Koyama on McCloskey on Polanyi

Mark Koyama at the Oxonomics blog writes about the extent to which past societies can be fairly characterised as market economies. He attacks the view that Karl Polanyi made famous (infamous?) that market economies somehow only emerged around 1750 - 1800 and before then exchange was either reciprocal or coercive. Koyama writes that the best response to Polanyi is

... in the draft of McCloskey's latest book that I've been reading. She writes that `Polanyi's economic history of England is utterly, completely, even embarassingly mistaken'. All medieval historians know that there was a market in land from the late 12th century onwards and that perhaps half of the male population were wage labourers by the 13th century. Ditto for the ancient world.

McCloskey's piece made something else clear to me. Polanyi and the historians and sociologists who have been inspired by Polanyi mainly claim that markets didn't exist before 1800 or 1750 because they don't know what markets are. Not understanding that the market simply refers to the existence of institutions that enable voluntary trade between strangers, they identify markets with actual market places. As McCloskey notes 'No economist would suppose that the lack of an agora or forum shows that an economy is not organized by markets'.

My reading, such as it is, of the work of Morris Silver, in particular his 1995 book Economic Structures of Antiquity suggest to me at least that markets are much older than the 1750s. Part II of the book, "Markets in Antiquity: The Challenge of the Evidence", contains two chapters; the first on "The Existence of Markets" and the second on "The Credibility of Markets". These chapters challenge Polanyi's position that the ancient world did not know market activity. Silver presents 14 factual assertions that outline Polanyi's view and confronts them with the available evidence. All of the chapters are worth reading but let me pick out one assertion, number 8 - p.153, which I think is relevant.

As a general rule, the cities (e.g., Babyon) of the ancient world possessed no marketplaces of any significance. We first meet an important market for the retailing of food in the seventh century B.C. at Salamis in Asia Minor.

Silver argues on pages 153-6 that is is in fact wrong. "Free" markets do seemed to have existed. Silver writes,

Polanyi's assertion is nevertheless surprising because marketplaces - the geographic concentration of transactions-are a predictable and easily implemented adaptation to high information and transportation costs. In a world without daily newspapers, the location of similar trades in a compact area would have reduced the cost to consumers of acquiring information about prices and product characteristics. The resulting increase in information acquired would reduce price dispersion and help traders to interpret market signals accurately. The gains from reducing travel time between shops would be greatest for relatively standardized goods and for "search goods," whose quality is easily ascertained by inspection (Nelson 1970: 323-25). The benefits to consumers were not forgone because, despite Polanyi, there is ample evidence for marketplaces in the ancient Near East. (p.153-4)

Silver continues

Nehemiah 13.16 (fifth century B.C.E.) tells of the "men of Tyre . . . who brought in fish, and all manner of ware, and sold on the sabbath unto the children of Judah, and in Jerusalem." (p.154)

and

Edward Lipinski (personal correspondence) calls my attention to the phrase bab abulli, an expression designating the gate as a place where business is transacted. There are references in commercial contexts to the babtu "quarter of a city, neighborhood," a word arguably derived from babu. Texts of the earlier second millennium record that the copper of several individuals lies at Assur in the babtu and show merchants using silver from the babtu. Babylonian and Assyrian texts of the first millennium speak of the "gate of buying." Note also the evidence of grain sales at Samaria's gate in the ninth century. Another Akkadian word, machiru, often has the abstract meanings "price, market value" and "commercial activity." Rollig (1976) has shown, however, that beginning in the Old Assyrian and Old Babylonian periods, machiru also has the concrete meaning "marketplace." The machiru is a place for macharu "receiving" goods. Slaves, garments, and grain are purchased in the marketplace and loans are repaid there. At Mari grain is "(measured) in the container (used in) the marketplace"; a tablet is written in Nuzi's marketplace and a stela with "correct prices" is set up in the marketplace. Again, loans are given, sacks are bought, and captured Arab camels are sold at the bib machiri "marketplace gate". In the Old Babylonian period bit machiri "seems to refer to the stall of a merchant. . . , small in size . . . and adjacent to other stalls".(p.154-5)

Silver also points out, (p.156-66), that money was used in ancient economies, "[i]n fact, the ancient Near East knew money very well in the generic sense of common media of exchange" (p.157). If there was no voluntary trade, why would money be used on a widespread basis? After all Menger's explanation of the historical origin of money relies on trade.