If Muslims get richer, Hindus try to kiss them.

Implications of an Economic Theory of Conflict: Hindu-Muslim Violence in India

Anirban Mitra, Debraj Ray

NBER Working Paper No. 19090
Issued in May 2013
NBER Program(s):   DEV   POL 

We model inter-group conflict driven by economic changes within groups. We show that if group incomes are low, increasing group incomes raises violence against that group, and lowers violence generated by it. We then apply the model to data on Hindu-Muslim violence in India. Our main result is that an increase in per-capita Muslim expenditures generates a large and significant increase in future religious conflict. An increase in Hindu expenditures has negative or no effect. These findings speak to the origins of Hindu-Muslim violence in post-Independence India

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The full paper is here.
On the assumptions of the authors,  assuming the Police are non-functional or that they side with the majority, then -if a riot breaks out- the majority will
1) kill more than the minority unless the minority has rational expectations and quickly runs away
2) loot more than the minority and thus, potentially, come out ahead.
Thus only Minorities which are stupid or which have very poor Leadership or which have a suicide wish will ever participate in riots. Instead, they will be prepared to pay a Protection Tax till such time as they can safely emigrate. Similarly, Majorities with rational expectations will launch periodic predatory assaults on the Minority if for no other purpose than to keep their numbers down.
Prima facie, this model predicts that minority share of population wlll fall as indeed has happened in Bangladesh and Pakistan and now Iraq and Egpt and so on.

Examining the empirical evidence, the authors find something strange.
In India, the majority community doesn't slaughter and dispossess the minority (unless the majority happens to be Christian, as in Nagaland, or Muslim, as in Kashmir). Instead, if its Income goes up, it gets less aggressive (provided it is Hindu). Not so the Minority (unless it is Hindu- in which case it runs away). If its Income goes up it is more prone to go on the rampage. But this means it will lose more and so its Income will fall back down after a riot. Still, once Income starts rising again, they just go on the rampage  again and the pattern continues till either they become the majority (assume poorer people have bigger families) or they become so de-skilled that their Incomes can never rise.

Obviously, the Identity categories 'Hindu' or 'Muslim' have no natural or inevitable connection with 'majority' and 'minority' and thus can't be used as explanans in a scenario like this, yet this is what the authors do. Their conclusion is that when Muslims get richer, Hindus attack them. This is entirely inconsistent with their assumptions and findings. What is warranted is the conclusion that you don't have to be a Bengali Hindu to be a shite Economist, but it sure seems to help.

Prof Debraj Ray, Capitalism and the inevitability of increased Inequality.

Apropos of Piketty's book on Inequality, this is Prof. Debraj Ray's- Fundamental Law of Capitalism. Uneven growth or not, there is invariably a long run tendency for technical progress to displace labor. 

There is a simple argument why this law must hold. It is this: capital can be indefinitely accumulated, while the growth of labor is fundamentally limited by the growth of population. Therefore there is always a tendency for capital to become progressively cheaper relative to labor, and so all technical progress must be fundamentally redirected away from labor. But there is a subtlety here: that redirection must of necessity be slow. If it is too fast, then the demand for labor must fall dramatically, resulting in labor being too cheap. But if labor is too cheap, the impetus for labor-displacing technical progress vanishes. So, this change must be slow. But it will be implacable. To avoid the ever widening capital-labor inequality as we lurch towards an automated world, all its inhabitants must ultimately own shares of physical capital. Whether this can successfully happen or not is an open question. I am pessimistic, but the deepest of all long-run policy implications lies in pondering this question. 


Can Capital be indefinitely accumulated? Let us take
1) Physical Capital. Urm, either it occupies space or it provides an input to something which takes up space. Space isn't infinite. So Physical Capital can't be infinitely accumulated. It can be periodically junked and sometimes even replaced.
2) Financial Capital. Can it indefinitely accumulate? Perhaps in nominal terms but not in terms of a claim on present day goods and services. However, only a small subset of what is in circulation comes under this rubric for all sorts of reasons- Legal, Customary, Government Policy etc. Furthermore, Financial Assets are less like pots of gold and more like a software program. They are the product of engineering and can go obsolete or get buggy or just do a Madoff. Assuming the Stationary Bandit of the State is on the prowl, what we can say about Financial Assets (and the sort of Inequality Piketty highlights) is that, insofar as they keep their value, under Red Queen type pressure (i.e. exhibit co-evolved complexity) they show typical Predator Prey cyclicity. Sure, from a peak, looking back, this may not appear because we no longer recognize genotypal variants which went extinct as belonging to the same species. 
3) Human Capital. Are you shitting me? Rahul Gandhi has an MPhil from Cambridge. Smriti Irani is a Tenth standard drop-out. Whom would you rather see in charge of the HRD Ministry? Nuff said.

What about the 'growth of labor'? It certainly isn't limited by the growth of population. First World War- women started to work- the labour supply increased. In a sense, Technological advances, embodied in fresh Capital goods, determine the potential increment in the Labour supply at any given time. A guy who would have had to retire at 70 may be able to earn a wage at 90 thanks to new technology. A kid of 8 might create an app and sell it for more than a Computer Studies graduate circa 1980.

I can't make sense of the rest of the Professor's remark. He's a real smart guy and knows from multiple equilibria and complementarity and re-switching and so on. His story about indefinitely accumulating Capital ignores rats- Madoff type rats (Principal Agent hazard) and Red Queen type Stationary Bandit, Bureaucratic rats, not to mention good old fashioned Depreciation.
Of course, he may be right. Maybe them smartypants on Wall Street really do know what the future fitness landscape will look like AND what's more incentive compatibility obtains such that no Principal-Agent hazard exists and what's more all the Politicians have been bought off a la Arundhati Roy or Arvind Kejriwal.

If so, History really has ended. However, this still doesn't tell us anything about Inequality. Why? Well, if History has ended then there is no driver for 'canalisation'- human beings will separate out into different species. 
I personally hope to be a pedigree breed of pussy-cat prized by bosomy women who will cook me plenty of treats and let me sharpen my claws on Amartya Sen.
OMG, if only Rahul had taken the same course, he'd now be PM! Seriously, scratching Amartya Sen's face and saying miaow and then jumping into Smriti Irani's cleavage is the only way to defeat Hindutva.