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).

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.

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?