The Rational Optimist (P.S.)

by Matt Ridley

The economist Karl Polanyi argued in the 1950s that the concept of the market cannot be applied to any time before the fourth century BC, that until then instead of supply, demand and price, there was reciprocal exchange, state-sponsored redistribution of goods and top-down treaty trade in which agents were sent abroad to acquire things on behalf of the palace. Trade was administered, not spontaneous. But Polanyi’s thesis or those of his fellow ‘substantivists’ has not stood the test of time well. It now seems that the state did not so much sponsor trade, as capture it. The more that comes to light about ancient trade, the more bottom-up it looks. While it is true that some Akkadian merchants may well have eventually seen themselves partly as civil servants sent abroad to acquire goods for their rulers, even they earned a living by trading for a profit themselves. Polanyi depicted a reflection of his own planning-obsessed times. The dirigiste mentality that dominated the second half of the twentieth century was always asking who is in charge, looking for who decided on a policy of trade. That is not how the world works. Trade emerged from the interactions of individuals. It evolved. Nobody was in charge.