Markets, Community and Just Infrastructures

Nancy Neiman

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000090567
• Edition: 1
• Topic: Economics
• Subtopic: Microeconomics
• Index: Economics

A series of market-related crises over the past two decades – financial, environmental, health, education, poverty – reinvigorated the debate about markets and social justice. Since then, counter-hegemonic movements all over the globe are attempting to redefine markets and the meaning of economic enterprise in people's daily lives. Assessments of market outcomes tend toward the polemical, with capitalists and socialists, globalization advocates and anti-globalization movements, those on the political right and those on the left, all facing off to argue the benefits or harms brought about by markets. Yet not enough attention has been paid to analyzing the conditions under which markets result in just outcomes. This book explores how culture, politics, and ideology help shape market incentives in an attempt to reclaim the language of economic rationality and the policymaking legitimacy that accompanies it. Through a variety of case studies – labor relations in the U.S. meatpacking industry, the globalization process in Juaìrez, Mexico, financial reform in Cuba, and an interfaith Ugandan coffee cooperative – this book provides a framework for understanding the conditions under which markets promote just or unjust outcomes (e.g., discrimination, income inequality, environmental degradation, or racial justice, human rights, and equitable growth). This book touches on subject matter as varied as food, religion, banking, and race and gender equality, from a multi-disciplinary perspective. It offers an analysis of markets based on community rather than pure individualism that has the potential to change the way we think about economic rationality. An accessible and compelling read, this book will appeal to students and scholars in political science, economics, sociology, geography, gender studies, critical race studies, environmental studies, and all those interested in the critique of mainstream economics and neoliberal logic.

1
The severing paradigm and the rationality of justice

Introduction

Scholars have attempted to build a deeper understanding of the complexities of markets and economic interactions – trade, production, and consumption – by imagining and constructing a hegemonic discourse that has systematically served to disconnect, or compartmentalize, not only the study of markets but also people into narrowly defined sets of motivations. The disciplines of Economics and Political Science in particular come out of a tradition of compartmentalizing human motivation through the construction of metaphorical Economic and Political Man. The logic of modern economic thought has downplayed, and often denied, human connectedness for centuries. The idea of community scarcely exists in the world of atomistic individuals assumed throughout the economics discourse. This chapter will demonstrate the ways in which social science discourses, especially economics, have promoted disconnectedness by severing 1) the individual from the community; 2) the market from society; and finally, 3) the present from the past. In contrast, this book engages in the project of reconnecting. It argues for an understanding of markets as embedded in communities, society (including institutional arrangements and dominant ideologies), and history (historically contingent), in order to better understand why markets sometimes result in socially just or unjust outcomes.

The project of severing

a. The individual from the community

Modern economics takes the atomistic individual to be the unit of analysis. Individuals are conceived of separately from the community or the relationships that constitute them. Such individuals are considered rational if they demonstrate self-interest and seek to maximize their own utility or wellbeing. While this approach, sometimes referred to as methodological individualism, has enabled social scientists to use mathematics and scientific methodology in order to build far-reaching and mathematically elegant predictive models, it has been increasingly critiqued both philosophically and empirically. From a legal philosophical perspective, Cass Sunstein questions why “individual actors, autonomous and independent of social ties,” form the foundation of social contract theory when “no obvious reason supports this starting point. It would be equally natural to take collective action as the norm.”¹ Here Sunstein’s critique of social contract theory could be expanded to the whole of social science. Certainly, there have been contentious debates within various disciplines over the issue of methodological individualism. Take for example the pushback in political science against the growing dominance of rational choice theory beginning in the 1990s and gathering steam in the 2000s with the “Perestroika” movement led by Theda Skocpol and others.² Yet rational choice continues to dominate the discipline in terms of top journals and faculty positions at major research universities. In fact, with few exceptions, social science methodology has tended to take the autonomous individual as the starting point for modeling and understanding human behavior.

Empirically, evidence is mounting as well that the “extreme individualism” assumption employed in economic modeling does not conform to real-world experience.³ Studies show that, contrary to the predictions of economic theory, people voluntarily contribute resources to a public good 40–60% of the time even though economic models suggest that a rational individual would give to the public in negligible amounts.⁴ Interestingly, the only time the self-interest assumption tends to be corroborated is when the experiment is conducted with groups of entering economics graduate students, who contribute less than 20% and find the concept of fairness alien.⁵ This suggests that while one can be trained out of collective action, extreme individualism is hardly the default position. Overall, behavioral economists and psychologists have found not only that real-world giving to public goods happens at much higher rates than predicted by economic models, but also that in free-riding experiments, subjects tend to be more cooperative than predicted.⁶ For example, in experiments where subjects are given tokens to invest in a public good for which each participant in a group of five receives ½ cent return versus investing in a private good for which the individual making the investment gets a one cent return, economists predict the overwhelming majority will invest privately as this is clearly the dominant strategy from the rational individual’s perspective.⁷ Yet in round after round, subjects give more to the public good than the model predicts.

There are some scholars who would attribute such findings to ignorance or confusion on the part of experiment participants. But the evidence points to what one author describes as a strong “social and cultural propensity for kindness.”⁸ In one important study designed to sift out decisions based on confusion as opposed to altruism, the authors found that more than half of the cooperative moves in multiple experiments could not be classified as confusion.⁹ The study’s author concludes, “[t]he persistent and sometimes counterintuitive nature of cooperation in public goods experiments has presented an important puzzle for economists.”¹⁰ Moreover, these experiments themselves tend to eliminate a large amount of people’s natural tendencies to cooperate, so we would expect even more cooperation in the real world.

One conclusion from behavioral economics is that economists should spend more time on detailed studies of charitable behavior. The problem is that while the basic assumption of rational individualism is being questioned in the face of powerful and mounting empirical evidence, the notion that we are atomistic individuals seems to be harder to shake. For example, the observed behavior of giving to the public good is interpreted by behavioral economists as charity or selflessness: giving to someone else at one’s own expense. If individuals are understood as having utility functions – mathematical representations of level of satisfaction – that are completely separate and independent from the community they inhabit, then the only way to understand a person’s decision matrix is as a series of trade-offs between self and other.

While developing reliable and predictive models of charitable and altruistic behavior may bolster the critique of the individual rationality assumption, it does not necessarily constitute a critique of the individual as the unit of analysis.¹¹ There have been economic studies of altruism going back to the 1970s showing that a person’s utility function depends positively on others.¹² These studies point out that altruism is not suicide and that one does not have to sacrifice oneself to save others, that “altruism is not irrationality.”¹³ However, as one prominent economist points out, “you cannot really explain general ‘altruism’ if you’re just depending on some notion of gratification from giving…. [I]f the action can be explained as ultimately selfish, then that action is not altruistic.” If the self is construed as independent, then it still comes down to a choice between consuming for self or giving it away. Thus far, altruism has been studied largely by tweaking economic theory, changing the assumption of individual tastes from selfish to altruistic, in order to explain altruistic behavior. This rather tautological approach – people are altruistic if we assume they have a taste for altruism – still assumes tastes are formulated by individuals completely independently.¹⁴ In this way, economists have remained focused on questions like “Is altruism efficient?”¹⁵ For some economists, the answer to this question is a resounding “no.” One popular scenario often cited to make this point is that if we were all completely altruistic and two people got to a doorway at the same time, they would spend hours deciding who should go through the door first. The answer given by those defending the study of altruism as efficient seems to be that efficiency requires that we love one another only slightly less than we love ourselves.¹⁶ This scenario trivializes the idea of altruism, but it does make the problem crystal clear: the only solution to the problem of understanding altruism in an individualistic world must be some function of love for self as opposed to love for others. Those defending altruism in the name of rational individualism have not managed to escape the problem at all. They have only made clear what the root of the problem is: the conceptualization of the individual as constituted independently from environment or community.

Some scholars have begun to call for a more fundamental rethinking of traditional economics and the development of a political and social economics that would deal directly with relations between and among individuals.¹⁷ But not even the desire to understand economic decisions in the context of social dynamics has made a dent in the assumption that the building blocks of the social are always individual units of analysis. Rather than understanding economic decision making as part of, or embedded in, a matrix of social behavior, those economists who have been critical of these economic assumptions simply suggest that when examining a new class of phenomena, one needs to change some of the assumptions about individual tastes.¹⁸ That is, economists are trying “to pack ‘sociocultural forces’ into the category of [individual] ‘tastes,’” rather than confronting the problems associated with methodological individualism.¹⁹

It is not enough to relax the assumption of selfishness, as some have suggested.²⁰ Instead of assuming an individual is acting unselfishly or without self-interest (i.e., irrationally), scholars might be better served by examining the conditions under which it is rational to be community minded. Only then can scholars build a sophisticated understanding of long-run sustainability with respect to communities and the environment. There are, in fact, scholars advocating for a new economic approach that centers on community as the main unit of analysis rather than the individual. Their main claim is that “[a] group or community cannot be understood if the unit of analysis is the individual taken alone. A society clearly is greater than the sum of its parts.”²¹ These authors also point out the fact that economics is a system of deductions from axioms, which is problematic if the axioms are flawed but untouchable. Economics don...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Dedication Page
• Contents
• Acknowledgments
• Preface
• Introduction
• 1 The severing paradigm and the rationality of justice
• 2 U.S. meatpacking and the promotion of racist ideology
• 3 Juárez and globalization in the context of neoliberal patriarchy
• 4 The Cuban reform process through a neoliberal frame
• 5 Marketing community in Uganda
• Conclusion: the rationality of justice
• Index