The Opposite of a Pyrrhic Victory Is...
links for 2009-12-10

To Market, To Market...

Humans have, as Adam Smith wrote more than 200 years ago, a natural propensity to "truck, barter, and exchange"--to enter into reciprocal gift- exchange relationships with one another. These reciprocal relationships do three things: (i) they allow us to trade things that we value less or that are less useful to us but more useful to somebody else for things that we value more or find more useful; (ii) they make us view our fellows as friends and partners who are useful aids rather than obstacles to us, and (iii) they allow us to gain status and put others under obligation: I did something very valuable for you, now it is your turn to do something very valuable to me.

Let's move--as economists like to do--into a fictional toy economy with a fictional toy market to try to gain some intuition about these issues. Let's work through a stylized example that I call "Blessed Are the Cheesemongers..."

We have a crossroads. Five days a week, 8 hours a day, every 24 minutes a guy with a highly perishable cheese--a seller--and a guy who likes cheese--a buyer--come by, meet each other, try to bargain, and then leave.

20091209 to market to market i.pdf

Econ 1--To Market, To Market.1.xls