I think it’s time to regroup, and actually do some of the ‘re’ thinking of markets I’m always planning to get around to. I want to do so in the context of three recent observations:
The first observation comes from Fabio Rojas, over at the orgtheory blog – though it is slowly becoming the orgborg (almost 20 current or past posters!). In talking about the possibility (likelihood, I’d say) of a downturn in the contemporary art market, and sifting through the comments of restive art producers, Rojas is puzzled by four things:
Interestingly, for me at least, the comment thread turned into a discussion about how the readers (mostly practicing artists) felt about Chelsea (the fancy pants NY art district). A few things came up in this thread, which are obvious to anyone hanging around artists:
* Some folks seem to have bitter feelings towards the booming art market. Winkleman himself seemed perplexed that some readers should wish for the disappearance of the galleries which are responsible for selling the art. It’s like car engineers hating local dealerships.
* Some folks resent the fact that there are types of art which are popular in hip art districts like Chelsea.
* There is often a severe mistrust of dealers, not just specific dealers.
* People believe that markets are irresistable forces that undermine art.
Fabio wants to inject “a little bit of Cowenism,” which as I understand it means economics+incentives+assumption of efficiency-via-markets. Or something. Somebody has to pay for art. So rather than whine about dealers getting their share of the financial compensation for art, or the power of galleries/dealers in setting aesthetic and market standards for the art world, artists ought to be more appreciative of the expansion of the art world via art markets. And we ought to simply recognize art as another market, organized in similar fashion (if a little quirky), and play by those rules. Or, you can get a real job.
The second example comes from the EPA’s recent decision to lower the value of human life. Or rather, to lower the determination of the value of a statistical human life, the hypothetical monetary value of the loss of human life. As a result, decisions are being altered for how the EPA would regulate the environment. The EPA, since the 1970s, has used cost-benefit analysis in its decisions to regulate or not (read Wendy Espeland’s Struggle for Water, and Ted Porter’s Trust in Numbers!). Thus, reducing the value of human life has the practical effect of making regulation less likely – the ‘costs’ of regulation have to be lower than the ‘benefits’ of saving X number of human lives. The more the costs and the lower the benefits, the less likely environmental regulation would be.
Analysis of the costs of human life vary, but the main way to measure it is via the economic principle of ‘revealed preference.’ That is, people make decisions everyday that put them at risk of death, and by measuring these decisions, we could assumedly make inferences about peoples’ own value on life. The probability of a firefighter dying in a fire over the course of their career, combined with the salaries of firefighters in the labor market, yields a kind of indirect decision that ‘reveals’ one’s own value on human life. You may not be willing to be paid $3 million to die, but you might be willing to be paid $65,000 to take a job with a possibility that you could die during the course of your duties.
In practice, the EPA has dropped the value of human life from $7.8 million in 2003 to $6.9 million in 2008. Interestingly, a number of different federal agencies apparently have different valuations of human life, despite attempts to come to a single price. The EPA, in its Solomonic wisdom, decided to split the difference between a couple different studies giving a high and low estimate for the value of human life.
The final example comes from the ongoing housing meltdown, this time the Freddie Mac/Fannie Mae edition 1. These two agencies are quasi-governmental, meaning that they have had a governmental imprimatur to buy and package mortgages, not backed by the federal government per se, but really backed by the federal government. In the coming bailout that you, me, and your grandchildren will be paying for, a number of folks in the business press are suggesting that we’re treating these agencies, and bad homeowners, to a version of ‘capitalism lite’:
Why should responsible homeowners have to foot the bill for the irresponsible behavior of others in a capitalist system? (No, the folks buying homes they couldn’t afford weren’t all hoodwinked by mortgage lenders.)
The answer: A higher power has decided that the anticipated future cost — the risky behavior it encourages tomorrow by rewarding it today — is less than the more easily measured current cost.
The housing market is a mess. Sales and prices are still falling, competition from distressed sales (of foreclosed properties or short sales by the bank) is mounting, lenders are tightening credit standards and employment is falling. Policy makers have decided that short-term pain is intolerable, especially in an election year, with constituents badgering their representatives to “do something” about high gas prices and a lousy economy.
Assumedly, this means that we should be treating them as just capitalism (or ‘capitalism classic,’ maybe). That is, let the banks fail, let markets separate the wheat from the chaff, let the capitalist system to its work. This is the financial crisis writ small, I think. The argument goes something like, let Bear Stearns fail, banks should close, people making stupid decisions should be punished. Capitalist markets are about market signals, punish with poverty, reward with prosperity. Let the government get out of the way of these signals.
This reminds me of my recent trip to Canada (rocks and trees and water!), where our tour guide kept saying that since the government no longer lets the forests catch fire, they overgrow, get diseased, and now no wildlife really live in them. Fire is natural. Analogously, downturns in capitalist economies are natural. Get in the way of them (with government!), and we get disease, rot, and no more wildlife. Er, innovation.
Here is the problem. In each of these cases, MARKETS ARE A METAPHOR. In the real world, markets are a metaphor. Say it with me, now. Markets are a metaphor. We’ve arrived at a socio-cultural place where so many people believe that markets are things found in nature that it’s just out of control. Even in the best of cases, say, a core financial capital trading environment, it is a metaphor.
Of course, that it is a metaphor does not make it inconsequential. On the contrary, what this insight should tell you is that if someone tries to convince you with an authoritative, ‘well, you know, markets!’, you should call BS. The extraction and distribution of resources is a political question2, subject to formal and informal rules of authority, cultural, and social practices.
There are resources, yes. Raw materials, found in nature, as well as in human ingenuity. Lots of coordination among lots of people is necessary to get at some of these resources, to be sure. And these resources do have to be distributed, with enough subjectively-understood fairness that people continue to want to participate. These things are all true. But there is a big big difference between saying markets=what economics tells us markets are, and markets=how these resources are extracted from the social and natural environment in the world-that-is. I’m not just saying that markets are different where the rubber hits the road, compared to the textbooks of neo-classical economics. I am saying that economic markets do not describe some found reality. They describe an existing set of institutional arrangements. People who believe markets are natural are like people who believe that mathematics taps the mind of God because a nautilus’ shell grows like the Golden Spiral. It has the benefit of being completely arrogant. And the added benefit of being not, you know, true.
Markets are one means of creating incentives for extracting resources and distributing their rewards. Doing so in other ways may require such a shift in what we are currently about that it seems crazy. This is a fancy way of saying that markets are hegemonic; they have achieved ‘theoretical closure’; they have an aura of ‘naturalness’; they are taken-for granted. In Michael Pollan’s Omnivore’s Dilemma, he comes across a pastoral, slow-food organic farmer whom he asked about how a place like New York City would fit into his vision of local food economies: “…he startled me with his answer: ‘Why do we have to have a New York City? What good is it?'” (245). Unthinkable! Our society would change a lot, lot lot, if we were to really consider extracting, using, and distributing resources in more radically new and different ways. (Another aside, don’t you just want to kick the asses of those who get the vapors over manufacturing that isn’t carbon-neutral, but don’t give a shit about manufacturing, or farming, or service work for that matter, that doesn’t pay a living wage?)
What has happened here? My own guess is a relative collapse of imagination, combined with a hearty stake in the existing state of things, particularly for the first world (and those aspiring to get there). And that the only alternative to markets is state-determined extraction and distribution of resources (ie communism/socialism) is a testament to the enduring power of Marx to inspire along with a long-term successful stoking of anti-communism as a political maneuver. Are there really no other ways to coordinate and extract resources, and then to distribute those resources, than markets or via the state?
In the meantime, why shouldn’t artists be ticked off at dealers who make money from their labors? To me, a little bit of Cowenism is kind of a version of hectoring laid-off factory workers about the aggregate benefits of comparative advantage, or being ticked at college students who don’t love globalization.
And the EPA doesn’t place a monetary value on life, don’t be moronic (or rather, try to pay the EPA to snuff out a colleague and see what happens). It makes decisions about how and how much to regulate polluters. Cost-benefit analysis is kabuki theater to give well-meaning, and sometimes not so well-meaning, to a decidedly political process of balancing the interests of industrial polluters and the rest of us. ‘Valuation of a statistical life’ is a metaphor, being used to allow polluters to continue to pollute irrespective of the rest of us. Is this that difficult to understand? And Wall Street has never had the interests of the rest of us at heart. Never in its two hundred year history. That it has made some rich, spread some wealth, allocated financial capital to where and when it was needed, provided a powerful ‘information mechanism’ is all true. But we should start comparing these things to the degradations Wall Street has also fostered. Every time someone hides behind ‘markets,’ I feel like getting all Dolores Umbridge 3 on ’em. So enough BS with assuming markets real things discovered in nature and not social practices bolstered by rules, culture, and practices, already; let’s start working on other ways to tackle the problem.
As an aside, I’d like give a shoutout to that subset of jerks who knew you could not afford the homes you bought and bought them anyway, feigning shock over the future costs of those giant fake mortgages. Thanks, guys! Way to give a crap about the rest of us!)
You know, you don’t have-a a patron saint for the United States, but there are some American saints. Just the last couple of years they made-a some. The first was-a about-a two years ago. Her name was-a Saint Elizabeth Ann Seton. Mother Seton-is-a what they call her. And she’s got-a these nuns of her own order who lobby-they’re real heavy-they came to Rome and everything. And it’s amazing, you see. To be made a saint in-a the catholic church, you have to have-a four miracles. That’s-a the rules, you know. It’s-a always been that-a. Four miracles, and-a to prove it. Well, this-a Mother Seton-now they could only prove-a three miracles. But the Pope-he just waved the fourth one. He just waved it! And do you know why? It’s-a because she was American. It’s all-a politics. We got-a some Italian-a people, they got-a forty, fifty, sixty miracles to their name. They can’t-a get in just cause they say there’s already too many Italian saints, and this woman comes along with-a three lousy miracles. I understand that-a two of them was-a card tricks. Next thing you know, they’re gonna be making Kreskin a saint. Saint Kreskin-they’ll probably call him. It’s a good one.
Dolores Umbridge: [walks in front of Harry with a straight face] Yes?
Harry Potter: [hesitates and looks at his scarred hand] Nothing.
Dolores Umbridge: [bends down] That’s right. Because deep down you know that you deserve to be punished. Don’t you Mr. Potter?