5.5.19

EXCHANGE, SPECIALIZATION, AND COOPERATION.

Years ago, I put together a course pack for introductory economics using that title.  In part, that was my protest against overpriced and overcrowded principles texts, in part that was the better to get the message across without the technical complications.  The technical complications are for a second course.
[T]here might be reason for creating an introductory and an intermediate course: get the basics (trading for mutual gain, specialization by comparative advantage, institutions evolve to economize on transaction costs, competitive markets allocate resources efficiently) in an introductory course, and reserve the heavy graphing (isoquants, indifference curves, monopolistic competition if you must) and game theory for the intermediate course.
I push the importance of those basics (exchange, arbitrage, indifference, opportunity cost) whenever I can.

Duke's Michael Munger uses a variant on those basics as his "argument for capitalism."  Part of the problem he's confronting is that the very term "capitalism" suggests some sort of ideology (in opposition to socialism or something) when market exchange is an emergent phenomenon, not amenable to the leadership of a vanguard.  Thus, in the following passage, I'd substitute "leading to the emergence of market exchange" for "argument for capitalism," while accepting the elements so introduced.  "There are three elements to the argument for capitalism, and while they connect in crucial ways they can be separately defined. Those three elements are (a) division of labor; (b) impersonal exchange based on prices; and (3) economies of scale based on knowledge."

That's close enough to "specialization, exchange, and cooperation" for me.

The "cooperation" part probably doesn't get enough attention, in part thanks to all the attention the principles course, and the business community, pays to "competition," itself not always well understood.  In the archives is a reference to a passage in Catallarchy to make that point.
Competition is a matter of nature no matter what societal organization we have. Even the definition of economics - the study of the allocation of scarce resources - alludes to competition. Whether a society is organized as a market economy or a socialist economy, there is a competition for scarce resources. What differentiates market economies from other economies is that in market economies individuals voluntarily cooperate to increase wealth and allocate resources.
I repeat, because repeat I must, much of that voluntary cooperation is emergent.  What further differentiates market economies from planned economies is that market traders are capable of being adaptive in ways beyond the power of planners to grasp.

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