Thursday, November 20, 2008

Adam Smith on Bargaining

Stephen J. Dubner writes the Blog: Freakonomics (‘the hidden side of everything’) HERE:

The Weirdest Cookbook You Will Ever Need

Shopsin has just written a book that is half cookbook and half memoir, entirely fascinating. I had never sat down and read a cookbook from cover to cover but that is what happened with Shopsin’s book (co-written with Carolynn Carreno). It is called Eat Me. The introduction is a reprint of a New Yorker article by Calvin (Bud) Trillin, a regular at Shopsin’s.

Trillin also figures in a story that Shopsin tells in the book, a story that illustrates the creativity with which we human beings barter and exchange. Gains from trade indeed. Adam Smith would be proud:

I’ve never used cookbooks for recipes, but I do like to read them to get ideas and to see how different cooks do things — and I especially liked doing this way back when I first started cooking. Back then, Bud Trillin used to bring me the review copies of cookbooks that were sent to him. He would bring in a stack of cookbooks, and in exchange I would give him 25 percent of the face value of the books in food credit. It was a great deal for both of us.

*From Smith’s An Inquiry Into the Nature and Causes of the Wealth of Nations: “Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog. Nobody ever saw one animal by its gestures and natural cries signify to another, this is mine, that yours; I am willing to give this for that

Which provoked the following interesting comment from a reader, Michael Sullivan:

The quote from Adam Smith is interesting in that it is, strictly speaking, no longer true. There was a case involving an orangutan at a zoo. The zookeepers came in one morning and found the orangutan in the moat separating his enclosure from the public. They moved the orangutan back to his enclosure, berated the staff for not locking the door and considered the incident closed. The next morning they found the orangutan back in the moat. Thinking that it was unlikely that the staff would forget to lock the door after being berated the previous day, they investigated further and found that the orangutan was using a piece of wire pried loose from somewhere in his enclosure to pick the lock on the door. So, they removed all wire that he could use to pick the lock. This solved the problem, for a while. When they again found the orangutan in the moat, they again investigated. What they ultimately found out was that there was a female orangutan in an adjoining enclosure who was overweight and therefore on a diet. She was giving the male orangutan pieces of wire in exchange for some of his food. I may have some of the details of this story wrong, but the basic point is that there is no way to describe the interchange between those two orangutans other than as a barter transaction, thus disproving the second half of Adam Smith’s statement.” Michael Sullivan

Stephen Dubner is correct in that the exchange between “Calvin (Bud) Trillin” and “Shopsin” is a clear example of the normal exchange common in commercial societies and societies with elements of commerce in their mode of subistence.

The section of Wealth Of Nations from which Dubner quotes is at WN I.ii.2: p 26, and is part of the most important, but under-appreciated passages, in the whole book.

Even in this quote, Smith states the conditional proposition: “this is mine, that yours; I am willing to give this for that.” He follows this up later in the same paragraph:

Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of.”

On the substance of Michael Sullivan’s comment, I am only partly convinced, not least because Sullivan admits to not being sure of the accuracy of his account of the incident (I would love the read the actual report), but also because I have read various similar accounts of apparent exchange among primates, which specialists claim were coincidental (mainly 'sex' for 'food'), though this exchange of 'wire' for 'food' is exciting in that it appears purposeful.

For those interested some years ago I wrote a ms, “The Pre-Hisrtory of Bargaining”, from which I have presented a version in two-parts, the first part of which I presented at a conference of the “European Association for Evolutionary Political Economy” in Rome a week or so ago. You can read a copy from the Lost Legacy home page (HERE).

This paper looks at Adam Smith on bargaining exchanges and its evolution from exchange behaviours (‘quasi-bargaining’) among the primates, including the evolutionary tracks of the numerous Hominid species to the Homo sapien species as hunter-gatherers.

The second-part, as yet unpublished on Lost Legacy takes the evolution of bargaining through the invention of property – shepherding and farming – to the emergence of commerce.

I believe I show that Adam Smith’s statement of the conditional proposition is absolutely correct and holds today. Presently, I reserve my final views on whether the second part of Smith's above statement is sound or is 'disproven', as Sullivan asserts.

There are several reports of other primates implicitly exchanging in an intentional manner, over which disciplinary experts are divided at present.



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