Guest Post by Gabriel Rossman-- Professor Rossman is a sociologist at UCLA. His work applies economic sociology to media industries. He blogs at Code and Culture and is the author of Climbing the Charts
In the course of a discussion about Mormons, a friend pointed me to a religious testimony offered by Clayton Christensen (who is best known for his work on disruptive innovation). In his testimony, Christensen describes his belief in the Book of Mormon through a religious epiphany reminiscent of St. Augustine's "tolle lege" experience. However this is in the second half of the essay, the first half being devoted to a description of the strength of the LDS community and an argument that this social capital is directly related to the lay priesthood ecclesiastical structure of LDS. One story from this part of the testimonial struck me in particular:
[O]ur family had out-grown our small home, so we found a larger one and put the word out that we would appreciate any help in loading and unloading our rented moving truck. Among those who showed up that morning was Mitt Romney, now the governor of Massachusetts, who had just completed his unsuccessful campaign for the U.S. Senate in Massachusetts. Mitt had a broken collarbone, but for two hours traipsed between our home and the truck, carrying out whatever he could manage with his one good arm.
From a purely utilitarian perspective this is ridiculous. You have a man with a vast fortune and a (temporary) physical impairment. It would be an obvious gain from trade if rather than providing his hobbled physical labor, Romney were instead to give Christensen $100 and tell him to hire a day laborer. Of course if it happened like that the story would be the plot to an episode of Curb Your Enthusiasm with the upshot that Larry David is an obtuse misanthrope, not a religious testimonial with the upshot that Mormons have a strong community. Indeed this story is in the middle of a paragraph which begins and ends by talking about how as a general matter Mormons are eager to help one another and is part of a broader argument about how Mormons provide both mundane and ecclesiastical services to one another directly rather than through professionals. In the context of the essay, the practical value of the impaired labor that Romney provided is clearly secondary to the affirmation of moral community implied by his willingness to provide it. In this sense, that Romney was injured makes his contribution more significant, not less, which is why Christensen chose to draw attention to it.
Similarly, consider Joel Waldfogel's AER article "The Deadweight Loss of Christmas" (which he later adapted into Scroogenomics). The article basically demonstrates that people don't especially like the gifts grandma gives them for Christmas. I like Waldfogel a lot* and think this article makes a real contribution in showing how gifts are a deadweight loss when viewed from the perspective of market pricing. However treating this as a problem and normatively asserting that people are irrational to give gifts is like an astronomer chastising a comet for not having the right orbit. (This is not an uncommon issue with economists). The conclusion suggests the policy proposal that replacing in-kind welfare benefits with cash transfers would increase the poor's utility. (Again, not unheard of). In related news, if my grandmother had balls she'd be my grandfather. There is a certain logic to replacing in-kind programs with cash transfers that is very compelling on its own terms, but in practice few people would agree to it. One of our biggest transfer programs is Medicaid, and converting it to a cash transfer would mean that especially sick poor people would go without heath care, something the left would find unacceptable. (You can see this understanding implicit in the individual mandate, which not only serves the wonkish goals of avoiding the death spiral and cross-subsidizing the sick, but perhaps more importantly the political goal of including in universal coverage those people who would rather spend their money on something other than insurance premiums). Likewise, the right has a habit of objecting when welfare recipients spend transfers frivolously on either an isolated or widespread basis. In the 1990s it was a common trope to complain about welfare recipients who had cable television. More recently we've seen complaints about (and restrictions against) people drawing transfer payments from ATMs at casinos and strip clubs or using food stamps to buy junk food. That is to say, there is an implicit, pan-ideological consensus that transfers are about society providing the poor with that which we deem it appropriate for them to have and not that which they would purchase themselves if they had the money. A cash transfer welfare state would be politically untenable even though it is probably true that cash would be more efficient (as assessed by the utilitarian logic of market pricing).
Human beings have a variety of ways to exchange goods and services and the ways we do so both reveals and structures the nature of our relationships. Alan Fiske's relational models theory describes four types of exchange:
- communal sharing -- people are effectively a common unit and can freely draw resources from communal property, as with households
- authority ranking -- people have asymmetric duties and obligations to one another, as with patron-client ties
- equality matching -- people match actions on a like-for-like and tit-for-tat basis, as with friends
- market pricing -- people commensurate across categories on the basis of ratios (with prices being a special case of these ratios when we have money as a unit of account), as with traders in a market
In this schema we would say that Mormons have a communal sharing relationship with each other (at least for some services) whereas welfare recipients are in an authority ranking relationship with the state, as are Wharton students in authority ranking relationships with their grandmothers but in equality matching relationships with one another.
The interesting thing about equality matching is how central reciprocity is to it. It is a common trope in the gift literature to note the impossibility of the "pure" (that is, unreciprocated) gift. In Debt,** Graeber notes that some religious traditions emphasize that because anonymous gifts cannot be reciprocated (either in-kind or with clientalism) they are the highest form of charity. Graeber uses the impossibility of reciprocity with Santa Claus as a familiar example, and I would add that traditional iconography of St. Nicholas depicts him furtively tossing gold through a window to serve as dowries for three poor sisters who would otherwise be driven to prostitution. The social scientific point is not to argue that we ought to avoid reciprocity, only that it is so core to gifts that avoiding it requires special circumstances and in the normal course of things a gift will be reciprocated. The normal way not to enter into a reciprocal relationship is not to gift at all. For instance, last Christmas I deliberated giving a friend an album that I thought would resonate deeply with him, but I refrained from doing so precisely because I didn't want to impose an obligation to reciprocate. This same friend and I have bought one another meals, but reciprocity is achieved in-kind and is not commensurable with other types of gifts. In equality matching a meal cannot be easily reciprocated with an album, but only like for like.
A major source of social conflicts and scandals is when people disagree about what relational model does or ought to characterize an interaction. For instance, suppose a woman is attracted to a man at a party and they end up sleeping together. As they part, he says "that was great" and hands her $100. In blackboard economics this is just lovely. We know the utility to be derived from the hookup was sufficient to motivate her to go home with this guy. If x utility exceeded her reservation then surely x + $100 exceeds it by that much more. Surplus! Of course no human being (including economists) actually believes this. We all know intuitively that she would not view the $100 as income but as an accusation. In contrast if the man did not hand her cash at their parting but rather a day or two later sent her flowers and similar gifts worth $100 she would not be insulted. We can imagine her refusing either the cash or the gifts, but in the one case her refusal would mean "I'm offended that you think I'm a whore" whereas in the other it would mean "I'm sorry but I don't want to get into a relationship."
In the last week we've seen a fair amount of outrage over Facebook billionaire Eduardo Saverin renouncing his US citizenship to reduce his capital gains tax liability. The controversy is premised on an understanding that the citizen's proper relationship to the state is one of authority ranking where the state has such obligations to the citizen as to provide physical security and the citizen has such reciprocal but asymmetric obligations as to pay taxes. This understanding is betrayed by Saverin's tax exile, which treats citizenship as in the realm of market pricing. Not surprisingly people who tend to be skeptical of authority ranking relationships view Saverin's actions more sympathetically.
For another illustration of how we can get into trouble with conflicting understandings of relational models, consider another episode from Mitt Romney's life. In 1981, Romney was arrested for launching a boat after a police officer warned him that his boat's license number was inadequately displayed and he faced a $50 fine. Romney launched the boat anyway and the cop arrested him. What seems to have gone on is a conflict in how to understand the interaction up unto that point. The cop seems to have seen himself as giving an order which was then disobeyed. That is, a violation of an authority relationship which requires the lower party to show deference. Conversely, Romney described the situation as "I was willing to pay the fine. But if he had said don't launch the boat and not mentioned the fine, I would not have done it." That is he was operating under the understanding that, as Gneezy and Rustichini later put it, "a fine is a price." In this model a naked demand carries the weight of the relationship behind it, whether it be between daycare workers and parents who are late to pick up their kids or between a cop and citizen whose boat's tags are marred by some stray paint. This moral weight will often be enough to prevent transgression. In contrast a fine puts a price on the action and this finite price may be less inhibiting than the unpriced, and thus in some sense infinitely priced, demand. Romney's understanding was that the fine was a price and that if he was willing to pay the price this would fully settle the matter. In other words, it was a matter of market pricing. In contrast the police officer did not seem to be worried that Romney would skip out on the fine but that, as Eric Cartman would say, he had failed to "respect my authorité" ranking.
* I am familiar with and admire Waldfogel's work because we both study mass media. My favorite of his articles is a QJE on chain ownership in radio to which I devote an entire lecture in my undergraduate course.
** Graeber uses a similar typology as Fiske but with slightly different nomenclature: communism, hierarchy, and exchange. The main difference between their respective typologies is that whereas Fiske has separate categories for equality matching and market pricing, Graeber treats both of them as subcategories of "exchange."