‘Commoditised’ services?

I’ve been pondering my recent conversation with Branko Milanovic about ‘commodification’ and whether or not it’s a good thing. As he says in his reply on the subject, it is happening as a matter of definition. He puts this in terms of the formalization of economic activity as economies grow richer. I’d express it as the increasing share of services in economies as they grow richer. Goods have been largely commoditized (as it were) in the west for aeons and nobody really thinks there’s any social problem with buying your shoes and fridges in the market. As the growth process continues, the division of labour and specialization extend into areas of services.

On the whole, I disagree with Branko that there is a tradeoff, that while people clearly value these market exchanges, they weakens social ties: “[W]hile in many cases, greater commodification has made our lives better and responds to a definite choice of people, it has also in many cases weakened personal ties and in some cases made us more callous because our knowledge that any pesky little problem can be solved by throwing money at it made us less concerned about our neighbors and family.” He links this to the emerging ‘gig’ economy.

For many or perhaps most services, I don’t see this. If I specialize in economic consultancy, my neighbour in translation, a friend in gardening, another in teaching in a gym, what’s the social problem that arises from these being market exchanges? Indeed, the argument that these sorts of monetary transactions undermines relationships seems demonstrably false: services of this kind require a high level of trust for transactions to occur because there is a huge asymmetry of information between the seller and the buyer. If Paola translates a paper into Italian for me, I have no idea how good it is. This asymmetry is why professional services are regulated and in some countries provided by the public sector, presumed to have an ethos of public service.

The social problems come with a particular category, the personal, labour intensive services often badly paid. This could be because they are paid for by squeezed public funds (hospital cleaners), or because they are jobs that might not exist if the pay had to be higher (supermarket checkouts – now getting automated – or domestic cleaners – some working women would do without if their pay doubled). One could argue that some of these activities should as a matter of ethics never be marketed, but this was my original challenge to Branko, as child care and cleaning are still typically mainly done by women. Barbara Ehernreich in her terrific book argued that anyway nobody should be asked to clean somebody else’s toilet, as a matter of (self-)respect. I’m more interested in interventions in the market to ensure good pay and conditions, rather than – what? banning these transactions?

[amazon_image id=”1862075212″ link=”true” target=”_blank” size=”medium” ]Nickel and Dimed: Undercover in Low-wage USA[/amazon_image]

As for the ‘gig’ economy, this seems to me a question of how good or bad the workers’ outside options are (as well as the corporate behaviour). Nobody is forced to drive for Uber or ride for Deliveroo, so their other options are probably worse. This is an argument for a reasonable minimum wage properly enforced, and a legal framework that is updated to protect the rights of all individuals doing paid work – I’ve been arguing for this since  in 1997.

I’d go further and say there are areas where we need more market exchange. Like many economists, I’d like to see more market instruments used to serve the interests of environmental protection and the safeguarding of natural capital. I admire Al Roth’s work on bringing a market-type (but non-monetary) exchange process to kidney donations, literally life saving work.

PS Apologies about the ongoing tech problems with the blog. I keep thinking it’s fixed. The fix is short term but hopefully it will be sorted long term within a week or two. This is a problem of success, with more traffic and an accumulation of posts, so I hope regular readers will be patient with the tech issues.

Share

Markets and humans

Brank Milanovic has an interesting post on what he decries as the commodification of life by markets, something that will surely strike a chord with the many fans of Michael Sandel’s and others. While I absolutely agree that there ought to be limits to what resources are allocated by markets as opposed to other means, Branko lost me in this early paragraph: “The most obvious case is commodification of activities that used to be conducted within extended families and then, as we became richer and more individualistic within nuclear families. Cooking has now become out-sourced and families often do not eat meals together. Cleaning and child-rearing have become more commercialized than before or ever.”

The trend towards buying ‘domestic’ services outside the home dates back decades now, linked to urbanisation and women’s participation in the paid workforce. The switch from home cooking to ‘outsourced’ meals, and similar market activities, has saved women millions of hours of labour in the home. I’m all for it.

Indeed, one of the social advantages in general of a switch toward markets (or ‘commodification’) is precisely the anonymity of the market as compared with the personal (patriarchal) power relations involved in from home production and household/village economic activity. Robert Putnam’s classic touches on this in its contrast of northern and southern Italy – the south being more family-centred, with ‘strong ties’, in all sense of the word family, the north more oriented toward ‘weak ties’ in the wider urban community. Partha Dasgupta’s Economics of Social Capital is very good on this tension.

Branko’s post goes on to criticize the so-called ‘gig’ economy. Again, I think this isn’t so straightforward. Some of the ‘gig’ corporations are deeply unpleasant and the conditions of work unsatisfactory. However, those conditions are determined by workers’ outside options in the job market, so corporations’ behaviour to these workers can be improved by the framework of labour law and its enforcement. There is every reason to believe – from the numbers participating if nothing else – that very many people appreciate the opportunity to make money from participating in this segment of the economy; and indeed that it offers a route into the formal job market for people who otherwise find it hard to participate (see for example this on Uber in France by Anne-Sylvaine Chassany).

Branko writes: “The problem with this kind of commodification and flexibilization is that it undermines human relations and trust that are needed for the smooth functioning of an economy. ” This seems obviously true, and indeed the tension was identified by Daniel Bell in his , and all its forerunners.

I’d certainly agree that western economies are not in a good place in terms of this balance now. But to illustrate this, I wouldn’t pick on the exactly the examples of markets that empower women and marginalized workers.

[amazon_image id=”184614471X” link=”true” target=”_blank” size=”medium” ]What Money Can’t Buy: The Moral Limits of Markets[/amazon_image] [amazon_image id=”0691037388″ link=”true” target=”_blank” size=”medium” ]Making Democracy Work: Civic Traditions in Modern Italy (Princeton Paperbacks)[/amazon_image] [amazon_image id=”B0028QL03K” link=”true” target=”_blank” size=”medium” ]By Daniel Bell – The Cultural Contradictions Of Capitalism (20th Anniversary Ed)[/amazon_image]

Share

Big books on the big question

I’ve nearly finished reading Deirdre McCloskey’s – it’s out next month and I will be reviewing it elsewhere. This is of course the latest in her grand project, The Bourgeois Era, the first two being and . (I reviewed the latter in The New Statesman at the time.) McCloskey originally planned six volumes, but it seems three might now be the total. As each is over 600 pages long, this is already quite a lot.

[amazon_image id=”022633399X” link=”true” target=”_blank” size=”medium” ]Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World[/amazon_image] [amazon_image id=”0226556743″ link=”true” target=”_blank” size=”medium” ]Bourgeois Dignity: Why Economics Can’t Explain the Modern World[/amazon_image] [amazon_image id=”0226556646″ link=”true” target=”_blank” size=”medium” ]The Bourgeois Virtues: Ethics for an Age of Commerce[/amazon_image]

Anyway, this isn’t a spoiler – I’ll save up my thoughts on But reading it set me thinking about what other books one ought to have read to evaluate properly this series about the history and dynamics of capitalism (although McCloskey doesn’t like the word). These are the ones that came to mind first – and clearly this is a question that inspires BIG books.

David Landes, .

Kenneth Pomeranz, [amazon_image id=”0691090106″ link=”true” target=”_blank” size=”medium” ]The Great Divergence: China, Europe, and the Making of the Modern World Economy (The Princeton Economic History of the Western World)[/amazon_image]

Joel Mokyr, ; ;

[amazon_image id=”0140278176″ link=”true” target=”_blank” size=”medium” ]The Enlightened Economy: Britain and the Industrial Revolution, 1700-1850[/amazon_image] [amazon_image id=”0195074777″ link=”true” target=”_blank” size=”medium” ]The Lever of Riches: Technological Creativity and Economic Progress[/amazon_image] [amazon_image id=”0691120137″ link=”true” target=”_blank” size=”medium” ]The Gifts of Athena: Historical Origins of the Knowledge Economy[/amazon_image]

Robert Allen,

Jared Diamond,

Ian Morris,

Acemoglu and Robinson,

Douglass North,   [amazon_image id=”B00HQ18ICI” link=”true” target=”_blank” size=”medium” ]The Rise of the Western World: A New Economic History by North, Douglass C. Published by Cambridge University Press (1976) Paperback[/amazon_image]

Joseph Tainter,

I’m sure there are tons more – McCloskey’s bibliography alone is 50 pages long. But anything essential left off this list?

Share

The capitalism we deserve

The idea that it’s harder to write at length than concisely is so familiar that it has become a cliché, but it is surely true that if writing a history of capitalism then number of pages could be a help rather than a hindrance. Historian Jürgen Kocka has written at 169 pages. What’s more, it spans the centuries from China during the Han Dynasty through the Arab empire and the European Middle Ages to global financial capitalism today.

[amazon_image id=”069116522X” link=”true” target=”_blank” size=”medium” ]Capitalism: A Short History[/amazon_image]

The point of the book is stated most clearly in the very last paragraph:

“Every era, every region and every civilization gets the capitalism it deserves. Currently, considered alternatives to capitalism are hard to identify. But within capitalism, very different variants and alternatives can be observes and even more of them can be imagined. It is their development that matters. The reform of capitalism is a permanent task. In this the critique of capitalism plays a central role.”

The unstated aim of the book, I think, is to address the critics – generally speaking, these are the people who talk about ‘capitalism’, whereas capitalists talk about ‘the economy’, or something else. Kocha seems to me to be saying that a system of exchange based on markets is deeply embedded in human society and should be regarded as reformable but essential. He argues that capitalism is linked to financial innovation and therefore long pre-dates industrialisation, and one should not conflate the two. Double entry book-keeping, promissory notes, futures trading were all key for the formation of capitalism. And this financial development was closely linked to state formation.

Kocha therefore disagrees with the Marxist line that production and the organization of work are intrinsic to the definition of capitalism – although he accepts that, “Preindustrial commercial traditions of capitalism, wherever they persisted, significantly promoted the breakthrough to industrialization.”

If you’re neither a Marxist not a critic of capitalism in general (as opposed to some of its specifics today), this is a mildly interesting debate but not one to affect the blood pressure in either direction. On the other hand, there are some nice insights, and it is after all a short book, ideal for a train journey or flight. Describing the capitalism we would like to deserve would take rather more pages.

Share

Capitalism and the law

My previous post – the ten books a well-educated social science student ought to have read – generated a lot of terrific comments with other suggestions, which I’ll mull over and compile into an alternative list at the weekend.

Meanwhile, I’ve read by Brett Christophers. I greatly admired his previous book, , and this new one has the same compelling combination of analysis and historical detail. The theme this time is capitalism as a constant balance between competitive markets and market power, these two forces applied by laws and their enforcement. Anti-trust laws are enacted or enforced with greater rigour when monopoly power gets out of hand. Intellectual property laws are strengthened after periods of cut-throat competition. In contrast to those – often Marxist – writers who have seen a single direction of travel toward ever-greater monopoly power, Christophers argues here that there is a cycle. He cites , but also Marx’s dialectics: “Monopoly produces competition, competition produces monopoly,” Christophers quotes Marx as writing in a letter of 1846.

[amazon_image id=”0674504917″ link=”true” target=”_blank” size=”medium” ]The Great Leveler: Capitalism and Competition in the Court of Law[/amazon_image]

The book starts with three chapters setting out Christophers’ analytical framework and explaining in more detail the dynamic to and fro between more and less market power for businesses. It is very interesting to see an analysis of this kind in terms of the legal framework. While law has hardly been ignored by economists, this big picture, historical perspective provides much food for thought. As Christophers puts it in the introduction, modern political economy has tended to focus more on the sphere of production, whereas competition and IP law concern the sphere of exchange. Yet many of the flash points in public policy today concern exactly competition and intellectual property, precisely because the basic productive structure of the economy is being changed by technology. The two spheres meet.

This means is an important contribution to understanding some of the most acute modern policy – and political – questions. The analysis of the first half is followed by two chapters looking at the historical experience of the US and UK from the late 19th century, and a final chapter on 21st century monopoly. Recent decades have seen the phase of the cycle where enforcement of competition diminishes and enforcement of IP protection increases. Christophers links this to the Chicago School of economics, with its powerful impact on public policy on both sides of the Atlantic. He sees little sign that this has changed even now: “Post-Chicago developments have certainly entailed meaningful changes in antitrust thinking and practice, but such changes ultimately amount to small beer compared to the changes that the Chicago revolution itself heralded.” The ‘post-Chicago’ work of economists such as Jean Tirole, Christophers argues, have concerned specific business practices or mergers rather than the framework of competition law as a whole.

As for policy approaches to intellectual property, there is little sign of any recent redressing of the balance, for all the forceful concerns many people – academics and regulators – have voiced about excessive protection, from the TRIPS clauses to copyright madness. Indeed, this chapter argues that strong IP protection was deemed pro-competitive by Chicago-flavoured thinkers (I’m afraid Christophers does use the adjective ‘neoliberal’, although it obscures rather than clarifies matters, given that so many non-economists use it to describe all economists, as if there were no differences of opinion or political philosophy in my professsion). He underlines the irony that ‘pro-market’ can mean either pro-competition (citing early Mont Pelerin economists such as Lionel Robbins) or ‘pro-business’ (ie anti-competition), as – he argues – many law-and-economics  ‘neoliberals’ are today.

The book concludes: “Political economy never sits still.” This is a terrifically interesting book, one for anybody interested in political economy, or just in the narrower canvas of law and economics.

There’s no doubt the plates are shifting again now, although who knows where they will take us – the political and economic forces undermining the post-1980s structure are powerful, yet there is no alternative intellectual framework, in contrast to the preparedness of the early Chicago School in the mid to late 20th century. I was much struck by Daniel Stedman Jones’s account in of the systematic preparation of that earlier generation of economists to change the public philosophy – decades-worth of research and influencing. It’s clear – especially after reading – that the balance ought to tilt back now away from monopoly protection toward competition enforcement, as the dominant model of capitalism is self-undermining. But who knows how or whether that will come about? Christophers ends with Lenin’s prediction that the future is capitalist monopoly on the international stage, monopoly imperialism. I have more confidence in self-correcting mechanisms. We will see.

PS. Christopher May, much cited in The Great Leveler, is the author of , published in paperback last year. I haven’t read it, but it offers an explanation of why global politics so often seems to turn on legal issues. “In accessible terms, Christopher May argues that we can no longer merely use the idea of the rule of law without question but rather must appreciate its multifaceted and contested character if we are to begin to understand how and why it is now seen as a ‘good thing’ across the political spectrum,” according to the blurb.

[amazon_image id=”B00ZY8G016″ link=”true” target=”_blank” size=”medium” ]The Rule of Law: The Common Sense of Global Politics by Christopher May (2014) Hardcover[/amazon_image]

Share