Published by EH.NET (March 2008)

Stephen A. Marglin, The Dismal Science: How Thinking Like an Economist Undermines Community. Cambridge, MA: Harvard University Press, 2008. xvi + 359 pp. $35 (cloth), ISBN: 978-0-674-02654-4.

Reviewed for EH.NET by Eric Jones, Melbourne Business School.

This is an exceptionally learned, uncompromisingly contrarian critique of markets and economics by a member of the Department of Economics at Harvard University. Stephen Marglin emphasizes the costs of market transactions and blames economics for supplying the associated frame of reference. The Dismal Science is patently the result of a lifetime of reading and cogitating about conceptual issues related to market exchanges and economists’ approaches to them. Some historical background is given but what is mainly offered is extended commentary on the history of thought and on everyday practice.

The “modern world view,” in Marglin’s opinion, derives from economics, which ignores the breakdown of community and elevates instead an obsession with productive efficiency. No accusation seems too gross for him to level at the economics profession. Economics distorts everything, he says, particularly human proclivities, although I found it hard to keep clear whether he thinks non-economists are too sensible to think like smart-alec graduate students or have been brainwashed by the economics’ mind-set seeping into every debate. In a meandering volume crammed with long quotations, he seems to qualify each assertion only to proffer some variant a few pages later.

His charges against economics boil down to the way the subject fosters individual maximization, ignores distributional concerns, and legitimizes “the market” behind a pretense of scientific detachment. Yet economics is a broad church and is always evolving, never more so than at present. Aha, the reader thinks, at least behavioral economics is not so crass as to accept the Homo economicus of Econ 101. Marglin is a step ahead, however, urging that all the behavioral economists are doing is altering one or two assumptions at a time. Theirs may seem a prototypically scientific procedure but Marglin will not agree. His mind is made up, right to lamenting that Adam Smith failed to entitle his book, The Wealth of Workers.

One of Marglin’s favored examples is the Amish, whose mutual dependence resists the market. The Amish exemplify community in his terms, which is to say there is no exit short of exorbitant personal cost. Who are the Amish? For practical purposes they are the community leaders. A world thus dominated is surely as likely to become that of the Lord of the Flies as a circle of benevolence.

While Amish community patterns survive, they are only patterns: Pennsylvania is not the eighteenth-century Rhineland, nor can it be when some Amish run tools off propane gas although they are forbidden electricity, install telephones in their barns although they are not to have them in their houses, and so forth. Thus, while they do so at a long remove, the Amish shadow American society. Theirs is often, so to speak, the world of the Shabbas goy, not the principled realm of community implied.

Marglin’s notion that a world of neighborliness was swept away by impersonal insurance markets does not fully capture reality. He thinks the neighbors would have rallied round to put up another barn for you if yours burned down ? a Seven Brides for Seven Brothers’ model of community help. No doubt there was mutuality in small places. But he does not refer to what actually preceded the development of fire insurance. Previous arrangements were less, not more, personal than the policy one might buy for oneself from an insurance agent. They relied on briefs for alms, instruments not abolished in England until 1828. Parish records are full of sums collected for briefs for distant places.

The system was non-compulsory but also non-local ? you subscribed for sufferers whom you would never meet and lived in hopes they would respond to your brief if you suffered in turn. People helped their neighbors but simultaneously belonged to vast networks of Christian support that can only be termed “community” by considerable stretching. This had little to do with the nation-state, which is one of Marglin’s innumerable betes noires: the instrument was previously the Papal Brief. Briefs did not supplant community, they supplemented it, while being less reliable than formal insurance. Moreover it is misleading to single out England as the home of insurance markets. Continental countries were writing insurance against losses of crops from hailstorms back in the eighteenth century. England, supposed fount of market ideology, did not do so until 1842.

Nor is the impression given of the English enclosure movement more persuasive. Landowners were eager to take land into ring-fenced holdings of their own but this did not preclude their raising productivity. Marglin thinks they were merely engrossing. Enclosure processes were long drawn out, he claims, because until 1688 peasants who resisted were backed by the Crown. Nevertheless we have to explain why progress was slow even afterwards. Copyholders were not instantly stripped of resources ? Marglin does not acknowledge that they typically held their farms on three lives. Nor were farmers necessarily averse to leaving the land in order to become shopkeepers in the market towns of a gradually expanding economy.

We must agree that markets entail costs, as Marglin endlessly insists, even if economists neglect the fact. Yet he rationalizes away the corresponding costs of being trapped in small groups that risk being inequitable as well as inefficient. The work of Jonathan Hughes on the colonial economy shows just how onerous non-market regulatory control was: we need not rely on gains in efficiency from the adoption of markets to reject the politicized allocation of resources and roles inseparable from “community.”

Marglin does advance some telling points against the practice of modern economics and, even leaving aside the political animus evident in The Dismal Science, it would take another volume (though not such a long one) to expound and contest its hundreds of propositions. Economists may be left to look after themselves; and while economic historians may wish to contemplate aspects of the critique, I suspect most of them will leave by the door through which they first came in. They may also be under-whelmed by some of the stylized historical facts on which the arguments depend.

Eric Jones is Professorial Fellow, Melbourne Business School, University of Melbourne, and Visiting Professor, University of Exeter. He is the author of The European Miracle, Growth Recurring, and Cultures Merging.