Monday, June 25, 2012

The assumption that markets are 'natural'

I've just begun to browse the pages of David Graeber's  2011 book entitled 'Debt - The First 5,000 Years'.  Graeber is an anthropologist who makes no bones about the historical errors made by many economists on the evolution of markets and the use and nature of money.

On pages 44-45 Graeber writes:
"People continue to argue about whether an unfettered free market really will produced the results that [Adam] Smith said it would; but no one questions whether "the market" naturally exists....we simply assume that when valuable objects do change hands, it will normally be because two individuals have both decided they would gain a material advantage by swapping them.  One interesting corollary is that, as a result, economists have come to see the very question of the presence or absence of money as not especially important, since money is just a commodity, chosen to facilitate exchange, and which we use to measure the value of other commodities.  Otherwise it has no special qualities.

"....Call this the final apotheosis of economics as common sense.  Money is unimportant.  Economies - "real economies" - are really vast barter systems.  The problem is that history shows that without money, such vast barter systems do not occur....It's money that had made it possible for us to imagine ourselves in the way economists encourage us to do:  as a collection of individuals and nations whose main business is swapping things.  It's also clear that the mere existence of money, in itself, is not enough to allow us to see the world this way. ...

"The missing element is in fact...the role of government policy..."

Graeber goes on to explain how government foster 'the market'.  Laws, police, monetary policy, pegging the value of currency to precious metals, altering the amount of coins in circulation, regulating banks etc.

On page 49 Graeber asks a key question: "...what exactly was the point of extracting the gold, stamping one's picture on it, causing it to circulate among one's subjects - and then demanding that those same subjects give it back again?"

"This does seem a bit of a puzzle.  But if money and markets do not emerge spontaneously, it actually makes perfect sense.  Because this is the simplest and most efficient way to bring markets into being."

Money brings markets into being.  Not the other way around, as most economists would have it.  If this is true then Graeber's concluding thought has some authenticity:  "Perhaps the world really does owe you a living."

10 comments:

Dan Crawford (Rdan) said...

Hi Brenda.

May I repost this one?

Dan
Angry Bear

Brenda Rosser said...

You're welcome to repost, Dan.
Happy Angry Bear ;-)

coberly said...

I liked the book and recommend it, but the reader should be careful to distinguish between "anthropology" and "Graeber."

But today I am a little alarmed by Rosser's conclusion. Long before there was money or government, people had to go out into the world and make their own living. It is true that the existence of governments, and the people who make the rules, have altered the terms of making a living so far from that "state of nature" that human decency, or self interest, would suggest we arrange those rules to prevent the kind of poverty that arise under them unless we take special care.

But the attitude that "the world owes you a living" just isn't going to work, and it turns out to be especially pernicious at this time with my friends the liberals trying to turn everything into welfare as we knew it, and destroy a very simple system that does enable people to provide for their own living, as well as help those who for one reason or another are not able to completely take care of themselves.

I am not advocating a hard "work ethic" here along the lines of a Peter Peterson who can't stand the idea that "the help" could spend their golden years "standing around not working" even though they pay for their own retirement. I am advocating that Social Security is the best model we have for enabling those people to pay for their own living, without demanding that "the world" (Peterson?) owes them.

Woj said...

I agree with @coberly that the conclusion is surprising. It seems unlikely that governments or money would have come into being unless individuals had previously learned to exchange ideas, goods and services (http://bit.ly/LBreXF).

Even if one accepts that markets are natural, I don't think one can conclude that government policy or money in unimportant. On the contrary, government policy and money almost certainly increase the abundance and benefits of markets.

Dan Crawford (Rdan) said...

Hey Brenda,

Lots of comments. Please come by.

Brenda Rosser said...

Dan, I've tried to post to Angry Bear but I've had a lot of trouble signing in there....and still haven't succeeded.

I paste, below, my response:

Thanks for your feedback. I wasn't expecting the reactions that have presented. What I think is the key paragraph in the article is the following (with my emphasis):
"Economies - "real economies" - are really VAST barter systems. The problem is that history shows that without money, such vast barter systems do not occur....It's money that had made it possible for us to imagine ourselves in the way economists encourage us to do: as a collection of individuals and nations whose main business is swapping things. It's also clear that the mere existence of money, in itself, is not enough to allow us to see the world this way. ..."The missing element is in fact...the role of government policy..."

Graeber, when he uses the word 'economy' is not referring to primitive and simple systems of exchange in tribes and rural communities. He's talking about the modern industrial notion of what an 'economy' is. The one made possible by vast quantities of fossil energy where workers concentrate in ciities and in this era (now quickly passing) where the notion that a lifestyle focused on consumption is viable, satiating and sustainable.

I understand that up till around 1930 'the economy' was viewed as a process (incorporating thoughts of governance through the proper management of people and resources). After that it became a 'thing'.

The ideology of a 'natural' market within large modern industrial 'economies' was the central project of the Neoliberal movement. Neoliberalism (according to one economic historian, at least) was launched in Paris in August 1938. At a colloquium to discuss the work of Walter Lippmann. It was a movement against planning as a method of concentrating and deploying expert knowledge. neoliberalism proposed an alternative ordering of knowledge, expertise, and political technology that it named “the market.”... Its political challenge to the Keynesian consensus got underway … with the founding of a think tank called the Institute of Economic Affairs in London in 1955..."

See: http://cmes.hmdc.harvard.edu/files/Mitchell%20Paper.pdf

The central message I was trying to convey in this article is that if money is the key factor in the creation of markets then there is no good reason why we should confront a world where markets contract violently such as in a Great Depression. We can create our own markets and our own currencies, especially when our governments are busy implenting austerity measures and limiting the dispersion of currency within communities. We can create the world that does owe us a living through our own creation of 'economies'. Graeber doesn't write in those terms when he says that 'perhaps the world does owe us a living'. He focuses on the need for a general understanding that it is not necessarily a moral thing to always pay back a debt. There is good argument for "some kind of Biblical-style Jubilee.

Brenda Rosser said...

Can could you please delete the multiple replies on Angry Bear. Thanks

coberly said...

Brenda

the very nice comment i left for you was eaten by your comment program. must need a higher i.q. or a secret handshake.

coberly said...

Brenda

thank you for your post and subsequent explanation.

there is lots of room for misunderstanding, given vastly different cognitive contexts, however i think i am in substantial agreement with both you and Graeber.

I do think "the world owes you a living" is an expression of contempt among working people for a good reason, and it is not a good way to describe either the very moral not paying of some debts.. or even more moral not insisting on collecting them... or a good attitude to hold, even "in jest", when well meaning people are helping to destroy the best anti poverty program America has ever had by trying to turn it into welfare.

Brenda Rosser said...

Re: "I do think "the world owes you a living" is an expression of contempt among working people....when well meaning people are helping to destroy the best anti poverty program America has ever had by trying to turn it into welfare."

Good point, Coberly.