14 Pieces Worth Reading, Mostly Economics for March 30, 2010
Department of "Huh?": Default Discounts in U.S. Treasury Interest Rates????????? Edition

A Few Notes on the "Doux Commerce" Thesis

The thesis that market economies would be worth having for their own sake, even if they were inefficient at production and distribution, is held by Tyler Cowen:

Who is a first-best economist?: I think of myself as a better-than-first-best economist. On average market solutions have positive Pareto-relevant externalities, if only through supplying experimentation and strengthening social norms in favor of commerce.  That's true even for the market in thumbtacks, if you consider it as feeding into a broader social stream.... But I don't mean this as a plea for laissez-faire.  Governments must produce public goods, maintain social order, and of course support markets. At the margin, those activities, such as imposing accountability under the law, are also largely underprovided.... An oversimplified version of my view is that anything good is underprovided at the margin. This follows from a belief in strong network and peer effects, and a belief in the relevance of basic sociology...

The basic logic is that if the bulk of your social interactions are win-win acts of voluntary mutually-beneficial exchange, you are likely to think that you live in a happy benevolent peaceful world and are less likely to go Mad Max on your fellows.

In his The Passions and the Interests and in his Rival Views of Market Society, Albert Hirschman names this the "doux commerce" thesis--and sees it as a "powerful moralizing agent which brings many nonmaterial improvements to society, even though a bit of hypocrisy may have to be accepted into the bargain." As Hirschman quotes Samuel Ricard:

Commerce attaches [people] one to another through mutual utility. Through commerce the moral and physical passions are superseded by interest.... Commerce has a special character which distinguishes it from all other professions. It affects the feelings of men so strongly that it makes him who was proud and haughty suddenly turn supple, bending and serviceable. Through commerce, man learns to deliberate, to be honest, to acquire manners, to be prudent and reserved in both talk and action. Sensing the necessity to be wise and honest in order to succeed, he flees vice, or at least his demeanor exhibits decency and seriousness so as not to arouse any adverse judgement on the part of present and future acquaintances; he would not dare make a spectacle of himself for fear of damaging his credit standing, and thus society may well avoid a scandal which it might otherwise have to deplore...

Hirschman, The Passions and the Interests:

There was much talk, from the late seventeenth century on, about the douceur of commerce... sweetness, softness, calm, and gentleness... the antonym of violence. The first mention of this qualification I have been able to find occurs in Jacques Savary's Le Parfait Negociant, the seventeenth-century textbook for businessmen.... The most influential exponent of the doctrine of the doux commerce was Montesquieu...

Adam Smith, Lectures on Jurisprudence:

A dealer is afraid of losing his character, and is scrupulous in observing every engagement. When a person makes perhaps 20 contracts in a day, he cannot gain so much by endeavouring to impose on his neighbours, as the very appearance of a cheat would make him lose. Where people seldom deal with one another, we find that they are somewhat disposed to cheat, because they can gain more by a smart trick than they can lose by the injury which it does their character...

But even Smith's self-interested and calculating market agents are sociable ones: they exchange, and perhaps they cheat--they don't kill, rape, burn, and steal. Which is odd, given that fifty years before Smith was born not far from his house there were lots of people who saw others not as potential partners in acts of mutually-beneficial commerce but instead as either (i) clan allies, (ii) clan enemies to be killed, or (iii) strangers to be robbed.