Homo Economicus and the Myth of Barter

I began by pointing out the Grading Policy page and the two books we’ll be reading. Please see the previous post for more details.

Today we discussed Chapter 2 of David Graeber’s Debt: The First 5000 Years, “The Myth of Barter.” Perhaps “discussed” is a bit generous: I felt like I talked a bit more than I’d have liked. You should feel free to let me know if such lectures are helpful or not. I’ll try to step back a bit in the next couple classes so there’s more room for discussion.

I began by trying to explain what is at stake in this chapter. Put in grand terms: what is at stake is the whole world as most of us know it.

Put in more technical terms: Graeber is attempting to call into questions the intellectual foundations of the discipline of (mainstream) economics. Today I pointed to two aspect of that foundation: homo economicus (economic man) and “the myth of barter.”

Homo Economicus: This theory of human nature understands humans to be (a) competitive (i.e., they are out to surpass their fellows), (b) acquisitive (i.e., they want more and more wealth), (c) self interested (i.e., they want it for themselves), and (d) “rational” in a narrow sense (i.e., they make choices based on what will further their competitive, acquisitive, self-interest). There are other things one may add to this definition, but this is a good place to start. Many people accept this theory of human nature because it adequately describes how we behave in some aspects of many of our lives (for example, in competition for jobs). But does it really describe how we behave in all aspects of our lives? And is it necessary that we would behave this way at all?

The Myth of Barter: Is a story that attempts to make sense of the world we have, a world in which money plays a major role in motivating human behavior. It is a “working history,” a story that does work to justify and help interpret the world we live in. The Myth of Barter goes like this: before people exchanged money for the goods they needed (like food, housing, labor, etc.), they simply exchanged goods directly without money. For example, if someone in a society that did not use money needed a pair of shoes, they would have to find someone who had or made shoes and offer to trade them, say, a fishing pole for the shoes. If the person with the shoes didn’t want a fishing pole, well, then, as one student today said, “they’re out of luck. They can’t do business.” According to the story, money is an ingenious solution to this problem, because it allows the person with shoes to accept money, so they can then get what they do want from someone else.

As Graeber argues, the problem with this story is that it has no basis in reality. There has never been a human community (that did not already use money) that organized its wealth in this way.

Today, I suggested that this story serves two functions: first, it allows us to imagine that homo economicus is truly our human nature, by projecting into the past the same kind of economic relations we have today, just minus the money part [i.e., it is a story of continuity]; second, it allows us to tell a story of progress. We are left with the impression that life was terribly inconvenient before money came along, and we should be thankful to have it.

Graeber’s claim that this story about barter is false therefore has two huge implications: first, it leads us to ask, “if people interacted completely differently with respect to material goods before they used money, how did they do it?” This allows us to open up our imaginations to a variety of possibilities that we currently can’t imagine; second, if the invention of money is not an ingenious solution to a problem that all human societies have had, then are we so sure that we’ve made “progress” by using it?

This is the basic set of ideas I wanted to get on the table today. I understand this is quite complex, and I’d like to spend the rest of the week just discussing these ideas to make sure we are all on the same page. I will have another, much shorter reading up for you by Wednesday which we can discuss on Friday, but let’s consider this week the “break out of the myth of barter” week.

As a side note, let me give you some understanding of why I’m focusing on all this. The founding text of “western” political philosophy, Plato’s Republic, is a long and intricate discussion of what a city of perfect justice might look like. In that text, probably one of the most influential texts in the history of the world, Plato tells a story quite similar to the one that Graeber is criticizing. In the early pages of the discussion of the perfect city, Socrates says:

“Now what about this? In the city itself, how will they exchange what they have produced with one another? It was for just this that we made a partnership and founded the city.”

“Plainly,” he [Adeimantus] said, “by buying and selling.”

“Out of this we’ll get a market and an established currency as a token for exchange.”

“Most certainly.”

Here we find an important feature of the myth of barter, if not the whole myth itself: money is seen as just a convenient way of exchanging goods, which people would be doing anyway.

If we are going to ask big questions about the nature of justice — which we are going to do in this class — we need to make sure we are starting from a place that takes into account the complexity of human experience. We can’t just look around at our society and assume we know what is possible.

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