Wednesday, June 27, 2012

Markets are 'natural' and money is important

Brenda Rosser discusses the assumption that markets are ‘natural’ using David Graeber’s recent book, Debt: The First 5,000 Years, as a guide. The basic gist of Graeber’s selected quotes appears to be that government policy and money are necessary to enable functioning markets. This is mentioned in contrast to the presumed view of economists which
have come to see the very question of the presence or absence of money as not especially important, since money is just a commodity, chosen to facilitate exchange, and which we use to measure the value of other commodities.
While this may be true of most mainstream economists, I have previously highlighted the fallacy of monetary neutrality and the need to incorporate money into economic models.

Stemming from Graeber’s text, Brenda concludes that
Money brings markets into being.  Not the other way around, as most economists would have it.
While I don't disagree that governments set rules for the market or that money is important to market transactions, I think it is a stretch to suggest that governments or money is necessary for markets to exist. Surely there have been periods throughout history, where prior to governments or money, people exchanged goods or services. In fact, it is unlikely that governments or money would have come into being unless individuals had previously learned to exchange ideas, goods and services. Given that markets can/do exist naturally, it would still be a mistake to assume this minimizes or nullifies the role of government policy and money. It is in combination with government policy and money, that markets will almost certainly prove most abundant and beneficial.

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