Monday, May 3, 2010

The Stories Markets Tell

Earlier today I began reading the book Moral Markets by Paul Zak which is a collection of work by scholars from many disciplines (anthropology, biology, business, economics, law, and psychology) about how values relate to/evolve with free-exchange or markets. The book is a fantastic read thus far. Here is a summary and my thoughts on the first article called "The Stories Markets Tell" by William D. Casebeer:

Our lives are written as stories in a book therefore it should not be a surprise to us that our cognitive processes are also geared towards stories. Mark Turner writes, “Story is a basic principle of mind. Most of our experience, our knowledge, and our thinking is organized as stories.” We recall memories, become motivated to action, reason and emotionally react to and through stories. Casebeer writes about how our affinity for stories has led to a caricature of the market process where several awful/horrific anecdotes are shared, but many of the mundane successes are not spread. He establishes three archetypal narratives that say “free exchange [or a market] is bad”:

  1. It is selfish – This cartoon, Casebeer says, may be best seen in the movie “Wall Street” where Gordon Gekko proclaims that “greed is good”. This archetype emphasizes the cutthroat nature of competition and leads the listener to the conclusion that our character will be in poor shape as a result of markets.
  2. It is exploitative – This is the Marxian story of exploitation of the worker: The rich become richer based on the production of the poor and once the poor recognize that they are being exploited they will rebel is the cartoon told here. This archetype emphasizes class distinction and views “consensual exchange suspiciously as masking exploitative relationships.”
  3. It is, on balance, bad and ought to be rolled back – This story is less extreme than the first two but tends to overemphasize the uglier side of free-exchange (negative externalities) while downplaying the benefits. This worldview would have us believe that progress through technology and development are bad.

These myths capture our attention because they appeal to the ingredients of a good story: problem, complication, resolution. They seem likely, but, do not tell the whole story. Essentially, they are based on a kernel of truth that is inflated beyond a reasonable conclusion. What does he propose to redress the myths?

He begins by stating what the essential ingredients of a counter argument: ethos (credibility), pathos (emotional appeal), and logos (logical consistency). Then, he speaks to the uphill climb someone has in presenting something that appears counter-intuitive. Casbeer employs the Fundamental Attribution Error from social psychology to discuss why there is an uphill climb. FAE makes the point that people overvalue personality based explanations for observed behavior while undervaluing situation based reasons.

Then, Casebeer makes three claims that heavily cross-reference future chapters in the book Moral Markets: 1.) Free-exchange environments can evolve creatures that are at least as prone to cooperation as selfishness, 2.)Free-exchange environments afford critical opportunities to develop virtues, and 3.) Free-exchange environments afford incentives to develop and maintain moral standards.

The remainder of the book will address these questions more thoroughly. I'm really looking forward to reading it and hope you are looking forward to joining me on the journey : ) Casebeer makes a really compelling point about what people are "willing to buy". My own experience has been that students distrust the market, especially when it comes to large businesses from wealthier countries doing business with developing countries. While their stories about horrible working conditions are true it is sometimes difficult to point out the distinction between anecdotal stories and systematic evidence. For example, are there cases of forced labor in developing countries? Yes. Does that mean that globalization is bad? No. Systematically globalization has been an improvement in the lives of the poor. Although there are important points to be made about the distribution of those benefits.

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