Let's say you've been in a fender-bender and have taken your car to the shop where it's been fixed. You're pulling out your wallet and the mechanic says, "No - no - I could never accept any money for this... But tell me: did you apologize to the person you hit? Okay then, the car's fixed - now, be more careful next time."
You're at the dinner table that night explaining this strange occurrence to your family when it's discovered that only one more chocolate chip cookie remains for desert. An open-outcry auction breaks out and Mom awards it to your youngest daughter with a high bid of $20. As Mom's collecting she reminds your kids that allowances will be paid this weekend but that their rent has gone up 10% due to higher fuel bills - so they should keep that in mind when they're figuring what to hold back from their allowance.
You've either stepped into the twilight zone or into my rhetorical device for introducing the difference between two worlds (the small group and the market)...
Obviously we wouldn't expect either of these scenarios to occur... (okay, I confess I did once hold an auction for a cookie with my kids, but it was fake money)... But we are often at odds - emotionally and maybe even sometimes politically - with free markets because we fail to recognize that there are two different worlds we operate in and that we often try to force the rules that apply to one onto the other.
Nobel economist F.A. Hayek, in his classic The Fatal Conceit, said:
Part of our present difficulty is that we must constantly adjust our lives, our thoughts and our emotions, in order to live simultaneously within different kinds of orders according to different rules. If we were to apply the unmodified, uncurbed, rules of the micro-cosmos (i.e. of the small band or troop, or of, say, our families) to the macro-cosmos (our wider civilization), as our instincts and sentimental yearnings often make us wish to do, we would destroy it. Yet if we were to always apply the rules of the extended order to our more intimate groupings, we would crush them. So we must learn to live in two worlds at once. To apply the name 'society' to both, or even to either, is hardly of any use, and can be most misleading.
These two worlds (the "extended order of cooperation" we call the market and the more familiar small-group world) are tightly interwoven and interact in complex ways. We switch between them sometimes without consciously having to shift gears. But the rules of the game are strikingly different between them.
We tend to be preoccupied with the family and friends world. It's the more instinctive of the two - perhaps literally so, since it is reasonable to assume that at some point in our past, being separated from the group, from the herd, was a death sentence. Thriving in the small group - once survival is taken care of - consists of cooperation through altruistic sacrifices, compromise, loyalty and reciprocity.
In fact, sales people play to this instinctual sense of reciprocity. That's why they want to pay for your meal during a sales call.. when the stakes are high, the steaks are free - they know that despite your best efforts to the contrary, they have eons of evolutionary forces on their side. If you let them pay, you will have the urge to reciprocate. (This is just one good reason why you shouldn't accept gifts from vendors - no matter what the size. For fascinating insights on this topic, see Cialdini's Influence: The Psychology of Persuasion).
The extended order of the marketplace is more about competition and self-interest constrained by the rule of law - a set of general rules, subscribed to by all, that tends to emphasize the few things you can't do rather than saying all the things you can do. We need competition and self-interested behavior because it enables discovery - the mainspring of human growth and progress.
The idea that, "you don't need to love your fellow man, just serve him," that it is not from the, "benevolence of the butcher, baker or brewer from which we expect our dinner but from regard to their own self-interest," violates our instinctual small-group norms and rules. it doesn't sit well that, "much of the good that a man does in the extended [market] order is ... not due to his being naturally good."
The idea of allowing market forces to go to work on a problem in society is anathema as well - because the particular problem (high gasoline prices, etc.) screams, "do something!" But, as Jeremy Bentham famously warned, leaders of a free market economy have "much to learn and little to do." If we step back and take a breath, enforce the rules of the game, and stay away from prescribing particular outcomes, markets will tend to discover better solutions than any set of experts could come up with on their own.
Markets are not natural. But then neither is "reason" or "culture" - in the sense of being passed on genetically. It is an altogether different and learned set of norms and rules from that which we are intimately and naturally familiar - the small group. But if you think that you don't need the extended impersonal order of the marketplace, as different and "unnatural" as it may be from the more familiar small-group norms and rules, then I leave you with a question from Walter Williams:
"Ask yourself, how much would get done [in this world] if it all depended on human love and kindness."
Recent Comments