Chayanov and Marxism

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The Unfinished Narodnik Agenda: Chayanov, Marxism,

and Marginalism Revisited
Sivakumar
Published online: 08 Sep 2010.
To cite this article: Sivakumar (2001) The Unfinished Narodnik Agenda: Chayanov, Marxism, and Marginalism Revisited, The
Journal of Peasant Studies, 29:1, 31-60
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The Unfinished Narodnik Agenda:

Chayanov, Marxism and Marginalism
Revisited
Downloaded by [UNICAMP] at 08:52 09 January 2014
S . S . S I VA K U M A R
This article reviews some of the salient aspects of the

controversy over capitalism and the fate of Russian peasantry,
among the Russian Marxists and the narodniks immediately
prior to and after the Bolshevik revolution. At issue was the
characterization of peasant economies. The narodniks
believed that neither marginalism nor Marxism fully captured
the nuances of peasant agriculture and the economic
system/systems that evolved out of it; neither the market
model nor class analysis adequately described the allocative
and distributive processes in such economies. While
nineteenth-century narodniks stressed the role of institutions
based in the village community, Chayanovs twentieth-century
populism stressed the organizational dynamic of peasant
households within an institutional framework. Accordingly,
the economics of the Chayanovian interpretation are
examined from an institutional and organizational
perspective. Such an exercise, it is argued, lends more
credibility not only to the narodnik agenda, but also to the
peasantist model of development.
INTRODUCTION
At the start of the development decade, Georgescu-Roegen [1960] produced

a seminal paper which questioned the validity of marginalist economic
Professor S.S. Sivakumar, Department of Econometrics, University of Madras, Chennai
600005, India. The questions posed in this article had their genesis over two decades ago in a
summer evenings discussion with Teodor Shanin, and although the two never met afterwards,
Shanins compelling arguments continued to influence this author. The latter also gratefully
acknowledges Chitra Sivakumar, Aurobindo Ghose, M.N. Srinivas, Burton Stein, U. Ayyasamy,
N.S.S. Narayana, David Washbrook, Peter Robb, Prannoy Roy, Sukhomoy Ganguly and Dharma
Kumar for valuable suggestions during the development of the ideas underlying this article.
The Journal of Peasant Studies, Vol.29, No.1, October 2001, pp.3160
PUBLISHED BY FRANK CASS, LONDON
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THE JOURNAL OF PEASANT STUDIES
concepts in the context of peasant agriculture. When he was writing the paper,
economic development was universally regarded as synonymous with a
transition from peasant agriculture to capitalist agriculture; for neo-classical
theorists, the distinction between the two was that in peasant agriculture the
marginalist economic rules of resource allocation were said to have failed,
while capitalism was said to be governed by these rules [Nurkse, 1953; Lewis,
1954; Ranis and Fei, 1961]. Against this, Georgescu-Roegen argued that
peasant agriculture should be viewed as a distinct organizational form, rather
than as a case of success or failure of marginalist rules.
Significantly, the 1960s also witnessed a revival of interest in the
historical ideas of Russian populism (or narodnichestvo), which flourished
in pre- and post-revolutionary Russia, and covered a range of issues, from
art, through literature to macroeconomics.1 In 1966 the American Economic
Association published the first ever English translation of Chayanovs
Theory of Peasant Economy.2 Populist ideals and Chayanovian theory about
the peasantry increasingly became a part of the study of economic
development, and the debates (mainly, but not only, between Marxists and
marginalists) about the role of peasantry in this process.
The purpose of this article, therefore, is to examine the agenda of
Russian narodnism, both at the level of macroeconomic processes and at the
level of microeconomic decision-making, and to offer an alternative
institutional and organizational perspective on some important populist
arguments.3 To this end, sections one and two are devoted to a brief review
of narodnik macroeconomics and Chayanovs peasant decision-making
model respectively. Sections three and four offer an institutional and
organizational perspective, both of agrarian institutions and of the
organization of agrarian society (with illustrations from South India). The
final section consists of concluding remarks, with particular reference to the
concept of transaction regimes, which is central to the perspective
advocated here.
I. CAPITA LISM, MARKET AND REGULATED D EV E L O P M E N T
Russian populism, as Berlin [1960: vii] points out, was no single coherent
body of doctrines, but a broad current of thought, differentiated within
itself [Walicki, 1969: 4], as well as a set of shared attitudes and
preoccupations, hopes and fears, longings and hatreds, that were merely
given shape by one or the other ideological formulations [Wortman, 1967:
ix]. It would be no exaggeration to add that the concern over the fate of
Russian peasantry was among the most common of these preoccupations,
from Bakunin the anarchist to Vorontsov the legal populist, from
Chicherin the conservative to Tkachev the Jacobean.
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THE UNFINISHED NARODNIK AGENDA
33
According to Gerschenkron [1960: 159], the earliest intellectual reaction

against Russian serfdom appeared in the works of Radishchev in 1790.
However, both he [Gerschenkron, 1960: 161] and Venturi [1960: 6] agree
that it was the Decembrist uprising that began the serious reaction against
serfdom. The Decembrists turned again and again to the obschina, looking
upon it as the guarantee of stability and security, although most of them
were advocates of free trade [Venturi, 1960: 69].4 One of them, Bestuzhev,
raised a question, which was to be modified only slightly 50 years later by
Danielson: Which is the more useful for agriculture, great estates or small
properties? In 1850 Bestuzhev wrote that the proletariat existed only in the
West owing to the institution of private property in land, whereas in the
Russian obschina, where land was used merely as a means of work,
proletarianization could not occur. Further, everyone, however poor,
always had the right to a piece of land. However, the 1850s belonged not
so much to Bestuzhev as to Bakunin and Hertzen, both of whom were the
more influential writers about the Russian peasantry.
The 1860s belonged to Chernyshevsky, who was even willing to
cooperate with ultra-nationalist Slavophiles in order to protect the obschina.
According to Walicki [1969: 18], Chernyshevsky believed that primitive
communal collectivism was similar to the developed collectivism of a
socialist society; benefiting from the scientific achievements of the West,
Russia and similar peasant economies could move directly towards
socialism, skipping the intermediate stage of capitalism [Schapiro, 1960:
4623]. At the same time, as Venturi [1960: 174, 165] points out,
Chernyshevsky was an ardent westernizer and supporter of state regulation
of economic activities in order to save the peasants from the monopolies
that were inevitably created by an unequal distribution of wealth and
power. As long as there existed inequalities, laissez-faire had no meaning.
By the 1870s, the future of the obschina was no longer a matter of mere
intellectual speculation or reflection. The failure of the edict of
emancipation, enacted by Tsar Alexander II, aroused the Russian
intelligentsia into direct action. The 1870s witnessed the rise and slow
proliferation of (mainly student) groups which discussed the ways of
liberating the peasants from the pincer-like hold of an autocratic state and
the grasping capitalist [Venturi, 1960: 23352; Utechin, 1962: 722].
Eventually such groups threw up the nucleus of what would become the
Bolshevik party. However, they also enabled the emergence of systematic
analysis of the conditions of Russian peasantry. Among the earliest analyses
was that by Vasily Vasilevich Bervi (pseudonym M. Flerovsky), who wrote
The Situation of the Working Class in Russia.
Bervis work, which was based on extensive first-hand knowledge,
analysed the causes underlying the destitution of urban and rural workers as
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well as the small proprietor. The oppressive taxation of the state was seen
by him as the primary source of this destitution, and the poor were preyed
upon further by a growing class of kulaks and merchants [Venturi, 1960:
490, 499; Walicki, 1969: 224]. Evidently Bervi believed that only the state
could undo the damage it had caused. Accordingly, he advocated the
creation by the state, on its own land, of a class of independent peasants,
who would then cultivate it on the basis of the traditional system of periodic
land redistribution. In addition, the state had to abolish modern forms of
private property in land so that the peasant could be freed from the clutches
of the kulak and the merchant. Thus, while Bervi diagnosed the ills of the
Russian peasantry almost as a Bolshevik might have done, his remedial
prescriptions were almost romantically Slavophile [Schapiro, 1960: 460].
Nevertheless, it is to Bervi that the credit must go for the first enunciation
of the narodnik economic programme: a non-capitalist economic system
based on small peasant farms, which upheld the non-acquisitive moral order
of the traditional village community and its institutions.
The works of Vorontsov and Danielson completed the economic
formulations of nineteenth-century narodniks. Vorontsovs views on the
possibility of capitalist development in Russia were outlined in a series of
publications during the 1880s. In the opinion of Vorontsov, the development
of capitalism in Russia had a dual element [Walicki, 1969: 11516]:
The historical peculiarity of our large-scale industry consists in the
circumstances that it must grow up when other countries have already
achieved a high level of development. It entails a two-fold result;
firstly, our industry can utilize all the forms which have been created
in the West, and therefore, can develop very rapidly, without passing
at a snails pace through all the stages; secondly, it must compete with
the more experienced, highly industrialized countries, and the
competition with such rivals can choke the weak sparks of our
scarcely awakening capitalism.
Both Vorontsov and Danielson were influenced enough by Marx to use the
language of home market, foreign market and surplus value, as Lenin
[1964: 44] was to observe. According to Vorontsov, the Russian home
market was shrinking, a fact which created problems for the process of
realization of surplus value within the closed economy. At the same time
Russian industry was not competitive enough abroad. In the absence of a
foreign market, and with a dwindling home market, Russian capitalism
would be restricted to small islands of production catering mainly to the
upper classes, and would thus not become a prevailing, nation-wide form
of production [Walicki, 1969: 11820]. On the contrary, measures to
increase surplus value, which under the circumstances could consist only of
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labour-saving technology, would further immiserize the working class.

Thus Vorontsov anticipated an almost Marxian interpretation of the crisis
of capitalism in Russia long before capitalism was theoretically mature
enough for such an event.
Additional evidence for the failure of capitalism was to be found in the
Russian countryside: the small producer had managed hitherto to resist
capitalism, despite the ruthless extortion effected by the government.
Vorontsov identified all small landholders as non-capitalists, however much
they participated in the commodity economy; according to him, therefore,
only large rural estates were capitalist. In support of this, he pointed out that
manorial lands were rented out to small landholders rather than large-scale
farmers, since the former were more efficient.5 On the basis of this evidence,
Vorontsov maintained that Russian peasant agriculture was of a higher type
than capitalist agriculture.
In policy terms, Vorontsov advocated the nationalization of large-scale
industry, the formation of artels to encourage small industries, the
cooperativization of handicrafts, and state regulation of markets for the
inputs and outputs of agriculture and handicrafts. Because in his view
capitalist development was an illegitimate child of history, and hence
artificial as far as Russia was concerned, it was possible for Russia to
move directly from the stage of pre-industrial popular production to that
of socialized popular production [Walicki, 1969: 11820].
Danielsons major work was entitled Outlines of Our Social Economy
after the Enfranchisement of the Peasants, and it differed significantly from
the arguments of Vorontsov. To begin with, he did not share the latters
pessimism about the development of capitalism in Russia, not least because
he accepted that capitalism was already a reality in Russia, as evidenced by
the events leading to the famine of 1891. At the same time, Danielson
agreed with Vorontsov that the lack of international competitiveness in
Russian industry limited the possibilities of capitalism in Russia. On this
point, Danielson argued [Walicki, 1969: 1256]:
the incompatibility of our forms of production with the needs of the
large majority threatens us with such disasters concerning both
population and state, that we have no other choice than this: to lean on
our historical inheritance and to cease to destroy our ancient,
historical form of production, a form being based upon the ownership
of the means of production by direct producers. It is necessary to do
this in order to avoid the danger which threatens every nation which
departs from the age-long foundations of its welfare. All efforts must
be directed at a unification of agriculture and manufacturing industry
in the hands of direct producers.
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Danielson advocated the socialization of labour as a major measure, and

was sceptical of the more moderate policies of Vorontsov, such as
encouragement and regulation by the state of small producers and peasants,
which in the view of the former was tantamount to decree of universal
mediocrity. The point on which both Vorontsov and Danielson were in full
agreement, however, was the feasibility of a non-capitalist path of
development and the important role in this of a strongly regulatory state.
To sum up, there were three main features to nineteenth-century
narodnik arguments. First, there existed in Russia a large number of familylabour-utilizing rural producers who, functioning within the obschina,
constituted a form of production which was more efficient, and historically
more appropriate to Russia, than capitalist enterprise, which depended on
exploitation of labour. Second, these producers constituted the potential for
the development in Russia of a non-capitalist path. And third, the Russian
state had a strong regulatory role to perform in the establishment and
consolidation of this path, through fiscal policy as well as direct controls.
I I . T H E T H E O RY O F P E A S A N T E C O N O M Y
The key question in the debate between Marxists and narodniks in Russia
was the issue of peasant differentiation: was the obschina an egalitarian
world, or was it internally differentiated? And if the obschina was indeed
differentiated, was there a non-Marxist explanation for it? These were the
questions that Chayanov attempted to answer. At the same time, he also
tried to explain why marginalist (or neo-classical) economics could not
account for the organizational basis of peasant agriculture. In order to
address these issues, he created the ideal-typical category of the peasant
family labour farm.
Chayanov and Marxism
Since the theoretical claims associated with the Chayanovian framework
have been discussed extensively during the last three decades, it suffices
only to outline its main aspects. First, Chayanov defined the family in
biological terms, and identified a positive correlation statistically between
the sown area of its holdings and the age and size of the peasant household.
Second, productive activity, whether in terms of cultivation or off-farm
income, was determined by the relationship between family consumer
demand and household working members. While Chayanov did not
maintain that per-capita consumption would remain constant in the long
run, he did insist that it constituted the exogenous limit to work effort
expended by the household during a given time-period. Third, the level of
work effort, and hence the demand for farm inputs (i.e. land, capital, seeds,
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fertilizers etc.), was a function of what he termed the equilibrium between

the measure of demand satisfaction and the drudgery of labour. Fourth,
since this equilibrium level of self-exploitation varied across families of
different ages and sizes, as well as longitudinally within the same family,
peasant family farms exhibited heterogeneous responses to land, capital and
output markets.6 Often, therefore, they behaved in a manner contrary to the
requirements of profit maximization. And fifth, Chayanov [1987: 90]
argued that this model might be applied generally, not merely to the peasant
farm, but to any family labour economic unit in which work is connected
with expenditure of physical effort, and earnings are proportional to this
effort, whether the economic unit be artisan, cottage industry, or simply any
economic activity of the family.7
Chayanovs ideas were criticized fiercely by Marxists, who regarded
them as an apologia for an homogeneous peasantry, composed of economic
actors who appeared to defy the historical process of class differentiation.
This was in a sense unsurprising, since it corresponded to Lenins criticism
of Vorontsov and Danielson, and Chayanov merely continued where
Vorontsov left off. In his Development of Capitalism in Russia, Lenin
[1964] emphasized that peasant differentiation was well under way in late
nineteenth-century Russia, as a consequence of which capitalism was
established in the Russian countryside. As noted above, the narodniks never
denied this, but argued that state intervention on behalf of the peasantry
would arrest this process. Chayanov was no different; he advocated statesponsored cooperatives for the peasantry. The key question, therefore, was:
would rural Russia be depeasantized by the inevitable development of
capitalism? The debate was terminated abruptly by Stalins collectivization
programme in the 1930s.
Chayanov, however, was writing in the 1920s, when the issue was still
open. Together with other members of the Organization and Production
School, he argued that the future of Russia would be shaped by what
happened to the peasantry, the same point made by his nineteenth-century
predecessors. He did not deny the fact of capitalist development in rural
Russia, but made a distinction between the organization of production on
the farm and capitalism in the larger economy [Chayanov, 1987: 257]; even
where the peasant family farm was involved in commodity production, its
organizational features precluded the possibility of surplus output and thus
surplus value.8 Peasant farms indeed experienced pressures from forces in
the larger economy, but this was because trading or merchant capital, rather
than capitalist production, dominated the Russian countryside.9 Chayanov
advocated marketing cooperatives to combat this. He was particularly
critical of the Marxist tendency to utilize sown area as an index for the
exploitation of hired labour [Chayanov, 1987: 255]. He did not deny the
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existence of hired labour, but insisted that sown area was a poor indicator of
production relations, especially given the organizational dynamics of the
peasant family farm. According to Chayanov, cross-sectional as well as
inter-temporal data showed, more often than not, a correlation between
sown area and the consumer-worker ratio of the family-farm. He was
emphatic that family farms, rather than capitalist farms, dominated the
Russian countryside.
The principal flaw in Chayanovs reasoning lay not in the above
assertion, but in the way he conceptualized the relationship between the
peasant family labour farm and the market. Essentially, all that Chayanov
was able to establish was that peasant demand for land, capital, machinery
and other inputs was heterogeneous cross-sectionally as well as
longitudinally, depending upon the consumer-worker ratio. In other words,
his arguments accounted only for the demand side of the market for inputs.
In the absence of an adequate supply-side argument, Chayanovs analysis
was able to explain neither markets nor resource allocation properly; he had
no alternative to offer to the Marxian theory of value, which was mostly
supply-side economics. Despite the intensity of the polemical clashes
between the Organization and Production School and Marxists, there was
a fundamental inconsistency in the position of the former: if the demand
side of the market was segmented by the heterogeneity of consumerworker
ratios, what explained the existence of a single price in a market at any point
of time?
The answer could come only through a supply-side argument or an
institutional argument. Chayanov and his colleagues had neither a sound
theory of value nor a sound macroeconomic theory; eventually, this became
the Achilles heel of the Organization and Production School. It did not
matter that Lenin had by the 1920s made fundamental revisions in his
analysis of the class structure of the Russian countryside, especially his
ideas concerning the enigmatic middle peasant [Kerblay, 1987: ii]. It did
not matter that there were overwhelming data in support of the family farm
model. The paradigmatic poverty of their macroeconomics put Chayanov
and his colleagues at a considerable theoretical and polemical disadvantage
vis--vis the Marxists.
Chayanov and Marginalism
In addition to the charge that he failed to differentiate the peasantry,
Chayanov was also accused of being a marginalist. While the Russian
Marxists used the term marginalism in a limited sense, to refer to the
Austrian School represented by Menger, Bohm-Bowerk, Von Thunen and
others, it would be more useful to consider marginalism in its modern and
generalized version.10 The idea that efficient economic activity equalizes the
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trade-off between gains and losses at the margin is nowadays at the heart of
the neo-classical model in economics. One level of this model deals with the
economic actors individual decision processes, based on the postulates of
rationality and economic entropy; given these, the model shows how
utility/profit/net-gain is maximized. The other level of the model deals with
group behaviour among economic actors with opposing responses to prices,
who transact from the demand and supply sides of a notional transaction
space called the market; these transactions determine the prices in the
market, as well as the quantities of different goods exchanged.
The Marshallian version of this model has a notional separation between
these two levels of discourse, the individual and the market respectively,
which are analytically linked through the process of aggregation. The
Walrassian model consists of a single discourse known as general
equilibrium, in which all individual transactions clear simultaneously, thus
pre-empting the need for aggregation across markets. When all markets
clear, or when there is no inventory left in any market, the situation is one
of maximum efficiency, or Pareto optimum. In the Marshallian model, cases
where markets do not clear are recognized as distortions or imperfections.
The Walrassian model does not provide for such situations. What is
important, therefore, is the presence within marginalism of two mutually
dependent levels of discourse: the micro-level and the macro-level. In order
to qualify as being marginalist, a particular theoretical proposition will have
to be marginalist at both levels. In almost all the recent economic literature
that claims to be marginalist, micro-level use of marginalist tools is
supported by macro-level assumptions of general equilibrium or an
equivalent macroeconomic system.
How does Chayanov fare in this regard? Indisputably, his analysis is
based on an entropic principle: that of drudgery or disutility of effort. The
peasant family farm is a dual-decision entity: it has to decide how much to
consume and how much to work. The number of consumers and workers in
the family constitute crucial analytical desiderata; and the consumer
worker ratio becomes the most important statistical index in the empirical
testing of the model. The model is a micro-level model, pure and simple.
Even at this level, therefore, there are a number of reasons why this may not
be a marginalist model at all, despite the existence of the entropic postulate.
It is necessary to expand on this point in some detail.
In the 1950s and the 1960s, models of economic development by Nurkse
[1953], Lewis [1954] and Ranis and Fei [1961] envisaged the transition of
peasant households from subsistence-oriented family farming to capitalist
agriculture. All of these, especially the Ranis-Fei exercise, were
characterized by the use of marginalist tools of analysis. Developing
economies were, in fact, considered to be characterized by economic
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dualism [Sen, 1966] in the agrarian sector, consisting of the traditional

family farming on the one hand and capitalist farming on the other. By the
1970s, this model had acquired an almost Chayanovian appearance in the
work of Barnum and Squire [1979] which, however, was a marginalist one
in every sense.
At the same time, there developed identical dual-decision models in the
work of Clower [1979] which, while marginalist in design, was used to
demonstrate non-marginalist in fact, quantity-rationing or neo-Keynesian
arguments. Similarly, the life-cycle hypothesis of consumption
[Modigliani and Brumberg, 1955; Ando and Modigliani, 1963] closely
resembled Chayanovs analysis of the relationship between the age profile
of the peasant family and its level of consumption. By no stretch of
imagination could the works of Clower, Modigliani, Nurkse or Lewis be
termed marginalist, since none of them assume the existence of either a
general equilibrium or an equivalent system. As regards his macro-level
preoccupations, nothing could be less marginalist than Chayanovs model.11
Consider, for example, the theoretically eclectic collection of concepts that
influence the resource allocation process in Chayanovs analysis: stochastic
or chance factors, surplus-value of merchant capitalists, linkage between
product and input markets, co-operativized decision making, state
regulation of markets, plus demographic considerations and the dynamics of
landman ratios.
Granted this, the designation of Chayanov as a marginalist was more
rhetorical and polemical than logically justifiable. Chayanov himself
repeatedly stressed that he had as yet to start reflecting seriously on the
macroeconomic implications of his analysis. Two strands of thought are
clear in his work: that the economic dynamic of peasant household
reproduction is only poorly captured through marginalist and Marxian
analysis; and that both the latter are unable to conceptualize fully a number
of factors that influence the allocation of resources and the distribution of
income in economies predominated by peasant agriculture.
Considering the times in which he lived and wrote, Chayanovs critique
of Marxism is characterized by caution and prudence, especially in relation
to institutions. That his debate with Marxists and the tone of his polemics
were of a defensive nature is self-evident. The latter notwithstanding, it is
possible to find in his Theory of Peasant Economy many references to the
role of institutions in peasant economy, the most common being institutions
that determine the size and composition of household consumption,
variations in the age and size of the peasant family, and price formation. In
fact, Chayanovs analysis considers a large number of factors that constitute
the exogenous parameters influencing the relationship between
consumerworker ratio and labourtime allocation in his family-labour-farm
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model: for example, household-size, landman ratio, soil and ecology,

distance from markets and bazaars, non-farm skills, prices, institutions and
market forms that link product and input markets, availability of credit and
the size of household wealth, cultural determinants of consumption, group
decision-making institutions, types of risk, technology, social and religious
events requiring time allocation, dynamics of subjective risk perception and
the subjective factors that cause variations in the perception of drudgery.
Another set of institutions is discernible in the work of the nineteenthcentury narodniks and Lenins Development of Capitalism in Russia: these
include common property institutions, tenurial conditions, the institutional
role of obschina in determining public goods and common property
institutions (which would affect the type of externalities), customs relating
to periodic land-redistribution among peasants, the nature and incidence of
taxation, the terms of trade between industry and agriculture and the
political interest groups representing peasants. This sizeable list suggests
that a variety of influences were subsumed under Chayanovs ideal type, in
the same way as they are included in the neo-classical or marginalist
framework under positive economics. Thus, Chayanovs model would merit
the same immunity from empirical testing as that extended by Friedman to
positive economics: it is the result of theoretical analysis that is to be
subjected to empirical testing rather than the theory itself. While the
existence of the pudding itself cannot be verified, whether it tastes like one
can!12 As in the case of neo-classical economics, it would be possible to
build exogenous factors into a peasant family labour-time allocation model.
Like a neo-classical firm, therefore, the peasant family deviates from idealtype behaviour when faced with more than one objective. In each case, the
resulting economic activity is best characterized as satisficing behaviour
rather than as maximizing profits or minimizing drudgery.13 The economic
actor is looking for a good enough solution, as Simon [1983: 85] puts it,
rather than insisting that only the best solution will do.
In the case of the peasants, satisficing behaviour might arise from a
number of limitations on rational economic conduct engendered by
internal (or subjective) aspects of the human personality and unavoidable
external contingencies. All these might have to be covered simultaneously
with the need to attain the desired level of consumption. This behaviour
entails a type of efficiency conceptualized by Leibenstein [1966] as Xefficiency. An economic actor, or an economic system, is X-efficient when
it functions well within its production possibility limits, for reasons beyond
his/her/its control. Accordingly, an X-efficient Chayanovian peasant would
simultaneously combine all or some of the previously mentioned elements
while deciding allocation of labour-time, cropping plan, type of non-farm
activities and level/type of labour market participation. One of the
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characteristic features of X-efficient satisficing behaviour is the innate

dynamism of the decision-making process: as the situation changes, so do
the satisficing priorities of the economic actor. The objectives as well as
the decision-making activity under X-efficiency, are parts of the dynamic to
which the economic actor is constantly subject. Let us consider a couple of
illustrations relating to the peasant family labour farm itself.14
The first relates to the objectives of economic activity. In the
Chayanovian ideal-type, the objective is family demand satisfaction; the
peasant family would cease to work once the revenues from effort equal the
familys consumption requirement. However, from Chayanovs own data it
is possible to perceive that some peasant families might face constraints
with regard to land, capital or some other input. In these circumstances, the
peasant family might be unable to meet its consumption requirements
whatever the level of effort. Such families would end up trying to maximize
their total revenue from all their activities, which is consistent with the
Baumol [1967] variant of the marginalist theme of profit maximization.
Unfavourable downward shifts in output prices, or upward shifts in input
prices, including interest rates, might also engender the same situation.15
Finally, if the peasant family does not have enough experience enabling it
to assess risk [Shackle, 1955], it might develop a practice of hoarding
wealth whenever possible. In many parts of the world peasant households
find this wealth useful as collateral during times of need. This, too, is a
variant of the neo-classical (or marginalist) maxim of profit maximization.
The moral of the story is simply that peasant households might adapt
themselves to changing objectives and constraints, as a part of the learning
process, which is precisely what satisficing means.
This point has a crucial bearing on the debate between Chayanov and
Marxism, since each interprets profit-maximizing behaviour as that of the
stereotypical capitalist.16 In so doing, both schools restricted themselves
needlessly; as demonstrated by the substantial literature on industrial
organization which has come into existence since then; and, as discussed in
Sivakumar [1997a: 2938], even capitalists maximize profits only under the
hypothetical form of competition which tends to perfection.
The second illustration relates to the participation of peasant households
in the labour market. Chayanovs ideal type does not entail a significant
level of labour-market participation, either from the demand side or the
supply side. However, the introduction of discontinuities changes all this
rather dramatically. Consider, for example, seasonal variations that induce
sharp fluctuations in labour demand in agriculture throughout the world.
Peasant families that can afford to hire in labour during the peak season do
so, even if their own family labour remains unemployed during the slack
season. Hence the hiring-in of labour during the peak season does not
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necessarily convert the peasant into a surplus value-appropriating

capitalist. One needs to know something about unavoidable discontinuities
in labour demand before one is able to judge this.
Conversely, other peasant families, unable to hire in enough labourers,
might hire out all their labour, allowing their own lands to remain fallow for
the season. There are a number of reasons why this might happen, not all of
them indicative of rural proletarianization. A reasonably wealthy peasant
household might have pledged its assets as collateral to meet some
emergency, and hence possesses no resources to invest in a cultivating
season; in the world of the peasant, quite aside from droughts and cropfailures, a marriage or a funeral or, indeed, any other socially necessary
expenditure involving large scale consumption is known to trigger such an
emergency [Mauss, 1990: 6566; Bataille, 1988: 3234]. That a peasant
household has recourse to hiring-out its family labour for a particular season
does not, therefore, mean that it has become proletarian. This fact is
recognized in vernacular utterances. Thus, for example, most Tamilspeaking peasants in South India distinguish between being poor during a
draught (panjattu aandi) and being hereditarily poor (paramparai aandi).
More generally, the cross-sectional data available to Chayanov and his
Marxist critics did not permit a judgment as to whether or not capitalist
production relations were developing in Russia. Just as those peasant
households that hired in labour on a seasonal basis were not necessarily
capitalist producers, so the ones that hired out labour on the same basis were
not necessarily proletarians. Many peasant households had intermediary
working arrangements, involving monetized or traditional labour exchanges
with kinsfolk and/or fellow villagers.17 Chayanov and his Marxist
adversaries were thus on shaky grounds when they accepted hiring-in or
hiring-out of labour only as characteristics of capitalist production relations.
By categorizing peasant households hiring in labour as profit maximizers,
they merely compounded this error, thereby detracting from an
understanding of Russian peasant society. The simultaneous hiring-in and
hiring-out of labour by peasant households itself gave rise to the notoriously
problematic category of middle peasant, the characteristics of which
continue to elude much contemporary analysis.
The lesson of these two illustrations is clear: both Marxism and
marginalism are incapable of capturing the nuances of X-efficient
satisficing behaviour, and of learning processes in general. This was
Chayanovs message, notwithstanding the fact that he could not afford to be
explicitly critical of Marxism. He observed [Chayanov, 1987: 27] that only
rarely in economic life do we come across any economic order like a pure
culture, to use a term borrowed from biology. Usually economic systems
exist side by side and make for very complicated conglomerations.
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At the same time, it is beyond dispute that both Marxism and

marginalism offer much that makes sound common sense. Excepting the
hypothetical perfectly competitive market, all other markets explicitly
involve the presence of economic actors who try to influence priceformation and the process of allocation of resources in their favour, thereby
making the political economy of domination and subordination a central
discourse.18 Marxism is, to date, the most systematic if somewhat limited
formulation of this political economy. Similarly, the marginalist
proposition that scarcity induces a trade-off between gains and losses, and
among the options constituting a choice set, is an eminently sensible truism.
Chayanov accepted, without demur, the basic propositions of both
marginalism and Marxism, while seeking to transcend both. This was the
underlying message of the first half of his work On the Theory of NonCapitalist Systems. As Shanin [1987] rightly points out, it is this broader
and deeper perspective not that of Domar [1968] that is the only
meaningful way in which to interpret Chayanov. Is it possible, then, to
develop an approach to the study of agrarian systems that would
simultaneously explain an X-efficient satisficing micro-level decision
framework involving a learning process, as well as the macroeconomics and
the institutions of hierarchy, subordination and dominance? This is the
question which the next section attempts to answer.
Conceptually, X-efficient satisficing behaviour means that peasant
decision-making processes do not follow any single objective function, such
as the maximization of profit. The arguments that follow are intended to
show that the factors that appear to hinder the maximization of profit are
also the sources of agrarian institutions and of the agrarian structure.
III. PEASANTS, INSTITUTIONS AND AGRARIAN STRUCTURE
It has already been observed that marginalist theory rests on two postulates:
rationality and economic entropy. The simplest interpretation of rationality
is that people are smart, in the sense that they would like to get the best
out of every situation. However, the postulate goes further, and makes two
strong claims about human psychology. First, the economic actor is
consciously self-seeking in all his/her activities, including gregarious or
altruistic ones. And second, the conscious part of his/her being is all that
matters.19 In its simple version the second postulate that of economic
entropy simply states that the objects used by human beings have finite
use-value. However, since the mathematical proof of the efficiency of
rational economic choice depends on the use of calculus, this postulate goes
further: as economic objects are continuously used, the subjective index of
their use-value (or utility) must continuously decline, until there is no value
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left to be used. When the utility of an object is plotted as a mathematical

function of its use, its slope and its convexity are central to the proof of the
efficiency of rational choice.
Thus the utilities of objects the productivity of labour and the yield of
land declines, till they are all zero.20 Chayanovs drudgery function is of
this type. The generalized form of this postulate is variously known as the
law of diminishing returns, the law of diminishing utility or the law of
diminishing productivity, depending upon the object under use. The rational
individual who perceives this will not use the object if its marginal utility is
lower than the price (as money or goods or effort), that she/he has to pay for
it. This condition that, at the limit, the use-value of objects is not less than
its exchange-value, is the central rule of efficient behaviour and constitutes
the marginal utility-rule, or the marginal-product rule. When a producer
observes this rule strictly in the market for all his inputs, the marginal cost
of production will equal the marginal exchange value of the product. This is
the golden rule of efficiency for the economic system as a whole: the
equality of marginal cost and marginal revenue. When this happens, profits
are maximized; not merely by a single producer, but by all of them
simultaneously. Thus microeconomic efficiency coincides with
macroeconomic efficiency. The key question, therefore, is whether the
peasant can observe these rules of efficiency, and hence whether he can
maximize his profit. He encounters his first hurdle when dealing with
nature.
Agriculture and Nature
Agriculture may be considered as the harnessing and the reorganization of
the environmental and soil conditions under which plants grow. It is a
conscious human intervention into an ecological system, or a given
organization of nature. Plants themselves, being part of the organization of
nature, have their own propensity and capability to live, grow, survive and
reproduce, quite irrespective of human intervention. This being so, inputs
applied by human beings towards the selective growth and propagation of
plants cultivation, in other words will have only an indirect influence
over the plants autonomous and symbiotic conduct with respect to its
environmental as well as homeostatic conditions.
This type of production must be distinguished from that of the assembly
line in a modern factory, where the output consists of objects whose nature
and character are entirely predicated on human design. The assembly line
represents the organizational structure or production function in its most
controlled form, wherein the instrument as well as its object are exclusively
a function of human design. In contrast, the agricultural production function
is far less controlled: human beings try to intervene in an already organized
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nature. The productivity of the inputs assigned for this purpose is subject to
the way nature accepts them. Hence the relationship between inputs of
human design and agricultural output cannot be strictly determined.
Consider, for instance, the relationship between any single agricultural
operation say, ploughing and the output. While the cultivator knows that
it is necessary to plough the land before sowing the seeds, he cannot predict
how much of the output would be attributable to the activity of ploughing
as distinct from (say) that of weeding. For the plant will grow and yield
anyway. Under such conditions, costs of different operations and the shares
of output attributable to different operations cannot be related on a one-toone basis, but only along an approximate range. Similarly, input prices and
productivities will also be related only as an approximation. Both
relationships can be only indicative and qualitative.21 Marginal equalities do
not come about. This is the first of the problems of indeterminacies in
agriculture.
Externalities and Uncertainty
The next two problems relate to externalities and uncertainties in
agriculture. Externalities take many forms: for example, upstream water
users tend to add to the salinity of water to the detriment of downstream
users, application of pesticides in one field causes the pests to migrate to a
neighbouring field, manure applied in one field is likely to get washed into
the neighbours field through common irrigation channels, and communal
grazing of cattle in the open fields adds to the fertility of all fields,
irrespective of who owns how many cattle. The complex and symbiotic
relationship between cattle and crops is the oldest among agricultural
externalities. What externalities do is to create further indeterminacy in the
relationship between inputs and costs, and between productivities and
profits. Marginal equalities are once again difficult, if not impossible, to
demonstrate. It is clear, moreover, that a number of externalities are
contingent on different definitions of property. For instance, common
property would minimize some of the externalities noted above. Perhaps
this was the logic informing the customary common ownership of land
combined with periodic redistribution of its use among peasant families, a
practice found not merely in pre-revolutionary Russia but also in South and
South East Asia.
Uncertainty in agriculture takes a variety of forms: for example,
fluctuations in rainfall, humidity and other environmental conditions cause
fluctuations in output. This is important if we acknowledge the fact that all
agriculture is inherently dependent on credit: resources and labour have to
be committed to cultivation long before the land yields. Fluctuations in
output make the problem of agricultural insurance among the most complex
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of problems. There are two types of uncertainty, the statistical variety and
the Shacklean variety, and almost all the study of uncertainty in neoclassical (or marginalist) economics is of the statistical variety.22 One of the
earliest discussions of uncertainty relevant to the matter in hand is
attributable to the writings of Shackle [1955], who argued that the process
of conducting enough experiments to acquire adequate knowledge of
economic events for the reduction of uncertainty into the probability of risk,
would by itself be prohibitively expensive. Therefore economic uncertainty
could not be reduced to an estimate of risk. If we consider the immense
problem of agricultural uncertainty, there is no doubt that it is of a
Shacklean variety. In turn, this would mean that uncertainty compounds the
problem of indeterminacy in agriculture considerably. The implication is
that credit markets in agrarian economies are characterized by a range of
interest rates, rather than single equilibrium values.23
Overarching Credit Markets and the Problem of Insurance
It is now time to draw together our inferences. First, the fact that plants are
a part of the organization of nature means that input productivities, and
therefore input prices, arising out of human intervention, become
indeterminate. This problem is particularly pronounced in the labour
market, where another source of indeterminacy arises from the fact that
labour input occurs in teams. The existence of externalities also makes the
estimation of agricultural costs problematic, and hence makes questionable
most methods of estimating the economic rent (= difference between yields
of plots of land of different qualities) and thus, also, the capitalized value of
land. Accordingly, the market for agricultural credit becomes the most
complex of all markets. On the one hand, credit has to be committed without
an adequate prior knowledge of how costs and productivities are going to
behave. On the other, the existence of Shacklean uncertainty makes it
difficult for the peasant farmer, or his creditor, to formulate a satisfactory
distribution of the probability of different events on which to base output
and yield expectations.
The market for agricultural credit is, indeed, vulnerable on a number of
counts. The creditor needs a twofold insurance; one in relation to the cost of
the venture financed by creditor, and the other in relation to its revenue.
Consequently, there is a need to control the market for inputs financed by
creditor, so that he will have some say over the way inputs are used. At the
same time, there is the need to control the market for the output, so that the
creditor will be able to control the earnings of his debtor. In undertaking
these two forms of control, the creditors risk is spread from a single market
(credit) to many markets (credit, input and output). Thus in almost all
agrarian economies, it is common to find the input and output markets
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enveloped within an overarching credit market.24 The requirement for

insurance, which leads to overarching credit markets, constitutes the basis
of some of the most important organizational forms and institutions in
agrarian society. These forms and institutions usually determine not merely
the prices of different inputs (including labour) but also the modalities of
payment, of bargaining and of arbitration and settlement of disputes over
these. Thus the political aspect of agrarian society is interwoven with its
economic aspect at the lowest level: that is, the peasant farm.
It is evident, therefore, that the credit market will be one of the key
factors determining political-economic hierarchy. Nothing except water
(see below) is more important than credit in the agrarian economy.
Consequently, for any given distribution of wealth at a point of time, the
hierarchy will also reflect differing degrees of control (or, conversely,
dependency) with respect to the credit market. In the context of uncertainty,
information acquires crucial importance. It is reasonable, therefore, to
consider that asymmetry in access to information (more generally, access to
education, scientific and technological knowledge and institutions relating
to these) coincides with the asymmetry in the distribution of wealth, which
also the basis of credit. Thus, the basic structure of the interest groups
involved in macro-level political economy acquires its definition at the
lowest level, the farm. Equally important, institutions and organizational
forms of governance and of subordination and authority are historically
constituted as the morphological basis of economic processes. The history
of contestation and collaboration in relation to the power embedded in a
hierarchy is, therefore, also the history of agrarian institutions and social
organizations. As the following case study from South India demonstrates,
the processes relating to micro-level agrarian institutions are the
determinants of the morphology of agrarian history.25
I V. I R R I G AT I O N I N S T I T U T I O N S A N D A G R A R I A N S T R U C T U R E I N
SOUTH INDIA
Tondaimandalam is an ancient eco-cultural zone in South India,

encompassing parts of the modern states of Tamilnadu and Andhra Pradesh.
Most of this region consists of mildly undulating coastal country, with a
scattering of hills. This area also contains ancient man-made irrigation
reservoirs (known as yeri), many of them over a thousand years old. These
reservoirs store the water from the north-east monsoon rains during October
to December; unlike the rest of India, the south-west monsoons of June to
August are highly unpredictable in this region.
Ranging in size from 0.2 sq. km. to 9 sq. km., these reservoirs often form
complex chains, linked by channels both to each other and to rivers. Usually
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water runs down a catchment area (usually, the high ground at the base of a
chain of hills) and floods the reservoir with enough storage to last four to
six months. Some of the reservoirs hold water for a period of ten to 11
months. The dyke that restrains the water at the lower ends of the reservoir
(called a bundh or karai) is man-made, and contains a sluice, which is a
large slab of granite with hole in it. This hole is stopped with a large wooden
peg rolled up in cloth or sacking material. As the fabric expands with
moisture, it effectively blocks the exit of water. When fields are to be
irrigated, the sluice attendant dives into the water and removes the peg.
From each sluice, a channel distributes water to the surrounding fields.
There are some major organizational implications underlying such an
irrigation system. First, not all fields abut the channels. In such cases, the
task of getting water to ones field usually involves the erection of a
temporary dam in the main channel to raise the level of water, and divert it
over shallow temporary channels across the fields contiguous to the main
channel, on to ones own field. Second, seepage along the channels leads to
a considerable loss of water. Present day agricultural engineering estimates
put the combined water loss due to evaporation and seepage at around 20
per cent. This means that the water-use per unit of land increases as one
moves away from the sluice. Conversely, the further away ones fields are
from the sluice, the less assured the water supply becomes. This is often
referred to as the problem of the tail-end area farmers, or a situation where
nature creates inequities. Finally, the heterogeneity in the quality and the
size of plots of land in the command area of the reservoir imposes varying
degrees of economies (or diseconomies) of scale on the cultivators
irrigation activities.
Irrigation management of this type is complex, and involves calculation
of water in storage (which varies according to rainfall and the duration of
storage), the length of channels, the quality of soil, the distance of fields from
the channels, the type of crops, the number of claimants to water rights, their
position in the socio-economic hierarchy and so on. Since there is variation
of these parameters from village to village (or catchment area to catchment
area), regionally centralized irrigation management is neither feasible nor
conceivable. The need to plan and manage the use of locally heterogeneous
irrigation resource efficiently led historically to the emergence of water
management organizations that were to a considerable degree autonomous.
In a system as complex as this, disputes are an ever-present possibility.
Taking water from the channel is a matter of importance for a peasant
farmer. From his point of view, his needs take precedence over those of all
others. Violation of the norms of water use is thus an attractive proposition,
and hence a constant source of friction and dispute. Cultivators whose fields
are located some distance away from the main channel have further
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problems. Taking water through someone elses field requires at least a tacit
permission. The existence of a dispute between the respective owners of the
fields over other matters, for example, could manifest itself in terms of a
denial of permission to access water in this manner.
Irrigation management organizations are therefore constantly involved in
adjudication and arbitration of disputes regarding water entitlements and the
enforcement of these entitlements. It is but natural that these organizations
are called upon to adjudicate and arbitrate in other matters involving water
users. The extent to which they are called upon to do so depends upon the
relative importance of water management activity in the locality. Broadly
speaking, the greater the quantum of water resources to be managed (either
in terms of months of possible irrigation, or in terms of quantum of water use
per unit of land), the greater the influence exercised by these organizations
outside the specific domain of water management. Conversely, in sparsely
irrigated localities, water management organizations may find it difficult
even to enforce water management norms. Historically speaking, the role of
the trader-cum-money-lender has been more powerful in relatively sparsely
irrigated rural areas of South India, while land-water oligarchies have played
an equally powerful role in irrigated tracts.26
Organizational Imperatives of Paddy Cultivation
Crop diversity accentuates the transaction costs of water-management
regimes such as the one in Tondaimandalam. The consequent advantage of a
similar cropping pattern was further enhanced in this area by the existence of
fairly uniform soil and climatic conditions suitable for the cultivation of
paddy (rice). By the eighteenth century this region had become one of the
major paddy-growing areas in South India. There were two major agricultural
seasons (known as bhogum) in the region: the samba season, lasting from July
to January, and the navarai, lasting from January to April. Since the crop
calendar followed the dictates of irrigation management, at least during the
first season, labour demand on the part of cultivators also had a uniform
seasonality. Peak demand occurred during the Tamil months of maasi (15
January14 February), aani (15 June14 July) and aipasi (15 October14
November). For the rest of the year, there was an excess supply of labour.
If demand and supply alone were to decide wage rates, peak-season
wage rates would be beyond the reach of most of the farmers.27 In addition,
as we have noted earlier, wage determination is generally problematic in
agriculture. Not surprisingly, rewards for labour were decided by a complex
set of payments ranging from a monthly subsistence allowance, through
harvest bonuses, to periodic gifts which ensured subsistence during a
slack season, stabilized peak-season fluctuations, provided an insurance
against moral hazard and created a strong basis for negotiation and
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bargaining. Further, the system of rewards also emphasized the symbiotic

nature of the labour market: employers and employees depended on one
another for survival, but each category also occupied conflicting bargaining
positions over their respective shares from village output. While their
interests within agriculture were essentially of a conflicting nature,
therefore, agriculture itself would cease if they did not find methods of
mutually acceptable cooperation.28
The specific arrangement arrived at would eventually depend upon
varied ecological agronomic and demographic conditions that characterized
different parts of the region. The most important among these factors, as
already noted, was the linkage between land and water. Individuals or
groups (i.e. kin groups or caste groups) with dominant claims over land
were also those with dominant claims over water. Thus water and land
resources were tied to each other through claims over control, as well as
claims over use.29 Finally, since land and water entitlements constituted the
basis of demand for labour, we may infer that land, water and labour
resources were linked through webs of use as well as webs of entitlement. In
short, they constituted the basis of the hierarchy of interests, the economic
basis of the political order at the ground level. Needless to say, the
distribution of wealth and income, as the basis of agricultural credit, was
ubiquitous as the overarching aspect of this hierarchy.30
V. C O N C L U D I N G C O M M E N T S
Marginalist analysis, it has been argued, suffers from major limitations in its
ability to explain what, and how much, would be produced in agrarian
economies. The political economy of such societies is necessarily grounded
in micro-level decision-making processes. Crucial determinants of such a
political economy arise from overarching credit markets and the webs of
entitlements over resources, which throw up hierarchies of interests. Since
agriculture depends strongly on nature, ecological and irrigation-related
factors also play a strong role in determining the nature of such hierarchies.
Clearly, there are also important implications for the psychological
postulates underlying marginalism; in a milieu where group control over
resources and wealth are crucial desiderata, it would be better to speak of
the psychological and behavioural aspects of the individual as being
significantly influenced by group imperatives. Therefore the unconscious
aspects of the self, wherein ones social identity overlaps ones personal
identity, are at least as important as the conscious rational self.31
Rationality is accordingly bounded by two sets of limits: external limits to
ones rational conduct, and the internal (or subjective) morphology of the
self [Simon, 1993]. Not surprisingly, the agrarian economy is best
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characterized as an X-efficient system where every economic actor is

oriented towards satisficing behaviour, rather than optimizing behaviour.
The organization of economic processes, however, necessarily occurs
within a framework of entitlements defined by the politico-legal and
cultural organization. The nature and structure of entitlements engendered
by a given politico-legal and cultural organization, its diverse
interpretations among economic actors and the dynamics of adjudication
and arbitration among them involve different magnitudes of transaction
costs. Together, the politico-legal and cultural organization, as well as the
resulting economic institutions and organizations, may be designated as a
transaction regime. Such regimes may be taken to denote the totality of
exchange processes, interest groups, institutions of hierarchy and
organization and the state as the legitimizing and regulating authority. If
different types of markets are characterized by different normative and
institutional limits to efficiency, then markets are a lot more than the mere
notional spaces for economic transactions that theoretical convention makes
it out to be: markets are transaction regimes.
Being transaction regimes, markets are also cultures. The received
wisdom of much modern economics is that pre-capitalist economies are
more culturally influenced than are capitalist ones, and the theoretical
convention acknowledges cultures only within the ambit of economic
determinism. Although this is not the place for an extensive discussion of
this issue, it must be observed that there is much evidence to the contrary,
not all of it from sociology or anthropology.32 Although nineteenth-century
narodniks stressed culture much more strongly than did Chayanov, the
above discussion of transaction regimes offers a corrective to this. In
particular, Chayanovs [1987: 28] plea for a more comprehensive view of
historical processes, should be noted:
we have no doubt that the future of economic theory lies not in
constructing a single universal theory of economic life but in
conceiving a number of theoretical systems that would be adequate to
the range of present and past economic orders and would disclose the
forms of their coexistence and evolution [emphasis added].
Both Marxism and marginalism fell short of his expectations this regard.
Each espoused theoretical constructs which had scant regard for factors
underlying morphological processes in history. The neglect of the latter by
the Bolsheviks should not, however, be attributed to Marx, who explicitly
showed awareness of the possibility of (if not the importance of) such
processes in Volume III of Capital. As pointed out elsewhere [Sivakumar,
1986; Sivakumar and Sivakumar, 1993], Marxism and marginalism are
centrally characterized by a substantivist preoccupation, which celebrates
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axiomatic (or paradigmatic) consistency rather than completeness of

perception. By contrast, the idea of a transaction regime lends itself more
easily to the understanding of morphological processes. At the same time,
neither Marxism nor marginalism stands negated by the study of transaction
regimes. In the X-efficient decision framework, marginalist solutions as
well as Chayanovs drudgery minimization can be shown as special cases.33
The concept of transaction regimes has two important aspects that
recommend themselves. The first is the morphological rootedness of
transaction regimes in ground-level factors (from ecology and land-man ratios
to language, culture and ethnicity) which define the basis of entitlements,
economic organizations and hierarchy. In other words, economic institutions
are derived from below, rather than from hypothetical or paradigmatic
conjecture. The concept of transaction regime might be viewed as a more
complete analytical category with a capacity to highlight features of what the
narodniks called non-capitalist economic systems. In this sense, it may be
seen as a possible response to Chayanovs quest for a theory of non-capitalist
systems. Secondly, transaction regime is an inclusive concept. It need not
refer to a single mode of production, although this too is possible as a special
case. More generally, it can be seen to consist of a number of modes of
production, or a number of overlapping patterns of subordination and
dominance, or of a plurality of context-based hierarchies.34
It might be argued that an overlap between different kinds of hierarchies and
interest groups might define an unstable macroeconomic system, in which
the formulation and implementation of economic policy was fraught with
uncertainty. In keeping with the literature on the incentives of political
stability, it might be argued further that the entire public-interest theory of
the state underlying Keynesian and monetarist economics is violated by the
idea of transaction regimes. In reply to these points it could be pointed out
that such instability has, in fact, been the basic characteristic of the state
during most of history, except for periods when a powerful dynasty, a
charismatic leader or an interest group has ruled. It is possible to explain
such periods too as special cases in the study of transaction regimes.
It is evident that none of the participants in the debate about the peasantry
Chayanov, the narodniks, and the Russian Marxists had a clear picture of
the agrarian situation in Russia during the decades of the revolution. The
narodniks had a weak theory of the state, which undermined their position in
debates with the Marxists, while the latter depicted the Russian countryside
exclusively as a zone of conflict between rich and poor (the kulak and the
bednyak). The attempt on the part of Marxists to sweep the vast number of
cultivators who did not fall into either of these two classes into a residual
middle peasant category failed with Lenins acknowledgement of his
having misunderstood the issue. By then, however, the revolution was a fact
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of history and Stalin had successfully manoeuvred himself into power; what
Lenin thought about Russia in the 1920s was hardly relevant to the events
that were to unfold in the countryside during the following decade.
In fact, it was not the Marxists but Chayanov who formulated a
meaningful theory of peasant-decision-making that explained the economics
of the so-called middle peasants. He also attempted not wholly successfully
to formulate a theory of non-capitalist economic systems. In this he was
beset by the same problem that plagued his nineteenth-century predecessors:
a weak theory of the state, and a poor explanation of dominance,
subordination and hierarchy. Because of this, the originality of Chayanovs
work and the profundity of his questions were lost in a polemical deluge. In
an attempt to rectify this, the argument presented here has attempted to
formulate a series of institutional and organizational explanations
encompassing markets, state and interest groups in a theory of non-capitalist
economic systems that highlight the non-Marxist and non-marginalist
aspects of his analytical framework. Such a theory, it is argued, might better
explain the agrarian situation in much of the Third World today.
NOTES
1.
2.
3.
4.
5.
6.
7.
8.
Some of this literature was an explicit study of narodnism, while others impinged upon
narodnism in their evaluation of Marxism in Russia and elsewhere; for instance, Mitrany
[1951], Haimson [1955], Billington [1958], Venturi [1960], Malia [1960], Pipes [1960; 1964],
Schapiro [1960], Mendel [1961], Utechin [1962], Wortman [1967], Walicki [1969], Meisner
[1971], and Shanin [1972; 1974]. More generally, modern forms of populism are discussed in
Worsley [1964], Ionescu and Gellner [1970] and Van Nierkek [1974].
Subsequently, the Oxford University Press republished it in 1987. It is this later version of
Chayanovs Theory of Peasant Economy that is used here. This growing interest in the
economics of peasant agriculture, and in the narodnik economic program, culminated in the
emergence of journals exclusively devoted to the study of peasants during the 1970s, one of
which was The Journal of Peasant Studies.
Because the focus here is on the historical reception of Chayanovian theory in his times, no
attempt is made to address the critiques of this by recent and current Marxist theory. The latter
are well known, and have received extensive coverage in this journal see, for example,
Harrison [1977a; 1977b; 1979] and elsewhere [Littlejohn, 1977; Kitching, 1982].
The word obschina is used in this work in the same sense as mir or the village community,
which also housed the zemstvos after the abolition of serfdom in 186162.
This was also to be the main argument of Chayanov 40 years later. More recently, this was the
basic contention of Amartya Sen [1962], which led to nearly two decades of debate among
Indian economists on the relationship between size and productivity of farms in India. See also
Sivakumar [1977, 1980a, 1980b, 1986].
Chayanov [1987: 64] himself is not certain about the direction of causality between family
demography and sown area. At the same time, his use of consumerworker ratio as an
analytical tool pre-empts much of the ensuing confusion. His model rests on the belief that, at
least in the short run (an agricultural season?), this ratio constitutes an independent variable
influencing the level economic activity.
In this sense, Chayanov might truly be considered the founder of the economics of the informal
sector.
Surplus output was not possible because peasant output was constrained by family
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9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
55
consumption demand, which was postulated to be constant in the short run, an assumption that
invited criticism even during Chayanovs own lifetime. To this criticism Chayanov
sarcastically retorts: We ourselves do not have such a conception and are inclined to believe
that no peasant would refuse good roast beef or a gramophone, or even a block of Shell Oil
Company shares, if the chance occurred. What was left unsaid was that he also believed that,
barring the roast beef, the above events had an extremely low probability in the life of a peasant.
However, this is not the same as saying that consumption was ipso facto a constant. This
ambivalence arose essentially because of Chayanovs unwillingness/inability to figure out a
long-run model as distinct from a short-run model. That such a distinction would lay to rest a
lot of the apparent ambivalence in Chayanovs model is illustrated in Sivakumar, Nagarajan
and Velmurugan [1996].
Chayanov [1987: 257] quotes studies by Lenin, Hilferding and Lyashchenko to support this
argument.
The Bolsheviks were not alone in this belief. See Gide and Rist [1913: 488505].
Chayanov [1987: 220] considers macroeconomics to be the weakest link, or the main error,
in marginalist analysis. As regards his own concerns, Chayanov is explicit: My whole analysis
up to the present has been one of on-farm processes. Further, in his Theory of Non-Capitalist
Economic Systems, Chayanovs ideas come very close to those of Schmoller and other German
Historicists: Therefore, he observed [Chayanov, 1987: 27], it seems much more practical for
theoretical economics to establish for each economic regime a particular national economic
theory.
In particular, see The Methodology of Positive Economics in Friedman [1953].
See Cyert and March [1963], Simon [1955; 1959; 1987], and March and Simon [1968].
Another approach is that of evolutionary economics [Nelson and Winter, 1982], where
alternatives to a neo-classical profit-maximization objective are seen in short-run routines and
a long-run search for better and better routines .As may be inferred from Simon [1983:669],
there does not seem to be any conflict between these approaches, as long as we grant that such
routines may not necessarily yield the best results in a long-run search.
The ensuing discussion is based on a more extensive analysis of X-efficient macroeconomic
systems, and the illustration of X-efficient peasant households, in Sivakumar [1997a: 6066],
and also Sivakumar, Nagarajan and Velmurugan [1996].
The role of efficiency in the formulation of budgetary equilibrium of such price-taking but
non-competitive households is discussed more extensively in Sivakumar, Nagarajan and
Velmurugan [1996].
In India during the 1970s there was extensive debate among Marxists about the mode of
production in Indian agriculture [Rudra et al., 1978; Thorner, 1982]. Almost all the participants
defined capitalist farmers as cultivators who hired labour and exhibited a profit motive. Some
of these issues are dealt with empirically and theoretically in Sivakumar [1977, 1980b].
Since Chayanovs time anthropological and economic research has compiled much information
on the relationship between kinship and labour organization in Africa and Asia. Contemporary
and historical South Indian data of this type are explored in Sivakumar [1978] and in
Sivakumar and Sivakumar [1979; 1993].
For a non-political-economic, and more orthodox, approach to recent theories of predation in
market economies, see Tirole [1988: 36488].
As Georgescu-Roegen [1971: 342] observes, there is a Weltanschauung beneath each form of
rationality: Nothing is more natural than the inability of the standard economists to understand
their German colleagues who insisted on bringing in such obscurantist ideas as Geist or
Weltanschauung into economic science.
More generally any activity including leisure depletes free energy in land, labour,
machinery and so on. As Georgescu-Roegen [1971: 277] puts it, our whole economic life
feeds on low entropy, to wit, cloth, lumber, china, copper, etc., all of which are highly ordered
structures. The question is whether a universal principle such as entropy can be reduced to
refer to units of labour, machinery etc. Once again, Georgescu-Roegen [1971: 277] is explicit:
the only reason why thermodynamics initially differentiated between the heat contained in the
ocean waters and that inside a ships furnace is that we can use the latter but not the former.
There are two ways of paradigmatizing this problem. One is through contingent costs: there are
so many things happening to the soil and seeds since the time of ploughing and sowing, that it
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22.
23.
24.
25.
26.
27.
28.
29.
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is impossible to contemplate let alone foresee all of them. The other is to follow GeorgescuRoegen [1971: 2989], and explain that the lasting obstacle to mans manipulating living
matter as efficaciously as inert matter lies in the absence of human knowledge of all cosmic
information on genotypes, and the corresponding absence of an ability to delve into the deeper
recesses of micro-genetic systems. Notwithstanding all of scientific progress, the fact remains
that we do not know the limits to either of these quests.
The statistical version assumes that we have enough knowledge about events to be able to
estimate and thus represent statistically the risk associated with them. This is the statistical
variety of uncertainty, measured and reduced to an estimated risk. Theoretically this would
enable the farmer to plan the amount of expenditure he would need to commit to the crop, under
a given probability distribution of crop-related events, and hence to determine the amount of
credit needed for the crop. Almost all of agricultural economics depends on probability
distributions of this type. We must also distinguish between natural and man-made
uncertainties. While the former may depend on rainfall, humidity etc., the latter is an outcome
of human intervention in nature, and involves issues such as soil toxicity and exhaustion,
irrigation salinity etc.
Shackles arguments underlie the neo-Keynesian critique of neo-classical beliefs in the longrun stability of interest rates. Under these conditions, neo-Keynesian economists argued that
risk-aversion would lead to types of portfolio behaviour different from those suggested by
statistical probability. Field studies in South Indian villages have shown the considerable
significance of Shacklean risk perception, which governs asset preference and economic
mobility among peasant households [Sivakumar, 1978; Arunachalam, 1986]. There is also
another way of looking at this problem: in the case of foreseen but difficult-to-provide-for
contingencies, therefore, contracts cannot contain accurate estimates of contingent costs. While
the Shacklean approach deals with the issue as one of subjective boundaries to rational
conduct, the contingent cost approach refers to the objective problem of the impossibility of
determining a probability distribution of risk. Simon [1983: 847] argues that such distinctions
might be redundant if rationality itself is bounded.
Overarching credit markets mean the same as inter-connected or inter-linked factor markets
[Bardhan, 1989]. What the economics of market inter-linkages fails to observe, however, is the
significance of Shacklean uncertainty in creating overarching needs for insurance in the credit
market. The kind of problems that we have considered, involving the determination and
monitoring of effort, also fall under the moral hazard genre of issues. Moral hazard originated
in insurance-related studies, but has come to address a wider range of problems involving
conflicting interests between principal and agent [Arrow, 1985; Scherer, 1988; Hart and
Holmstrom, 1987]. From this point of view, overarching credit markets and other organizational
imperatives of agriculture could be looked upon as institutions through which moral hazard is
minimized. Since we are not concerned with models of microeconomic equilibria involving
moral hazard, it would be sufficient to acknowledge the powerful organizational implications of
moral hazard. In general, the higher the cost of setting up governance structures [Williamson,
1985], the greater the moral hazard.
The morphology of agrarian history also depends upon the degree of regional homogeneity or
heterogeneity in such agrarian organizations. In turn, these are conditioned by the degree of
regional homogeneity or heterogeneity in terms of population, soil, climate, irrigation and the
crops cultivated, which reflect the state of nature, the type of uncertainties and externalities and
the quality and quantity of labour used. Local variations in the institutional and organizational
aspects of the agrarian society and political economy may be taken as morphological responses
of economic processes to locally specific conditions.
See Sivakumar and Sivakumar [1979; 1993; 1996], Ludden [1985], Tirumalai [1981; 1987]
and Murton [1979] for the role of irrigation management in the formation of cultural and
political institutions in South Indian history.
For an interesting but brief discussion of the organizational implications of a demand curve
which lies above the supply curve, see Menard [1989].
See Sivakumar and Sivakumar [1993; 1996] for a more detailed discussion of labour markets
and income distribution in rural South India during the late eighteenth century.
Throughout the history of South Indian agriculture, entitlements to land were often granted by
rulers to those who were prepared to risk harnessing and managing irrigation from existing
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57
river systems [Tirumalai, 1987].

30. As observed earlier, depending upon the availability of water, the locus of power might rest
with affluent groups, of traders or of peasants, or both. In the historical evolution of the caste
society in rural South India, some of the most important of the trading castes (e.g. the Chetty
caste) are believed to have evolved from peasant origins (e.g. Velan Chetty), on which see Sastri
[1955a; 1955b] and Nagaswamy [1973].
31. The postulate of rationality has been one of the most controversial aspects of the marginalist
tradition long before Simon [1955; 1957; 1959] started writing about boundaries to rationality;
for an excellent survey of the scene since, see Conlisk [1996]. Before the 1950s, the emergence
of the concepts such as the unconscious in Freudian psychology and collective
consciousness in Jungean psychology showed conscious rationality to be a limited aspect of
human behaviour. However, the most important set of questions to be posed about the latter
domain have been those raised by postmodern theory since the 1980s, which look upon the
self as a fragmented or many-layered subject. As noted in Sivakumar [1997b], this is a
position with which economists can agree. Even before the advent of postmodernism, however,
at least one economist was arguing along similar lines: hence the view of Georgescu-Roegen
[1971: 346] that to an American farmer the behaviour of a Filipino peasant seems irrational.
But so does the behavior of the former appear to the latter. The two live in different ecological
niches and each has a different Weltanschauung.
32. Williamson [1985] classifies the cultural/moral complex of behavioural imperatives which
affect governance structures and contracting behaviour into market incentives and internal
incentives, while Bell [1974] offers an excellent sociological perspective on the same subject.
More generally, for an understanding of the role of culture in global investment and business
strategies, see Hill [1998]; cultural anthropologists and developmental sociologists might,
however, find Hill far too basic. For forceful post-structuralist arguments on the role of culture
in economic processes see Castoriadis [1987] and Baudrillard [1981; 1990]. A much more
detailed discussion of the role of culture, religion and ideology in the shaping of transaction
regimes has been undertaken in Sivakumar and Sivakumar [1993; 1996].
33. Equally important is the fact that institutional explanations of ground-level politico-legal
organization and hierarchy create the basis for understanding interest-group activity vis--vis
the state. The emergence of these interest groups, and the way they shape regulatory policy, is
discussed in Sivakumar and Batavia [1995]. The problem of decision-making facing the state
and state-owned enterprises under such conditions is discussed in Sivakumar and Nagarajan
[1995]. It is necessary to observe only that interest-group activity is the central feature of the
states behaviour in any transaction regime, and that Marxian analysis of class contradictions
can also be regarded as a special case in the study of transaction regimes.
34. This also raises two possible weaknesses in the conceptualization of transaction regimes. First,
the concept does not lend itself to the creation of rigorous paradigmatic frameworks paralleling
those of marginalism and Marxism. In turn, this would suggest that transaction regimes do not
possess many paradigmatic applications, as has been the case with both marginalism and
Marxism during this century. However, as is argued elsewhere [Sivakumar, 1986,1993;
Sivakumar and Sivakumar, 1993], this is not necessarily a shortcoming. It is the essential outcome
of the preference for completeness over axiomatic consistency in scientific inquiry.
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Chayanov and Marxism

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Chayanov and Marxism

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This article was downloaded by: [UNICAMP]

On: 09 January 2014, At: 08:52

The Journal of Peasant Studies

The Unfinished Narodnik Agenda: Chayanov, Marxism,

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The Unfinished Narodnik Agenda:

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This article reviews some of the salient aspects of the

At the start of the development decade, Georgescu-Roegen [1960] produced

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According to Gerschenkron [1960: 159], the earliest intellectual reaction

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labour-saving technology, would further immiserize the working class.

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Danielson advocated the socialization of labour as a major measure, and

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fertilizers etc.), was a function of what he termed the equilibrium between

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dualism [Sen, 1966] in the agrarian sector, consisting of the traditional

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model: for example, household-size, landman ratio, soil and ecology,

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characteristic features of X-efficient satisficing behaviour is the innate

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necessarily convert the peasant into a surplus value-appropriating

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At the same time, it is beyond dispute that both Marxism and

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left to be used. When the utility of an object is plotted as a mathematical

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enveloped within an overarching credit market.24 The requirement for

Tondaimandalam is an ancient eco-cultural zone in South India,

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bargaining. Further, the system of rewards also emphasized the symbiotic

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