Human Nature and Economics

In the textbook “Principles of Microeconomics” (sixth edition, by Eugene Silberberg and Gregory Ellis, with the pretty Seattle skyline on the cover) there is a chapter on exchange and supply with a subheading “Formation of Markets” that includes a story from a British P.O.W. in World War II.  The soldier, R. A. Radford, wrote:

     “We reached a transit camp in Italy about a fortnight after capture and recieved 1/4 of a Red Cross parcel each a week later.  At once exchanges, already established, multiplied in volume.  Starting with simple direct barter, such as a non-smoker giving a smoker friend his cigarette issue in exchange for a chocolate ration, more complex exchanges soon became an accepted custom.  Stories circulated of a padre who started off round the camp with a tin of cheese and five cigarettes and returned to his bed with a complete parcel in addition to his original cheese and cigarettes; the market was not yet perfect.  Within a week or two, as the volume of trade grew, rough scales of exchange values came into existence.  Sikhs, who had at first exchanged tinned beef for practically any other foodstuff, began to insist on jam and margarine.  It was realised that a tin of jam was worth 1/2 lb. of margarine plus something else; that a cigarette issue was worth several chocolates issues, and a tin of diced carrots worth practically nothing.
In this camp we did not visit other bungalows very much and prices varied from place to place; hence the germ of truth in the story of the itinerant priest.  By the end of a month, when we reached our permanent camp, there was a lively trade in all commodities and their relative values were all well known, and expressed in terms of one another -one didn’t quote bully [canned beef] in terms of sugar- but in terms of cigarettes.  The cigarette became the standard of value… The unity of the market and the prevalence of a single price varied directly with the general level of organisation and comfort in the camp. A transit camp was always chaotic and uncomfortable… a transit camp was not one market but many.  The price of a tin of salmon is known to have varied by two cigarettes in twenty between one end of a hut and the other…
The permanent camps in Germany saw the highest level of commercial organisation.  In addition to the Exchange and Mart notice boards, a shop was organised as a public utility, controlled by representatives of the Senior British Officer, on a no profit basis.  People left their surplus clothing toilet requisites and food there until they sold at a fixed price in cigarettes.  Only sales in cigarettes were accepted -there was no barter- and there was no higgling…
An influx of new prisoners, proverbially hungry, raised [the general price level].  Heavy air raids in the vicinity of the camp probably increased the non-monetary demand for cigarettes and accentuated deflation…”

Image result for red cross pow parcels

To simplify the story, essentially a soldier found that within a few months of arriving at a Prisoner of War camp, barter based economies arose organically and rapidly morphed into a currency-esque system utilizing their smokes as the fixed unit of trade.  Now, conceptually this is both fascinating and prosaic.  Early on, simple human desire to get something out of any deal means that a non-smoking soldier would trade his cigarettes for something that the smoker/tradee needed less than cigarettes, like a stick of gum or something.  By trading cigarettes for gum, both parties win and come away from the trade feeling like they won something.  That’s the prosaic part of the story, that people trade stuff they don’t want for things they want.  The fascinating part is that commerce comes rocketing onto the stage so quickly.  The philosopher in me wants to ask, did the soldiers create a barter/soft-currency based economy because it was what they knew, or do people simply gravitate towards economics and merchant based trade as a part of human nature?  In a way it is a question about Carl Jung’s “collective unconscious”, a theory that posits that people are born with layers and layers of knowledge already rattling around in their brains as a result of their ancestors. (Jung would argue that if one took a caveman that was born in the world of today and raised in the exact same way as a modern child, that the cavechild would be considered supremely less intelligent than a modern child.  Jung argues that we are born with generations of more trial and error under our belts.)  In that regard, does a person of today quickly pivot towards bartering with a single form of currency because it is our comfort zone, or do we do so because it is purely more efficient in an economic sense and thereby more efficient on a human level?

The same textbook (with the pretty Seattle skyline) has a quote from Booker T. Washington earlier in the chapter, quoting him writing:

     “The making of these bricks taught me an important lesson in regard to the relations of the two races in the South.  Many white people who had no contact with the school [Tuskegee], and perhaps no sympathy with it, came to us to buy bricks because they found that ours were good bricks… As the people of the neighborhood came to us to buy bricks, we got acquainted with them; they traded with us and we with them.  Our business interests became intermingled.  We had something they wanted; they had something we wanted… In this way pleasant relations between the races have been stimulated.
My experience is that there is something in human nature which always makes an individual recognize and reward merit… The man who learns at Tuskegee to build and repair wagons and carts is regarded as a benefactor by both races in the community where he goes.  The people with whom he lives and works are going to think twice before they part with such a  man.”
Image result for booker t washington

Washington’s approach to the basics of economics was that through crossing the wires of individual desire and individual needs, race relations could be created in a place where none had existed prior.  Tuskegee’s bricks were superior to all other bricks around, so builders came to the school to purchase the bricks.  Essentially, that simple economic invisible forces pressured Southerners who would normally have leaned away from purchasing bricks from a Black school.  Over time, the ties that bind become ingrained and people are valued based on content and quality.

Both of the short quotes are thought provoking and likely very able to be refuted through reasoned and critical discussion, but they provide a wonderful springboard for a curious mind beginning to think about the interplay between economics and human nature.

Principles of Microeconomics, Eugene Silberberg and Gregory M. Ellis, (Pearson Learning Solutions, Updated Sixth Edition, 2010).


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