Sunday, February 13, 2005

Are Markets In Our Blood? Doubtful.

Dr. Don Boudreaux, from the blog Cafe Hayek, makes an interesting point that markets might be "in our genes".

"Are markets an extended phenotype of humans? A case can be made that they are. We are programmed to trade, to exchange, to seek bargains, all in order to make ourselves better off and, hence, to promote our survival. Markets certainly do promote our survival. By promoting the division of labor, exchange increases the total amount that humans produce and enable those with relatively little in the way of valuable resources to increase the value of their holdings. For sure, without the enormously deep division of labor that now marks much of the globe, and the market institutions that sustain and guide it, billions of us would perish.

So, yes, as I understand the concept of phenotypes, the market-driven extensive global division of labor is an extended human phenotype. It's in our genes."
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It's an interesting idea, but it doesn't seem very likely to me. Looking back over human history markets seem to be less important for resource allocation next to tradition, war, and command. In fact, up until 250 years ago, most of the important things in western society life ( like what people did for a living) were determined by tradition and class. Certainly, there were markets for individual goods like spices and silk, but there wasn't the pervasive market structure that characterizes modern life. In "Economics Explained", Robert Heilbroner and Lester Thurow described markets of the historical west as "the ornaments of society" while tradition and command were its "iron structure."

But, If markets were truly in our genes, then we must ask why an understanding of how markets work seems to be essential for making markets work. Why are people in former communist nations having such a hard time "learning" how to behave in markets, if it is truly in our genes? Are Russians genetically different from Americans? I doubt it.