The assumption that markets are ‘natural’
by Brenda Rosser
re-posted from Econospeak with permission from the author
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.”
I don’t disagree that governments set rules for the market or that money is important to market transactions, but I think it is a strecth to suggest that government or money is necessary for markets to exist. Surely their have been periods throughout history, where prior to governments or money, people exchanged goods or services. Markets can therefore exist on their own, but are likely far more efficient and abundant in combination with government and money.
Woj
you need to read the book. (Graeber is pretty sure “barter” never existed in the way that Econ 101 texts… and therefore all economists… would have you believe.)
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.
“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……”
Dale,
You know that you and I are mostly on the same page. However, I have to point out that you have been harping on this theme that “liberals want welfare for all” and it just isn’t true. Here at AB or any place in this country for that matter. Liberals, if that label is even appropriate, want an equitable system of economic distribution, whether in the formn of goods and services or in the form of wealth. That doesn’t mean an equal distribution, but it does mean that things are f__ked up now, and have been increasingly so over the past several decades. It swings this way throughout history. Those with plenty want yet more and those with little generally sit and take it.
Again Dale, liberals, whoever they may be, don’t want welfare. They want equitable distribution. We’ve been shown repeatedly recently that the financiers are little different from the robber barons of yesterday. it is unseemly for you to continuously make the case for the radical right that welfare is the goal. Equity is the goal. Let Paul Ryan make his own deceitful case. I don’t understand why you insist on helping him by repeating such bull shit propaganda more suited to Rush & Rove.
“…without demanding that “the world” (Peterson?) owes them (a living).”
You see, you’re bouncing off of one tongue in cheek remark from Brenda’s post as cited from Graeber’s book. Focus on the entirety of the work. Let Mitt pitch his own hissy fit. The right wing hardly needs your help to promote its deceipt.
I call BS
First off, if money indeed brought markets to fruition then why is it primitive tribes have barter and/or gift-giving exchange systems before the creation of a circulating currency?
Second…
“…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?”
To prevent counterfeit (stamping of the King’s face) and to use money as an easily storable, convenient, and divisible medium of exchange. Really, this isn’t that hard a concept.
Finally, what exactly is natural? I have no idea what anthropologists are talking about when they make this claim. People, and our innate homo sapien characteristics and abilities, came from nature. So is everything that we do not natural?
I call BS
First off, if money indeed brought markets to fruition then why is it primitive tribes have barter and/or gift-giving exchange systems before the creation of a circulating currency?
Second…
“…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?”
To prevent counterfeit (stamping of the King’s face) and to use money as an easily storable, convenient, and divisible medium of exchange. Really, this isn’t that hard a concept.
Finally, what exactly is natural? I have no idea what anthropologists are talking about when they make this claim. People, and our innate homo sapien characteristics and abilities, came from nature. So is everything that we do not natural?
I call BS
First off, if money indeed brought markets to fruition then why is it primitive tribes have barter and/or gift-giving exchange systems before the creation of a circulating currency?
Second…
“…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?”
To prevent counterfeit (stamping of the King’s face) and to use money as an easily storable, convenient, and divisible medium of exchange. Really, this isn’t that hard a concept.
Finally, what exactly is natural? I have no idea what anthropologists are talking about when they make this claim. People, and our innate homo sapien characteristics and abilities, came from nature. So is everything that we do not natural?
I call BS
First off, if money indeed brought markets to fruition then why is it primitive tribes have barter and/or gift-giving exchange systems before the creation of a circulating currency?
Second…
“…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?”
To prevent counterfeit (stamping of the King’s face) and to use money as an easily storable, convenient, and divisible medium of exchange. Really, this isn’t that hard a concept.
Finally, what exactly is natural? I have no idea what anthropologists are talking about when they make this claim. People, and our innate homo sapien characteristics and abilities, came from nature. So is everything that we do not natural?
I call BS
First off, if money indeed brought markets to fruition then why is it primitive tribes have barter and/or gift-giving exchange systems before the creation of a circulating currency?
Second…
“…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?”
To prevent counterfeit (stamping of the King’s face) and to use money as an easily storable, convenient, and divisible medium of exchange. Really, this isn’t that hard a concept.
Finally, what exactly is natural? I have no idea what anthropologists are talking about when they make this claim. People, and our innate homo sapien characteristics and abilities, came from nature. So is everything that we do not natural?
I call BS
First off, if money indeed brought markets to fruition then why is it primitive tribes have barter and/or gift-giving exchange systems before the creation of a circulating currency?
Second…
“…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?”
To prevent counterfeit (stamping of the King’s face) and to use money as an easily storable, convenient, and divisible medium of exchange. Really, this isn’t that hard a concept.
Finally, what exactly is natural? I have no idea what anthropologists are talking about when they make this claim. People, and our innate homo sapien characteristics and abilities, came from nature. So is everything that we do not natural?
I’m not sure of what definition of barter is being used, but there are even today societies that use barter but don’t use money. For example, the Bushmen in Botswana use trade as part of their strategy for dealing with famine. The anthropologist Pauline Weissner observed this in the 70s after severe rains destroyed a lot of the traditional food sources. She had come to study stylistic differences in stoneworking, but during the famine, everyone was too busy making things to talk to her. They were making arrowheads, clothing, beads and knives, and they took them to trade with other tribes who were less affected by the famine in exchange for food and access to food. This can be viewed as gift giving as part of building and reinforcing social ties (hxaro), or it can be viewed as trade. It doesn’t involve money or pricing, but it sure looks a lot like barter. Weissner also studied the more extensive exchange relationships among the Enga in Papua New Guinea who apparently moved from hunting and gathering and subsistence farming to a more complex system driven by the introduction of the sweet potato and its associated agricultural surpluses about 350 years ago.
My guess is that a variety of exchange networks and mechanism have long existed, probably from even before we were modern humans. Now you can argue whether these are barter systems or not, and you can argue about the role of money or government, particularly if you use government to refer to cultural norms about obligation and enforcement rather than in a more formal sense. I still don’t buy the idea that barter networks cannot exist without money.
Jack
actually you have a point. because you don’t know what “liberals” i am talking about. the sad fact is that those who call themselves the defenders of social security have decided that they will not bother to inform the people that they can pay for social security themselves, forever, as they always have.
they have the fantastic idea that if they call for “scrap the cap” all those rich people who are complaining about Social Security costing them so much (it costs them nothing now) will say, “okay, here’s my contribution.”
add them to the “it’s a regressive tax” professors, and it begins to look to me like liberals really do want to “tax the rich” so “the poor” can get more and better welfare to answer all their needs.
i am sorry that i am being misunderstood,,, but if on this one issue, “liberals” will come out and say, “hey, us workers can pay for our own damn Social Security” we don’t need Mr Petersons’s steekin’ money, I will repent.
you see, it’s not me making the radical right’s case, it’s … well, a certain group of liberals.
if Rosser was speaking tongue in cheek, the humor was lost on me, on accounta some bad times i have had with folks who mean exactly that “the world owes me a living.”
as for Graeber’s book, the main message i got from it is that debt peonage has been with us a long long time… and yes, you are right, the robber barons are back.
Richard
read the book. Graeber says that your idea of “barter” never existed except in the minds of economists.
and “money” is not that hard of a concept, but you have missed the point.
and yes, we are all natural, so congratulations, you have just eliminated a word from the english language. we no longer need to distinguish between “natural” and “products of advanced civilization” since, of course, as you point out, advanced civilizations came from nature.
Kaleberg
the “barter” that Graeber says never happened is the barter you read about in Econ 101. He does talk about “exchanges” between people who don’t use money, but you oughta read what he says, then we can stop misunderstanding each other.
my apologies for not being able to give you a twenty five word summary.
“…what exactly was the point of extracting the gold, stamping one’s picture on it…”
—Stamping images and mottos on coins is one of the oldest forms of propaganda. The emperors of Rome were all about it. Ask anyone opposed to “In God We Trust” being placed on U.S. currency. Another reason governments get into the business of creating currency is the huge profit in minting. Minters can extract seigniorage or charge a demurrage to take advantage of their position.
“…causing it to circulate among one’s subjects – and then demanding that those same subjects give it back again?”
—The easy profit comes when you pay workers with created currency. For example, mining firms in West Virginia paid their workers in tokens, company currency, that could only be used at a company store, which charged inflated prices. Governments often do the same thing when they pay public employees or procure services from the private sector. They know the value of this function which is why governments ban alternative currencies (a threat) or place severe restriction on local currencies.
“The assumption that markets are ‘natural'”
—Markets are natural and they come about when people recognize a shared value in a commodity. Prisoners use cans of tuna as a medium of exchange, replacing cigarettes due to recent smoking restrictions. An recent alternative currency on the black market, in exchange for drugs, is Tide detergent.
The author’s argument also fails to address the many instances when markets did NOT value the government’s issued currency. We also know that there were times when robust, viable markets existed BEFORE a government issued a national currency.
I don’t understand why the author is associating “unfettered free markets” with Adam Smith. He had a far more nuanced understanding of how markets work (including the labor market) than that, way more so than any of his contemporary “followers.” Either that, or I have completely misread The Wealth of Nations.
I haven’t read the book, but saw an interview with Graeber about it. He talked about colonizing powers introducing a form of money and a tax that had to be paid with that money. The colonized people had to obtain money, either by exchanging goods (such as part of their crop) for it or by working for it. That is, the people had to participate in the market, and therefore the imposition of money (and taxes) created the market. The tax also helped finance the occupation. Therefore, the market system was imposed on most of the world by governments through force.
Thankyou for your helpful feedback on this article. I wasn’t expecting the reactions that have presented themselves. 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.
Thankyou for your helpful feedback on this article. I wasn’t expecting the reactions that have presented themselves. 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.
Thankyou for your helpful feedback on this article. I wasn’t expecting the reactions that have presented themselves. 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.
Thankyou for your helpful feedback on this article. I wasn’t expecting the reactions that have presented themselves. 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.
Thankyou for your helpful feedback on this article. I wasn’t expecting the reactions that have presented themselves. 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.
Thankyou for your helpful feedback on this article. I wasn’t expecting the reactions that have presented themselves. 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.
Dan, could you delete these multple entries. I had trouble lgging in and the result was this. I will expand my comments on the weekend.
Brenda offers one below.
It would be easier to understand the position of money in any market by thinking of things called money as symbolic (maybe iconic) representations of the value of goods. In the “old world” with fewer goods, services and people within a given society (or market if one prefers) it was less complicated. But always some easy to carry and easy to recognize, if maybe a bit more difficult to counterfit, object was used as “money”. Beads, shells, animal teeth or skins, etc were money. And then there were “precious metals.” Why were they precious? Only because of some p[erceived desireability and scarcity. Coins soon followed. The market is really all barter, but money is the means by which barter is more effectively defined and evaluated. Money is what ever a circumscribed group defines it to be.
Look at the difference between gold coins and gold nuggets. Both are easily transported as well as recognizably valuable, but the coins have ben “processed” in a way that allows better and easier assessment of their trade value. Nuggets and dust would have to be weighed at each transaction. Purity would be uncertain. Coins win as money and market facilitators. Societies both big and small need money. Barter breaks down quickly. But I’ll give you ten Mickey Mantles for one Honus Wagner.
Brenda, If you are using the same machine as you did to make the comment there should be a “Delete” button right next to the “Reply” button.
Jack, there is no ‘delete’ button next to the multiple entries (so I can’t get rid of them). It’s a problem with the software on this site.
Regarding your comment that ‘The Market’ is all barter. I don’t necessarily agree with you. A good component of the financial markets involves compulsion placed on workers to ‘invest’ a part of their wages in mutual funds for retirement, for example. There needs much more discussion on ‘The Market’, in general. I’m reading Martin Baker’s ‘A Fool and His Money’ published in 1995. On page 5 he writes:
“…What the fuck is The Market anyway? Good question. One to which the dcirect, literal answers are few, and mostly unsatisfactory, while the stock of euphemism appears to be inexhaustible….”