Markets are the source of all ills in the capitalist world, right? This was my instinct before I started my MPA. Coming from a background in environmental worrying and occasional campaigning, it certainly seemed that markets were the cause of the relentless attack on the natural world and on the best attributes of people and society. After an intensive term learning about economics, in fact, after a second term letting the first one settle, I’ve come to understand markets in a different light. My sense now is that markets are simply one expression of a fundamental characteristic of humanity. Why they fail is a clue to why other aspects of our society are also not working.
Markets are often explained and justified using the counterfactual: if you don’t have markets for the discovery, creation and allocation of private goods (Song & Simpson, 2018) you have to have planning, i.e. the state. The example in this BBC radio programme considers sandwich shops under a planned economy. Even the most publicly-minded government can struggle to meet their population’s desires for sandwiches. They may site shops in inappropriate locations and instruct them to produce undesirable sandwiches at unattractive prices. Markets, on the other hand, allow the different options to be discovered, compared and tested, until some equilibrium is achieved - that is, the locations of shops, the choice of sandwiches and their price is optimised for the population and the sandwich shop owners. Planning, on the other hand, works for public goods that need centralised co-ordination and long-term investment.
So, its markets or state or … chaos? That’s not what Nobel prizewinner Elinor Ostrom demonstrated (Ostrom, 2010). By actually observing real people operating in real communities, Ostrom identified “polycentric governance” by which “common pool resources” - those goods that we need to share and take care of - are managed effectively by communities. There is no “tragedy of the commons” by which selfish individuals deplete the resource and exclude others. Instead, people discuss and find consensus, implement and enforce agreements, monitor and evaluate outcomes and cycle through these processes as conditions change. Certainly, sometimes this would fail, in which case the system would break down. Those that were successful, however, would remain and develop. As such these systems are evolutionary (Kay & King, 2020, p 168).Its as if humans knew how to run their lives for thousands of years before we were blessed with the markets and the state.
One of my most favourite books that I’ll probably never read again because it required a fair amount of concentration is The Enigma of Reason by Mercier and Sperber (2018). It discusses how humans actually reason, as opposed to how we think we reason. A striking aspect that I took away was how everything that we have created as a species arises from our collective intelligence. This intelligence manifests when we interact, expressing our different perspectives, sometimes arriving at a common understanding. From this understanding we can not only cooperate over the management of resources but we produce novel ideas and creations. These are the ideas and creations that have precipitated intellectual and technological innovations and revolutions throughout our history (and prehistory). I love that this book implicitly (at least I don’t think it said explicitly) explains that neurodiversity is the human condition, we are nothing without our divergent brains.
Ostrom’s polycentric governance requires Mercier and Sperber’s interactionist reasoning - through expression, argument and evaluation of ideas. Both are evolutionary, the latter probably more genetic, the former more cultural, but both expressions of a complexity of negotiation that seems to be quintessentially human. It seems to me that markets are a “thin”1 version of this. Markets enable a diversity of perspectives to be negotiated over and, when they work “correctly” a consensus that benefits all can (at least briefly) be arrived at. However, I think they are “thin” because, unlike polycentric governance, which demonstrably worked for thousands of years as a complete system, most markets are symplistic and exernalise much that they depend on. Markets fail without external regulation, stabilisation and legitimisation2 - which is where the state comes in. Possibly we could argue that markets could also evolve into a comprehensive self-regulating, -stabilising and -legitimising system. That would require respecifying the goals of the system to include a thriving human future.
Markets are a recent emergence from the natural character of our species to interact from our differing perspectives in order to arrive at a (temporary) consensus. But they are incomplete because they exclude relevant perspectives, such as those relating to the exploitation of resources throughout the lifecycle of the good. It seems to me that much of how we run society right now excludes this core aspect of humanity. Our version of democracy stifles our humanity, leaving the majority powerless to express how decisions impact their lives. Instead they shout into the voids of social media with increasing anger and polarisation. There are moves to bring humanity’s skill at expressing, arguing and evaluating a much wider range of perspectives back into democracy (I wrote an essay on participatory deliberative democracy last term). Also, my own area, innovation, stifles its potential by being considered the lofty realm of devoted organisations such as universities and a few entrepreneurs. This misses out on the perspectives and insights from the majority of citizens who, now more than ever, are needed to solve our most pressing problems (Cottam, 2018, Trischler et al., 2022).
There’s a deep theme here to understand how we channel one of our most human characteristics into improving our world, from how we run our organisations to how we solve our social, nature and climate crises. I intend to explore this much more over the coming year. Also, I haven’t missed the contradiction that I arrived at these thoughts without discussion - but I couldn’t have grasped any of this without the help of many deeply considered texts and talks. Further, expressing these ideas in an undescoverable blog is quite ironic. But the possibility that someone may one day stumble over these words has made me consider them more carefully and formulate my own thoughts with greater clarity then when I began writing. That’s powerful.
References
Cottam, Hilary, 2018. Radical Help. https://www.hilarycottam.com/radical-help/
Kay, John & King, Mervyn, 2020. Radical Uncertainty https://www.johnkay.com/2020/02/12/radical-uncertainty/
Mercier, Hugo & Sperber, Dan, 2017. The Enigma of Reason: A New Theory of Human Understanding. https://www.penguin.co.uk/books/183625/the-enigma-of-reason-by-hugo-mercier-and-dan-sperber/9780241957851
Ostrom, Elinor, 2010. Beyond Markets and States: Polycentric Governance of Complex Economic Systems. The American Economic Review, Vol. 100, No. 3 https://doi.org/10.1257/aer.100.3.641
Rodrik, Dani, 2007. One Economics, Many Recipes: Globalization, Institutions, and Economic Growth https://doi.org/10.2307/j.ctvcm4jbh
Scott, James C., 2020. Seeing Like a State https://en.wikipedia.org/wiki/Seeing_Like_a_State
Song, Ligang & Simpson, Chérie, 2018. Linking “adaptive efficiency” with the basic market functions: A new analytical perspective for institution and policy analysis. Asia Pacific Policy Studies, Vol. 5 p. 544-557 https://onlinelibrary.wiley.com/doi/10.1002/app5.249
Trischler, Jakob, Svensson, Peter O., Williams, Helén & Wikström, Fredrik, 2022. Citizens as an innovation source in sustainability transitions – linking the directionality of innovations with the locus of the problem in transformative innovation policy. Public Management Review. Routledge p. 1-23 https://doi.org/10.1080/14719037.2022.2062041
Of course, I’m drawing on Scott’s Seeing Like a State (2020) in this idea of “thin” - what results when settlements are planned rather than letting them grow and evolve by the actions of society. ↩
I’ve used Song & Simpson (2018)’s citation of Rodrik, 2007, to identify three of the four external mechanisms that markets require. The other is mechanism is the creation of the market itself. ↩
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