle has its objectives in building its research based and generating economic utility of the same. From the academic perspective, there might be different motivations as would be if organized by corporate bodies or activist organizations. Each have their own jargons and playbooks. From the outside, these give a perception of being incompatible with the other circles. To an academic, participation in activist conference might sound odd. This is perhaps because she might feel that given differing objectives, she might be the odd person out and might not get an audience for her ideas. She would perhaps be happy to attend if there are at least 25-30% of the participants are from her field. Since each from her field are thinking independently on the same lines, aggregate preference will turn out to be segregated sub sets while being part of one universal set.

The same phenomenon applies to residential ghettoization. There is degree of homophily in each individual/group. There is apprehension however unfounded it might turn to be that there could be a possibility of adverse selection in an unfamiliar ambiances. Man by his y nature would intrinsically be attracted to the familiar. Therefore, an individual seeking residential quarters would prefer where his ‘tribe’ is in majority. Since the order is evolved bottom-up each individual would seek moving to locations of the familiar rather than the comparatively strange. To sustain a minority base, there perhaps a need for at least 20-30% of the base. Since independent decisions are focused on analysis the present, therefore, in absence of such a minority, the individuals will decide to shift the familiar terrain. The outcome will be segregation.

The same principle evolved in money lending business. Apart from Christian and Islamic taboos which resulted in Jews monopolizing the business, their dominance meant very few non-Jews could even though formal barriers might not have existed. For any one or two who might choose to enter, being in extreme minority might have been a deterrence thus their individual apprehension perhaps ceding space in toto to the Jews. The similar algorithm is at play in the Indian slaughter house/ meat business.

Instances of such segregation are invariably found across sonic-economic-political spheres in our society. Yet the process is not static. Formations evolve over time. More often than not, flips are observed. There are residential areas dominated by a certain group giving way to other groups over period of time. It needs one adventurous willing to live in the relative strange, attract few others creating the necessary minimum minority to create outright majority. Again an individual preference exercised with unrelated factors in the background generate a path dependency with the aggregate outcome manufacturing very different picture.  

However, segregation rather attributing to woke tendencies of constructing the same in terms of class-conflict etc. has to be observed in alignment with independent exercise of preferences by numerous individuals/groups at given point collectively translating into an aggregate of unintended segregation.