Market Design for Social Justice: A Case Study on a Constitutional Crisis in India

Abstract

In a 3-2 split verdict, the Supreme Court approved the exclusion of India’s socially and economically backward classes from its affirmative action measures to address economic deprivation. Dissenting justices, including the Chief Justice of India, protested the Majority opinion for sanctioning “an avowedly exclusionary and discriminatory principle.” In order to justify their controversial decision, majority justices relied on technical arguments which are categorically false. The confusion of the justices is due to a combination of two related but subtle technical aspects of the affirmative action system in India. The first aspect is the significance of overlaps between members of protected groups, and the second one is the significance of the processing sequence of protected groups in the presence of such overlaps. Conventionally, protected classes were determined by the caste system, which meant they did not overlap. Addition of a new protected class defined by economic criteria alters this structure, unless it is artificially enforced. The majority justices failed to appreciate the significance of these changes, and inaccurately argued that the controversial exclusion is a technical necessity to provide benefits to previously-unprotected members of a new class. We show that this case could have been resolved with three competing policies that each avoids the controversial exclusion. One of these policies is in line with the core arguments in the Majority opinion, whereas a second one is in line with those in the Dissenting opinion.

Keywords: Market design, matching, affirmative action, reserve system, EWS quota, distributive justice

JEL Classification: C78, D47