Contrary to the classical sociological tradition of Marx, Durkheim, and Weber, Margaret Thatcher famously proclaimed that “there is no such thing as society.”
Similarly mainstream economics assumes the basic unit of individuals and individual private property as the foundation of the market system. Drawing upon her mentor Friedrich von Hayek, Thatcher presumed that markets were sufficient to provide information to manage the modern economy. Hayek stressed that the market provided superior knowledge, more encompassing than whatever could be accumulated by any single human person.
Even in the age of the internet, social media, big data, and artificial intelligence, many modern economists, such as Gary Becker and Alvin Roth, still rely on the market for optimal management. Markets are presumed to be everywhere, and, if not already in existence, should be created.
This is all the more remarkable since the unit of individual private property is bounded, like a discreet parcel of land delineated by its borders. The right to exclude non-owners presumably provides the owner with an incentive to make the best use of his own private property, to increase his own private wealth. In this sense, the right to exclude presumably makes property more productive.
This argument regarding the efficacy of property originated with John Locke in the seventeenth century England, elaborated by Malthus and Ricardo who added the notion of the diminishing returns to scale. Prior to Locke, the definition of property was often overlapping, with hunters and gatherers able to use the same plot of land, with so-called usufruct rights.
In fact, more typical of modern economies is increasing economies of scale, where the larger the unit of production, the more productive it is. In this case, the more likely contributor to growth is not exclusion but expansion and inclusion.
While this principle of economies of scale is true of mass production, especially with information technology, it may also be true of social units. For example, a scientific community, which operates based on shared discoveries and mutual testing protocols, may make contributions to basic research the more quickly the larger it is. Similarly, an insurance pool may diversify risks more effectively with a larger number of members. And social networks, like Facebook and Twitter, are more useful the more users there are, what is called “network externalities.”
As we learn more about global ecology, the lesson is that interconnection, rather than exclusion, is the basic principle of the requirements of living things. Any given piece of property is subject to global flows of energy and gases, including water vapor as well as greenhouse gases like carbon dioxide (CO2). These global flows affect each owner and yet are beyond the control of every owner. Even exclusionary bounded territories like nation states are subject to global emissions of CO2. Without global management, the increasing accumulation of CO2 and other heat-trapping gases threatens to reduce the habitable areas of the earth.
In a recent article, I explore these themes. The usual grid for delineating property makes a contrast between public and private goods, as illustrated in Table 1. below. Private goods are both excludable, where it is feasible to keep out non-owners, and substractable, where the use of one person detracts from the usefulness to others.
Table. 1. Conventional Property Grid
| Property Dimensions | ||
| Subtractable | Not Subtractable | |
| Excludable | Private property | Club good |
| Not excludable | Common pool resources | Public goods |
Monetary payment is required for acquiring private goods, which otherwise can only be used by the owner. By contrast, public goods are available to all and are not subtractable.
With the growing awareness of increasing returns to scale, the desirability of “exclusion” becomes questionable.
Table 2. New Property Grid With Increasing Returns to Scale
| Alternative Property Dimensions | ||
| Subtractable | Synergistic | |
| Excludable | Private property |
Community
|
| Scalable | “Tragedy of the commons” | Natural capital;
Scientific community; Sharing economy Ecological community |
In Table 2, the potential for synergy is allowed, where larger and scalable groups have the potential make unique contributions. In particular, an ecological community can access a larger territory, monitor its flows of global nutrients like carbon and water, protect the landscape with forests and wildlife habitat, and organize human settlement in ways that are conducive to sustainability. By taking the larger unit into account, the population as well as the land area, it is possible to be both more productive and more sustainable.
Rather than individual private property, there would be shared territories with various overlapping types of usufruct, with global management of the energy balance, carbon budget, and other “externalities” like eutrophication.
The lack of attention to the social dimension in economics results in an under appreciation of the economic impact of externalities, such as climate change as well as inequality in income, health, and education. The long-term economic performance suffers from such lacunae and oversights, even past crisis dimensions of global degradation and social unrest.
While mainstream economics operates by making divisions, between public and private, between property owners and non-owners, between debtors and creditors, between nations, between workers and capitalists, as well as by race and by gender, the capacity to address climate change will only come with a unity, the perspective of a social whole, of a human species living together on a single earth.
One aspect that mainstream economics can never solve, no matter how much data is available from markets, is the doubling of use value vs. exchange value. These terms, which Marx borrowed from Aristotle and Adam Smith, refer to the qualitative feature of an object, compared with its market value. For example, a person is a member of the human community (use value) as well as a potential worker (exchange value). The earth is the habitat for all living things (use value) as well as the source of raw materials for commodity production (exchange value).
As long as markets are the predominant method of organizing human communities, these two elements are potentially incompatible, especially in the short run. An ecological community, with human development and sustainability for its goals, does not have this basic contradiction. Until then, the pursuit of wealth (exchange value) risks jeopardizing the habitat for all living things (use value)
Ann E. Davis is an Associate Professor of Economics at Marist College. She is the author of Money as a Social Institution: The Institutional Development of Capitalism. This article draw on her recent piece “Salvation or Commodification? The Role of Money and Market in Global Ecological Preservation.” Review of Radical Political Economics, 51(4): 536-543.
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