Sunday, September 14, 2008

Karl Polanyi was Wrong: Markets Existed Before 1750


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I regularly visit an economics Blog, Oxonomics (‘a peer-reviewed, academic journal established by graduate members of the University of Oxford), because it is intelligent and thoughtful. Posts by Mark Koyama are particularly interesting.

A typical example of its quality is accessible in the debate that Mark Koyama is having with Arnold Kling of the well-established Blog, The Library of Economics and Liberty, written with Bryan Caplan at http//:econlog.econlib.org

On this occasion the subject is about the existence of markets in Ancient civilisations, particularly around the Mediterranean. The issue is important for historians of economic thought, not least because arguments that assert that commercial markets did not exist before 1750, as presented by Karl Polanyi in The Great Transformation (1944), directly contradicts Adam Smith’s assertion that the ‘propensity to truck, barter, and exchange’ became endemic in human behaviour was a ‘necessary consequence of the faculties of reason and speech’, placing its ‘very slow and gradual’ social evolution deep into pre-history.

Hence, my interest in Polany’s hypothesis. I mention it briefly in Adam Smith: a moral philosopher and his political economy (Palgrave Macmillan, 2008).

You can read the Oxonomics debate HERE, HERE, HERE and HERE

To which I have appended the following brief comment:

Polanyi was quite wrong in his (ideological) assertion that markets did not exist before 1750.

Roman soldiers were paid in silver coins - they spent these on consumables, indicating existence of markets. Ships criss-crossed the Mediterranean for millennia, mainly for trade purposes.

The fall of Rome in the 5th century set back commerce for nearly a thousand years until it began to revive in the 15th century. Trade among eastern Europe, Arabia, India and China was extensive. Where there is trade there is propensity to 'truck, barter, and exchange' (Adam Smith placed this deep into prehistory: ' faculties of 'reason and speech').

The best demolition of Karl Polanyi is by Morris Silver, 1995: Economic Structures in Antiquity, Greenwood Press, Conn
.

I recommend the debate both for conduct and for its tone and scholarly manner.

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1 Comments:

Blogger Jeptha said...

It would help to read Polanyi's work before you criticize it (although I'll admit it can be dense and often difficult to work through). He never argues that markets did not exist before 1750. In fact, in several different parts of The Great Transformation, he explicitly states that markets, including very complex and extensive international commodity markets, did exist before 1750. His argument was that the idea of one big self regulating free market had never existed before that date. He claims that such an all encompassing market needed markets for humans, nature and money, which led to the creation of the labor, land and currency markets we still have today. These are the only three markets that he claims did not exist in any large form before 1750. His argument was not that markets did not exist before 1750, it was that the valuation of land, labor and currency solely through the mechanism of supply and demand - which he equates with was not practiced before 1750.
Furthermore, this section of his argument was not related to his criticism of Adam Smith. Polanyi actually, agrees with Smith that humans do show a tendency to "tuck, barter and exchange." His disagreement is the primacy that Smith, and subsequent free market theorists, give to this one human tendency over other human social/economic behavior such as reciprocity, redistribution and householding.

11:39 am  

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