Larry Arnhart On Adam Smith On Exchange

Larry Arnhart Blogs at Darwinian Conservatism HERE http://darwinianconservatism.blogspot.co.uk/ writes a most interesting piece on the significance of Adam Smith’s recognition of the key role of what he called the “propensity to truck, barter, and trade” in human societies.  It is rather long post.

‘Is the "Propensity to Truck, Barter, and Exchange" Unique to Human Evolution?’

“I remember the first time” [reports Larry] “that I read Adam Smith's claim in The Wealth of Nations that the "propensity to truck, barter, and exchange one thing for another" is uniquely human and not found in any other animals.  I wondered whether this was true, and, if true, what it would mean for our understanding of human social life. 

… Haim Ofek (Second Nature: Economic Origins of Human Evolution) and Matt Ridley (The Rational Optimist) have argued that what we now know about human evolution confirms Smith's insight about the unique importance of exchange for human history.  The whole of human history for the past 200,000 years can be understood as the progressive extension of human cooperation through exchange and the division of labor--from foraging bands to agrarian states to modern commercial societies in global networks of trade.  Both Ofek and Ridley see this as arising from a human propensity to exchange that cannot be seen in any other animal. And yet I am still trying to make up my mind about this.

In The Wealth of Nations, Smith explains the division of labor as the primary cause for the increasing productivity of labor, which includes the famous example of the pin factory.  In the second chapter, he explains how this division of labor arises in human history.

"This division of labour, from which so many advantages are derived, is not originally the effect of any human wisdom, which foresees and intends that general opulence to which it gives occasion.  It is the necessary, though very slow and gradual consequence of a certain propensity in human nature which has in view no such extensive utility; the propensity to truck, barter, and exchange one thing for another.

"Whether this propensity be one of those original principles in human nature, of which no further account can be given; or whether, as seems more probable, it be the necessary consequence of the faculties of reason and speech …  It is common to all men, and to be found in no other race of animals, which seem to know neither this nor any other species of contracts.  … [Man] In civilized society he stands at all times in need of the cooperation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons.  In almost every other race of animals each individual, when it is gown up to maturity, is entirely independent, and in its natural state has occasion for the assistance of no other living creature.  But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only.  He will be more likely to prevail if he can interest their self-love in his favour, and shew them that it is for their own advantage to do for him what he requires of them.  Whoever offers to another a bargain of any kind, proposes to do this.  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.  It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.  We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.” [WN I.ii.]  …

[In] this passage, we see the fundamental idea that is common to Smith's social thought and Darwin's biology--the possibility of design-without-a-designer ("not originally the effect of any human wisdom") through emergent or spontaneous order. 

Smith [asks]: Was the propensity to exchange an original principle of human evolution, or was it a late by-product of earlier evolved "faculties of reason and speech"? [He]  considers it more probable that reason and speech came first, and then the propensity to exchange came later as a by-product.  In the Lectures on Jurisprudence, Smith says that the "real foundation" of exchange and the division of labor is "that principle to persuade which so much prevails in human nature."  [GK: This notion is expanded in Moral Sentiments in a manner entirely relevant for traded bargaining.] Like Aristotle, Smith seems to believe that human beings are more political than other political animals because human beings have a capacity for logos--reason or speech--that allows them to persuade one another to cooperate for common ends, which makes exchange and the division of labor possible.  Ofek argues, however, that the evidence of human evolutionary history now suggests that exchange was an early agent of human evolution that favored the evolution of human reason and speech. … Non-human animals are unable to communicate with one another well enough to say: "this is mine, that yours; I am willing to give this for that." … In human civilization, individuals need "the cooperation and assistance of great multitudes," and for this they must appeal not to benevolence but to self-love, by persuading other individuals to engage with them in mutually beneficial exchanges. 

… Remarkably, Darwin says almost nothing about exchange in human evolution.  But there are at least two passages in Darwin's writings that both Ofek and Ridley cite as supporting their arguments about the human evolution of exchange. … Darwin describes the savage people that he saw at Tierra del Fuego.  He reports: "Some of the Fuegians plainly showed that they had a fair notion of barter.  I gave one man a large nail (a most valuable present) without making any signs for a return; but he immediately picked out two fish, and handed them up on the point of his spear.  If any present was designed for one canoe, and it fell near another, it was invariably given to the right owner."  Darwin seems, then, to agree with Smith that even those living in the most primitive foraging societies show "the propensity to truck, barter, and exchange one thing for another."

In The Descent of Man, Darwin describes how man became "the most dominant animal" through technological inventions such as tools. … Although he doesn't make it explicit, Darwin implies that the complexity of artifacts in the archaeological record could be interpreted as evidence for a division of labor that promotes the dexterity and inventiveness that comes from specialization.  Ofek and Ridley have adopted this line of reasoning in arguing that the explosion of technological complexity in the Upper Paleolithic record of human evolution is a consequence of exchange and specialization, which is confirmed by evidence that some of the material in the human artifacts was transported over long distances, apparently by trade.

… Other animals cooperate with one another based on kinship, relatedness, and reciprocity (direct and indirect), and human cooperation show these same evolved mechanisms at work.  But cooperation based on exchange or barter is uniquely human, and it cannot be explained as a form of reciprocity.  Reciprocity means giving each other the same thing.  I'll scratch your back if you scratch mine (direct reciprocity).  Or I'll scratch your back because you have a reputation for scratching the backs of others (indirect reciprocity).  But exchange means giving each other different things.  As Smith puts it, "Give me that which I want, and you shall have this which you want."  Other animals can't do this.

… Ridley cites some experiments with chimpanzees: "The primatologist Sarah Brosnan tried to teach two different groups of chimpanzees about barter and found it very problematic.  Her chimps preferred grapes to apples to cucumbers to carrots (which they liked least of all).  They were prepared sometimes to give up carrots for grapes, but they almost never bartered apples for grapes (or vice versa), however advantageous the bargain.  They could not see the point of giving up food they liked for food they liked even more.  True barter requires that you give up something you value in exchange for something else you value slightly more." (59)

It seems to me though that Ridley is obscuring some of the complexity in these experiments … Brosnan and her colleagues apparently showed that chimps do barter, at least in a situation where they can trade very low valued items (carrots) for very high valued items (grapes).  [Chimps] not barter where the gains from barter are small--as in trading valuable apples for slightly more valuable grapes.  One possible explanation that they suggest is that the chimps are less inclined to take the risk from giving up a valued food item if the possible gains are too small.

Nevertheless, it does seem that these experiments provide some support for the Smith/Ridley position.  [Chimps] don't seem to spontaneously barter in the wild.  This is in contrast to the human situation where bartering seems to come easily as a spontaneous behavior, even in the most primitive human conditions, as with Darwin's Fuegians.  

It's still not clear to me, however, that Ridley has successfully distinguished exchange from reciprocity.  In fact, sometimes Ridley explains exchange as based on trustworthy reputation, and thus indirect reciprocity (see Ridley, 93-104).” 

Comment

Larry Arnhart’s contribution parallels some of my own research and writing of some years ago (unpublished, alas), “The Pre-History of Bargaining” (2003).  On the whole, despite some quibbles, Larry Arnhart’s thesis is very helpful.

Many modern social science scholars (including too many economists) misread Adam Smith’s chapter 2 of Wealth Of Nations (see my Lost Legacy post from yesterday as a prime example).  Others write without evidence that they take from Adam Smith on “truck, barter, and exchange”.  Some, such as Dr David Graeber, of Yale and London Universities, attack Smith from not anticipating 200 years of subsequent field research by anthropologists, most of whom have instant access to recent research numbered in the thousands without moving from their desks, from which Dr Graeber concludes that Smith wrote a load of nonsense about “barter”, on the ground that it is not common among hunter-gatherers studied today, and is not reported as existing from much field research.   Others beside anthropologists, including Dr Graeber, do not understand Smith’s meaning of “exchange”; they narrowly interpret exchange as being about bargaining in the modern sense.  Sometimes they slip into rewriting Smith’s “truck, barter, and exchange” as “truck, barter, and trade” (from memory I think Karl Polanyi did this once in his The Great Transformation, 1944).

Smith’s central concept of the generality of “exchange” appears in his earliest writings on the origins of language (1761).  Two strangers able to speak but not sharing a common language (specific sounds associated with objects) engage in developing an agreed language from the most primitive noun-only sounds, and so on to adjectives, verbs, etc.  There is a minimum requirement for agreement on meaning – this sound means that object, a tree or a cave and so on; that sound means danger.  Even chimps, birds and such like, seem to have recognizable calls for danger that are specific to their species in specific localities.  For humans this was the beginning of mutually intelligible language by agreement from exchange among co-specifics in a locality – languages were (are) numerous around the globe (40,000 languages among Australian aborigines in the 19^th century).

For Smith, exchange was a common phenomenon.  He did not make the mistake of believing that exchange was about “equivalents” of a common value (whatever that means), and nor does one party have to try to gain “more” than the “other’, whatever that means with incommensurable entities. What I give up in a bargained exchange may be valued less by me than what I accept in exchange as of more value to me and vice versa.  What we exchange is valued differently at the moment of the exchange because if it is valued the same, why bother exchanging?  I wonder sometimes just how much attention some anthropologists pay to what they are doing when they bargain?  In this conundrum the entire theory of surplus value is suspect.   Exchange is a two-way process.

When Captains Cook, Bligh and others, took their ships into Matavi Bay, Tahiti in the 18th century, the most popular European among the hundred or so sailors was the ship’s armourer, whose forge on shore, shaped the nails that the islanders received in exchanges with seamen (usually for sex with female islanders [A wag once described the transaction as “a screw for a nail”]) and made iron nails into something more useful for islanders.   There was no iron on the Pacific islands, and local products, such as spear-heads, knives, or spade heads, were made from wood or stones. In time, there was a downside for the islanders because the seamen brought with them venereal disease, which spread rapidly in the Tahitian Island group, and iron weapons proved too effective for killing local enemies, which also reduced the population.

I would qualify Larry’s observation that “Reciprocity means giving each other the same thing”.  Does it? Reciprocal acts are not the same thing when considered as actions separated in time.  Apes groom as ordered by the Alpha male, but they also engaged in discretionary grooming not based on Alpha power.  There are grooming circles in which certain apes groom other apes on a discretionary basis.  As grooming takes up to three hours, there is insufficient time in a day to spend six hours in reciprocal grooming.  Should an ape groom an ape and days later that ape does not reciprocate in grooming the original groomer, the disappointed ape refuses to groom that ape ever again.

In human reciprocation similar behaviour is noted.   A work-colleague who gives another lift to the station in heavy rain (or some such action like, feeding a neighbour’s cat or watering a colleague’s office plants, etc.,) is expected to reciprocate should the situation need to be reversed.  However, a failure to do so, breaks the reciprocal partnership, which leaves the colleague to walk in the rain, or the cat or the plants die, whatever the original motivation for the beneficial act, including altruism.   The different time and place for a reciprocal act adds an inescapable quality to the apparent sameness of the transactions.  They are not the same, which is why I say reciprocation is a “quasi-bargain”.  They are deep in human behaviour and anthropologists agree that they preceded bargaining exchanges in the 200 thousand years of human pre- and recorded history.

Please follow the link HERE  and read a useful contribution to Adam Smith’s understanding of bargaining.