Where markets don’t dare tread
@jimmytidey, I like your style. 
As an economist, however apostate I may be, I would like to throw in a couple of road signs to help this thread steer its way around concepts like markets and its failures. It is important to recognize that not every institution that presides over exchanges is a market. Typically, a market entails three things:
- The existence of at least one of each buyers and sellers, who have agency – i.e. you can model them with game-theoretical tools. You cannot make a market all by yourself.
- The absence of violence or coercion. Payment of protection money to your local thug is not a market transaction.
- A price signal, that incorporates the information about the buyers' and sellers' preferences for the good in question. "Out of the box" barter lacks this; hence some Makerfox choices to reinstate one.
It has been noted time and again by economists (at least since William Lloyd’s 1833 article on overgrazing) that markets can have sub-optimal equilibria. This tends to happen when the collective good is at stake – environmental goods are exhibit A. The standard response of the economics profession to this is to invoke market failure: the reason why the market does not produce an efficient equilibrium is that there is some good being exchanged at zero price – for example clean air, or a 1% increase in lung cancer rates, or the survival of an animal species. Stick a price tag on that good (or those goods) and then the price signals will incorporate the whole correct information. This, in turn, will allow the participants in the market to make the correct decisions, and the market equilibrium will be Pareto efficient once more.
I have tentatively believed that, as I participated in the “green economy” movement in the 1980s. We busied ourselves with ecotaxes and ecosubsidies and environmental liabilities coupled with Superfund-style instruments. Three decades on – and despite massive academic and policy support (example: the World Bank’s Global Environmental Facility, a body so effective you have probably never heard of it), we have not much to show for those efforts. Conclusion: correcting for market failures does not work, let’s move on.
Before we do so, it might be worth pausing for a moment to wonder why. I don’t know why, but reading David Graeber left me with the suspicion that many institutions that organize exchanges are not markets not because they don’t meet my condition number 3 (the price signal does not carry complete and true information about all parties’ preferences), but because it does they do not meet my condition number 2 (the exchange is not free from violence/coercion). In the case of the global environment, it is hard not to see that the richest people and, to a lesser degree, the richest countries, seem to draw benefits from a situation that is globally disadvantageous.
So, I see stewardship as a way not to correct for market failures, but to sidestep them. Stewardship is a non-market way to go about producing and allocating things. It is non-market because it does not use the market decision-making algorithm: it makes decisions with heuristics, or rules of thumbs. To clarify:
- Market operators make decisions applying an algorithm: they maximize their utility (or profit) function incorporating the price level into those functions.
- Stewards make decisions on the basis of rules of thumb like "make sure what you do does not affect negatively the next seven generations of the tribe", or "our family shall have zero debt: if we don't have the cash, we can't afford it".
Are the decision making rules consistent with stewardship also economically efficient? No way. But that’s not the point: stewardship is about resilience and durability, not efficiency. The Glass-Steagall Act came under attack from investment banks during the Clinton era because it was inefficient; but inefficiency was a feature of Glass-Steagall, not a bug. Every time you become more efficient, you make yourself more vulnerable to Black Swan events. Nassim Taleb argues that standard economics does not understand risk, and treats all risks are predictable. If it stopped doing that, the whole standard economics edifice would fall down, and the goal of efficiency would have to be replaced by a black-swan-risk minimization one. I think he has a very serious point here.
I had to build a pretty long case here (apologies!) but this is why I think that yes, it makes tons of sense to think about markets when you design systems for stewardship, but mostly to stay away from anything that looks like a market. If it needs stewardship, typically it means that markets do not produce it; and correcting for market failures is a fine idea that, to my knowledge, has never worked to solve any problem of substance.