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.

8 thoughts on “Who’s afraid of the big, bad market?

  1. Pingback: Links we liked « The First Mile

  2. A fuller view would note American society typically resists the idea of the bureaucrat having control. Often we prefer control to be through anonymous market and cultural forces rather than vesting control in some “faceless bureaucrat”. Somehow we often feel freer when no one is calling the shots .

  3. Pingback: De l’origine de l’aversion au marché « Rationalité Limitée

  4. I Agree with Zo. You are missing the point.

    Almost no one opposes markets per se.
    People like markets, but like to regulate them.
    Then,the real question is: why people oppose free markets and prefer regulated market.

    regards,
    Manoel

  5. “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.”

    This kind of impersonal market is a bit of a legal fiction. It was probably practical when Adam Smith wrote “the invisible hand”, when centers of capital were various, when great power depended on great landholdings, and Samuel Johnson wrote “a man is seldom so innocently employed as when he is making money.”

    That’s not what we have today. What we have today is a tsunami of investment capital sloshing around the world, directed by a few thousand people who can’t seem to think of uses for it that are at once beneficial and profitable.

    Consider Bolivian water. We know who loaned the money, we know who borrowed the money. We know who lobbied the government, we know who took control. They wanted us to know so they could sell stock.

    The farmers market might be a good project for tomorrow morning: “Buy the whole market and raise prices 2000%? Any other ideas? No? Let’s go.”

  6. I agree with what you have here, I would like to add two main points:

    She writes “I don’t think many people feel oppressed or exploited every time they buy a tube of Colgate Total.” True, I don’t feel exploited, but I know that it is only by way of the oppression/exploitation of people (somewhere) that so many types of inexpensive foods and products are available.

    She asks, “if you are someone who hears ‘water privatization’ and immediately has concerns that you do not have when you hear ‘government-run utility,’ why is that?”
    Again, it’s not about me. Think Bolivia, not America. It is the difference between access to government-run water and a privatized system that prices the poor out of a basic need (and lobbies for laws that makes collecting rain water illegal).