Wednesday, June 29, 2011

SF and Alternative Economies

This Sunday, I'm scheduled to be on a panel at Westercon, a local SF convention, with the title:

" Economics, SF's Weak Spot
      So many SF worlds, only two main economic systems. What else might we come up with as theories of value and exchange?"

Presumably the two systems referred to are market exchange and centrally planned socialism. Even within those classifications there is quite a wide range of possibilities. The Yugoslav system, for example, was nominally socialist but looked rather more like a market economy in which the firms, instead of being sole proprietorships, partnerships, or joint stock companies, were worker co-ops. The market socialism proposed by Abba Lerner and Oskar Lange in the course of the calculation controversy of the early 20th century was a system in which the means of production belonged to the state, but the state instructed the managers to play the game of pretending to be profit maximizing capitalists in order to take advantage of the decentralized control mechanism of the market. And the  system of institutions I sketched in my first book was not what most supporters of the market imagine such to be, since even what are traditionally seen as government functions, such as defining and enforcing law, were entirely private. And that one has showed up, occasionally, in other people's speculative fiction.

Suppose, however, we are willing to lump all of those into two piles. Are there other interesting alternatives, real or fictional, worth including in speculative fiction? What are they?

One that occurred to me is not only a real historical institution and one that appears in fiction, it is also one that plays a central role in science fiction fandom itself, as well as elsewhere in the modern world. I will be participating in three panels at Westercon, as well as giving a demonstration on how to make cuirboulli, hardened leather armor, an interesting period technology. My efforts will not be entirely unrewarded. I will probably get a free convention registration for myself, I may get one for my wife, I will almost certainly get access to the green room, the lounge that SF conventions traditionally provide for their panelists and speakers, which includes not only a certain amount of free food, something there is usually quite a lot of at cons, but also a  chance to interact with some of the more interesting people present.

But none of that is really a market exchange, a payment for service in the ordinary sense of the terms. I get the same reward whether I am on one panel or six, whether I am the organizers' favorite panelist or deemed barely worth inviting. And, as suggested by the way I just described the rewards, I don't actually know what I'm getting, since the terms are determined by custom not contract. What I am participating in is not a system of explicit exchange but a gift economy.

Most summers, although not, as it happens, this summer, my family spends about a week at the Pennsic War, the largest event put on by the Society for Creative Anachronism, a historical recreation organization in which we are long term participants. Over the course of that week I teach eight or ten classes on topics relevant to the hobby. Teaching classes is one of the ways I make my living, but it would never occur to me to charge for these ones, or to the people running the Pennsic University to offer to pay me for them. I don't even charge for handouts, which under the rules I am entitled to do. Their cost isn't very large, and it simply feels more appropriate to give them away, to include them within the (medieval) virtue of generosity.

During the same period of time I will spend about six nights, from dark to midnight or so, running a bardic circle, designed to create the illusion of a group of medieval people sitting around a campfire entertaining each other. Hosting it involves being prepared to present period, or at least period feeling, poems and stories to fill in as much of the three hours or so of the circle as is not filled by  pieces presented by other people present, as well as maintaining a conversation that supports the illusion, offering around period nibbles, being a host.

And one other element. If you present a piece that really impresses me, both as a good and entertaining story and as a good job of maintaining the illusion, you will leave with a silver arm ring of my construction. The silver is real and the rings reasonably heavy; the construction of new rings to replace the ones I have given away the previous years is one of the projects I engage in earlier in the summer. The pieces are modeled on the arm rings given away  by Norse rulers to reward entertainers. Ideally I would like to average one a night, but I don't think I have ever been that lucky.

This again is a gift economy and was recognized as such, in that context and others, by its medieval participants. It is a pattern that has been observed in many other societies. The basic rule is that, instead of exchanging value for value on pre-agreed terms, you give something to someone in the expectation that, although he has no legal obligation to reciprocate, he has a social obligation to. If he doesn't, he will lose status, be seen as a skinflint, almost a cheat. The Elder Edda, a collection of Norse poetry probably dating from the 9th century, contains one poem, Havamal, that is a collection of verses of advice attributed to the god Odin. One of my favorite lines is:

"No man is so wealthy that he objects to receiving a gift in exchange for his gift."

They knew what they were doing.

They did. I'm not sure I do. Looking at the institution as an economist, it feels like a much clumsier way of coordinating human activity than an explicit market. Looking at it as a participant, on the other hand, it makes sense, feels right. A few days ago, wandering the web, I came across a comment by someone who at some point had received one of my arm rings. She referred to it as "one of my most treasured possessions." 

She wouldn't have if she had bought it.

So that is one example of an economic system, a way of coordinating human activity, that doesn't fit neatly into either the socialist or market category, even though the transactions are entirely volunary. Other examples?

27 Comments:

At 3:15 PM, June 29, 2011, Blogger mtraven said...

The Disposessed by Ursula LeGuin (anarchist socialism) immediately comes to mind. And the reputation-based economy of "whuffies" in Down and Out in the Magic Kingdom.

 
At 3:54 PM, June 29, 2011, Blogger Mark Atwood said...

The artistic gift economy of Burning Man is very similar to the one you describe for Pennsic. People gift each other artistic experience, labor input, jewelry, booze, shade, food, and hardware.

It is considered extremely tacky to *expect* to be gifted the stuff you need to survive, e.g. you are to bring your own food, water, tent, and shade. However, if you honestly forget something, or something breaks, people will give you what you need to survive.

 
At 3:57 PM, June 29, 2011, Anonymous William H. Stoddard said...

Your account of the gift economy sounds like it has some relationship to what anthropologists call "redistributive" economies (a misleading name, as it suggests redistribution of wealth or income by the state, which is not what is meant): the kind of economy found in the Pacific Northwest, and vestigially in the birthday gifts of the Shire (and one of Tolkien's letters suggests that he knew exactly what he was writing about). I found this a useful model for the economy of a mythic fantasy world, back when I was trying to write fiction.

As I understand it, the basis of a redistributive economy is that if you are wealthy and powerful, you are expected to hand out large amounts of assets to friends, allies, and relatives. And then you get a reputation, and people want to associate with you, and you ask them to help you accumulate wealth by bringing you gifts, which you then distribute the next time around. There's a definite sense of fairness in all this, just as there is for Christmas gifts in our society, but you can't just say, "Okay, I'll give you three salmon, but you have to give me six bushels of potatoes."

I don't think this can work in a real world setting, not for more than a few thousand people; it really isn't as efficient as a market. But it has a good flavor for fantasy.

 
At 4:03 PM, June 29, 2011, Blogger Mark Atwood said...

Another source of "economics of SF" can be found in polemic novels, such as "Looking Backwards", "For Us, the Living", and Huxley's "Island". They are pretty much all apologetics for various flavors of socialism. The "social credit" system of FUtL is a different take than most such apologetics. "Riders of the Purple Wage" is also interesting on that basis.

 
At 5:57 PM, June 29, 2011, Anonymous Ricardo Cruz said...

"I don't think this can work in a real world setting, not for more than a few thousand people; it really isn't as efficient as a market."

Of course. If it worked efficiently for big groups, then the modern economy would run in such principles (despite the fact it's easier to evade taxes in a gift economy).

 
At 8:13 PM, June 29, 2011, Blogger Greg Gruber said...

In Kim Stanley Robinson's Mars trilogy (Red Mars, Green Mars, Blue Mars) he envisions a gift economy. An interesting combination of a market and gift economy is described in Paul McAuley's The Quiet War, where "kudos" are used as a form of currency, but one of the main ways that you accumulate kudos is by doing interesting things in art, science, sport, exploration, etc. People award you kudos through social networking.

 
At 3:47 AM, June 30, 2011, Blogger Milhouse said...

1. Adam Smith, in The Wealth of Nations writes about the fabled generosity of the nobility in earlier centuries, and points out that before international trade developed, once you had the basic necessities there was very little to spend wealth on. Reputation was about all you could buy, so those with wealth bought it. As soon as there was something better to spend ones money on, such as jewels, spices, luxury fabrics, etc., that well of generosity dried up. So one condition for a widespread gift economy, rather than the small scale ones we see today, is a limited market.

2. In some societies the vague expectation of return gifts could be legally enforced. One example is in the way the Talmud treats wedding gifts. There were extensive gift customs associated with weddings, both those the groom would give the bride during their year-long engagement, the monetary settlement a father was expected to give his daughter on her marriage, and especially the gifts the groom's friends would give him, and the week they would take away from their other pursuits to attend him.

Attending a wedding was a significant burden, because it lasted all week. The wedding party was composed entirely of the groom's male friends (even his parents did not usually attend), and they spent the entire time feasting with him. If someone had been to your wedding, you were expected to attend his, and bring a gift; once a pattern had been established among a group of friends, all of whom were expected to attend each other's weddings, an enforceable legal obligation was created. I don't think you could be compelled to actually attend, let alone to have a good time, but you could be compelled to send a gift. (It's been a while since I studied this topic, so it's possible that I've confused some things; but this is the gist of it)

Also, if a man had married off several daughters before his death, then when his remaining daughters got married his estate was legally obligated to settle on them an amount comparable to what their sisters had got. If he had not yet established a pattern for how much he would give each daughter, then the legal default was 10% of whatever was left of the estate at the time of the marriage.

 
At 6:46 AM, June 30, 2011, Blogger Matt said...

The major condition for a gift economy is not so much a limited market as a post-scarcity one. In a post-scarcity context, the signalling utility of accumulation of goods obviously drops tremendously, and one has to measure status another way. It seems to have developed many times independently that the optimal response to this is a gift economy.

The ability of gift-economic psychology to spread and infect a surrounding, larger scarcity-based economy is nonzero, but nevertheless limited. (The extremely wealthy already live this way in the West, for example, as do -- as you point out -- SF fans at a con or SCAdians and Pennsic. So does the world of Open Source software.) But if you're talking science fiction, then all sorts of conditions could be postulated which would render the overall condition of humanity into a post-scarcity state. Pervasive nanotech, for example, might well do it. Matter replication certainly would.

 
At 10:59 AM, June 30, 2011, Anonymous astrolabio said...

Mauss studied several exchange systems based on gifts; this is the most famous, maybe.

http://en.wikipedia.org/wiki/Kula_ring

 
At 12:20 PM, June 30, 2011, Anonymous William H. Stoddard said...

Matt: Your whole argument looks to me to be self-contradictory. You refer to "post-scarcity" conditions. Now, I don't believe we are post-scarcity or even will be; only an omnipotent God could have a post-scarcity existence. People who talk about being "post-scarcity" are simply confession the limitations of their own imagination for desirable things.

But setting that aside: The only reason for economizing is scarcity; if there is no scarcity, you can have as much as you want of everything you want, with no need ever to choose between one good and another. If there is no need for economizing, then there is no economy. A "post-scarcity economy" is like, to use Nietzsche's phrase, wooden iron: a contradiction in terms.

 
At 12:48 PM, June 30, 2011, Blogger Matt said...

"People who talk about being 'post-scarcity' are simply confession the limitations of their own imagination for desirable things."

...or an awareness of the fact that once one passes a given point, the marginal utility of most concrete "things" and other goods which are priced according to conventional economic theory drops below the point where it ceases to be worth paying attention to.

It is certainly not the case today (but in an SF-nal world, might plausibly be) that wealth has expanded to the point where this category includes "everything one might plausibly buy with money". If this happens, the assumptions underlying both of the current major economic philosophies will break down, and one needs a hypothesis as to what would happen next.

"Desire as a concept will disappear" seems unlikely. The "gift economy" hypothesis ultimately amounts to a restatement of Maslow -- that is, once the urgent needs of life are met, one ever-more seeks things which are ever-less available for simple purchase with money.

Perhaps you disagree. Do you have an alternate theory? If so, does your theory explain the social customs Our Host describes better than mine does? Or (if you believe that he and I are liars, when we describe such phenomena occurring right here in the present day) for that matter, does it explain the existence of this blog? Or any blog?

 
At 1:16 PM, June 30, 2011, OpenID dagonell said...

Have you read the original "DUNE" novel by Frank Herbert? The planet Arrakis produces a spice that allows space pilots to travel faster than light. The spice is harvested in mobile factories which have to stay one step ahead of the Sandworms, a creature that could devour an elephant in a gulp. Needless to say, wars are fought over the spice. Maud-dib learns to control the sandworms and hence the spice production.

 
At 1:47 PM, June 30, 2011, Blogger David Friedman said...

On the issue of "post scarcity" ... .

I agree that, taken literally, it doesn't look like a plausible situation, given the range of things humans value. But what is plausible is a society rich enough in material things so that it is rational for many people to divert a good deal of effort from obtaining material things to obtaining status or other social goods. There is still scarcity--most obviously of status.

 
At 4:49 PM, June 30, 2011, Blogger Will McLean said...

Are you familiar with liturgies in ancient Athens? The wealthiest individuals were required to pay for certain functions of the state, such as sponsoring a tragedy or a trireme. You could provide the bare minimum, or you could pay for something superlative that would enhance your fame and renown.

 
At 4:53 PM, June 30, 2011, Blogger Will McLean said...

potlatch

 
At 5:26 PM, June 30, 2011, Blogger David Friedman said...

Yes I am familiar with liturgies. A different feature of them--the mechanism for proving that another Athenian was richer than you (and hadn't done a liturgy this year or last, so should do the one you were assigned)--is my standard example of why I think their legal system was invented by a mad economist.

Folk interested in this sort of stuff may want to look at the page from my course on legal systems very different from ours:

http://www.daviddfriedman.com/Academic/Course_Pages/legal_systems_very_different_10/legal_systems_v_diff.htm

It includes recordings of most of the classes, lecture notes, and lots of other stuff--including a fairly detailed outline of a good book on classical Greek law.

 
At 6:43 PM, June 30, 2011, Blogger Wirkman Virkkala said...

As I understand it, early in the history of ancient Egypt the pharaohs and priests practiced a central-store barter system as the mainstay of their society. The state heavily taxed grain production, and then distributed the grain (mostly as bread and beer) in exchange for services to state, and grain ended up a kind of clumsy money. Barter was secondary in social life; with the ascent of money, trading became dominant and less centralized, undermining the centralized grain distribution system.

One could imagine a similar system, I suppose, using air/oxygen production as the central commodity, with the state or corporation or arcology running the system as a centralizing institution.

Gift economies vary as social groupings become larger, by the way. Hunter-gatherer societies (which are usually HUNTER-centric) have a very different sharing ethos than did the rich-environment chiefdom of the potlatch systems. The former tended to egalitarianism; the latter did not.

As Marvin Harris explained, potlatching served as a regional protection against poor salmon runs. All a group had to do to receive enough to survive the winter was to praise the givers in an unseemly-to-us extravagant manner, and they got what they needed.

I believe the Makah people are so named by the Quinalt to signify their status as "givers of many fish."

Before Mauss explored the subject, Herbert Spencer also did some interesting work exploring such economies. (See several sections of his Principles of Sociology.) For a rational breakdown of possible forms of co-operation, see Spencer's sociology chapter in the Principles of Ethics.

 
At 7:03 PM, June 30, 2011, Anonymous William H. Stoddard said...

Matt: You write as if you thought that scarcity=obtaining things with money or in exchange for material goods. That is not at all my assumption, and it is not a necessary assumption of economics. The Maslovian phenomenon you are writing about is an alternative system of exchange, and therefore an alternative strategy for dealing with scarcity; it is not a condition in which scarcity no longer exists.

Beyond that, if we're talking about superabundance of material things, where can I buy my tourist flight to Saturn? My e-reader with the complete Library of Congress stored in it? My aging reversal treatment? My brain modification to give me a sense of pitch? Or, on a more modest scale, my staff of researchers and computer animators to support my roleplaying campaigns (something that is in principle possible today, but that no roleplayer I've heard of can pay for)? The last of these could be purchased today by someone rich enough, and the others will almost certainly be bought and sold in some way if we ever have the technology to support them . . . that is, they're all material goods. And they're certainly all things I honestly would like to have. I don't see that we are going to move beyond scarcity of desirable material things any time soon, if ever.

Ellie: A soul is a very expensive thing to keep: much more so than a motor car.
Shotover: Is it? How much does your soul eat?
Ellie: Oh, a lot. It eats music and pictures and books and mountains and lakes and beautiful things to wear and nice people to be with.
—Bernard Shaw, Heartbreak House

 
At 8:02 PM, June 30, 2011, OpenID Ben Brown said...

David, first, this is a great and thought provoking blog post.

Economics can be studied at the level of transactions, and the structure of arcane transactions influences the nature of the economic system as a whole. Most transactions are founded on the ability to make agreements, and to trust that the person with whom one is agreeing will perform her part of the agreement.

In the United States, economic transactions are governed and enforced by contract law. This law determines the structure of transactions, supplies default terms in areas where an agreement is silent, prohibits some obligations, and requires others. For instance, a tenant may not be evicted from a rented apartment without prior notice - even if the agreement between renter and landlord explicitly says that the landlord may evict the tenant without notice. The law allows every mortgagor who has failed to make payments a certain time period in which she can prevent foreclosure by paying down the whole debt - and this time period cannot be vitiated by an agreement between mortgagor and mortgagee. In California, agreements that relieve someone performing a service from tort liability - e.g., a signed form relieving a carnival operator of liability for injuries caused by the rides - are not enforced by the courts, so they can be freely ignored. By imagining how the law that governs agreements might be different, we could re-imagine how hundreds of types of everyday transactions might have very different structures.

 
At 6:04 AM, July 01, 2011, Blogger Will McLean said...

See the kudos economy of Banks' The Algebraist.

Also, Kirstendale in Vance's Big Planet for something different yet again: what I'd describe as a timeshare aristocracy.

 
At 7:28 AM, July 01, 2011, Blogger Milhouse said...

Another example: the way Jewish communities financed communal expenses in the middle ages and into the early 19th century. The board or council that ran the community were known as the parnasim, which literally means "providers", because that is what they did. They paid for all the expenses out of their own pockets. In Poland, for instance, the rich members of the community were expected to take turns as parnas chodesh, "provider for the month"; for that month he was the president/mayor/chief of the community — and also footed the bill. Jews with surnames like Parnas or Parnes are descended from a rich ancestor who served in this function, whether he liked it or not.

When Benjamin D'Israeli's father refused to take his turn as parnas of the Sephardi Jewish community at Bevis Marks, he was shunned, banned from synagogue honours, and not allowed to hold young Benjamin's barmitzvah there. Angered at his treatment, he decided to have the boy baptised instead, and that's how Benjamin ended up Prime Minister.

 
At 8:33 AM, July 01, 2011, Anonymous Rex Little said...

If you think about it, tipping is sort of a gift-economy practice. It's not legally required (except in certain cases where the restaurant includes a tip in the bill). Yet virtually everyone tips, even when they'll suffer no consequence for failing to (like if they're in a place far from home which they'll never visit again).

 
At 10:41 AM, July 01, 2011, Blogger Karl said...

It seems to me the way economics is treated in speculative fiction is to either rebalance the notions of what is and what isn't scarce, or to ignore economics in part or whole.

In the Harry Potter universe, stuff costs money, but costs don't relate to each other in a systematic way. If a real economy were set up that way, there'd be lots of room for arbitrage, and either everyone would be incredibly wealthy or prices would change until the opportunities for arbitrage disappeared.
Another factor that's not well treated in an economic sense is magic. Magic is a way of getting stuff to happen, but the rules governing its behavior are at best unclear. Nevertheless, a careful observer will spot any number of areas where magic can upend an economy. When Dumbledore can restore a run-down house to a new, clean house with the wave of a wand, why hire a maid? Dumbledore may have more skill at magic than others, but it doesn't seem to be of a scale that would cause maids to be in demand in society. If it takes five or ten waves of a wand to clean house instead of one, it's still cheaper and easier than hiring a maid. (Unless the maid is skilled in magic and you pay her a dollar to come in once a day and wave her wand so you don't have to think about it.)
Depending on what the spell "reparo" can repair, handymen become extinct, and skilled craftsmen may become extinct. There are some limits on what the spell will do. Generally it won't repair a broken wand, and I suspect you still need a construction crew to repair the World Trade Center.
But these are all questions that are ignored for the sake of having a story to tell.

 
At 6:36 PM, July 03, 2011, Anonymous drewkitty said...

Thank you for your appearance and participation in the panel. Despite difficulties in relocation and new location, the panel was well attended. Just wish I had seen this before the panel . . .

 
At 2:25 AM, July 04, 2011, Blogger Kevin Carson said...

By arguing that voluntary gifting is a transaction that falls outside the "market economy," it seems to me you're implying that a market economy is one in which all human relationships and transactions are organized through the cash nexus.

But it's hard for me to imagine a market economy -- even one designed by the most hardcore Randroids -- in which the cash nexus didn't coexist with a range of other forms of non-coercive relationships.

 
At 2:14 PM, July 05, 2011, Blogger Gray Woodland said...

Kevin Carson: I think this is no more than suggesting that many good things don't work through market-like mechanisms - with or without a cash nexus - and yet are compatible with an economy in which the market resolves persistent conflicts over scarce resources.

To me, this is just the distinction between a 'market economy' that thinks marketplace behaviour is the ethical floor, and another one that thinks it's the ceiling.

 
At 1:28 PM, July 06, 2011, Blogger David Friedman said...

Re the comment on the Harry Potter books ...

One of the things that impressed me about Elizabeth Moon's writing, specifically (I think) the first of the Paksenarian books, was that she did take account of the economic implications of magic. At one point, the military unit she is part of is very badly injured, I think (it's been a while) as a result of treachery by someone. When Paks wakes up, she's entirely healed. On further inquiry, she discovers that everyone has been healed, by magic.

Being a bright young lady, she asks the obvious question—if healing serious wounds by magic works this well, how come there are doctors? How come anyone ever ends up injured more more than a few hours?

The answer she gets is that her commander was so mad at what had happened that he blew essentially the entire season's earnings on the very expensive cost of magical healing for everyone. I think there is some further explanation of why such healing is expensive.

 

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