Arnold Kling  

Truck and Barter or Bandits?

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Paul Walker writes,


Arnold Kling isn't buying into this. He writes,"I just don't believe that over a thousand years ago human beings had the trustworthiness, discipline, numeracy, and institutional base to engage in what we would today recognize as free trade." I'm not sure why. In his book, The Origins of Human Society, Peter Bogucki writes

One of the major advances in Maya research has been the identification of early trading networks, since the procurement of status goods such as jadeite, marine shell, quetzal feathers, and obsidian was linked with the emergence of elites. The site of Cerros, on the Caribbean coast of Belize, is particularly significant (Robertson and Friedel 1986). It lies on Chetumal Bay near the mouths of the New River and Rio Hondo, which lead into the interior of Belize. Not only was it well-suited to engage in coastal trade between the salt-producing areas of Yucatan to the north and the source area of obsidian and jade in Guatemala and El Salvador to the south, but from this location goods could also move into the interior of Belize and northern Guatemala. (p.348)


I'm willing to be wrong. But here is my alternative to the view that the Mayans (or the Romans) had a market economy.

Way back when, most people had to live primarily on what they produced within the household. Within extended families and small villages there was also some reciprocal exchange. But no markets.

Then one day, a clan living near an oasis or a salt source said, "Hey. Everybody needs this stuff. If we take control of the access to it, then we can collect a toll, and we won't have to work so hard any more." Thus was born what Mancur Olson called a "stationary bandit."

In some locations, it took a relatively large organization to control access to critical resources. In order to exercise control, the stationary bandits had to evolve to be relatively well-organized--heading in the direction of what we would now term "progress" and "civilization."

This civilization evolved further when, in some areas, stationary bandits formed associations and hooked up with roving bandits, creating empires. The roving bandits collected booty from distant neighbors and the stationary bandits collected tolls from local subjects. The booty and the tolls took the form of goods and slaves. If the empire got really big and powerful, the goods and slaves could be distributed and traded in a central location.

You might call the central location where the bandits distributed and exchanged stuff a "market." But it was not a market in the sense that people voluntarily produced the goods in order to sell them for cash into the market. Instead, people had their stuff stolen, and when a lot of stolen goods were collected in one place, the thieves had a "market."

Again, I'm willing to be wrong. And it could very well be that the difference between voluntary trade and stolen goods is more of a continuum than a sharp distinction. It could be that markets have always been a mix of goods produced for voluntary trade and stolen goods. But for what it's worth, my picture of pre-modern markets is that they consisted mostly of stolen goods. My picture of modern markets is that they consist mostly of goods produced voluntarily with the intent of selling.


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CATEGORIES: Economic History



COMMENTS (25 to date)
Matt writes:

We are all monopolists at heart, we suffer the free market because the alternative is banditry.

jorod writes:

Check out the Book:

Victory of Reason: How Christianity led to Capitalism, Freedom and Western Success by Rodney Stark. Stark maintains that capitalism started in Europe based on a religion that emphasized reason and progress. He also notes that ancient civilations did not have a market economy. See his definition of markets and capitalism.

8 writes:

The Soviet Union.

Troy Camplin writes:

Um, didn't the "stationary bandit" simply declare the salt lick or water source to be his property, and then rightly charge people to access to the goods his property contained/produced? It sounds like you are arguing that there was a commons that was working until some evil bastards came along and developed the idea of property rights. By doing so, they probably kept the water flowing longer than it would have.

Again, there's no free markets in the same sense as we had after the Renaissance, but barter markets leading into markets where money exchanged rather than goods? Yes, there was a market of this sort -- certainly in ancient Athens, as well as in the Roman Republic/Empire, throughout the Empire. It is actually later, during the Medieval period, where you get lords taxing the peasants, getting a certain percentage of their food they grew. The land was the Lord's, and the Lord allowed the peasants to sharecrop it. If that's what you're thinking of, that was a later development, after the egocentric Greek/Roman/Mayan societies.

shayne writes:

To Arnold:

I'm assuming you are wrong - at least in your emphasis on the degree of stolen goods. Obviously, piracy of the sort you describe was an artifact, and still is. But it isn't and can't be dominant. Consider the disincentive to further production of having it "stolen" on a repeated basis.

It seems the same principle still holds true - the "theft", or more properly the "attachment" (taxation) of current production to excessive levels tends to dissuade further production. (Isn't that the foundational concept behind Pigovian taxes?) There is a point of diminishing returns to both theft and taxation. I suppose the Laffer Curve is probably most illustrative of the phenomena.

Regards the ancients, Mayian or others, mere theft of excess production/wealth would simply discourage excess production. It sounds like the early societies and cultures discovered that first-hand and realized that mutually beneficial trade was superior to mere theft for sustainable wealth creation/accumulation. I suspect that would be even more true for consumable goods (salt, food, spices, etc.) than for more durable goods.

Arnold Kling writes:

Troy,
interesting comments. Can you have private property in an environment without rule of law? If a clan's control over an oasis only holds until another clan uses force to drive them away, do we say that the clan has property in the modern sense of the term?

dearieme writes:

Try "Britain in the Middle Ages", subtitled 'An Archaeological History', by Francis Pryor (2006). He seems to think that Britain, or at least Southern and Eastern England, was quite well equipped with towns that lived off trade a thousand years ago.

Lord writes:

The goods produced may be the product of slavery, but the choice to exchange them must always be by something with the power do so, and the exchange is voluntary unless force is required. Trade between cultures was always free to that extent, though trade within cultures may have been more limited. Independent parties choosing exchange over theft allowing specialization of work and production is the reason for all those Grecian urns throughout the Mediterranean. Transport difficulties and transaction costs would limit this to relatively high value goods not easily self provided for, but it doesn't mean it didn't exist.

Snark writes:

A stronger case can be made for the development of free trade in ancient Greece. Although activities that did not conform to the ideal of communalism were held in low esteem, early manifestations of banausos (i.e. capitalism) can be traced back to the classical period. Athens, as well as other Greek poleis, resorted to limited measures to foster interregional trade in order to obtain grain imports (particularly wheat), which was crucial to the economy.

The seeds of “trustworthiness, discipline, numeracy, and institutional base to engage in what we would today recognize as free trade” can be found in statements made by prominent statesmen like Demosthenes:

... men of Athens, you must not forget that, while you are today deciding one case alone you are fixing a law for the whole port, and that many of those engaged in overseas trade are standing here and watching you to see how you decide this question. For if you hold that contracts and agreements made between man and man are to be binding, and show no leniency towards those who transgress them, lenders will be more ready to risk their money, and the business of your port will be increased.

Or Pericles:

“The shame is not in being poor, but in not doing anything to escape from poverty.”

It appears to me, anyway, that the ancient Greeks not only understood free trade, but practiced it.

Lord writes:

In agrarian societies, farmers must always decide how much to produce, consume, store, or sell. No doubt custom, tradition, and law make an impact, but even so, probably less than the weather and the will of the farmer.

Troy Camplin writes:

Certainly one does not have property rights in the modern, ideal sense of the term at that time -- but if we are to be completely honest with ourselves, don't we all just live with the danger of living on our property until someone with more power comes along to force us off of it? If the state decides to build a road through my house, I have to leave. They're a bigger gang than me. And better armed. In this sense, they had the same kind of property rights as I or anyone else has had throughout history. A few governments have discovered that they can have more power through economic growth through enforcing people's property rights, and so those rights are protected by that government for that period of time, but there's little practical difference between personally protecting your oasis from people who would take your land from you and paying tribute to a government to have them do it for you (while under constant threat from them taking it from you instead of strangers).

Now, to comment on ancient Athens: read Aristophanes. In his anti-war plays he's always going on about how the war was stifling free trade, market exchange, and economic prosperity. He seemed to particularly miss the eels from Boeotia.

Mark Koyama writes:

I know very little about the Maya but the evidence that the Romans had a sophisticated market economy is indisputable. Consider the evidence marshalled in Bryan Ward-Perkin's excellent book the Fall of Rome and the End of Civilization available at http://www.amazon.com/Fall-Rome-End-Civilization/dp/0192807285/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1199919567&sr=8-1 The book indicates that the production of a number goods displayed a remarkably deep and complex division of labour. For instance the remains of Roman pottery suggests that even basic consumer goods (as opposed to luxuries or status goods) were transported around the empire in vast quantities.

Certainly however I think your model applies to a number of other societies where historians often mistake a plunder based economy for market-based prosperity.

Morgan writes:

Egads. Try reading the Cambridge Economic History of Europe series. There is indisputable physical proof of markets extending back thousands of years. Of particular interest is reading Diocletian's attempts to create a command economy based on Persian practices and their classical, pardon the little pun, disastrous side-effects. Every Econ professional should be both intimately aware of these edicts and their effects. There is little else in the historical record, including modern recent history, which documents the inevitable effects of a command economy more clearly and eloquently than this period. Any supporter of free markets should be able to trot out this piece of illustrative history.

Don't take this the wrong way, but I don't understand how people can graduate college, let alone get a PhD and be so totally in the dark about basic history, especially essential history. I know an overwhelming number of college graduates who until recently had no clue that Palestine and Pakistan were two different places. I hear so much arrogance based on the fact that one has such and such a degree, yet they remain totally ignorant of basic, essential information. We claim to have the best universities in the world, no doubt we do, but what a failure they are in their basic function, preparing people to be both capable professionals and educated citizens. The flip side is what untapped potential we could realize if we ever made a go at serious educational reform, at all levels.

Sudha Shenoy writes:

??? Economists generally consult the literature when writing on a particular topic. This is routine professional practice. What is so fascinating is that economists are not even aware (1) there already exists a vast body of well-established research in economic & legal history, not to speak of archaeology, of various parts of the globe (2) these are living disciplines, with research continuing.

In other words, for economists, a knowledge of technical economics is a perfect substitute for even simple awareness of the existence of historical/archaeological research. And this is perfectly acceptable professionally. Not contra, of course: noneconomists are pitied for their lack of even basic economic concepts.

An entire raft of research topics for historians looking into the intellectual history of the late 20th century...

Troy Camplin writes:

Morgan,

It's because out colleges don't teach content anymore, but process. Students are taught how to researching things, but aren't told why they should bother. So, of course, they don't. Everything has been dehistoricized, decontextualized, and made devoid of content by the postmodern left. Education is rotten at the top, and that rottenness has infected our schools all the way down because of it.

Arnold Kling writes:

I know I'm just an ignorant, unread economist and all, but how do these archaeologists know that the sites they dig up are markets where people sent stuff voluntarily rather than plunder-distribution centers?

Troy Camplin writes:

Well, if you have an ancient primitive market that looks like a modern primitive market, they probably worked on the same principles. That would be one thing. Then there is textual support -- what contemporary historians and literary writers said was going on in those places at that time. Historical literature can be a good source of historical information about everyday life. Again, I recommend Aristophanes and his complaints about what was being lost in the war with Sparta as far as trade and markets went as evidence of the kinds of things that were going on in ancient times. You would have to supply some pretty strong evidence if you wanted to make the argument that the Greeks were unique in engaging in non-plunder trade. It's not that plunder may not have been available as well, but that pots made by potters and food grown by local farmers were the rule, not the exception. Also, the existence of money in places like ancient Greece and ancient Mesopotamia is a strong indication of market exchange of this kind. As we know, money was developed to make bartering easier. Further, the first writing -- again, in Mesopotamia -- is known to have been developed for bookkeeping. Again, you don't need bookkeeping for plunder -- you need it to keep track of traded goods. The first letter of the Mesopotamian alphabet looks a lot like a cow's head -- and for good reason, as it did in fact represent heads of cattle that were exchanges for other good or for breeding purposes. Writing, like money, was invented to aid in market exchanges of created and grown goods. We see specialization in labor during this same period, meaning, again, that people had to engage in exchange in order to get things they weren't producing. There is considerable archaeological and textual evidence for all these things. These were primitive markets to be sure, and they were nothing like the market economies that arose after the Renaissance, but they were far more than plunder economies. Plunder occurred, but it was quite rare compared to specialization and market exchange. Taxes in these places also varied, and were rarely if ever anywhere near 100%.

Morgan writes:

That's why I recommended the Cambridge Economic Series. They discuss the evidence in detail, including merchant documents, accounts etc. We do have a thorough knowledge of Latin and Ancient Greek as well as all the ancient Indo-European languages. We also have extensive records from China that go back thousands of years.

The Mayans of course are a much younger civilization than the Chinese and Graeco-Romans. They have been less studied for obvious reasons but there is an extensive knowledge base already established.

Now as to whether Satan planted these documents in archaeological sites while he was out planting dinosaur bones I don't know.

Troy Camplin writes:

They Mayans were at the same developmental stage as those civilizations, so we shouldn't be surprised to find developmental parallels.

Sudha Shenoy writes:

Arnold:

Archaeology & history study specific contexts. Their assessments relate to these contexts.

For example: there is evidence (evidence) of medium- to long-distance _trade_ (trade) from the Palaeolithic period onwards, in (eg) Europe, SEAsia, Australia, etc., etc. The earliest items traded included special types of flints, ivory beads, polished stones, grinding stones, etc., etc. There are also many studies of salt production in many parts of the world, from earliest times onwards, as also of the salt trade (it was, for obvious reasons, one of the earliest trade items.) Later evidence shows an intensification of all trade, from just about all areas studied.

So: _Which_ specific context(s) are we talking about? What is the _specific_ archaeological/historical evidence in issue? How have archaeologists/historians seen this material (archaeological, documentary, etc)? What other possibilities does this material support?

Troy Camplin writes:

We even see trade -- in the form of barter -- among chimpanzees and bonobos. Especially among bonobos (who are very peaceful, solving almost all their problems with sex and/or trade).

Bob Knaus writes:

Columbus made his first contact with the Mayans well offshore the coast north of Honduras and east of Belize. It was a merchant family in sea-going canoes, trading honey and jade. The routes were well established and quite modern by the standards of 1492. See the six-mile long canal dug across the pennisula near Chetumal, and the range lights at Tulum which were lit at night to guide vessels through the narrow reef cut.

Now, granted, the merchant family's canoes were paddled by slaves, so the locomotive power for the trade was not voluntary. But I think you'll find the trade itself was.

Columbus of course seized the family, their slaves, canoes, and trade goods for himself. So much for Western Christians promoting free trade :-)

Clarke Ries writes:

@ Troy Camplin

Troy, the reason for ignorance in college graduates has nothing to do with the nefarious left. Colleges are not designed, and perhaps never have been (I'm too young to say for sure), to provide a broad intellectual knowledge base. Students pick a department and typically learn next to nothing of the world outside that area. If you're in commerce, economics, or engineering, you may learn a lot of equations, but you won't ever need to learn the difference between Palestine and Pakistan.

Ironically enough, that's basic free market economics. If there's a high demand for learning about how to make money and a low demand for courses about Palestine, no supplier of education in their right mind offers courses on Palestine. This is especially true when the economic model of the modern college uses education as a loss leader for future alumni donations, which requires a focus on those students most likely to make money post-graduation: the engineers and business students. Apologies for the dig in advance, but I feel the need to point out that it's the right wing determination to privatize and/or cut funding for public institutions that has made it necessary for colleges to act as market entities in the first place.

Morgan writes:

While I agree with some of what you say, Universities have plenty of money. Apparently too much money if college inflation is any indication, which I think we should all agree, it is.

Troy Camplin writes:

There was a time when universities did provide what was called a liberal education. The idea was that you had to have a broad-based education if you were going to be a good citizen and a good scholar and a good anything else. 18 year olds do not have the maturity to make decisions about what they need to learn, and have no business having a say in it. Them having a say is indeed the left's fault. Universities have turned rotten ever since the postmodern left took them over in the late 60's, and they have gotten more and more so over the years.

And we can see the results throughout society. CEOs don't have ethics. Business reporters like Lou Dobbs know nothing about economics. Politicians know even less about economics or history of much of anything. How can honestly say one is educated in economics if you don't know the history of economics? Including ancient history and pre-history? I would go even further in what an economist should know, including evolutionary psychology and sociobiology. I'm only picking on economists because this is an economics blog, but the same could be said about sociologists who seem to know nothing about economics most of the time, literary theorists who don't seem to know much of anything any more, including why what they are doing even has any value, etc. Specialization has reached its limits -- and really it was only any good for the hard sciences like math, physics, and chemistry anyway. Anyone dealing with and in the human sciences or the humanities really needs an interdisciplinary education if they're going to understand their own discipline.

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