Economic “law”?

Economic “law”? August 2, 2012

In his contribution to Reciprocity in Ancient Greece (36-7), Hans van Wees asks whether a “reciprocal economy” is subject to the law of supply and demand. His answer is, Yes and No:

“When initiating a reciprocal relationship, one might go where the goods one intends to give away are most scarce and where goods one hopes to receive are most abundant. Once the relation has been established, however, it is, in theory, no longer possible to calculate one’s material interests in the light of changes in supply and demand, since the norms of reciprocity tell one to continue exchanging the same goods with the same partner at the same rates of equivalence. In practice, when supply and demand change so much that an established exchange relationship is no longer economically viable, the disadvantaged party may break off the relationship altogether and initiate a new one with a different partner that reflects more closely the new supply and demand situation. Reciprocity is thus not impervious to the laws of supply and demand, but does have a built-in resistance to them.”

He adds:

“supply and demand do not always determine the value and equivalence of gifts when a partnership is first established. In the ideal market economy, free negotiation between buyers and sellers allows supply and demand to determine the value of commodities and labour. In reciprocal exchange, by contrast, equivalence is never open to negotiation: the value of the return gift or favour is from the outset left for the partner to decide. This leaves scope for criteria of value other than ‘how much it will bring’ in exchange.” Gifts are not valued by supply and demand but “by the amount or quality of the labour expended in their production, or by their usefulness in consumption.” In reciprocal exchanges, further, issues of power play a role that they do not play in market exchanges: the powerful may “define ‘equivalencies’ unfavourable to their weaker exchange partners.”

Still in most cases, “scarcity does appear to be a major determinant of value.” Someone “who from the outset gives no thought at all to the relative scarcity of goods will find his exchange relationships economically non-viable and short-lived.” He concludes that “forces of supply and demand are not necessarily prime movers; if they have an influence, it is almost despite the norms of reciprocity.”

This supports Milbank’s argument that social sciences do not discover universal laws of social or economic life, but rather serve as a description of democratic society and capitalist economy. With their scientific claims, they provide ideological support for “liberal” order, making it appear to be what it is not – the “natural” order of things determined by social and economic “law.”

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