Uh… no. Jimmy, an element seems to be missing from your analysis: what it is we are trying to exchange. This is not a matter of taste or ideology. We have established markets work really well for private goods with no externalities – say, potatoes. Not much debate there. However, they don’t work as well for collective goods, or private goods with externalities – say, clean air or the continued existence of the Welsh language. More debate here, but I am hoping the “Einstein test” (only a fool keeps doing the same thing expecting different results) is enough to at least agree that in practice markets that do not work on their own cannot be made to work.
There are other two interesting things that I think merit consideration:
Markets do have an ethical value. In most of the philosophical literature I know of, that value is overwhelmingly positive. John Stuart Mill thought commerce to be "the great permanent security for the uninterrupted progress of the ideas, the institutions, and the character of the human race" and that it would "rapidly render war obsolete, by strengthening and multiplying the personal interests which are in natural opposition to it". Graeber agrees, and raves about the civility of the muslim trading cities of the Indian Ocean pre-Reconquista. He also adds an interesting spin: in those cities, what passed for the state (armed desert bedouins who mistrusted city life and culture) refused to enforce contracts. If your business partner screws you over, that's your problem, you are on your own. This ended up fostering a climate in which reputation capital was very important, and commerce never led to violence, public or private. Now that we have translated his masterful piece on merchant communities, I would love to have the opinion of @lasindias on this.
However, market logic tends to "bleed" out of its original context. Graeber (again) has a very interesting story about the Nuer, a tribe of pastoralists originally from Southern Ethiopia (coincidentally, I am in Addis Ababa as I write this and I see the occasional Nuer on the streets – they are hard to miss, very tall and almost black-skinned, many Ethiopian models tend to be Nuer). The Nuer, as many African tribes, had a currency that was not used to buy everyday things, but only offered as compensation for what can never be fully compensated: human life, specifically the life of young women of fertile age. The idea is: you can't buy a bride, if you marry my sister you have to offer me yours. But then, market logic kicks in: suppose I don't like your sister, or she is three years old. What happens then? You give me some copper rods, symbolizing the debt of one young woman your clan has with respect to mine. I can then go to your second cousin and reclaim his sister. But then what happens is: someone becomes economically successful in "normal" goods, and accepts payment from a struggling partner in copper rods. At this point, the crafty businessman owns a woman from a clan without having to give one. Fast forwards ten generations, add European- and Arab-led slave trade to Africa and – you guessed it – you get a full fledged market for human lives. Some stewardship! Graeber's argument is complex, and my stickman rendition does not do it justice. But it did leave me wary of applying market logic to anything that is not a private good, no externalities.
A poor economist’s and cooperative worker’s point of view
Yes of course. I did not read Graeber, but while documenting «Phyles: From Nations to Networks» I worked a lot on Greif’s famous paper on judeo-magrebi merchants in the Mediterranean sea around year 1000: mechanics and conclussions were similar to those you quoted.
I have no doubt about the «real markets’» ethical effects you reclaim neither. In my life’s experience, in a country where class divide is strong, subtle and ever present, «semi-markets» as well as institutional controlled provisions, were always, at the end of the day, exclusive and unfair, only those «well functioning markets» were equitable. I don’t mean I reject your arguments on market mechanism limits. I agree with them. I just want to say that, at a first view, I don’t tend to trust «semi-market» and state provision more that anything what seems to be a market. There is something comfortable about markets to me: they don’t reward your social origins or your family names.
But there are also good ethical news about markets this days. Under today’s conditions (erosion of intellectual property, globalization of SMEs, reduction of the optimum industrial scale, etc.) market rents tend to dissipate (that is why big business tend to capture rents through cronyism and tailored regulation). As we can observe in many businesses under the «Direct Economy Model» (most of the industrial products you can find in Kickstarter -ie: Studio Neat) firms become little more than signatures, because products are quickly low cost copied and the authors have to improve themselves, create a new innovation and try again… So, if you want to have innovation rents, you will have to create continuously new innovations, because they are more and more temporary. If you don’t you will be very near to a commodity market with very few margins, and ever decreasing prices… what is socially great but you will have just the «normal» reward in competitive markets where equilibrium price tends to zero: the opportunity cost (ie: BQ).
So, «Direct Economy Markets» incentive moral behaviour for rent-seekers (to be perpetually innovative) while make social results tend to abundance…
I didn’t mean for the last post to have one para in big - just seemed to get formatted that way.
Love the ‘Selling out’ piece, I think that gets at some of the psychological aspects of the market.
So my understanding of the landscape is as follows, I think this is useful but I don’t want to parody anyone:
We could hold the view that all markets are ethically bad - I guess any advocate of a command economy believes this. Neither Alberto or I take this view, instead believing that it depends what is being sold in the market.
We could the view that all markets are ethically good. I’m not sure anyone takes that view, or that any society has functioned in this way.
Instead Alberto and I take the view that whether a market is a socially desirable depends on what is being bought and sold. Neither of us support a free market in human lives or panda pelts (I’m assuming), but we do support a free market for potatoes.
Alberto believes that any market for a good with externalities, positive or negative, cannot function well, and therefore a wholly different model is required is these circumstances. The evidence of failures to reduce environmental externalities from economic activity supports this, as does evidence from health care systems around the world. Experience shows that, in practise, attempts to correct these markets are doomed.
I’m thinking about the specific case of sharing small amounts of surplus time or resources within a localised community. Tracking who puts in and takes out would allow an exchange mechanism with some of the features of a market - whether it has that name or not - and that could enhance the sustainability of that model. Specifically, by reducing reliance on altruism. I think the possibility of correcting market failures is an open question, and in any case I’m not convinced you can generalise from national healthcare provision or global pollution to the local scale in question. If this is the case market heuristics are still a valuable part of the mix when exploring systems of local exchange.
It comes down to your judgement about the nature of existing market failures are the transferability of those lessons to other circumstances, which is discussed above.
