The Missing Sector

For more than two hundred years, mainstream thinking has regarded the market as the primary source of material “progress.” And indeed, to a large extent that’s been true. But yesterday is not forever. Today the market is approaching a point of diminishing returns – systemic diminishing returns. It is yielding less well-being per unit of output by practically any measure, and more problems instead: obesity instead of good health, congestion instead of mobility , time deficits instead of leisure, depression and stress instead of a sense of well-being, social fracture rather than cohesion, environmental degradation rather than improvement.

In place of wealth, the economic machinery increasingly turns out what John Ruskin, the 19th Century essayist on art and economics, called “illth,” which is accumulation that fosters ill results rather than towards weal, or well-being.This is not just a matter of distribution, which is the traditional concern of the Left. Inequitable distribution is a major problem, to be sure, and becoming more so. But to redistribute illth is not necessarily to do anyone a great favor.


Meet Us at the Zocalo

We humans like to gather, and to be around other people in informal and unstructured settings. For time out of memory, places in which to do so were built into daily life. Medieval cities had squares outside of churches, which is where markets first began. Boston and other New England towns began with commons. Towns in Mexico have zocalos, or central plazas where people congregate and socialize.

At least one couple here in Point Reyes Station, California, met at a zocalo in their home town. Another local couple was married in the Boston Common. These spaces all are versions of the same thing: settings in which people can be in the presence of others, even if just to sit and read, or play dominoes or chess, or watch the world go by. The instinct to do so runs deep. The office coffee machine. The street corner outside a bodega. Front stoops in the city or the mango tree in my wife’s village in the Philippines — the gnarly roots provide a place to sit and the leaves offer protection from the brutal sun.


Why Economists Are So Often Wrong

What is called “economics” is really psychology on steroids. It starts with a model of human nature and extrapolates an entire scenario for how the world works from that. The model is homo economicus,the myopic protoganist of the economics texts. This hypothetical person has no social affinities, no lapses of judgment or hang-ups, no capacity even for thinking about anyone besides him or herself. He goes through life with an unfailing and relentless calculus of personal loss and gain.

As I explained in the first part of this essay, The Tragedy of Economics this portrayal of our basic nature did not arise from actual inquiry. Homo economicus was from the beginning a polemical construct, devised to serve political ends. At first this was to help undermine the secular authority of the Roman Church, and then the divine right of kings. More recently it has served to justify a fundamentalism of what is called “the market.” Along the way, it has provided economists with the semblance of a predictable atom of economic activity. This has enabled them to declaim under the banner of “science,” and has given them a hook on which to hang their arcane math.


The Tragedy of Economics: Market Theory Vs. Human Nature

When Jimmy Wales, a refugee from options trading, set out to create an encyclopedia online, he thought first of the Britanica model, except with volunteers. He assigned articles to professional experts, and established panels for peer reviews. Then he started to write one himself – on options trading – and realized it was a drag.

It was like “handing in an essay at grad school,” he said later. So Wales shifted gears. He kept the volunteer model; but made it an open and social experience rather than a hierarchical one. Anyone could write an entry, on anything. The peer reviewers would be the readers themselves, who could correct factual errors and omissions, and challenge biases.


The Parallel Economy of the Commons

It is an article of faith among economists that a resource without a private property regime is destined for overuse. Yet on Bali, an island in the Indonesian archipelago, that is not the case. For centuries rice farmers there have coordinated their use of scarce water through social networks built on the innate human capacity to manage such resources in a cooperative manner.1

The system is based on what anthropologists have called “water temples,” which enfold the water sharing within a context of traditional Balinese religion. But actually the networks function through a form of bottom- up cooperation in which the temples provide a venue through which producers can coordinate their water use. Modern computer analysis has found that the resulting allocation is close to ideal in terms of the productivity of the farms. It defeats pests naturally and uses the available water to maximum effect.2