The Metallist and the Barter Myth
Learning Objectives
By the end of this section, you will be able to:
- Discuss the importance of barter in modern economic analysis
In what kind of economy do we live and operate our daily lives? This is not a trivial question. As ideas about how human beings can best organize their resources developed into enlightenment philosophy, a prominent method for expressing what a society free of the feudal constraints would look like involved imaginary stories. Philosophers, such as John Locke, Thomas Hobbes, and Jean-Jacques Rousseau asked their audience to imagine a place called the state of nature to consider possible social outcomes when this place is populated with free individuals. In the state of nature, will chaos, barbarism, or a harmonious stable society result?
In Locke’s version, individuals needed to follow two constraints or simple rules in order for a harmonious and stable society to emerge. The first of these constraints is the spoilage constraint. In the state of nature, no individual should collect more food, nuts, and berries than they can consume before they spoil. Second, the prejudice constraint cannot be violated. This constraint is “predicated on the right to subsistence: the privatization of land [can]not disadvantage non-property holders, violating their right to subsistence goods.”[1] As long as all those in the state of nature follow these two simple moral constraints, then a harmonious and stable society is argued to emerge. Through the evolution of similar stories, political economist would add their own plot twists and establish the setting for neoclassical economics.
What these imaginary stories have in common is the collective illusion that capitalism or free-market economics grows out of a state of nature. The basic plot and stage for this story remain the same in neoclassical economics. How many of you got dressed and ready for your classes today in the Cartesian plane? Like their enlightenment predecessors’ use of the state of nature, the neoclassical story also takes place in a space that is not inhabited by human beings. The mathematical universe of maximization and optimal decisions, like Locke’s imagined individuals, aggregates to a harmonious and stable solution. This solution is known as equilibrium in the formalized mathematical models of neoclassical economics. While the technical names and the math provide the neoclassical story with a scientific veneer, the underlying plot remains generally the same as those told over the previous four hundred plus years. A strong characteristic of these stories is their staying power, but a significant cost of such longevity is a lack of analysis regarding the actual economy in which we live and conduct our daily lives.
The economy described by Jean Baptiste Say[2] and other classical political economists of his era, as well as by modern neoclassical economists, is a barter economy. In a barter economy, goods trade for other goods. If we we