Money’s Mutation of the Modern Moral Mind

This is a story about how and why modern people think differently from premodern people.

Let me start off first by explaining why this is entangled political economy paper. Entanglement in general between different domains of life is something that falls out of this paper. Entanglement between, for example, politics and economics arises very early in human social evolution, and it’s only very recently that these have started to be disentangled. So even though we as Wagnerian political economists might be inclined to model the relationship between politics and economics as entangled, this paper could go part way toward explaining why the default assumption is that they would not be entangled, because today they are indeed less entangled than they have been in the past.

And that’s true not just of domains like politics and economics, but pick any two domains pairwise. The same is true of religion and politics, religion and art, art and economics, religion and economics, romance and economics – and we’ll talk about each of those later on during the presentation.

The first thing I want to do is establish that moderns and premoderns do indeed think differently from each other. I’m going to paint in very broad strokes here and defend this a little later.

Very broadly speaking, moderns approach problems analytically, break them down into the constituent parts, solve them independently. And it’s a very powerful way of solving problems. But premoderns don’t tend to do it that way. Problems tend to get approached more holistically, as unified wholes, without breaking them down into parts. And very often, as we’ll see later in some examples, premoderns will even be reluctant to use syllogistic logic at all, at least explicitly.

Moderns tend to be individualistic in the sense of locating their moral worth as individuals as opposed to as members of groups. This one’s going to be a sound a little weird to some people probably, but I’m going to argue that moderns are much more morally rigorous than premoderns, who tend to be more morally pragmatic. That sounds odd to us for reasons I’ll explain later, but basically we’re able to take our sacred values much more seriously, even though they are perhaps less pervasive through our life. We have a much larger domain of profane action, but the values that we do hold sacred, we hold them much more rigorously than premodern people did, and we separate them from economic domains.

Finally, language itself is used somewhat differently. We tend to think of the purpose of language as communicating factual information, and we have maybe a different register for literary or figurative language. We tend to think of those as separate kinds of things. That wasn’t the case in a lot of premodern writing or speech. Not that language was more figurative, but that there wasn’t a sharp distinction at all. If you read any ancient literature, a lot of it will strike you as kind of fantastical, or confabulation, or maybe exaggeration. But the distinction just was not that sharp prior to the modern era.

For a lot of you this is going to raise a lot of red flags, and I’m going to have to justify painting with this broad of a brush now. Of course there’s gradation across both space and time. But there is also a very clear syndrome of modernity that manifests in broad differences in approach, psychologically, along approximately these lines. And I hope to show analytically why it makes sense to paint with a broad brush like this. Numerous authors have pointed to something like this difference. They pointed to different aspects, and they have different stories of where it comes from. But lots and lots of people are pointing to something like this difference.

Max Weber, for example, talks about increasing rationalization of life. Karl Polanyi talks about how modern moral sentiments are shaped as a reaction against markets – and this is going to end up actually being kind of a reverse Polanyi story. Joseph Henrich’s recent book, The WEIRDest People in the World, I draw on in the title. WEIRD for Henrich is an acronym for Western, Educated, Industrialized, Rich, Democratic. He uses this as a shorthand for this syndrome of modernity. Some of you have probably read Johnson and Koyama’s book Persecution and Toleration, where they talk about modern moral sentiments like tolerance being not really possible under premodern institutional arrangements. Some people have approached this question religiously: we have a different relationship with the sacred today than a lot of people in the past did.

But I’m going to focus on what I think is an underrated account here, from Georg Simmel’s 1906 The Philosophy of Money. Simmel is a sociologist, and he tells the story I’m going to call the Simmel hypothesis. So let me sketch this in broad terms before restating it in language that will be more familiar to you and me.

For Simmel, money is a pure means, as opposed to an end in itself. We don’t desire money for itself in any capacity; we only value it for what it can do for us. That’s different from most other things: there are things we want because they’re means to other things, but to some extent things are individual. Money is not individual. Money is fungible. And so money dissolves distinctions between formerly incommensurable domains of life. This thing’s valuable, that thing’s valuable – how do you compare them? I don’t know. But if you express them in money terms, you can express them as a price ratio. This is worth, let’s say, two and a half of that.

According to Simmel, however, this doesn’t dissolve the distinction between domains of life. He talks about dissolving qualitative distinctions into quantitative distinctions. But what this does is it frees domains of life from the constraints of economic necessity. So this paper is going to retell the Simmel story, especially from his chapter on Individual Freedom, as a story of changing cultural evolutionary constraints on a signaling game. Specifically a signaling game that coordinates the division of labor.

The division of labor is something that needs to be coordinated. And it needs to be coordinated with signals. I expend some cost or effort for you, I want some assurance that that’s going to be reciprocated. It’s not going to be worth it for me otherwise.

Now the usual story we as economists tell is a Crusoe and Friday story: they’re on their own, they come together, they realize that they could be better off, there’s gains from trade. But the problem with the story, especially as we scale up from Crusoe and Friday, is that exchange is not incentive compatible unless you assume property rights. If predation is possible, predation is generally going to be the dominant strategy, especially as we get more and more people, unless you have some kind of defensive advantage that you can establish something like property rights. And it’s not clear to me that such a defensive advantage exists among individuals. So we can’t assume and organize the division of labor through dyadic exchange. We’ve gotta start first with a collectively organized defensive advantage.

What does collective action do for us? Collective action gives us a defensive advantage. But it also, kind of for free, organizes the division of labor too. Collective action is one way of organizing the division of labor. And sure enough in the archaeological record, what we see is very little spot exchange within groups, but very early we see spot exchange between groups. Why is that? Because groups are able to establish a defensive advantage and establish rights collectively much more easily than individuals are. And once you do that, exchange within the group is kind of unnecessary. You organize that holistically, and that’s what we tend to see archaeologically.

So we can’t start with dyadic exchange. What we’ve got to do is start with collective action, and then build up to dyadic exchange later.

Now Collective action is a problem. We talk about the collective action problem. So how did this get off the ground in the first place? The basic problem is that there is no potential strategy that is incentive compatible for all members of a of a group in groups larger than about five. Homo economicus cannot participate in collective action without an external enforcer. And if the external enforcer is himself a homo economicus, it falls apart at some level or another.

But even if collective action is not a Nash equilibrium, it can be evolutionarily stable if we have competition and selection between groups, not just between individuals. Groups with more cooperative individuals are going to outcompete groups with fewer cooperative individuals, as long as cooperators can assort with each other. So you have this assortativity so that cooperators can gain the benefits of cooperating with each other, and they have to have mechanisms to exclude and suppress non-cooperation within those groups. I talked about this problem at length the last time I presented here in the “Inside and Outside Perspectives” paper, that’s the background to where I’m coming from with this.

But now let’s ask another interesting question: what does this feel like from the inside, subjectively, as somebody in these groups? If I’m a homo economicus, my subjective states are very easy to understand. I pursue things, I desire things in my own interests. But if that makes Collective action impossible, if there’s selection at a level other than the individuals who are actually consciously formulating the strategies, this is going to feel like non-instrumental values. So I’m desiring things, not because they are in my immediate material self-interest, but I desire things for their own sake, and regardless of my own objective material interests. Specifically group loyalty: I am loyal to my group, not for what it can do for me, because if that were the case then defection would be the Nash equilibrium. But I am loyal to my group non-instrumentally.

This is going to entail certain signals of that non-instrumentality. The earliest example would be ritual. A ritual is a way for me to say, hey, you can’t see my preferences, but I’m going to participate in a – let’s say – wasteful potlatch festival. I’m going to waste a bunch of resources so you know that I’m not in it for my material benefit, that I’m committed non-instrumentally to the group.

So let’s scale up. That all works fine for personalistic groups. But it doesn’t really scale. So what happens when we get groups larger than can be really coordinated through a single deliberative collective action context?

It’ll be similar in a lot of ways. But what we’re now going to get is factions. We’re going to get a more refined division of labor, just because the size of the market makes that possible in a way that it’s not in really small groups. And that’s going to fall along interest group lines. Groups are going to organize around a productive specialization, because in order to secure enough rents for themselves to survive as a group, they’re going to need to monopolize that. This is the North Wallis and Weingast natural state story. Factions in a society are going to monopolize certain productive opportunities, and use that to generate a stream of rents in order to survive as a distinctive group.

Now why does the division of labor fall along these interest group lines? Because what happens is that the enforcement mechanisms that arose before to suppress defection within a group get exapted to not only suppress defection internally, but also to punish internal defectors against outgroups. Why would they do that? This is to preserve the flow of rents. Because in order to monopolize a trade, you’ve got to trade with other groups that are specialized in other things. So you’ve got to have those internal enforcement mechanisms to make sure that your members don’t screw anybody else. These same enforcement mechanisms end up co-evolving with the group itself. You have normative groups organized around, let’s say, a religion, an ethnicity, certain clans, sometimes occupation as such can be the axis of differentiation – but you get specialization, not as individuals, but as groups, because they have to co-evolve with these enforcement mechanisms in order to establish this division of labor.

So again we’re going to ask what does it feel like to be inside this kind of structure? North Wallis and Weingast called it the Natural State. Different authors have different words for it. I’m going to call it clientelism, in the sense of being organized by personalistic loyalty to groups centered around some non-instrumental value. These groups can overlap. You can share certain non-instrumental values with the broader society, and then maybe a narrower set with the group that you specialize with. But fundamentally what your non-instrumental values look like, and how that translates into actual on the ground norms, is constrained the necessity to generate rents sufficient to ensure your survival as a group. It constrains your norms and your practices to that set that supports those internal and external enforcement mechanisms. If you can’t purge defectors from your own ranks, or if you can’t prevent your own ranks from defecting against others that they’re trading with, you’re not going to survive as a group.

This means that, for reasons I talk about in another paper, this is going to entail inconsistency. This is going to entail moral pragmatism. This means that you cannot lean too hard on the logical entailments of any particular belief. And the reason for that is because – and this also falls out of the previous Inside and Outside Perspectives paper – any articulable strategy that you lean on does not form a complete system. So it’s exploitable. In any potential system of rules, there has to be some point at which you compromise. You have an inconsistency.

Let me give you an example. Weber talks about the Hindu caste system being extraordinarily strict in a lot of ways, in terms of who’s allowed to be in contact with whom. But there’s a broad exception: “the hand of the Artisan is always clean.” In other words, when it comes to economic necessity, there’s going to be compromises that make it possible to fulfill your basic needs. There’s a bunch more examples in the paper; we can go through some of that in the Q&A. There’s an interesting one about leopards that I’ll skip for time’s sake; that’s why the picture is here the bestiary. But essentially if you have a faction that that leans too heavily on some kind of normative commitment, and the logical entailments of it, that’s going to fizzle out; that’s not going to be compatible with the provision of these kinds of internal and external enforcement mechanisms. That was our original problem, that there’s no fully articulable strategy that is compatible with the kind of collective action necessary to sustain these kinds of rents.

You also see this in, for example, European history. The early Christian church had very radical anti-political commitments. Then when that gets instituted in the late Roman Empire, a lot of that goes away. The Sermon on the Mount, super radical, really hard to actually live by. Then when that gets instituted as the state religion, this gets explicitly relegated not as normative for everybody. The Catholic Church would call these “counsels of perfection”. If you want to be perfect, go ahead and try for this, but don’t worry about it otherwise; not for the average Joe. You had sects for a millennium try to take these values more seriously. All of them fizzle out until the Reformation, and not just because of persecution. We’ll talk about why the Reformation succeeded where all these others failed in just a moment.

What do the signals look like under these circumstances, as compared to personalistic groups? You’re still coordinating with signals. Your group membership is going to be rigid. You don’t get to pick what group you’re a part of, because again it’s non-instrumental. It has to be, in order for the collective action to hang together. So in equilibrium, everybody has an interest in honestly displaying their normative commitments. This is a signal of what group you’re part of, what are your normative commitments, what enforcement mechanisms are you subject to, and if you screw me, who can I go to for recourse?

This is why we see sumptuary laws all throughout history, all over the world. In both the Ottoman Empire and the Holy Roman Empire, there were laws saying that Christians, Jews, and Muslims had to dress differently. In the Ottoman Empire, the administrative class had distinctive dress. If any of you have read the Skarbek book about prison gangs, why is the division of labor in prison gangs always divided by race, as opposed to anything else? You can’t dress differently in prison, so you need some other visible signal quick to tell you, hey, some guy just sold me a bad batch, who do I go to? You know immediately just by looking at his skin color. So these visible signals that are not subject to individual choice, whether that’s religious, ethnic, sartorial, something else, these are going to be the signals that coordinate the division of labor under a clientelist regime.

Now let’s bring in money. How does money change things? Money has existed for a long long time. But for most people throughout most of this history, most of their needs were not satisfied through money. Money was more for external trade. Money was for a Mercantile class. But if you’re just an average Joe, you don’t really deal with a whole lot of money. So the money economy really becomes possible, it takes off, you get Market integration, when you have not just different groups jockeying with each other for rents in the North, Wallis, and Weingast natural state, but when you have an overarching group imposing property rights between groups and enforcing them.

When this is happening, all of a sudden money stands in as a signal in these same senses. Money is a signal of the expectation of reciprocation, in the sense that if you give me money, that’s a signal that my costly effort will be reciprocated. Not necessarily by you, but by somebody in the future. So money stands in as a signal in the exact same way as ritual did, as these sartorial and ethnic markers did. But the important difference is that monetary exchange is now incentive compatible. There’s no collective action here: the collective action is already taken care of in the territorial law aspect of this. I don’t have to hold anything non-instrumentally; I can regard money as a pure means. So money is going to take over the coordinating function of a lot of these previous institutions.

Now this is the story that we as economists are more familiar with: money coordinating the division of labor. If you’re a naive functionalist, you might look at this and tell a secularization story. When money takes this over, now we don’t need these non-instrumental values, maybe they fade away. But that’s not what we see. Maybe within some domains. But more broadly, what we see is that because these values were held non-instrumentally – we didn’t believe in these things because of what they could get for us – and so if what they get for us changes, we don’t necessarily stop valuing these things. But it does remove the constraint of economic necessity on them. Now we have these groups centered around these non-instrumental values, but they’re not constrained anymore to provide the kind of internal and external enforcement mechanisms that allow them to specialize. Groups can be self-justifying. As Simmel says, now these domains of life can evolve “according to their own internal laws.” Now we can have these kind these radical commitments, and they don’t fizzle out.

So why did the Reformation succeed where previous attempts to do the same thing had failed? It’s not just the printing press: the increasing monetization of European society by the 1500s made it possible for a religious group to succeed and to spread without having to provide for these kinds of enforcement mechanisms that would have been necessary for a group to survive on its own previously. It allows us to take certain values much more seriously, much more literally, and lean on the logical entailments of those a lot more heavily.

This is how we get rationalism. Rationalism would have never been possible without this. There’s a Soviet anthropologist who tells a story about going to Central Asian villages, and they won’t follow syllogisms. Not because they’re dumb; their kids who are Western educated do it just fine. But because it sounds like trickery. If they don’t trust you, they’re not going to follow you down this thought experiment. And so rationalism only becomes possible when the possibility of these types of opportunism in a collective action game gets removed. But now I’ve got to provide for myself with money. And I don’t have to trust anybody’s good intentions when I pay or get paid. That makes rationalism possible. And in the religious realm, that’s fundamentalism. You take an axiom and you run with it through all the logical entailments in a way that would never have been possible prior.

So Simmel’s story is that this leads to differentiation between domains of life. You have these visible markers that are no longer bearing a functional burden: all of a sudden we can regard them instrumentally; they can evolve according to their own internal logic, according to other non-instrumental values that we might hold. Simmel has a nice analysis of fashion, which would have never been possible when sartorial markers were coordinating the division of labor. So we see not only differentiation within domains, by different fashions, but we also see differentiation between domains. Things like separation of church and state, like the disentanglement of politics and economics.

So let’s cycle back and ask once again what does it feel like from the inside to be in this kind of situation. We as moderns can be much more analytical, in the sense that we are able to differentiate between different domains of life and consider them separately, because they are now evolved according to their own internal laws, not bound up together in an ad hoc inconsistent way, in a way that would make it necessary to consider the problem holistically. We moderns are more rationalistic in the sense of taking our value statements seriously, literally, and thinking through the logical entailments of those in a way that would have been disastrous for collective action provision previously.

We also tend to be more morally rigorous in the sense that we’re much more protective of the things we do regard as sacred and non-instrumental. If I were to pose the question to you, you know jail is not great, let’s be more humane and, if somebody murders somebody, instead of jailing them, let’s impose a monetary fine. Now you’re thinking wait a minute, alarm bells. What’s the problem with that? We imagine some billionaire somewhere going, yeah, a couple murders, that’s in my budget. So we don’t want monetary calculation touching something sacred like life. But that would have been completely unproblematic for much of premodern history. Hammurabi’s code, wergeld, both have provision for monetary fines for crimes up to and including murder.

And finally we also tend to be more individualistic, in in the sense that the locus of our economic provision for ourselves is now individual specialization, not the enmeshment in a group and its enforcement mechanisms.

Marta: I think I didn’t understand this from the paper: why are we not okay now, but we were okay back in the day with payment for murder? It was it because the group was responsible then for that payment? What’s the mechanism that explains why this was acceptable to pay if you murdered someone?

Yeah partly it’s because, you’re right, the clan would have been responsible for that. But also partly because this connotation of rational calculation just was not there. People weren’t thinking in the sense of, yeah my budget lets me afford a few murders. You and I today think of money as perfectly fungible. Money makes anything with a money price comparable. This was not necessarily the case in a lot of premodern places. There’s a lot of examples in places all around the world, South Pacific, sub-Saharan Africa, of places with a variety of non-fungible monies that are used in certain domains but not others. And there’s debate about whether to call it money or not. But a of medium of exchange that does have some kind of non-instrumental ritual significance. And so because these domains of non-instrumentality were impinging even on what we would now call the economic, there wasn’t the taint of rational calculation that we are now so jealously walling off from everything else.

I’ll run quickly through a few examples. Art took a very different turn in the modern era than it ever had previously. Why? Because it’s now maximizing values internal to the artistic community. It’s not bound up with other domains and dependent on them for generating rents. Previously art was very much tasked with things like buttressing political legitimacy, religious adoration, things like that. Now, if art is its own differentiated domain maximizing values internal to it, now it can spin off into very very weird directions. Mondrian would never have been possible in the premodern era.

Or how about romance. We today feel icky and weird about putting money near romantic connection, or paying for romance. But cross-culturally, dowries and bride prices are very very common throughout the pre-modern world.

Religion we’ve talked about. The painting at the on the opening slide was Jesus overturning the tables of the moneychangers in the temple. This is very easy for us to understand: what are the moneychangers doing in the temple? This this seems kind of corrupt. But this wouldn’t have been weird at the time. This was a very weird thing for Jesus to be doing that would have made no sense at the time. It would be very common to regard religion transactionally. There’s a principle in Roman religion, “I give therefore you may give.” You supplicate the gods, they give you blessings, it’s transactional. Nothing wrong with that. Even in medieval Europe with indulgences, penance had a definite monetary price in a way that would strike Protestants and probably even most Catholics today as weird.

Today what we also see is occupations will even attempt to sacralize themselves in order to wall themselves off from economic calculation. Teachers for example, doctors, if you think that education or healthcare is sacred, then this is going to take this off the table of political budgeting and of considerations of trade-offs in a way that would have never been possible in the premodern era. You can’t make this argument in the premodern era because your constraint is, the group doesn’t survive.

So let’s conclude. The human evolutionary niche is to provision for ourselves through collective action in one way or another in an incentive incompatible game. This incentive incompatibility has been gotten around in a huge variety of ways, but fundamentally this is going to select against consistency. This is going to select for non-instrumental values. And then when we replace that incentive incompatible game with money, which is incentive compatible – our ordinary economic story fast forwarding to the present day – where do our non-instrumental values go? They can even intensify. They spin off and and become more self-consistent, more rationalistic. So our values, our thinking, our approach to problems, fundamentally depend on the ability to coordinate the division of labor with money as opposed to these other potential ways that they have been coordinated in the past.

That’ll take me to the end of this whirlwind tour. This was a sketch of an argument; the actual paper goes into a lot more detail. So if there’s any part of this that you felt was sketchy, or that you’re skeptical of, or if you read the paper and didn’t buy it, we can talk about that now.

Q&A

Marta: You have a very provocative argument. I don’t know if I’m fully on board just yet, but I definitely need to think about it quite hard. In one of the footnotes you comment like, for the strength of the argument I’m gonna stick with the orthodox economics. And you do it. You have game theory and so on. But orthodox economics is just individuals. Society doesn’t really enter. But that’s why you have to have that first part of the argument, because you’re starting with a framework that doesn’t allow for social phenomena. But if you were to start with a more classical perspective, then I don’t know if that would be necessary. And I don’t think it weakens their argument like the later parts. But maybe sticking with the Orthodox framework – and I understand the benefits of that – but it does get you started in a space where there is no society. So you have to justify why there are social phenomena.

You’re right, a sociologist might read this and say, why are we spending all this time talking about why society is necessary? And fair enough. Part of this might depend on how broadly you construe orthodox theory; how much of a straitjacket is that. I don’t think it’s much of a straitjacket because, as you pointed out, I’m not sticking with atomistic individuals. What I am doing is using these tools to show, society is a thing, it’s necessary, and that to me is a more satisfying explanation. And partly that’s just my perspective as an economist, but personally I’m not satisfied with just assuming the importance of these things like a sociologist might do. So that’s hence all the perhaps tedious background.

Marta: And maybe there’s another story here to be told about the entrepreneurial-institutional aspect, who creates those rituals? They don’t come from nowhere.

Vlad: Very interesting paper as usual. Something that I didn’t really follow in your argument, but I think it may be a very important part of it, is the stuff about the division of labor. I know the regular account of why we have division of labor. But you’re saying there is this prior mechanism for creating division of labor that is based on collective action and group selection if I understand correctly. I don’t understand that mechanism. I think there must be something to your argument because the division of Labor did not start with money; it existed before. So there must be some sort of other mechanism for creating division of labor. But on one hand I don’t really understand what your theory is about how exactly this happens. And then whatever the mechanism is, I assume that the division of labor that it creates is different than the division of labor that would be created by money. So then the the change is not just that we have a different mechanism for the same thing, it’s that we’re probably having a different type of division of labor, maybe deeper division of labor.

To your first point you’re right that maybe this is an organizational issue of how to go from step to step here. So the basic issue is that the division of labor, if that’s something you want, is something that requires coordination, because that’s not by itself incentive compatible. And then having established that, there’s the argument of how we got that initial division of labor, more scaling up from anarchic individuals argument – well, let me clarify which part of that were you asking about: the part about where the collective action comes from, or why the division of labor needs to be coordinated?

Vlad: Yeah not about where the collective action comes from, I think that’s pretty clear. But how does collective action create a particular type of division of labor? If we go very very early on, there’s a division of labor between hunters and gatherers, stuff like that. So how does that come about? And then later on, there’s a division of labor between, I don’t know, soldiers and farmers and so on. So you’re saying there’s a collective action mechanism that is creating that structure. That’s what I don’t understand.

That’s a very interesting question, that could be 20 more papers. I have some sketchy examples in the paper. But let me let me try to sketch out some of how this might work. You’re right that these different mechanisms of coordinating the division of labor are indeed going to entail substantively different divisions. So the fact that in a personalistic group the division of labor is coordinated by personalistic signals of participation in ritual, the specific types of ritual seem to correspond to the axes of the division of labor. As you mentioned, there’s the division between hunters and gatherers, which is generally going to be the division between men and women. And men and women in many many societies have distinct rituals that are very much tied to the kind of work they do. Especially male initiation rituals, because the hunting entails more collective action than the gathering. So you see really intense male initiation rituals, you see male secret societies. I’m not aware that you ever, maybe very rarely, see female secret societies in these personalistic societies. You also see division of labor by age. So coming of age ceremonies are also a big ritual. This is why I’d say that the specific enforcement mechanisms co-evolve with the place in the division of labor. In the case of a personalistic society, that’s going to co-evolve with the specific rituals that various segments of society participate in. As that scales up and you get more complex divisions between these different factions, that’s also going to coevolve based on the kinds of enforcement mechanisms that the group is suited to on the basis of its non-instrumental values. I have some examples in the paper from Greif, who talks about the Maghrebi traders. Barack Richman talks about diamond merchants in New York City which are ethnically specialized. In both these cases what seems to have happened is that certain features of the religion or the ethnic norms turned out to be very suitable for a particular trade. And then you get this mutual reinforcement of certain kinds of normative values that reinforce that position in the division of labor. So this coevolution process is going to shape reciprocally which group is located where in the division of labor, and what the enforcement mechanisms actually look like. So for example what problems might you face in one trade versus another? You might face certain types of incomplete information, asymmetric information, you might face different assurance problems. And different sets of non-instrumental values are going to be more or less equipped to handle different kinds of these problems. Johnson and Koyama’s book is also really interesting on this. Addresses this maybe a little indirectly, but it talks about the ways that a lot of religious minorities are able to specialize specifically in long distance trade, because of some of the enforcement mechanisms that characterize a lot of these religious minorities.

Vlad: It sounds like you are making a much less radical claim now, because you are connecting it to trade. So are you just saying we have division of labor because of barter, and then when you have money maybe things change but the actual mechanism at work that creates the division of labor is specialization and trade? And so this is not a different mechanism than the one we we usually talk about.

Perhaps not. But the Menger out-of-barter story is still individuals trading. In this story individuals mostly don’t trade with each other, at least within their own group. Generally speaking specialized groups will trade with each other. And you can see this in stereotyped ways: I cite the example from Malinowski of different villages trading fish for vegetables. But even when in, for example multi-ethnic Empires, you have ethnic specialization where you know who to go to to get such such and such done. It is in some sense a negotiated – certainly not spot barter, and certainly not on an individual level. But with those modifications – time separated and at the group level rather than the individual level, you could say that it’s similar to the standard story.

Vlad: It sounds a bit like the specialization and division of labor between firms. And now the group is like a firm.

Yeah you could think of it that way. I don’t draw this connection into the paper, but there’s a book that I draw on in the Inside and Outside Perspectives paper, Managerial Dilemmas, which some of you have probably read, that talks about the importance of company culture within a firm. And you can think of company culture as solving the same sort of collective action problem through a non-instrumental value. You could interpret this book as arguing that the need for non-instrumental values to organize collective action doesn’t go away when we have firms. Because the whole problem of firms is now we’re not exchanging using money within the firm, we’re organizing collective action. So you’re right, the same problems would obtain.

Pedro: First Cameron thank you so much for the paper and the talk. I believe I have read too fast, and it’s a paper that I think I need to read like three or four times to start getting. But I also appreciate that Vlad took some time so I could formulate my question. One point that’s still puzzling in my head is your use of the WEIRD framework. You mentioned the framework of the Western way of moral design and so on. And then you make this connection with money. And the first question that came to my head is, if we go to the history of money and the emergence of money, it’s not in the West. So I was curious what your explanation for money being an instrument that has a history that – for example I remember reading papers on Asia or Africa and so on, and I was like, what happened then, simply if money pops up there first, what is the unpacking of that relationship between money and the Western mind?

Pedro: Okay that was one comment. The other one was the concept of modernity. One claim also that came to mind was, that [?] paper, that we don’t have a modern. So I was searching for your concept of modernity. There is this Anthropologist that I know, he talks about 5000 years. Modernity doesn’t have five thousand years. And money goes quite far back. So when is that transformation that money makes happen? I was also curious about this other concept of modernity that might not be related: the emergence of the individual. When the individual comes to mind, maybe we do trade, we do all those things before, but we start thinking as an individual within a group when we have these new tools of monetary exchange. So one part that I quite like is when you’re talking about that we frown upon using money in certain realms of life. Yeah we do frown upon, but it’s not like we cannot do it. The criticism of Becker came from this. So Becker starts using economics in everything. And maybe we shouldn’t be doing what Becker should do. But we can do it. We’re probably against it, but the billionaire still does the math on what’s the risk of going to jail. And maybe he attaches monetary value to that. We don’t like the people who do that, but we still are able to do it. Sorry if I took too long; I was just curious about: what’s the Western in your topic, how does it relate to the modernity concept, what is modernity? Is it more about the impossibility of doing calculation in certain realms?

Really good questions. On the Western aspect: if it was me, WEIRD is a cute acronym, people know it, and Henrich is the one that’s tackled it as a psychological syndrome most directly. But if I were to come up with a name for it, I wouldn’t necessarily pick those five qualities. It’s certainly true that that this syndrome originated in the West. I think there have been arguments that there have been premodern precursors. I’ve seen the argument that ancient Greece was was at least to some extent WEIRD. I don’t know, I’m not able to evaluate that. So I’m not attached to a particular location of its origin, though historically at least, in the sense that we see it today, it does seem to have originated from Western Europe and spread out from there.

You also point out that the history of money is not Western history. Which is also true, and is again why I would prefer to talk about modern versus premodern rather than Western versus Eastern. A lot of what people point to as Western versus Eastern psychology is a remnant of modern versus premodern. For example, that book The Geography of Thought – I think most of that is just WEIRD/not-WEIRD, and that distinction seems to be disappearing very quickly as East Asia modernizes, at least in some respects, maybe not in others.

Then why is the history of money so much older than the history of modernity? This is a fair criticism that my paper has received before, that the mechanism here doesn’t really seem to be money so much as state capacity. Johnson and Koyama tell the story with state capacity operating directly on norms. The story I want to tell has money as the proximate cause. State capacity operates on individual psychologies through the availability of money, and the ability to use it instrumentally in a way that would have been probably confined to a narrow merchant class in most of the premodern era without the ability to reliably enforce property rights.

To your question as to when is modernity, I would also locate that origin with the rise of territorial states, which is about the same time that we start to see the rise of market integration. That’s about the same time we start to see the rise of mass monetization, where money is used not only by a merchant class, but is used by you and me, average Joes, in order to satisfy our own wants and needs rather than relying for our main provision through a local and more personalistic group. These transitions are all happening together, co-occurring, reinforcing one another. I focus on money here because I think it’s a more interesting angle than just the raw state capacity angle, but you could fairly point to state capacity as the ultimate exogenous shock here.

To your point about economic calculation, maybe we can do that regardless. If you’re of a Gary Becker bent, everything is fungible. Even if you don’t express it in money terms, you can express it in utility terms. I think that’s a very powerful framework and I’m sympathetic toward it. Part of this broad research program, however, is showing the limits to that. Because what I show in another paper is that for Gödelian incompleteness reasons, if you have a single-valued utility function the way that Becker-style rational Choice wants to model us, that is gameable, that is exploitable. So that’s never going to be able to support collective action in the first place. But that’s also going to be usable by external parties to get you to do things that you might not necessarily otherwise want to do. So part of the human psyche has to be this resistance to exploitation. As I hinted at in the Inside and Outside Perspectives paper – I’m working more with the information theoretic background to this – there are limits to the formalizability of human decisionmaking, let’s say as utility functions. Not only because of this collective action issue – and any strategy there would potentially be exploitable – but also because individuals’ own utility functions can be used against them.

Mikayla: Thank you very much for your presentation. One question that I had you’ve already answered, which was in response to Pedro about defining premodern versus modern. I think that answer was more than satisfactory. So my interpretation of what you were saying is that the emergence of money not only encourages a proliferation of transactions which are ends in themselves, but also independent values. And in that way a whole variety of activities which previously had close entanglements or attachments to transactions, or the realm of Mammon so to speak, even religion had become disentangled or separable. But just to clarify, I’m pretty sure you’re not suggesting that this is a sort of complete or totalizing process, because you’d be well aware – and I’m going to take some wind maybe out of Nathaniel’s sails with this – Nathaniel also talks about sympathetic exchange as being a very important attribute of economic life. Even in the modern realm. You can even think of a range of effects that are attributed to Viviana Zelizer – and you’ll you’ll be aware of this – where she indicates that individuals attach different meanings, purposes, to money. So I can so rattle off a whole range of examples. You can think about how stigmatized or marginalized communities like LGBT communities have used money for the purposes of community building. I can think of a nice little Australian example from 10 years ago where a racist politician expressed anti-Muslim sentiment, and in reaction we saw a spike in purchases of halal snack packs because people use their money to express a value against the statements of the racist politician. Even – depending on your view, and it’s a very highly charged and contentious phrase but – woke capitalism can be another example in which the moderns are still along various margins actually attaching or trying to use money to express the value. So my first broad question is, what’s your reaction to that – affirming, disaffirming? Then just a final comment, your paper reminds me a lot of Frank Knight who I’ve been reading quite a lot of. He refers frequently to a circle called a liberal revolution. You might actually find this of value for your research. He talks about the rise of modernity being consistent with the liberal revolution which had basically so consigned certain ethics to the sideline and elevated others. So you might actually find in addition, or as a separate paper, to using Simmel as your grand pivot, to use Frank Knight. But I’m interested in your sympathetic exchange or Zelizerian effects. Do they survive?

You’re absolutely right that this is not a totalizing process, and I think it could not possibly be a totalizing process. As Vlad mentioned before, firms run into these same problems. And there’s non-monetary exchange within firms. As you point out, there’s all kinds of communities that for one reason or another are not able to provide for themselves purely based on market exchange. In fact some of the examples of ethnic specialization that I talk about in the paper are even from the modern day. The Richman example of the diamond merchants in New York City, that’s a modern day example. That becomes necessary when a group is not able, not willing to abandon these enforcement mechanisms, or finds some other reason why these internal enforcement mechanisms can even be better in certain cases. For example extreme information asymmetries, which would characterize the market for diamonds. In these cases where it’s difficult, maybe in super high transaction cost environments, these kind of premodern examples might still be useful. The Skarbek example I mentioned too, lots of people outside the legal system are going to organize themselves in a way that still very much looks like premodern economic organization. The parallels there are very striking, between Skarbek’s prison gang example and North Wallis and Weingast’s natural state. They look the same. And there’s reasons they look the same.

You also talked about expressive purchasing. Expressive purchasing clearly exists. I do think one of the more – I don’t want to say concerning, because value judgments can differ – but I think some of this might be a symptom of a broader de-WEIRDing in the sense that there seems to be more of a push to organize political coalitions, and eventually this is going to be economic coalitions, around interest groups around particularly race in the U.S. It’s becoming a major wedge against the disentanglement process. You see very powerful forces pushing toward re-entanglement. And some of that may be functional, some of that may be entirely interest group driven. I can’t say how it’ll turn out. Is WEIRDness stable over the Long Haul of centuries? I honestly have my doubts, but that would be another paper.

Mikayla: The final point you raise is a fascinating one because of the tendencies of immigration, and the the cultural importation of practices and values, to bring along again along various margins the re-entanglement of money and social practice. So for example, in Australia and many other Western countries, an upspurt in dowries because of the Southern Asian populations in certain Western countries. So, interesting examples, and thanks for the answer.

And thank you for the Frank Knight recommendation. I’ve been meaning to read more Frank Knight; I’m sure there’ll be a lot there.

Marta: Maybe there’s a reading group idea in the midst here, because who wouldn’t want to read Frank Knight?

Nathaniel: It occurs to me that you have the opportunity to create a model here that places division of labor through money in tension with division of labor through cultural means. I think that’s what you’re doing here, but I think to create a formalized model here would be helpful, because some of your examples are even those modern situations where the cultural division of labor is better than the the money division of labor. So a formal model might get you some traction in other groups. And I got to that question by thinking about what moves us back to vicious faction. I like to distinguish between vicious faction and virtuous faction. And I’m thinking about the current political climate in the U.S. And it seems to me that having a lot of wealth, and maybe in particular being on a fixed income, might reduce the the opportunity cost of division of labor by money rather by cultural purposes. So folks who are retired and are on a fixed income, or folks who are on benefits and therefore on a fixed income, are more able to indulge in the kinds of activities that result in division of labor culturally. So in other words you see the rise of signals and symbols and factional type behavior in those contexts. Maybe you can even do something empirically with these ideas by looking at different groups that are on fixed incomes. And you can compare societies where more of the population is on a fixed income, or less so; in European countries more people are on a fixed income compared to other places.

Nathaniel: My last question would be related to my own work a little bit: who trades on behalf of of each group, when groups are interacting with one another? They may be organized by these cultural signals, but those are informal methods of organization that don’t require necessarily enforcement mechanisms. So they don’t require state capacity. But then when these groups trade with one another, or individuals within each group trading with one another across those lines – or is there an agent appointed and afforded some authority in order to engage in those trades across groups? And does initial interaction across groups give rise to an authority that then helps to create state capacity? So is it that interaction amongst groups when they conflict with one another, but then find ways to trade? Does that help to develop other things? So those are my broad set of thoughts. I enjoyed your paper and your research agenda very much, thank you.

To your first point on the formal model, I agree there’s potential here. I don’t know if I see the connection with fixed income. Are you saying mercantile activity might crowd out the ability to engage in faction, so if you’re on a fixed income maybe there’s a lower opportunity cost of indulging in that kind of thing?

Nathaniel: Yeah. My understanding is – and I could be wrong about this – that a large number of Trump supporters are on fixed incomes. So I’m wondering if that might be something that fits into what you’re doing here.

Yeah, I would attribute that not necessarily to fixed income, but to cultural lack of trust in general. Because if it was fixed income, you would expect to see far right and far left on fixed incomes. And I don’t think you see that. I could be wrong though, I haven’t looked into it. What I might point at in terms of organizing culturally rather than through money – and I like this distinction you’ve made between virtuous and vicious faction, because I think there are ways of doing this productively, for example with information asymmetries I mentioned, would be one way of encouraging productive faction. You have now a group with normative values that can be leveraged to overcome some information asymmetries. On the other hand, there are instances where where groups realize they can amass certain benefits to themselves through the political process, not because they have a comparative advantage, but because they are sufficiently politically or demographically powerful to secure a stream of rents. I would be comfortable calling that vicious yeah.

To your second point about who does the trading, I’m not sure if there’s any way to generalize, because I’m aware of examples where this has been organized in any number of ways. I mentioned the Malinowski example where the two villages trade fish and vegetables. This is done in a giant ceremony where the whole village comes together and the elders bless it and they trade a giant pile. In multi-ethnic Empires, individuals will trade and then appeal for recourse to the enforcement mechanisms of the other group. And this is this is basically how things work in the Skarbek example too. I want to buy drugs from another gang, I go to an individual of another gang, and I know exactly who to go to for recourse because I can see what group he’s a part of. And I think that’s going to be the more common way of organizing things as things scale up. That being said, there’s any number of ways that the actual trading could be done, depending on the good, depending on hostilities between the groups, how much trust there is, and various other other qualities.