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]

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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?

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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.

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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]

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Not all economists are neoliberal, honest

It was because of a tweet linking to her LSE lectures that I decided to read Wendy Brown’s . My relationship with the concept of neoliberalism is an uneasy one, in that I don’t really know what it means. Often, radical writers use it to mean ‘most of economics’ – Philip Mirowski’s Never Let A Serious Crisis Go to Waste is a good example of this –  making an exception only for certain Marxist or otherwise unimpeachably heterodox economists. I understand the idea well enough to know is not neoliberal. However, writing off all the rest of economics makes it an unhelpful concept in my book. Of course there are ideologically right wing economists but there is a wide range of views about both politics and economics within the profession.

[amazon_image id=”1935408534″ link=”true” target=”_blank” size=”medium” ]Undoing the Demos: Neoliberalism’s Stealth Revolution (Zone Books Ner Futures)[/amazon_image]

I thought Brown’s book was going to be subtler. Here is her definition: “neoliberalism is not about the state leaving the economy alone. Rather, neoliberalism activates the state on behalf of the economy, not to undertake economic functions or intervene in economic effects, but rather to facilitate economic competition and growth, and to economize the social, or as Foucault puts it, to ‘regulate society by the market’.” She adds that neoliberalism entails “the dramatic curtailment of public values, public goods and popular participation in political life.” This definition makes sense to me – and makes neoliberalism a political ideology, one that uses its claim about the primacy of markets to extend a certain political order into more and more areas of life. It is similar to Michael Sandel’s argument in .

However, Brown goes on to list all the neoliberal economists who include Milton Friedman, Friedrich Hayek, Gary Becker – but also Joseph Stiglitz. Wait – Joe Stiglitz in the same camp as Becker?! Barack Obama also gets labelled as neoliberal, along with Reagan and Bush. So this is back to vacuous.

It’s a shame because the argument that the primacy of the market has been extended into inappropriate domains needs to be taken seriously. People regard ticket scalping as unfair – this includes many economists – so those of us who do economics have to respect the fact that some values other than economic efficiency might have to win out. Freedom, civic cohesion, fairness are all important values. Where it is appropriate to prioritise efficiency, or to use market processes to achieve either efficiency or other outcomes, should always be a matter of public and political debate. Most of the economists I hang out with – applied micro people – think it will depend on both people’s political choices and on the exact circumstances: the US trade in SO2 emissions works well, the EU market in carbon emissions does not; ‘s matching markets for kidneys or medical jobs are magical (and no money changes hands). My kind of economists tend to be pragmatists, unlike those in politics who argue the market is always best.

There are some real dilemmas. Later in the book, Brown gives short shrift to the idea that ‘governance’ is ever more important than politics, and argues that independent, technocratic bodies such as central banks should not take decisions with political consequences – and no doubt the many critics of the ECB and the right-wing critics of the Fed would warmly agree. It does not seem so obvious to me. Central banks take ‘better’ decisions when they are independent in the specific sense that growth is less volatile and inflation lower. Yet of course they need legitimacy – answering to parliament, fulfilling a remit set by the government. And the Greek crisis has indeed demonstrated that central banking is political at times of great stress. Perhaps Brown is right but I don’t think she argues the case well, when there are areas of policy in which expert advice or decisions made by technocrats delivers good outcomes. Surely this is debatable.

Anyway, is an interesting book even though I ended up disagreeing with much of it. I will say that whenever anybody next tells me economics is an abstract, wholly theoretical subject, I will make them read this. But it still helped me understand Michel Foucault’s almost totally incomprehensible , which I read recently. And I do think it’s important to push back against the political stance that disguises ideological projects with the claim that market are always right.

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