The Mind of the Market : How Biology and Psychology Shape Our Economic Lives. By Michael Shermer. Holt Paperback. New York. 2008.
Some of the chapters in this book are interesting and informative, despite its author being a self-declared follower of the free-market ideologist, Ludwig von Mises and so an apologist for capitalism and a dedicated opponent of anything that seems to be socialism. Shermer is also a leading American ‘skeptic’ and a Scientific American columnist.
Economics, as now taught, is an odd discipline. It defines itself as the study of the allocation amongst competing ends of resources in short supply. To express this mathematically it has to make the absurd assumption that the ends are infinite, i.e. that people are infinitely greedy. It also assumes that economic actors (corporations, workers, consumers) act entirely rationally. Von Mises in fact regarded economic decision-making as the archetypal form of rational decision-making.
In recent years, some economists, calling themselves ‘behavioural economists’, have decided to investigate the actual behaviour of consumers, i.e. individual buyers. Not surprisingly they have found that no consumers (not even the writers of economic textbooks) decide what to buy on the basis of some rational calculation about equalising the “marginal utility” of all the things they buy. All sorts of other considerations enter into their decisions as to what to buy (e.g. what other people are buying, status, etc which the advertising business exploits).
It could be argued that the study of what motivates consumers is outside the scope of economics. Which is the position we Marxists have taken with our criticism of “the final futility of final utility”. We have left the study of the satisfaction users might derive from the use-values they acquire to psychology. Shermer goes along with the behavioural economists who have done some useful work in demolishing the myth of the rationally-calculating, narrowly selfish homo economicus that is one of the basic assumptions of academic economics. He doesn’t seem to realise that in doing so he has abandoned one of the key assumptions of the von Mises school of economics. In fact he goes so far as to concede that if people really did behave in this way, then capitalism could never have survived; even capitalism relies on the social nature of humans and their biological and psychological need to trust and co-operate with each other.
Shermer accepts the theories of the “evolutionary psychologists” according to which our reactions and decisions – including in economic matters – are influenced by the fact that our brains evolved when we were hunter-gatherers (as opposed to by purely rational calculations). No doubt our brain did evolve under these circumstances but this does not mean that we are therefore unsuited to live by acquiring what we need to live in any other way. The human brain that evolved is a brain that allows us to adapt to a great variety of ways of acquiring what we need.
We can live just as much under a capitalist system (where Shermer says we are ‘consumer-traders’) as in a socialist society (where we’d become ‘giver-takers’). If, as the evolutionary psychologists claim, our brains predispose us not to like freeloaders and to get satisfaction out of co-operating, and even helping, our fellow humans, these are features that would fully fit in with socialist society. Shermer thinks that they point to capitalism being the best system for humans to produce and share out wealth.
However, his defence of capitalism is pretty pathetic. On the basis of studies of the behaviour of people who are still hunter-gatherers today involved in face-to-face barter and of the measured effects on the brains of individuals choosing to buy something, he concludes that ‘trade’ and ‘trading’ is good for us. This ignores that ‘trade’ is not the only way of transferring the use of something from one person to another. There is also giving and taking. So, this is not an argument for buying and selling as best suited to our ‘biology and psychology’.
But the main flaw in Shermer’s argument is that there is an enormous difference between face-to-face barter and shopping and inter-capitalist trade. Inter-capitalist trade is carried on by states and corporations which do act in the ruthlessly calculating way that orthodox economics supposes individuals do. They do aim to maximise monetary profits in the long or short term. They don’t behave as we humans do. In fact some psychologists (as in the film The Corporation) have pointed out that if a human behaved in the same way as capitalist firms do – concentrating obsessively on one single aim (in this case, making profits) to the neglect of all other considerations – they would be classified as psychopaths.
Shermer shows up here the flaw in the defence of capitalism put up by ideologists such as von Mises – they assume that present-day capitalism is based entirely on freely-negotiated contracts between individuals, as if production and trade were carried on by individual, or at least small-scale, producers and shopkeepers. This might have been the case in Adam Smith’s day (mid-18th century) but is not the case today. Today production is carried on in large-scale productive units by producers contracted to work for wages, but not by other individuals but by capitalist firms which, while in contract law having a fictitious ‘personality’, are not really persons with biological brains. Their behaviour cannot therefore be explained by evolutionary or any other kinds of psychology, but only by a study of the impersonal laws of the market and profit-making which impose themselves on those who make decisions within them irrespective of what these human decision-makers might think or want.
Adam Buick
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