Inventing the Market: Smith, Hegel, and Political Theory

by Lisa Herzog

Inventing the Market: Smith, Hegel, and Political Theory analyses the constructions of the market in the thought of Adam Smith and Georg Wilhelm Friedrich Hegel and discusses their relevance for contemporary political philosophy. Combining the history of ideas with systematic analysis, it contrasts Smith's view of the market as a benevolently designed 'contrivance of nature' with Hegel's view of the market as a 'relic of the state of nature.' The differences in their views of the market are then connected to four central themes of political philosophy: identity, justice, freedom, and history. The conceptualization of the labour market as an exchange of human capital or as a locus for the development of a professional identity has an impact on how one conceptualizes the relation between individual and community. Comparing Smith's and Hegel's views of the market also helps to understand how social justice can be realized through or against markets, and under what conditions it makes sense to apply a notion of desert to labour market outcomes. For both authors, markets are not only spaces of negative liberty, but are connected to other aspects of liberty, such as individual autonomy and political self-government, in subtle and complex ways. Seeing Smith's and Hegel's account of the market as historical accounts, however, reminds us that markets are no a-historical phenomena, but depend on cultural and social preconditions and on the theories that are used to describe them. The book as a whole argues for becoming more conscious of the pictures of the market that have shaped our understanding, which can open up the possibility of alternative pictures and alternative realities.

Genres: Economics, Politics, Philosophy, History, Nonfiction

195 pages, ebook

First published January 1, 2013

Reviews

[Maxim · Rating 5 out of 5]

A great book. Herzog manages to distill the essence of Smith and Hegels views about what the market is and what we should value and what should concerns us about it and successfully shows that the arguments of both still are important undercurrents in today’s debates.

In her approach to Smith also manages to rescue his thought from common misconceptions and oversimplification (not least from his purported supporters!) and shows that there is much more nuance in his works than his invocation today might suggest.

As regards Hegel she takes a narrow approach, build mainly in his Philosophy of Right, rather than trying to put it into the full context of his metaphysics. This might be debatable, but works well in this context and as a contrast to Smith.

The most surprising take away might be that Smith and Hegel, while important differences are certainly there, are more often aligned in their views of the benefits and dangers of market societies than it might seem at first!

[Jon · Rating 3 out of 5]

I think the title of this book is a bit cheeky, as they say. It doesn't really match what the book is about in a clear way, if at all. Of course Smith and Hegel did not 'invent the market,' which has a history as a social practice stretching back into the dense haze of time. Herzog clearly had something else in mind. It could be Herzog's thinking is it goes without saying that prior to the modern era markets were largely practical affairs to sell surplus (if one even had control of their surplus), and not a necessary component of survival as they are today. But that is not mentioned in this work. What is also missing from this this account of Smith and Hegel's market theories crossed with the political (or what once was simply political economy) is contextual. What was invented was of course not markets, but market ideology.

At a few points Herzog seems to grasp this, even underlining the metaphysical underpinnings of market theory:

So for Smith it is a requirement almost at the level of a theodicy that in commercial society 'virtue pays', at least for most people, most of the time, in the long run. For Hegel, in contrast, the theodicy lies in understanding that world-history, with all its injustices and cruelties, is the development of freedom. Just as people and civilizations have to be sacrificed on the path to freedom, the principle of subjective freedom is so central that concerns about justice in commercial society have to be sacrificed to it.

Herzog also lists numerous problems market ideologies have unleashed, but she doesn't answer them. I would go far as to say Herzog gives lots of reasons to see why market ideologies do not serve the cause of human flourishing, and nothing substantial to justify enforcing them:

The above-average rewards must go to those whose behaviour supports and stabilizes the social order, that is, those who live virtuously; or at least they must also go to the virtuous, in addition to inherited fortunes and instances of pure luck. If this were not the case, if all prizes went to the most vicious, the social order would undermine exactly those character traits of its citizens that it relies on for a peaceful and flourishing existence. Moreover, if the market systematically led to the flourishing of the vicious and the decay of the virtuous, it could not be seen as just, and this would make it difficult to describe its creator as benevolent.

Apparently we can't have that. Of the few reasons I can find in this book that it's best to accept market ideology are appeals to normativity:

The intuition that what is rewarded in markets should be good, honest work that serves the real interests of others is deeply embedded in our shared moral understanding, as can be seen from the regular outcries in the public debate about incomes that seem to be completely out of link, downwards or upwards, with the contribution to the social whole. Although we may justifiably be quite wary about the ability of today's markets to reward virtue, we should not give up the normative intuition behind it-rather, we should think about the question of whether markets can be brought closer to rewarding the right kind of behaviour. For this, we need not even completely agree with Smith about what the bourgeois virtues consist of. But often we can at least agree on what would be the respective 'vices' that should not lead to highest success in markets. And sometimes we can suppress them by changing the rules of the system in ways that make it more difficult to succeed with such methods.

From what I can find, normitivity involves "claims about what someone ought to do, or should do, or is obligated to do, or has reason to do" (https://plato.stanford.edu/entries/no...). Since the authority with the ability to define this "ought/should/obligated/reason to" was not directly addressed, I'm not sure why such an appeal to "normativity" is supposed to be persuasive. In other words I can only discount it. It seems more like an appeal to conformity in the face of what I might not agree with, especially when I do not gain from this supposedly "voluntary" system.

Another major argument for market ideology here is, strangely, imagining alternatives:

Why not imagine a market that serves as distribution machine only for those goods that can easily be commodified, while not dominating our whole lives and inducing us to see so many other dimensions of life-education, hobbies, love, attention from others also in terms of markets? Why not imagine a market for, say, financial services, that is a bit less dynamic and innovative, but avoids the kind of turmoil and the kind of economic pressures on political processes that we have seen in recent years? Why not imagine markets that are regulated a bit more strongly and that allow us to lead lives that leave a bit more time for the private 'circles of sympathy' and the objects of 'absolute spirit', art, religion, and philosophy? Why not remember that those who invented the pictures of the market as we know it did not have in mind a disembedded, all-encompassing reality that threatens to cut the ground from under the feet of all institutions, principles, and ideas that do not obey its dictates?

Herzog acknowledges, but never entertains the thought that maybe the answers can't be found in market ideology. It would just seem we have markets, and therefore they should perform the miracles we want them to. Why not? I don't think this is really an uncommon view, but after more than three centuries of experience to the contrary, why keep flogging this dead horse? Who is gaining from it at this late date?

In the end I see this book as a victim to its own underlying assumptions, but valuably it goes through a lot of material in relatively few words, and also gives deep insight into earnest liberal market dogmatism.

[Hal]

Seen in Karlsruhe