Who’s afraid of the big, bad market?

Over at Wronging Rights, Amanda asks “Why do so many people respond so negatively to the idea of markets?“:

I don’t think it’s an actual discomfort with exchanging goods or services for money. We all engage in market transactions all the time, every day. Markets are where we get everything from our toothpaste to our cheesy Richard Curtis movies, but I don’t think many people feel oppressed or exploited every time they buy a tube of Colgate Total.

I wouldn’t dismiss discomfort.

Impersonal, non-cooperative markets are a recent invention. Even 50 years ago, most of Western intelligentsia doubted the batty-sounding system could work. Fifty years later, most of us believe in markets only because we see the wreckage of other systems each time we lean close to the precipice ourselves. Liberal ideology helps us rationalize the rest.

But impersonal markets are precisely the opposite of the human historical experience. Vernon Smith, experimental economist of Nobel fame, has suggested humans are hardwired to prefer close networks of reciprocal exchange. There’s a nice discussion of this point over at EconTalk. Our discomfort may be biological.

The argument would be familiar to Hayek; he argued that human beings want to take the familiar–the trust-based kin relationship–and extend it to society at large. But trust in the market is unlike trust within families. Hence our discomfit.

Another implication of impersonal markets: there is no one to blame. If you lose your job, if your home price falls, if your stock price tanks, seldom is one person accountable.

Finally, one always holds an uncomfortable feeling that someone else, someone with power, someone insipid and mean, is taking advantage of your good behavior.

When markets fail, we instinctively search out those who violated our trust, strip them of their wealth, and banish them. That satisfied feeling that follows banker bashing is pure primitive glee.