Are Markets Antisocial?

Among the moral critiques of the free market none seems to hit harder than that it is hopelessly bound up with individualism. Alexis de Tocqueville described individualism as

a considered and peaceful sentiment that disposes each citizen to isolate himself from the mass of his fellows and to withdraw to the side with his family and his friends; so that, after thus creating a small society for his own use, he willingly abandons the large society to itself.

This stands in stark opposition to conceptions of the good society as composed of individuals who practice both justice and charity — virtues that surely involve an orientation to persons and events beyond one’s small circle of family and friends. Indeed, some of the strongest supporters of the free market or economic liberalism — for instance Jeremy Bentham, John Stuart Mill, and Ayn Rand — are proponents of an aggressively individualistic philosophy that leaves little room for the traditional practice of justice and charity.

There are two ways we can imagine that the free market might be bound up with individualism. First, we can ask whether the free market depends upon individualistic agents or other characteristics of a narrowly self-centered society. This amounts to asking whether individualism causes, or gives rise to, markets.

Second, we can ask whether individualism is created, fostered, or encouraged by participation in markets. In the absence of markets, say, in a communal society, would people still tend to regard themselves as set off from one another? This amounts to asking whether the free market causes, or gives rise to, individualism.

A traditional way to approach these questions is in connection with the invention and use of money. A barter economy — one that does not use money — would seem to be highly social, because in order to trade, each person also needs to produce something that benefits others. But when money is introduced, it looks like avarice and individualism have free play. Money stands for anything. It can be accumulated without limit. And when one has it, one no longer needs to produce anything that benefits others.

But this makes the matter too simple, and we would do well to consider briefly how the use of money relates to individualism.

Money and the Communal Good
Perhaps the most compelling account of the origin and purpose of money is a thought experiment advanced by the Italian Enlightenment thinker Ferdinando Galiani (1728–1787), in his treatise Della Moneta (On Money).

DellaMoneta-w200

Title page to second edition

Galiani begins by noting that “small communal societies, such as religious orders, live better communally and generally more happily than others.” But could cities, or even whole kingdoms, live blissfully in such a way? He asks this question because he wants to know the best way of encouraging, in a large market economy, the same sharing and charity found in small communal societies.

His thought experiment proceeds in three steps. The first step, he says, is a fairly direct extension of the scheme of the small religious community. He asks us to consider an imaginary city in which citizens live communally, and in which each member is compelled to labor until exhausted and to contribute the fruits of his work into a common warehouse. From this warehouse citizens may take out what they wish to satisfy their needs.

Galiani argues that this simple communal arrangement is bound to fail, since lazy men would be tempted to free ride, “expecting to live on the toil of others,” and even industrious men might aim to take for themselves more than would be proportionate to their labors.

In step two, Galiani suggests a way of improving on this communal arrangement to rescue it from the difficulties of free riders and greedy citizens. He proposes a method of accounting so that each person shares “in the contributions of others only insofar as the results of his industry are of use to society.” People receive notes of credit when depositing their goods into common warehouses — say, a hundred pairs of shoes — and these notes allow the holders to withdraw goods against their credits.

Galiani proposes some refinements of the note system to allow that notes would be accepted at all warehouses, and could be used for all types of goods in the warehouse, regardless of what kind of goods had been deposited. These refinements necessitate that the prince assign a regulated measure of value to each deposit, and that he provide notes of credit to a select number of public servants, whose duty is to maintain the system by keeping account of the notes and credits, safeguarding the communal warehouses, and so forth. To support these public servants without incurring debt every citizen would need to contribute some goods gratis, without receiving credit, so that the notes of credit that are given to the public servants correspond to real goods.

But this situation in our imaginary city allows for a huge disadvantage: fraudulent notes. Galiani points out that public servants who are watchmen are just as likely to be dishonest as anyone else. Nothing hinders them from writing notes of credit for friends and family that exceed the value of the goods deposited.

Thus Galiani takes a third step and proposes as a final remedy that the value of official notes be fixed by the prince in advance, so that they cannot be altered by public servants. So, for instance, notes might be printed in the value of one pound of bread, and, when the value of goods deposited is more than one pound of bread, several notes of credit would be dispensed. These notes — because they would be official and viewed as trustworthy — would be accepted at all warehouses. Trade would be facilitated, since fear of fraud and injustice would be reduced.

At this critical point in the text considering this imaginary communal city, Galiani declares memorably,

a veil seemed to fall away from my eyes, and I realized that I had inadvertently been in the present-day world…. I saw, and all can now see, that trade and money — its prime mover — have led us from a wretched state of nature in which each thinks only of himself, to a blissful communal life in which each thinks of and labors for all.

This is a stunning conclusion. On Galiani’s account, if we have understood the analogy between his thought experiment and real societies, trade and commerce based on money are not anti-social but are in fact highly social, rescuing us from the type of individualism that Tocqueville defined.

Abbe Ferdinando Galiani

Ferdinando Galiani

It’s a clever discourse: give me an ideal communal city, Galiani says, and I will demonstrate what is minimally required to achieve communal happiness. This minimum is a rudimentary market system based on money. By means of trade and money, life is sustained, happiness achieved, and men labor to satisfy their mutual needs.

From this it follows quite simply that money itself cannot be morally suspect. On the contrary, money — a stable and reliable currency — is both “useful and excellent” and pertains to the very “constitution of society.” Yes, of course, the invention of money will not by itself make people just and charitable. But neither will obligatory sharing of all goods in a small religious community. In that community people still need the virtues. Their plan of common living is arguably the best scheme for expression of those virtues. Similarly, in a large market economy today, people need virtues, which they normally develop in the family and in civil society. But when those virtues are in place money as the instrument of exchange is analogous to the living arrangements in that admirable communal religious society, because the use of money helps to assure that we think about the needs of others when we produce goods but also that trade is just and fraud restrained.

When Galiani says that the market is the best alternative to the “wretched state of nature,” he uses the phrase very intentionally. In the century preceding Galiani’s, Hobbes and Locke had written about the development of modern societies from an imagined state of nature. When he writes Della Moneta, Galiani understands himself to be entering these discussions of political theory. For instance, he states in his introduction that his study of money should be of import “for persons entrusted with the responsibility of governing others” and that he is inspired alone “by love of the public’s welfare.”

But Galiani’s notion of a state of nature — unlike that of Hobbes and Locke — was classical and broadly Aristotelian. It was a commonplace maxim of classical thought that man at birth lacked the advantages of the other animals. He had no hooves or paws for walking on rocky ground. He had no fur for clothing. He had little shelter and food. Over time, the economy of the market took man out of this state: by allowing specialization and division of labor, coupled with free exchange, men would together remedy what nature had, so to speak, deliberately withheld, precisely to require men to cooperate. Money appears not as a corruption of the transition out of a state of nature, but as an ingenious and necessary additional remedy.

This point — that trade and commerce, facilitated by money, pertain to the very constitution of society — is about the nature of political organization, as well as about the ideals and goals of a good society. Galiani accepts and praises the idea that men should live for others and not for themselves. Like Aristotle, Galiani thinks living socially is a fundamental impulse of man, not something forced or contrived as the result of some political compact, as some other thinkers before him had argued. He sees trade and commerce, together with contracts, private property, and money, as pre-political, just like the family: they arise prior to political organization and therefore pertain to the very constitution of society.

Here we can see the full force of Galiani’s argument. Trade and money are anti-individualistic, because through them we labor not only for ourselves but for others. This is not the opposite of communal living, despite the need for private property, but instead the best realization of communal ideals. Returning now to our original question, we see that Galiani doesn’t merely reject the notion that the free market is bound up with individualism; he argues the exact opposite.

Bound Together
So does the market give rise to individualism? Or does individualism give rise to the market? In response to the first question, we can say that the market could not possibly give rise to individualism — because men and women who are engaged in meeting mutual needs through trade and commerce are not likely to think of themselves as set off from others. To the contrary, because of the division of labor in a trade economy people need each other even more than in any non-market arrangement, such as in a homestead environment where families aim to sustain themselves wholly or even partially. A craftsman who makes only shoes, for instance, needs his fellow man much more than a farmer who can provide for himself everything but shoes.

In response to the second question, we can say that individualism never could give rise to the market as we have envisioned it here. People who regard themselves as isolated from society, concerned only with a small circle of family and friends, would not seek to trade with strangers, when trade with family and friends would suffice.

If individualism is neither a cause nor a consequence of the market, why then has it become so commonplace to think of these two as bound up with one another?

I believe the answer to this lies in a confusion about the types of friendship proper to different modes of relation in civil society. We rightly observe, and sense in ourselves, that the care and concern we have for those with whom we do business falls far short of the care and concern that we have for our family and friends. For instance, while we might do anything for our child or our brother in need, we know that our care for our grocer or our tailor is limited. But this is not, as is sometimes supposed, a sign of individualism. Rather, it is a type of friendship proper to our relations with people closest to us.

By contrast, a market economy requires impartiality in human relations as a foundation for economic justice. Consider how much trade would be impeded if close, family-like ties existed in each market — or if, to make the point clearer, certain groups of people could seek special treatment in various economic and legal interactions. These close ties might lead people to ask for more favorable terms of trade, price adjustments, lenient contracts, and so forth. And these are exactly the sort of adjustments that create a general sense that terms of trade are unfair, and that, ultimately, lead markets to break down, or to turn into destructive shadow markets. Some of what I have just described is now rejected under the label of “crony capitalism.” Just trade and commerce depend inherently on a type of equal treatment, on a sense of fairness, on the practice of justice that excludes the sort of special treatment appropriate for close family and friends.

Taken together, these considerations suggest that a full discussion of the morality of the market — and a morality of money — requires a full account of the modes of human relationships in civil society, together with an account of the natural sociability of man and all that is prior to political organization.

Discussion Questions:

1. Under what conditions do market exchanges produce the sort of happy interdependence that Ferdinando Galiani envisions? Are there some market exchanges that fail to produce interdependence and instead foster something else?

2. Does online commerce diminish the social value of the market?

3. Thinking of market failures (for example through monopolies), does it seem right to say that they occur in part because of departures from ordinary norms of human sociability? If so, is this another “proof” that markets are inherently social, and not individualistic?

Discussion Summary

Our discussion turned on a couple of primary themes.

The first was whether technology obscures the naturally social dimension of the market, with readers having concerns especially related to computers, the Internet, and digital commerce. I argued that the market still achieves its social function even with virtual interfaces, since the sociality of the market is not dependent on seeing other people, even on Galiani’s account. However, it seems to be the case that it is harder to “see” the sociality of the market in a digital setting compared with a physical marketplace with many buyers and sellers.

A related theme was whether big markets, particularly global ones, could still embody some of the desirable features of markets, especially the possibility of being marked by a kind of civic friendship. It was noted that when participants in markets are very distant, it is harder to know whether interactions are fair, and whether the co-dependence is healthy or unhealthy. Analogizing this to the first theme, one might ask whether the size or scope of a market obscures its sociality.

These thoughts raise a few further big questions:

  1. How important is a “human” interaction in a marketplace?
  2. Do impersonal market transactions have less value than personal ones?
  3. Have technological changes favoring digital commerce and globalization made it more difficult to understand, and therefore defend, the natural basis of market behavior?

7 Responses

  1. sammie littlejohn says:

    So, I wonder if this historical/philosophical story of markets and sociality holds true as much today. I just get the sense that a lot of our latest technology pushes us in the other direction. To engage in markets, we don’t have to see one another, or see any person at all; we can just click some buttons to buy and sell. (And that doesn’t even mention the enormous amount of buying and selling that doesn’t involve any human beings whatsoever, the purely robot-to-robot transactions that make up an increasingly large volume of stock-market activity.) Moreover, markets have helped give us more and more techno-creations that push us away from sociality/community toward individualism/antisociality. We put on headphones, stare at screens, and create worlds alone, bubbles around ourselves, and while sometimes we’re using those screens to socialize, often we’re using them just to cut ourselves off from everybody else. And all that is made possible by markets.

    • I share this deep concern that aspects of modernity are pushing us into increasingly strange spaces with respect to human interaction. I am not convinced that the problem is “markets” per se, so much as the use or misuse of technology, and the commensurate failure of the modern age to engage in thoughtful reflection about how we ought to order our lives. I tend to see markets and market behavior as a fundamental “propensity in human nature.” It’s not clear we can remove this propensity: the better question is how to handle it. Men and women seem primed to come up with products and services to sell/exchange with one another. Some of these products and services aren’t good for us — or lead to unintended consequences. But then to blame markets seems a little like blaming dinnertime for the fact that some people overeat. The propensity to eat, and eat together, is a good one! The question we want to ask is what causes some people to overeat, and how can we address that difficulty?

      I might want to push back a little on your description of “buying and selling that doesn’t involve any human beings whatsoever.” For instance, I need a new cover for my MacBook Pro. I might go online later today, pick a cover, and purchase it with a few clicks. This interaction is quick and efficient and seems to be “without human beings whatsoever.” But someone designed that cover, and someone produced it, and someone (or several someone’s) make their livelihood from my purchase. Now, because that purchase is so efficient, I am freed up to spend more time with my children, more time in my neighborhood, and more time at my university where I teach. It is not clear to me that my sphere of concern in the Tocquevillian sense has narrowed, or that I have become less concerned for the common good. In short, what I am trying to say is that it is not the spot transaction (and how it takes place) that makes a market social. What makes it social in Galiani’s sense is that through the exchanging of goods and services we meet each other’s needs in important and irreplaceable ways. In the description of the warehouses in Galiani’s treatise, I believe we are free to imagine that the role of the watchmen and the writing of notes can be replaced by some technology — in that case the market still achieves what Galiani proposed it can achieve.

  2. Chris Tyrrell says:

    1. Competitive markets with maximum transparency of market information are the primary conditions for happy interdependence. Distrust and other failures of balanced interdependence are caused by information asymmetry or “excessive” market leverage. There is also a problem which arises from the cost of enforcement of contracts; where there is an inherent cost to enforce a contract, any transaction that has less value than the cost creates the potential for abuse.

    2. I think online commerce increases the social value of the market. The data provided by multiple market actors in a transparent online platform increases the amount of market information available to every participant. Actors in the online markets develop reputational scores through their interactions and performance in the “online society” of that market, which helps all participants judge their counterparties in ways that are almost unfathomable in the offline markets. Crowdsourcing of information can also increase market information for new products, shape the development of new products and services to better serve the “society” of consumers.

    3. I am not sure that generosity when one is in possession of a significant market advantage, which would be the “social norm” solution to the problem of monopoly, is a question of norms at all. It may be a question of the virtue of magnanimity, but I do not believe that social norms require the forfeit of all leverage in negotiations or market activities.

  3. Stephanie says:

    I can see how a local marketplace is social, but I’m not so sure that I could call a global market “social” and mean the same thing. For example, when I buy squash at a farmer’s market, both the farmer and I have a pretty good sense of what a fair price is, and so we exchange money for goods and I’m happy to think of that as a type of friendship. But I don’t have a clue really what fairness means when I buy a shirt that’s made in Malaysia by people whose living conditions I don’t know, and then it’s been transported here and gets sold in a big retail store. In a sense, that’s much more social than buying squash at the farmer’s market. But friendship, and economic justice? It’s not just online commerce that diminishes the social value of the market; any large market does that. Of course, a market may still be the best choice among economic models, provided there are buffers against exploitation, but I’m wary of calling it social or anti-individualistic just because there is co-dependence.

    • When I say that the market is “social” I am making a kind of negative claim: that the market — of itself — is not the cause or the consequence of individualism, or of anti-social behavior, since the market is one of the primary forms of sociability. It would take a different argument to say that if markets are social they are also fair, or just; as you have pointed out, a difficult argument to make. To put this more simply: I have argued here, following Galiani, that the market is not inherently anti-social. What I have not argued is that the market (or market exchange) is inherently virtuous.

      As regards friendship, which is a special type of sociability, I agree with your instinct here: If markets facilitate (and depend upon) a certain type of friendship, then it is fair to say that large markets are characterized by a weaker form of friendship (at least if we are thinking of the persons at extreme ends of this large market). Friendship always admits of degrees, and I see no reason why it should be different in this case.

  4. Giovan Mattias says:

    Granting your claim that individualism is neither a cause nor a consequence of the market, couldn’t it still be the case that the market gives rise to a perversion of individualism — a kind of individualism run rampant — or vice versa?

    • On the classical account, markets are not special arrangements allowed by nations, and they are not special inventions of people in certain times or places. Rather, markets are a kind of fundamental or characteristic human behavior; Adam Smith described this behavior as “the propensity to truck, barter and exchange.”

      To argue from analogy, consider another fundamental human behavior: the wearing of clothes. Wearing clothing of some kind is common to people in all places and at all times. In nearly every instance, wearing clothing has something of the characteristic of necessity, for instance, warmth against the cold, or protection against the sun. But also, in nearly every instance, clothing serves a social function, for instance, to signal class and status, to mark of occupations and professions, or even to participate in art and the cultivation of beauty.

      Now, the wearing of clothing has been associated with — from the beginning — various types of vices: for instance, vanity, pride and prejudice. But I would not want to say that clothing ‘causes’ or ‘is a consequence of’ vanity, for instance. Instead, I would follow Solzhenitsyn and say that there is a tendency to evil in every human heart. As such, we are always at risk of abusing things that are not wrong in themselves: we are at risk of vanity when we dress; and we are similarly at risk of selfishness in any economic exchange.

      The classical response to this difficulty wasn’t to impugn markets — it was rather to recommend and cultivate virtue as protective against vices “run rampant” to borrow your term. Virtue was understood to be cultivated through various forms of piety, including religion, patriotism, and participation in domestic and civil society.

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