Tuesday, February 26, 2008

Does Thinking Like An Economist Undermine Community?

Harvard economist Stephen Marglin seems to think so:

Economists celebrate the market as a device for regulating human interaction without acknowledging that their enthusiasm depends on a set of half-truths: that individuals are autonomous, self-interested, and rational calculators with unlimited wants and that the only community that matters is the nation-state. However, as Stephen Marglin argues, market relationships erode community. In the past, for example, when a farm family experienced a setback--say the barn burned down--neighbors pitched in. Now a farmer whose barn burns down turns, not to his neighbors, but to his insurance company. Insurance may be a more efficient way to organize resources than a community barn raising, but the deep social and human ties that are constitutive of community are weakened by the shift from reciprocity to market relations.

Marglin dissects the ways in which the foundational assumptions of economics justify a world in which individuals are isolated from one another and social connections are impoverished as people define themselves in terms of how much they can afford to consume. Over the last four centuries, this economic ideology has become the dominant ideology in much of the world. Marglin presents an account of how this happened and an argument for righting the imbalance in our lives that this ideology has fostered.

Here is chapter one of the book.

My thoughts: This is a book I'd like to read. I agree that economic development brings with it a lessened dependence on neighbors, making neighborly connections more voluntary. I certainly can see both positive and negative aspects to this changing relationship. However, I'm not convinced people on average are less connected than they were in times past. I do think the nature of these connections have changed.

In the past, our relationships tended to be with family and close neighbors, most of whom lived in the same town as us. With economic development, improvements in transportation and communication technologies, and transitioning from an agrarian to more of a knowledge worker society, people have become increasingly likely to move away from immediate family and more likely to move to areas where they are more disconnected from their immediate neighbors.

However, I think people have other connections which they use to substitute for neighborly connections. In cities I have lived in (Orlando, DC, Raleigh, Columbia), I have found communities to belong to that were not geographically-based but instead based on similar interests. There is something both lost and gained compared to neighborhood communities.

The positive effect of economic development on relationships is that it has lowered the cost of maintaining relationships at a distance and increased the physical distance we can travel in a given amount of time. For example, I currently live 45 miles from my parents. Several generations ago, it would have probably taken a couple days to cross this distance on horseback, exposed to the elements and an uncomfortable ride. Now it takes about an hour riding in an air-conditioned automobile with shock absorbers, cruising down a paved highway, listening to music of our choice, guided by a GPS giving us exact times to arrival, and possibly connecting with another friend or family member on a cell phone during the journey. Thanks to economic development, my parents and I just had lunch together last week.

In a similar way, the range of people I can interact with in a 30-minute journey from my home is exponentially larger than it would have been 100 years ago. This has certainly affected the way people form relationships and who they chose to form relationships with. It's far easier to find a specific group you would like to belong to according to interest, religion, political affiliation, etc. than in times past where you had only your direct neighbors to interact with. Some people might argue that this means you have much less diversity of people you interact with today, but I disagree. To illustrate, ask yourself is there more diversity in a city like DC or a small, rural village in Europe or a small town in Alabama? (I lived in a small town in Alabama for 5-months and while everyone does seem to know everyone else, it is probably the least diverse, most prejudicial community I've ever lived in. The KKK marched on town while I was there and I heard many stories about extremely sad racial discrimination.)

There is no doubt that economic development brings with it a shift from relying on personal relationships to impersonal transactions for work, trade, and production of goods and services. While there may be some drawbacks, I see this as largely a plus on several counts:

  1. It allows you to interact with a far more diverse group of people than you would otherwise, helping destroy distrust of groups different from your own. (When was the last time you asked a clerk at a store what their political, religious, or even ethnic background was? When is the last time you cared?) This helps build peace, understanding, and interdependence among larger groups of people.
  2. It makes personal relationships voluntary and in some ways enhanced because you don't have to second-guess the reason people are interacting with you.
  3. It leads to greater gains from trade, greatly enhancing the prosperity and economic well-being of everyone able to trade with one another.
  4. It allows for social interaction and exchange of ideas with a much broader, more diverse set of people than likely to encounter in a small, isolated community.

I have heard lots of commentators argue that we need to reconnect to our communities they way we were in times past. Unfortunately, I think the only way to accomplish this would be to advocate for people never to leave the place they were born. Much of Europe is like this. I don't think this step back is going to happen in the US. Nor do I think it would make us better off -- either economically or socially.

I grew up in a small town in Virginia about an hour outside DC. I have many cherished memories from my youth and the older I get, the more I appreciate the sense of community we shared there. However, I also appreciate how much easier it was to live there because of the economic advances I listed above. Rather than being an isolated community, we enjoyed easy access to shopping, museums, medical care, transportation services, historical sites, etc. -- all within an hour's drive. Part of the beauty of my hometown was the quaint size combined with the ease of access to so much, thanks to economic and technological advancement.

Incidentally, even in my hometown, other than the neighborhood kids my brother and I used to play with, most of our closest friends tended to be people across town from church and other social groups we were involved with, rather than our direct neighbors.

Both my mom and my Aunt Ruth grew up in very small, isolated farm towns -- an environment where people really did have to rely on their neighbors. While I think both of them would note some positive aspects of growing up as a kid in such an environment, neither of them would want to go back. I think that is instructive. It's also interesting to note that many of the people who seem to be the most nostalgic about "the way things used to be" are people who never experienced the full reality of those circumstances.

I am now living in an urban environment for the first time in my life and I love it. One of the neatest things about it is the number of people and opportunities for social interaction it puts within my reach. I live one block from the subway and a 15-minute ride away from the heart of Washington, DC. Rather than isolating me, in many ways I find it makes me far more connected than ever before. Still, other than meeting the people in my complex who called the cops when my truck was broken into, I have to confess I don't know any of my immediate neighbors...

Bottom line: I think Marglin's book looks like an excellent read and I think his thesis is an interesting one. Something that has bothered me about economics (among other things) is the little attention many economists give to social connection and influence. While I value methodological individualism as a paradigm for analyzing human behavior, I think it falls short when it ignores the social impact other individuals have on one another. The market is but one context in which people interact with one another. Some of the theories in the economics of religion start to explore these influences in greater depth and I think agent-based modeling is a great tool for modeling social influence without abandoning the key insights of methodological individualism.

To Marglin's point, market transactions often are substitutes for what was formerly handled through community relationships. As people become more dependent on the market, they typically become less dependent on community. As I mentioned earlier, this makes community more voluntary and less (economically) necessary. All else being equal, I do think this does weaken the sense of geographic community. Given the choice, almost everyone across the globe, independent of culture or nationality, seems to prefer the greater opportunity that markets and cities bring over community-based living. Rather than trying to fight this trend, the challenge of current and future generations is to develop social structures that capture the positive aspects of community without the negative. Fortunately, technology is here to help.

(HT Greg Mankiw)


Kevin said...

I'd suppose that depends on what the worldview of the economist is that effects the underlying assumptions. A Christian might come up with one set, a secularist might come up with some items that are exactly opposed, an economist which environmentalist but without a religious affiliation may come up with another set.

I think this article is too uniform. Economics is a science and like other sciences it it depends on the set of given behind the scientist that effects the course of the application.

thinking said...

It seems to me the author is complaining more about economic development in general than "thinking like an economist." I don't know quite why he chose that title, other than to have the cutesy tie-in to the phrase "the dismal science."

It's always so easy to look back with nostalgia and remember the good ol' days were not quite so good, or else they would have lasted.

There's a reason why insurance has replaced your neighbors help; it's because in the past your neighbor's help wasn't always so reliable. Not all small towns were Mayberry or like those in the Waltons. Life was tough, and the cold reality is that people were in many ways people were less sensitive.

Remember, when people find something that works they tend to stick with it. When things are not working so well, they seek out a different system. So the fact that the good ol' days led to these more modern times tells you that the mechanisms of the past did not work as well as what we have now, in terms of meeting people's overall needs. That's why people in their ingenuity sought to create something better.

So even if you could go wave a magic wand and recreate the old ways, you would find that in very short order people would abandon them once again and formulate something along the lines of what we have now.

mark said...

Most of the elderly people I've talked to, have rich memories of the past. Other than better medical care, and some other technologies, many of them have warm memories of past days. As far as "diverse" communities having all this energy, etc, family and kin based communities, being all fuddy duddy and boring supposed places, so you say. Well such places are maybe not as exciting, but are far more stable over the centuries. When the modern version of community works for a few centuries, THEN we will be able to say that it works. Right now, it hasn't been around long enough to know. civilization is always at the edge. When disaster strikes, it's closenit communities who tend to survive it. Not groups of barely aquainted strangers. This is one of my pet peeves. the assumption that everything about todays world is so much better, than it ever was. Well, it very well is in some ways. But in others, maybe not so much. All you have to do is read diaries that have been left to us thru history, to realize these people actually had interesting lives. And thier lives were more comfortable most of the time, than we think. Some people had hard lives. But many people lived modest, but good lives. By the way, if you think living 30 miles away is just as good as living in the same community, try it during a disaster. Like, say an ice storm. We, have had 2 very bad ones, within one years time. Nobody got in or out of town. for days. Your neighbor helped you, or nobody did. Technology, only goes so far. Sooner, or later, someone has to check on the old lady without power down the street. And you can't do that via bluetooth. Anyway, I'll close out my rant now, remember, some time in the future, somebody is going to be talking about todays world, HOW COULD they live so primitively back then? We, of course know, being here, that they wern't half as bad as those future commentaters think it was.