Hedging Desperation: How the Confucian Clan as an Internal Financial Market Reduced Cannibalism in Historical China

Abstract

How does a society hedge the most atrocious states of nature? Survival cannibalism persisted across societies and until recently. We document that in historical China the Confucian clan, which acted as an internal financial market providing its members with the fundamental functions of finance (i.e., resource pooling, risk sharing), reduced instances of cannibalism during times of drought-related hardship. We control for economic development and other factors and rule out alternative channels, such as Confucian conservativism and human capital accumulation. Our robustness checks using data on land ownership also confirm that the Confucian clan reduced cannibalism through risk-mitigation.

Keywords: Social value of finance, cannibalism, Confucianism, clan, risk sharing, resource pooling

JEL Classification: G20, N35, O17, Z13