Against (Karl) Polanyi

16 June 2011 at 5:16 pm 1 comment

| Peter Klein |

I mentioned Karl Polanyi (not to be confused with Michael) in yesterday’s post on anonymity. Gavin Kennedy points us today to Mark Pennington, who writes that Polanyi’s claims “are either historically inaccurate or based on a crude misrepresentation of classical liberalism.” Specifically,

classical liberalism has never claimed that narrowly selfish behaviour is all that is required to sustain the social fabric. Of course markets are always “embedded” in a broader nexus of institutions, but the question we need to ask is precisely what sort of institutional and social norms are required to facilitate social cooperation on the widest possible scale. Polanyi and his followers prefer to rely on hackneyed accounts of the Wealth of Nations rather than recognise that Smith’s support for markets and “self interest” constituted part of a broader ethical system set out in the Theory of Moral Sentiments. Specifically, Smith was concerned to elucidate the balance between the social norms appropriate to contexts of commercial exchange and those appropriate in more intimate environments. From Smith’s point of view feelings of sympathy which include love, friendship and reciprocity are reserved for people of whom we have detailed personal knowledge. The morals expected in commercial relations which are often between relative strangers, however, tend to be more impersonal, focussed on principles such as the observance of contracts and are oriented more towards the “self interest” of the parties involved rather than the direct benefit of “others.” The great mistake is to suppose that the type of ethos that pervades family life or that in tight knit communities can operate on a much wider scale. The development of inclusive markets requires a more impersonal ethos which enables people to engage with diverse actors who may not share the same moral outlook. If people deal only with those who share the same moral outlook or trade only with “locals” rather than engage in transactions with “foreigners” then the sphere of potentially cooperative relationships will be reduced. The alternative to self-interest is not solidarity, but suspicion if not outright conflict.

Entry filed under: - Klein -, Business/Economic History, Classical Liberalism, History of Economic and Management Thought, Myths and Realities, People, Recommended Reading. Tags: .

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1 Comment Add your own

  • 1. srp  |  17 June 2011 at 4:07 pm

    Alan Fiske and his many coauthors have tried to systematize similar insights using what they call relational models theory. They have some experimental data to support their idea that humans classify all interactions into either market pricing, authority ranking, communal sharing, or equality matching, but different people and cultures classify things differently. So we can get ideological conflict over whether medical care, say, should be allocated by markets, by empowered bureaucrats, by free clinics on an as-needed basis, or by rules that give each individual an equal amount of access.

    Interestingly, actual interactions often involve multiple modes but are still mentally classified exclusively. So a certain amount of dissatisfaction is built in. And of course different modes have different evolutionary implications, in that some are more conducive to prosperity and survival than others in different circumstances.

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