Daniel Little has yet another interesting post, this one on the topic of aggregation dynamics:
The social world starts with social individuals. So how do we get more complex social outcomes out of the actions and thoughts of independent individuals? How do the actions and thoughts of individuals aggregate into larger social happenings? How did the various religious, political, and relational attitudes of rural Kenyans aggregate to widespread ethnic violence a few years ago? What sorts of conditions lead to interactions that bring about unexpected outcomes? And, of course, how do larger social happenings impinge upon individuals, leading to characteristic kinds of socialized behavior?
Markets are theoretically an efficient mechanism for aggregating social and economic preferences. I think that’s already an overly strong statement, but accepting that for the moment, what about cases where markets are imposed rather than chosen? I’m thinking specifically of instances where the state decides to pursue market-based policies as solutions to social and political problems. Citizens then don’t have much of a choice of whether to participate or not, especially if the market is for a necessity like food. I am purely writing from my own interests, but it strikes me that the interaction of states, markets and society can often be more productively framed as a form of coercive aggregation, which is the exact opposite of the assumption of “aggregated preferences” that informs market-based theory.
The mechanism here is key. It seems to me that when the political system turns to markets, it effectively aggregates the multidimensional needs, risk tolerances and other characteristics of millions of individuals into a block of undifferentiated demand. That demand is delivered to a market, which through its own mechanism combines that demand with n other factors into a more or less volatile single output – price. Through that price, the market then diffuses a single stream of volatility back into the population, which sounds good in theory but in reality leaves individuals with far fewer degrees of freedom to adjust if the volatility is in the wrong direction. As a result, market forces paradoxically impose a collective outcome (typically, though not always, in the form of price) that overrides any possibility of the individual choice used to argue for markets in the first place.
Which brings me back to the topic of Little’s post. There is a direct line from food riots that have erupted again in the ‘third world’ (it is past time to come up with a better term) back to decisions made over the past few decades to turn away from local development of food resources and toward spot markets. When things go well, as they did when commodity prices were generally falling in the years before 2003, that ends up being a beneficial decision in the short run. We are now seeing the long-run results.
That’s an admittedly materialist interpretation, but we do seem to be living in materialist days.