Douglas C. North in his publication 'Institutions, Institutional Change, and Economic Performance' talks about the importance of institutions, and exactly how these institutions influence economic performance. Institutions include both informal rules like code of conducts, traditions and customs and formal rules like constitution, laws and property rights. People generally give consideration and then the formal rules which exist in the society and the informal rules do not get the interest and importance that they ought to get. The British in India did the same thing. But, North argues these informal rules are also important and they shape the future of the economy. Institutions as defined by North are humanly devised constraints that structure economic, social and political interaction.
Entry of British in India
When the British came to India in 1600s they saw a society which was not governed by any formal laws like the Bible (which was regarded as a divine way to obtain power, law and rules to them) which governed the English; but a heterogeneous society where every individual followed his or her own custom and tradition which were varied. There is no uniformity in the practices that were followed by folks. The concept of formal law like being governed by the uniform system of law or a constitution was an alien concept to the Indians. Kautilya in Arthashastra recognizes existence of four sources of law that happen to be 'dharma' (scriptures), 'vyavahara' (mutual agreement), 'charitra' (local custom) and 'rajashasana' (state decree). Kautilya says that these were in ascending order and that the state order prevailed above all the scriptures and customary practices, when a conflict would arise. Similarly even Ashoka and Akbar developed lawful restrictions which were to be followed by the subjects but they never mandated the people to follow these laws unless their customs were such to be able to lead to communal disharmony. Thus, we see that the Indians had complete freedom to practice any norm, practice, custom etc. that they pleased so long as harmony was maintained.
When the British stayed here as traders they didn't interfere into these local customs and practices and were least worried about it. When they came to the sub-continent the political power was weak as the energy of the Mughal Empire in the center was crippling, thus rendering it easier for the British to get political control and make a strong foothold in India. The English did gain the central control but their supremacy would only be identified by the people if indeed they would resolve disputes, which encouraged the British to build up judicial system in India. Regulations provided the British nothing less than a comprehensive ideology through which to rule.
The ideology that was employed by the British was as Edward Said talks about in his path breaking book "Orientalism". They made the Indians believe they were barbaric, uncivilized, in darkness and backward and it was their (British) duty to make the Indians civilized, modern, and progressive and bring them enlightenment. There was cultural hegemony which existed and the British believed that they could enhance the Indian situation. The image of the cruel and superstitious natives who needed Christian salvation was deliberately constructed by the Evangelists.
Informal Institutions in early India and path dependence
Initially the British tried administering the practices, norms, culture and traditions that were prevalent in the Indian society, but as there is insufficient uniformity as everyone followed different customs and traditions the British found the administration to be difficult. James Mill and Thomas Babington Macaulay wished to codify the laws in India and wished to conduct an experiment and see how codified laws worked. They wanted to make the laws predicated on the main of 'utilitarianism' and wanted a code that was "symmetric in every parts" and which would generate uniformity. Thus, started out India's shift from a casual institution where interactions between parties were predicated on social norms and customs to formal institutions like codified laws.
The natives in India for years and years have been following their own local "customs and usages". The Indians have been travelling on the path where they were not mandated to follow a particular law or text and were free to choose the norm or custom that they wished to follow. Since there have been no restrictions in it the Indians had complete freedom. The Indians had been on this path for some time and thus there is "path dependency". This means that because the Indians have been traversing this path for a long period taking an alternative solution path would be difficult and there would be a high price for changing the road. Another definition of path dependency is that which states that history matters and this impacts the possible outcomes in future. The change in path in future becomes difficult due to "increasing returns" or "positive feedback" that is received since it has been being followed for a long time frame by large number of people.
With the thought of the British to bring in formal rules and also to codify laws there is a shift in the institution from informal to formal. Shift in the criminal sphere had not been difficult as criminal law was universal and was to be employed universally on everyone. Warren Hastings agreed with this codification, but objected to the codification of the personal laws of the Indians as he knew it was dangerous and wished to stay away from it. Because the British could not impose their ideology Hastings decided that there would be Indian officials like pandits and maulvis who would help the English judges take decision. Since, the English judges were unaware of the Indian jurisprudence, this help by the officials was essential for them to choose upon cases.
Reasons leading to shift in institution from informal to formal
The court wanted specific solutions to complex issues. The colonizers didn't pay any importance to the prevailing diversity and would ask questions of general rule and the pandits would answer keeping dharma in mind. The answers which the British got were never in tandem with the questions asked, as the pandits and maulvis had never faced such a predicament before and the answers differed from one pandit to the other; and these answers were then accepted as 'general rule of law' and were imposed upon folks. Different pandits came to different conclusions even though the circumstances were same because they might refer to different texts or scriptures as there is complete freedom to find the custom that people wanted to. For example if an Englishman would ask how to turn into a Hindu, the method or the task told by different pandits would be different as there is no-one particular way of doing it. Thus, there is no uniformity.
The pandits in India weren't an organization like the Pope of the church. The pandits didn't interfere in the political sphere at all; unlike the church where in fact the Pope would coronate the King and then only could he rule. There were varied customs prevailing and every pandit would interpret the written text in different ways as there is no single interpretation like there is of the Bible. A proper - trained pandit would be in a posture to cite numerous versus on particular topics or only the ones that made a particular point useful to a particular scenario or indeed he might express his own judgment on the matter but these differed greatly from each other. The customs would change from place to place and the British were baffled as of this dissimilar existence of customs. Thus, there was no uniformity and certainty in the decisions distributed by the pandits and the maulvis. This resulted in a mistrust of them by the British and therefore they made a decision to codify regulations. Another reason for codification of the laws were that they believed that there was popular demand for such changes; and the favorite demand according to them contains group of elite Hindus who had been a part of the British administrative structure itself.
Organizations acting as change agents
North in his publication also talks about the existence of organizations which can be band of individuals bound together for purpose to attain objectives and are created to take benefit of the opportunities that the existing institution provides them and then either work within the existing institutions or change and alter the prevailing institutions, depending on the objective to be achieved; and therefore the organizations which are manufactured out of the existing choice set become major agents of institutional change.
When the British realized that administration in India was difficult due to non-existence of any certain law they finally took the bold step of codifying the personal laws as well. Hastings had wanted to avoid personal laws as he realized that marriage in India was tied to religion plus they had chosen staying neutral into the native religious affairs and secondly because they thought that there interference might lead to communal violence. However the assistance of the pandits and maulvis was now viewed with mistrust and therefore, Hastings selected 11 pandits to codify lawful restrictions which would then be followed by everyone.
The pandits developed 'Vivadarnavasetu' which literally means 'a bridge on the ocean of disputes' was the original Sanskrit version. Down the road these were translated in English (with which also there have been problems which will be dealt ahead) under the name of "A Code of Gentoo Laws". This is was totally transformed and words like 'code' and 'law' that have been never a part of the original text were now legitimized. On the other hand William Jones appointed Jagannath Tarkapanchanan, the legendary scholar on all branches of the Dharmasastras to compile 'Vivadabhangarnava' which literally means 'a break wave on the oceans of disputes' and it was later translated into English under the title "A Digest of Hindu Law". Again the importation of British concepts of 'digest' and 'law' were used to legitimize the transformation of the prescriptive guidelines in the 'Sastras' as legal rules to be administered by the court.
Initially the British gave regard to the customs that were ubiquitous while codifying the laws, but even they realized that there have been uncertainties plus they cannot trust the Indian officials as there was a possibility of them defrauding the company for his or her own benefits. Thus, many English jurists like William Jones, Colebrooke made a decision to translate the texts into English so that the judges could use it. But the translations were done by European scholars. When translations were done the essential meanings got lost and the complete meaning and its own essence could not be understood and translated, as there are specific words the exact word for which may not exist in the other language. Including the word 'dharma' this means 'the all en-compassing duty to do the right thing at the right time, at any point of your respective life', was simply translated as 'law'.
The English jurists who translated the texts into English were the organization which objected to the prevailing informal institution. This organization had the normal objective (having political control over India) was the ease of administering laws. The goal which the organization sought to achieve of uniformity and stability cannot be performed with the existing institution of informal norms, code of conduct and behavior; they had to enter something more concrete like formal laws so that there could be certainty and uniformity. This organization emerged as a result of existing choice set which was open to them because of the informal rules in place and they took benefit of the position that they had attained and acted as change agents or as North would call them entrepreneurs in monetary terms and gave India codified laws.
Importance of informal norms
North in his publication also states that move from informal to formal institutions is a slow process. Although formal rules may change overnight due to political or judicial decisions, informal constraints embodied in customs are a lot more impervious to deliberate policies. These cultural constraints not only hook up days gone by with today's and the near future, but provide us with an integral to explaining the path of historical change.
In India if we see the move from informal non-codified laws to formal codified laws was a slow process as the British in the beginning tried to manage the informal rules only, but when the result had not been with their satisfaction they decided to move towards codified formal rules. But, if seen from another perspective then we see that the change was all of a sudden as the British imposed these codified laws on the Indians when for a long period that they had been carrying out a different path altogether. This imposition of the laws on the Indians cannot percolate into the society and could not become a part of the society easily as these were imposed from outside and were not from within the society itself and sometimes were not in conformity with the existing norms.
Change from informal to formal institution has an expense - Transaction Cost
Now this institutional differ from informal to formal cannot be without the cost. There was a cost that your society were required to bear, but this cost had not been taken into consideration when the business was taking the decision of altering the institutions according to its own benefit. The price borne was the change of several customs which were existing, lack of many customs as these were not codified, freezing of identities, creeping in of foreign ideologies and biasness and death of plurality of customs, traditions and indigenous practices. This cost is known as transaction cost as it is the expense of changing the path upon which one has been travelling for an extended time frame (non-codified laws) to a fresh path (codified laws). Transaction cost is because the institutional change, but this transaction cost also would have earned Indians a sense of unity which had not existed before within a group and also led to the abolishment of many evil practices which were being practiced by people.
Codification of 'Hindu law' was a humongous task because there was no existence of anything called the 'Hindu law' (its existence was presumed by the British keeping in mind the bible that was their way to obtain law) before the colonial era, and secondly because the actual British mistook to be the source of 'Hindu law' was so vast that they were struggling to codify everything as there were various norms being followed in the society which did not come from some ancient scriptures or religious texts. In England there existed a homogenous society with everyone following what the church told them as mentioned previously above the church was a business and therefore their interpretations of the bible (that was the divine source of their law) were also same. So when the English came to India they was included with a framework in their mind that, there would be a homogenous society and that this homogenous society could have a divine source of law. But, the British were in for a surprise when they came to India. They realized that a heterogeneous society with various different practices existed in India plus they failed to find a 'divine source of law'; but were adamant on locating a way to obtain law something which was comparable to the cannon law and therefore in their desperate try to find a source, William Jones who was to then translate the "sources of law" directly into English considered 'Manusmriti' which were the 'Memories of Manu' to be the source of law and the translation came to be known as the "Institutes of Hindu Law". India doesn't have a cannon law which legitimizes a uniform code for all the diverse sets of the city; but, for that reason arbitrariness the British started patronizing education and interpretation of the shastras for his or her own.
The British thought that they might derive regulations from the texts and scriptures but this was cumbersome and impractical. These were influenced a lot by the legal theory especially that of Jeremy Bentham. Bentham believed in the principle of utilitarianism. Utilitarianism means greatest good for the maximum amount of people. In such a scenario it's the minority that is overlooked and their needs are not taken into account; but while codifying these laws the opposite happened. Codification of the laws was done by few pandits who had their own interpretation of the texts and it was done on the demand of some individuals with whom the British interacted. Thus, what got codified were only a few traditions and customs and a big number of them were overlooked and therefore got lost.
There was strong impact when colonial law encountered the non-public law. It led to customs like property rights which are essential for the development of any society being substantially altered in Bengal and rights of women to hold property was also substantially changed. There have been two schools of thought that existed in India 'Mitakshara' and 'Dayabhag' in relation to property rights. Mitakshara was followed everywhere except in Bengal where Dayabhag school of thought was followed. When codification was done by William Jones he was influenced by the Dayabhag School and hence, almost all of their beliefs got codified and beliefs of the other school were overlooked leading to the death of many customs. The increased loss of customs had not been only because these were not codified, but also because the judges refused to identify the existing norms if they didn't have any spiritual authority. Customs that the folks followed were something had been developed by the community on their own and had no spiritual backing and therefore these were considered invalid by the courts. When there was a conflict between customary law and the official law, then the customary law needed to be established and then only would the customary law prevail. But the standard set for proving customary law was so high that almost no law could meet up with the requirements and slowly most of them withered away. The judges also had the power to strike down the law on the foundation that they considered it to be against public policy. There is no definition given in regards to what was against public policy which gave unfettered power in the hands of the judge to choose which laws were valid and that have been against public policy.
There was freezing of identities as Hindus were now considered to be a more substantial group of people and were regarded as a 'community' while on the other hand the Muslims were considered 'outsiders'. This also happened because in courts the judges had to apply Hindu law to the Hindus and the Muslim laws to the Muslims; so now people had to decide which religious community they belonged to, whereas at first there was no such pressure about them to recognize themselves with a particular religion and were absolve to choose any custom of any religion they wanted to follow. The translation of the code was done by English jurists who had been trained in English laws and customs. So when they translated the law they could not keep aside their biasness and facets of English law crept in. Thus, the new law which happened made up of first, the interpretation of the laws by the judges, in the form of case laws acting as precedents and secondly, through codification of the scriptures. In addition they used the principles of justice, equity and good conscience while considering the cases. This led to the emergence of Anglo Hindu law.
As Anderson in 'Islamic Law' says :
"the construction of Hindu law in India by the British colonial government [and] the British effort to "find" Hindu lawassumed that the Hindu law would be found thoughdeduction from precedent and a give attention to cases. Hindu law steadily had become predicated on previous judges' decisions, not on Hindu sacred texts. These texts themselves were mistranslated and selected in line with the conceptions of English civil law, so that Hindu law was ultimately defined in conditions of European conceptions of Hindu law. "
But the transaction cost borne also helped as this death of plurality resulted in removal of several practices that were evil and were rampantly practiced in the society. Various acts were passed which made the social condition better, like the Sati regulation of 1829, the Caste Disabilities Removal Act 1850, the Hindu Women Remarriage Act 1856, and Child Marriage Restraint Act of 1929. Removal of Sati was an important step as this practice was highly followed in Bengal. Sati was so prevalent in Bengal because they followed the Dayabhag School of thought which gave property rights even to women. These acts helped increase the social conditions in the society at least in writing if not reality, as there is certainly evidence to show that sati was more widely practiced after the regulation that happened. There were retentionists as well who had been unhappy with such codes, and in many areas the customs were not changed relating to the code and they still continued; as a stroke of pen cannot completely do away with or abolish customs that were being followed for centuries. This may have earned more unity as now the Indians had something to recognize themselves with, which were common to all or any the people.
North says in his publication that the resultant path of institutional change is shaped by:
The lock - in that comes from the symbiotic relationship between institutions and the organizations which have evolved because of the incentive structure provided by those institutions - the new path of codified laws that India started walking on after codification was traversed on for some time and the road became locked ever sold and thus, gave India codified lawful restrictions which exist right now. This codification could only happen because the existing institutions didn't provide for the political unity of India which gave British the incentive to codify the laws using their political power; and
The feedback process by which human being perceive and respond to change in the opportunity set - keeping aside the costs borne because of codification, from British perspective this technique of institutional change was beneficial as it helped in smoother governance of the country and better control over the people.
Bengal as an illustration
Now let's look at the existence of this framework through example of Bengal. During this time Bengal comprised of Bihar as well and was named Bengal presidency. The populace of Bihar contains Muslims as well and not only Hindus. As already mentioned above there have been two schools of thoughts that existed. One was called the Mitakshara that was followed in every parts of India and the second being Dayabhaga which was followed in Bengal only. There was difference in the two Schools because they had different rules which governed them. for example: in Mitakshara the son had a pastime in the property as soon as he was born, while in Dayabhaga School the son got the house following the death of the father.
According to the Dayabhag School the ladies had substantial property rights. In some instances they managed the property with respect to the male members and on other occasions they might hold property in their own name following the death of the husband. Through the British era in the 19th century the amount of property that might be held by the ladies substantially reduced than what's was earlier. Their property was vulnerable to competing claims of the local powerful men. This change also happened because in England the British women didn't have property rights so when the British saw this new scene in India while codifying the laws they brought this change and the right of women to carry property was substantially taken away.
Warren Hastings had been the governor general of Bengal but towards the end due to financial instability he was replaced by Lord Cornwallis. One central aim of this project was to restore the landlord and property rights that existed a generation before. Lord Cornwallis planned to give a constitution which would protect the personal property of the individual and thus assist in the prosperity of the state of hawaii. Thus, he created new offices and courts to accumulate more revenue which was the purpose of the British. When the British came to India they was included with their English notions of how property was related to politics. So when they came to India lord Cornwallis could not disassociate this idea and believed that there would be the existence of same relation even in Bengal.
Using their pre-colonial notion of the existing offices and without bothering to comprehend the prevailing social institutions they removed Indian officials from important posts and made them mere informants or agents. During Warren Hastings stay he gave importance to the customs and usage of the local area, but when Lord Cornwallis came he thought that the info about the customs could be gained from the inhabitants of the place and thus abolished the office qanungu who was simply the district officer and would be a ready way to obtain information about the existing customs. But Lord Cornwallis removed any office convinced that the post had deep rooted immersion in the historical continuities of a particular society made them easily corrupt and there have been likelihood of them defrauding the Company with the landlords.
This essentially happened because the British wanted to maintain their supremacy and didn't want to lose their political power in India, but while being insecure about the hold of power politically they forgot to provide due importance to the existing social institutions which could have made their rule easy. The constitution given by Lord Cornwallis had a paradox. It had been based on the Burkean philosophies of trust and customary practice, but sadly, when it came to Bengal both were nonexistent as there is severance and a distance existed between your world of government and the relations it governed.
The judges in the court had officials that would assist them, but then the British started mistrusting these officials who were either pandits or maulvis. Thus William Jones wanted a text which could help the judges decide cases and their dependence on these officials reduced. The book was a translation of Sanskrit commentaries on contracts, property and inheritance laws compiled by Jagannatha Tarkapanchanam who was simply the esteemed jurist in India in the 18th century. This Digest was not to codify the laws but to compile all the utilization so that administration would be easy and not an attempt to codify laws. The written text was designed to supplement your choice taken by the officials and judges and not replace the law. But these texts again were of little help the judges as that they had no idea about Indian legal jurisprudence and hence, the text was also useless to them because in Alexander Tytler's words the laws that were existent were "jus vaguum et incognito - or vague and unknown".
The solution to this problem was presented with by governor of Bombay Elphinstone that was to create an authoritative set of rules or in other words to codify laws. They thought that would generate certainty, but this gave scope of interpretation which again resulted in the same problem, and hence they made a decision to write texts which contained all the laws and matters ever adjudicated after and more than even that of the pandits that was now to govern Bengal. They consisted of a conscious attempt to rationalize and reconstruct-rather than merely represent-Indian jurisprudence.
Here we can bring the same argument as that of the Uniform Civil Code (UCC) as to while causeing this to be uniform code or in this case while causeing this to be text which person did they keep in mind? The law when made will be produced in one perspective only and obviously the perspective and opinions of everybody can't be incorporated. Similarly while codifying the law; the text could not obviously contain all the indigenous customs and practices. The texts would cover the ideas of the British about how precisely regulations in India ought to be with complete disregard to how the law is. Even if they would view it from the medial side of the Indians or the Hindus they would keep in mind the opinions of these few with whom they interacted and folks at the periphery obviously lost out. This led to changes in the existing customs as time passes. Let me illustrate this with the help of a good example.
In 1780 a boy called Bhola Dhami was adopted by Nawazu who was his aunt and a widow, in the city of Mirzapur, in the district of Gaya in Bihar. He was adopted after the death of the husband and his name was never mentioned in front of the husband. (In ancient law women could not adopt son in their own name and she cannot adopt son after the death of the husband if the husband's consent was absent). In today's case Bhola Dhami was adopted without the consent of the husband, but even then the boy got the to inherit the property and the home at Mirzapur. As time went by and the boy grew up there were fights between the son (who was now twenty) and the mother. Nawazu wanted to eject Bhola Dhami as the heir and wanted to adopt her daughter's child Musan Dhami as the heir instead. Bhola Dhami sued Nawazu in the court of Gaya in 1800 to claim the house on the lands that the second adoption was minus the consent of the husband.
The judge in this case in the beginning asked the Indian official the Hindu law officer to aid him. His thoughts and opinions that was derived at by going through texts notably the Mitra Misra's medieval focus on inheritance law was not accepted by the judge as the judge cannot seem sensible of the pandit's vyavastha (opinion). He criticized it by saying that it was not explicit and therefore he asked another Hindu law officer to make a report predicated on local "usage" in what determined adoption in Gaya. The business used the customs and practices and not the texts as the foundation of deciding property disputes. After considering the report the judge reached the decision that in Gaya the parents were permitted to disinherit the adopted child and upheld Nawazu's second adoption.
The case did not end here but went in appeal and reached the highest court of appeal in Calcutta. The perplexity which existed before the judge deciding Bhola Dhami's case of not relying on the official's thoughts and opinions continued plus they had no rules to steer them, and therefore they would fall back on the Judicial Board or the appeal court in Calcutta to seek solutions to irresolvable disputes. The situation continued and reached the regional court of Patna in 1819. This time the judges rather than referring to the local "usage" referred the situation to the existing texts and the question which was now to be answered was whether both Bengal and Bihar were governed by the same rules. They reached the conclusion that both states followed the same rules of adoption and this the woman did not have the right to adopt without the consent of the husband and hence Nawazu's second adoption was considered to be invalid.
The dispute was heard for the last time, in the Sadr Diwani Adalat, the best Bengal appeal court, in 1831. Within this court it was the pandits who argued that the customs and practices were governed by the textual rules which both Bengal and Bihar were governed by one single rule, which was that the ladies could not adopt minus the leave of her husband.
Thus, we visit a very clear exemplory case of how the rules changed as time passes. Initially they were reliant on customs (informal norms) but slowly because of their inadequate understanding of the Indian jurisprudence they started counting on texts (formal institutions) and over time even the pandits who have been primarily for the customs started believing that customs flows from textual sources that is informal norms flow from formal rules, whereas the truth is it was the formal rules that had flown from the informal rules.
The Dayabhag School and the Benaras and Mithila sub-schools of Mitakshara law recognized five female relations as being eligible for inherit namely; widow, daughter, mother, paternal grandmother and paternal great grandmother and the Madras and Bombay sub-schools recognized the capability of larger volume of women. But, this scene changed when the British earned force the Hindu Law of Inheritance Act, 1929 according to which only three female members could be heirs to the property who have been son's daughter, daughter's daughter and sister thereby restricting the amount of female heirs. Hindu's Women To Property Act, 1939 brought revolutionary changes but also there have been certain defects and the rights of inheritance of female members went through changes; the price borne due to improve in institutions from informal to formal rules.
Conclusion
Hence, we see that how existing informal institutions and their inefficiencies in the eyes of the organization the British caused a big change in the prevailing institution and there was a shift from informal norms to formal rules. This, shift was not without costs as every time a path dependent process is changed costs are borne. There was reluctance for the British to change the norms plus they tried managing with the prevailing norms because of they didn't want to enter the non-public sphere of the Indians which have been travelling a particular path for an extended period of the time. But, the British cannot forever travel on these inefficient paths and so acting as change agents they changed the path. The costs borne known as transaction costs were the results of institutional changes, but these transaction costs also resulted in certain advantages to the society and evil practices were done away with. Thus, one cannot disregard the informal norms, codes of conduct and behavior completely and impose formal rules without giving the mandatory importance to culture, beliefs and institutions.
