why study traditional economic institutions? part II of a week-long series

Part II: academic perspectives on seeing capitalism and an institutional solution

This was my thesis in part I:

The historical and contemporary existence (both of which need to be proved) of moral economies -- more specifically, institutions of democratic governance of the economic sphere-- work against capitalist institutions that have aimed, since day 1, to separate the spheres of politics and economy.

I presented you with a challenge: tell me how to "see" capitalism in history. Imagine it, if you will, forming over time in a society like watching a child grow up. Can we tell of capitalism's emergence by focusing on who controls the surplus value? Is greed becoming the central value in our society? Is some kind of money the universal medium of exchange in a society? What about contracts? Representing the primary means by which rights (or more specifically and most commonly, rights to goods) are exchanged, contracts tell you which property rights are being exchanged in a transaction and thus who owned them to begin with. They thus specify not only ownership of property but also -- in conjunction with contract law -- the rules under which property is transformed by the contracting parties.

Capitalism is an economic system wherein the means of production are privately owned and production is carried out for profit. Some neoclassical economists have a better understanding of this than so-called Marxists such as Michael Merrill, who insist on telling the story of a moral economy through noting the lack of monetary exchange in early Massachusetts. Drawing from the above paragraph, contracts seem to me the most easiest way to imagine capitalism in history but that's because I use an institutional focus. Other approaches may be equally fruitful but for me, the single best way to understand a system of private ownership and transaction of labor power for profit is to understand the rules under which production takes place. Traditional economic institutions, in contrast, should lack private ownership and transaction of labor power for profit. This implies, in turn, that labor power is not seen as a commodity in traditional societies.

This may shock you for a variety of reasons. For instance, you may not feel that your labor power is a commodity, to be bought and sold on a market at the whims of others' preferences, other firms' technology or other workers' or firms' factor endowments (in short, supply and demand). But capitalism necessarily survives because it assumes labor power is "commodifiable" and the power of firms works hard to establish this in our society precisely because it is not intuitive to us as human beings. And hence we see the central conflict between the dramatis personae in this economic system. How will laws work to commodify labor power? Traditional economy is the standard to look toward for understanding what a political economy with noncommodified labor looks like. It is not an ideal type to be praised for its humanity (more on that in the next part). Furthermore, to understand the conflict is to understand, at its very roots, precisely how capitalism was successful at forcing this commodification (yes, I do think the word "force" is most apt here, and in more than just a physical sense of the word).

To summarize: the economic historian needs to focus on traditional economic institutions to understand a political economy that is not based on commodification of labor power. Furthermore, strands of anti-commodification are historically contingent and remain relevant to contemporary society (the point of part I). And thus we've arrived at a tentative answer to "why study traditional economic institutions?" but our work is not done here. All economies are different, all societies are different. One general trait of capitalism is found in some theoretical specifics such as contract law, but resistance in the form of traditional economic institutions experiences much variation across time and space, in the end proving how effective capitalism has been in transforming labor power into a commodity. The key to understanding the answer is in understanding all the different meanings of "commodification". We therefore conclude in part III with some applications of this idea. 1. How can an emphasis on traditional economic institutions weaken Marxist analysis? 2. Does U.S. labor history present us with an exceptional view of commodification of labor power? 3. How precisely did contract law break up the moral economy?

And again -- feel free to leave comments!