Wednesday, March 31, 2010

Markets and Communities

Interesting conversation between Will Wilkinson and Stephen Marglin of Harvard. I listened to this because Stephen Marglin is a distinguished radical/communitarian Economist and because I hoped that listening to a smart man I confidently expected to disagree with would kickstart my brain.

As expected, I disagreed with most of what he said. What was unexpected was that I largely agreed with him about what the costs and benefits of a market economy are. We disagree about the weights to assign to those losses and benefits.

The heart of his argument seems to be:
1. belonging to a community is extremely important to human flourishing
2. a market economy replaces a way of life where we contribute to the community, and depend on it, with one based on impersonal trade
3. this has led to tremendous gains in productivity and in the wealth of nations
4. however it has also alienated people from one another; we are no longer embedded in our local communities but are part of an vast, abstract, extended market system
5. this is nobody's fault; it is the unintended consequence of decisions taken by individuals over several generations
6. this has terrible consequences for many of the people in our communities, especially the weakest and poorest
7. to repair this damage, we must always consciously take into account the effect on our communities of the decisions we take; we need to choose what will bind our communities closer together, even if not a single member of our community is better off as a result of that decision. In a sense, the "community" becomes an interested party to all our decisions and choices.

Stephen Marglin explicitly recognizes the terrible costs of living in an all-enveloping community, but I wonder if he realizes how bad it can get.

I agree with much of what he says, especially about the costs borne by the weakest people in a society, but I am sure he recognizes just how impossible it is for a society to reverse such a move, even if everyone in that society wishes it. Simple Game Theory suggests that this genie can never be returned to its bottle.

More than that, I wonder if he recognizes how many people actually crave freedom from community, and welcome markets specifically for that reason.
Drawing on the experiences of a group of informants who participated in an ethnographic study of house moving in MontrĂ©al, Canada, my article shows that people often confront the social expectations and consequences of the gift economy—for example, they try to avoid indebtedness—by shifting back and forth between the gift economy and the market. But more importantly, and contrary to what the work of many consumer researchers would lead one to expect, it shows that people may escape to the market.

This is besides the obvious problem of deciding which community I belong to. If it is human to want to belong to a community, it is equally human to see those who do not belong to that community as not only outsiders, but also enemies, or even sub-human. Brad DeLong quotes Hirshmann and Adam Smith to show that classical economists believed that the growth of trade would be one more stage in the self-domestication of Man; as he notes
Even Smith's self-interested and calculating market agents are sociable ones: they exchange, and perhaps they cheat--they don't kill, rape, burn, and steal. Which is odd, given that fifty years before Smith was born not far from his house there were lots of people who saw others not as potential partners in acts of mutually-beneficial commerce but instead as either (i) clan allies, (ii) clan enemies to be killed, or (iii) strangers to be robbed.
I am glad I listened to the talk. I was not convinced by his arguments, but I do now better understand what I think, and why.

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