Lily Cole, the model and actress, has a website and now app called Impossible.com. The aim of which is that people will do things for each other just out of the love of their shared common humanity. Or something like that. And thus our interesting question, seeing as the site has swallowed £200,000 of hard earned taxpayers' cash in my native UK, is this just hippie dippy nonsense or is this Karl Polanyi versus Adam Smith being played out in real life?
Narrative tension is of course cathartic so I'll not reveal the answer just yet to that question. But it has also been shown that too much such tension is injurious to mental health. So, here is the answer--yes.
And that this is so makes this more than just a piece of sneering at some loopy online project. It actually gives us the answer as to what money is. Which is, and forget all that stuff about banks creating it (that's credit) and how governments can just keep printing it with nary a care in the world (that's the magic money tree argument), simply that money is a means of exchange. Further, that it's a means of exchange which allows you to do that exchange stuff with people you don't know. That's actually its function--and that's what makes the hippies at Impossible so interesting. Because they're trying to build a community of exchange without using the thing we invented to make such exchange possible with people we don't know.
Here's Lily:
There is a little more detail upon log-in: “You can post offers or requests for help, and trade small favours through the platform. Through sharing, we enable a sense of togetherness that is often lacking in modern life.” It is only when I read a few posts that I realise the app is based around the idea of people trading skills without using money – all part of the “kindness community” that Cole is hoping to foster.
Or rather, that's what the site is doing and here's Lily:
“There’s a space within the sharing economy where money isn’t the medium that some people call the gift economy,” she says. “That takes a bigger leap of faith [for investors], but it’s still very possible.”
Cynics among us may see a society that uses kindness as a currency instead of cold, hard cash as, for want of a better word, impossible. But Cole believes wholeheartedly in her concept. “The British Government say the amount people do already in the UK for one another for free is bigger than GDP. If you think about it, most people are doing tons of things – for family, for friends, for neighbours, for strangers – without direct financial return. That’s a big part of being human, social and being part of a community.”
Cole hopes to take Britain back to a time when local communities thrived. “The very point of the app in a way is to try and create more trust between strangers, because I feel that there’s a lot more myth than reality around people being dangerous and scary. We’re trying to debunk that myth.”
So far so hippie of course. We'll do stuff for other people just because we'd love to and they will hug and love us in return.
However, there is a deeper economic argument underlying this. It's at the heart of the philosophy of a market economy in fact, and is what really led to the invention of money. We can run these as being basically the Karl Polanyi model and the Adam Smith model. Polanyi was correct in his basic diagnosis:
A distinguishing characteristic of the "Market Society" is that humanity's economic mentalities were changed. Prior to the great transformation, people based their economies on reciprocity and redistribution and were not rational utility maximizers.[1] After the great transformation, people became more economically rational, behaving as neoclassical economic theory would predict.[2] The creation of capitalist institutions not only changed laws but also fundamentally altered humankind's economic mentalities, such that prior to the great transformation, markets played a very minor role in human affairs and were not even capable of setting prices because of their diminutive size.[3] It was only after the creation of new market institutions and industrialization that the myth of humanity's propensity to barter and trade became widespread in an effort to mold human nature to fit the new market based economic institutions.
But he's only right about that very basic diagnosis. Yes, there was a time when we did not use money to intermediate trade, instead we used reciprocity. Other than that he's wrong but in that one thing he is correct. And we use, as Lily points out, reciprocity in huge areas of our lives today. From who takes out the garbage to who goes out to earn the cash and who stays at home to corral the snotdribblers, within families pretty much everything (until the divorce and the lawyers start to cash everything up) is done on that basis of reciprocity. And for the vast majority of humanity's time on earth we were small bands of people in extended family groups. Thus the system worked on reciprocity.
This doesn't mean that people were not rational, nor utility maximisers. The results of the dictatorship game where people will, at cost to themselves, punish those they think are not being fair show that trade driven by reciprocity is still trade. The more traditional divisions into hunters and gatherers are still the division and specialisation of labour. It's just that reciprocity is the accounting mechanism, instead of who has the pile of cash there're those who have favours owed to them. We've even seen this persist into more modern times--potlatch society is the name usually given to it.
Where Smith comes in is in pointing out that if that division and specialisation makes people richer, as it does, then doing it with more people makes everyone more richer. Which again it does. But while we can rely upon reciprocity to run the accounting tabulations for the guy who is going to be sleeping two beds over for the next couple of decades we can't when it's the guy who just appeared over the hilltop with some shiny shiny that we'd like and who will be 30 miles away by tomorrow night. That's when money makes its appearance. It being just whatever it is that people will accept as a token of value instead of a promise to do a favour at some future date.
Butter, copper sheets, gold, silver, cowrie shells and salt have all served this function at times and places. It's a medium of exchange, or if you prefer, a medium of account for exchange. The great trick that money performs being that you can now trade with strangers without actually having to trust them. Well, without having to trust them long term, that they'll reciprocate at some indeterminate future date.
And that's what Impossible to trying to turn the clock back on. Myself I'm really not sure. Because I think reciprocity depends upon the intense feedback mechanisms of a small society. Here I think a little of Elinor Ostrom's work on resource management. It's possible to beat Garret Hardin's insistence upon private property or governmental regulation but only in groups of humans up to a couple of thousand people. After that the insistence upon reputation and communal management goes to pot.
Thus I find it very difficult to believe that we can construct large scale trading groups that operate on those reciprocal grounds. There's too much space among say 5,000, or 10,000, people for cheats to prosper. However, I am willing to be proven wrong. The manner in which Linux (and many other such projects) operates tells us that reputation can, in certain circumstances, keep in line large groups of people for considerable periods of time. Where I'm really not sure is quite how large those groups really are. I get the impression that "Linux" might be a large group, well above those Ostrom limits, but that where the work is actually done it's all a lot smaller. It's a series of small groups each approaching their specific problem.
In the end here I think that attempting to move back to a Polanyi economy on a large scale simply isn't going to work. The reinforcement mechanisms of reciprocity, the social pressure to conform to the norms, aren't going to be strong enough in a large group. This is why we invented cash, money, and I don't think that's going to go away. Although I am, as I say, willing to be proven wrong. And if the social pressures, the condemnation, of those who breach the social mores are strong enough I'm absolutely certain that online exchanges can increase the viable size of a reciprocal market, but unconvinced that that functional size is all that much larger than those Ostrom limits.
At which point Lily Cole's Impossible is hippie dippy and it is also a test of the Karl Polanyi and Adam Smith models of trade. An interesting experiment but one that I think is going to run into the brick wall of why we invented money in the first place. Reputation, reciprocity, isn't a strong enough force over thousands of human beings. Once we get to groups above that sort of size then money becomes necessary to keep score.
