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[This message originally appeared in Eh.Res. -- RBE]
The attitudes towards Polanyi's Great Transformation are perhaps as
interesting as the work itself. While the evidence that market activity
has existed for millenia is overwhelming, nonetheless a literature on
the early development of the American economy questions whether
production for markets played an important role. Polanyi has been much
neglected, but the issues he raised have not gone away -- as interest in
this thread reveals.
The debate on the issues might become clearer if people distinguished
among the institution of the market, the place of the market in society,
and rational maximising behaviour. Market exchange has a long, long
history, and there is no evidence that it is a difficult concept for a
people to learn or that a society automatically rejects the institution
of the market in any place in its society because it is morally
offensive or in some way alien. I also have seen no reason to believe
that in any society people do not rationally maximise -- in the sense
that given the choices available to them and their preferences (which
includes moral codes) they act so as to attain their greatest happiness.
Nonetheless, the place of the market in society has changed greatly
through time. First, high transactions costs greatly restricted market
exchange. Canadian farmers in 1840, like Polynesian islanders, consumed
a large portion of their own production because the economic benefits of
specializing in one commodity were not large enough to overcome the
transportation and other transaction costs. Indeed a surprisingly large
number of inhabitants of down town Hamilton in 1870 kept their own cows.
But even farmers on the frontiers used the market to the extent that it
was beneficial to do so. Rational maximising behaviour largely
determined when the market was used.
Of more fundamental importance to the issues raised by Polanyi is the
question of the limits social structure or moral concerns place on the
role of market exchange within society. Today, of course, we still set
limits over the extent of market exchange. People are not allowed to
sell themselves into slavery. The sale of organs for transplantation is
forbidden.
The great change which has occured in the place of the market is the
relationship between the political system and the market place. In early
Christian Ireland (the topic of my PhD work which employed Polanyi's
categories of exchange) payments of cattle established links between
political and military leaders and their followers. Agricultural produce
as well as military and other service was paid in exchange. Marriage,
the fosterage of children and reparations for legal offences also
required the payment of cattle. As a result, the allocation of land away
from pastoral and towards arable production would have required a major
restructuring of society. Instead, rational maximisers had a strong
incentive to keep larger herds of possibly underfed cattle than needed
to satisfy society's preferences for milk and meat. While markets have
long existed, there is little evidence for the steadily rising GDP per
capita before the last few centuries. The disembedding of the production
of goods and services so that rational decisions about the allocation of
resources could be made according to their impact on total output is
very likely a major cause of economic progress. The social disorder
often experienced by poor nations in the early stages of development may
result from the social change required to free the market from political
and social constraints.
The process still continues in developed economies, for instance in the
increasing allocation of women's labour in the market. After all, mine
may be the first generation in which a women's economic well-being often
depends primarily the value of the output she can produce from her
labour and her skills. In the past women were either prohibitted from
acquiring and marketing highly productive and therefore well-paid skills
at all or they were restricted to selling them only until marriage. The
economy a woman lived in was very much embedded -- her income and a
choice of lover and father of her children were made at precisely the
same time and the one decision could not be separated from the other. In
my parent's and grandparent's generations, a man could marry his heart's
fancy and still become a doctor or an engineer or a plumber,
independently determining his income. A women could not. Just as the
early Irish may have kept too many cows and produced less food than if
they had transferred land from pasture to arable, so women have been
encouraged to develop nuturing skills and leave other abilities fallow.
The dropping of the taboo on the sale of middle class women's labour on
open markets is part of the increasing growth of the role of the market
in society and the disembedding of economic decisions from other social
decisions. The result is likely a rise in economic productivity and a
transformation of society which some people like more than others.
If Polanyi is interpreted as arguing that the market was a new
innovation in 19th Britain, certainly he is wrong. Nonetheless, Polanyi
has given us an enhanced understanding that the role of the market
within society has changed greatly through time, with results that have
transformed society.
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