So the sway of modern Western culture is partial and incomplete even within the geographical boundaries of the West. And a good thing too, since no society organized on the principles outlined above could last five minutes, much less the 400 years that modernity has been in the ascendant. But make no mistake—modernity is the dominant culture in the West and increasingly so throughout the world. One has only to examine the assumptions that underlie contemporary economic thought—both stated and unstated—to confirm this assessment. Economics is simply the formalization of the assumptions of modern Western culture. That both teachers and students of economics accept these assumptions uncritically speaks volumes about the extent to which they hold sway.

It is not surprising then that a culture characterized in this way is a culture in which the market is the organizing principle of social life. Note my choice of words, “the market” and “social life,” not markets and economic life. Markets have been with us since time out of mind, but the market, the idea of markets as a system for organizing production and exchange, is a distinctly modern invention, which grew in tandem with the cultural assumption of the self-interested, algorithmic individual who pursues wants without limit, an individual who owes allegiance only to the nation-state.

There is no sense in trying to resolve the chicken-egg problem of which came first. Suffice it to say that we can hardly have the market without the assumptions that justify a market system—and the market system can function acceptably only when the assumptions of the modern West are widely shared. Conversely, once these assumptions are prevalent, markets appear to be a “natural” way to organize life.

Markets and Communities

If people and society were as the culture of the modern West assumes, then market and community would occupy separate ideological spaces, and would co-exist or not as people chose. However, contrary to the assumptions of individualism, the individual does not encounter society as a fully formed human being. We are constantly being shaped by our experiences, and in a society organized in terms of markets, we are formed by our experiences in the market. Markets organize not only the production and distribution of things; they also organize the production of people.

The rise of the market system is thus bound up with the loss of community. Economists do not deny this, but rather put a market friendly spin on the destruction of community: impersonal markets accomplish more efficiently what the connections of social solidarity, reciprocity, and other redistributive institutions do in the absence of markets. Take fire insurance, for example. I pay a premium of, say, US$200 per year, and if my barn burns down, the insurance company pays me US$60,000 to rebuild it. A simple market transaction replaces the more cumbersome method of gathering my neighbors for a barn-raising, as rural US communities used to do. For the economist, it is a virtue that the more efficient institution drives out the less efficient. In terms of building barns with a minimal expenditure of resources, insurance may indeed be more efficient than gathering the community each time somebody’s barn burns down. But in terms of maintaining the community, insurance is woefully lacking. Barn-raisings foster mutual interdependence: I rely on my neighbors economically—as well as in other ways—and they rely on me. Markets substitute impersonal relationships mediated by goods and services for the personal relationships of reciprocity and the like.

Why does community suffer if it is not reinforced by mutual economic dependence? Does not the relaxation of economic ties rather free up energy for other ways of connecting, as the English economist Dennis Robertson once suggested early in the 20th century? In a reflective mood toward the end of his life, Sir Dennis asked, “What does the economist economize?” His answer: “[T]hat scarce resource Love, which we know, just as well as anybody else, to be the most precious thing in the world.” By using the impersonal relationships of markets to do the work of fulfilling our material needs, we economize on our higher faculties of affection, our capacity for reciprocity and personal obligation—love, in Robertsonian shorthand—which can then be devoted to higher ends.

In the end, his protests to the contrary notwithstanding, Sir Dennis knew more about banking than about love. Robertson made the mistake of thinking that love, like a loaf of bread, gets used up as it is used. Not all goods are “private” goods like bread. There are also “public” or “collective” goods which are not consumed when used by one person. A lighthouse is the canonical example: my use of the light does not diminish its availability to you. Love is a hyper public good: it actually increases by being used and indeed may shrink to nothing if left unused for any length of time.

If love is not scarce in the way that bread is, it is not sensible to design social institutions to economize on it. On the contrary, it makes sense to design social institutions to draw out and develop the community’s stock of love. It is only when we focus on barns rather than on the people raising barns that insurance appears to be a more effective way of coping with disaster than is a community-wide barn-raising. The Amish, who are descendants of 18th century immigrants to the United States, are perhaps unique in the United States for their attention to fostering community; they forbid insurance precisely because they understand that the market relationship between an individual and the insurance company undermines the mutual dependence of the individuals that forms the basis of the community. For the Amish, barn-raisings are not exercises in nostalgia, but the cement which holds the community together.

Indeed, community cannot be viewed as just another good subject to the dynamics of market supply and demand that people can choose or not as they please, according to the same market test that applies to brands of soda or flavors of ice cream. Rather, the maintenance of community must be a collective responsibility for two reasons. The first is the so-called “free rider” problem. To return to the insurance example, my decision to purchase fire insurance rather than participate in the give and take of barn raising with my neighbors has the side effect—the “externality” in economics jargon—of lessening my involvement with the community. If I am the only one to act this way, this effect may be small with no harm done. But when all of us opt for insurance and leave caring for the community to others, there will be no others to care, and the community will disintegrate. In the case of insurance, I buy insurance because it is more convenient, and—acting in isolation—I can reasonably say to myself that my action hardly undermines the community. But when we all do so, the cement of mutual obligation is weakened to the point that it no longer supports the community.