Professor Rossman raises many issues. No doubt these will be discussed further. I want to carve off one point that he makes and address it more deeply. The question is not so much whether he is wrong or right, but when he is right, and when the context might require rethinking.
In particular, I want to raise the issues of transaction costs, the “size” of the surplus in the exchange, and the way society thinks of the exchange being “disreputable” in the first place.
First, let me echo the point made by Professor Tabarrok: our brains are evolved to react to personal interactions in settings where dire need requires help. The idea of using the market to ration things that “should” (in the Stone Age, where our mental modules evolved) be shared, or perhaps never exchanged at all, affects something deep inside us.
Remember, whales have hips. They don’t have legs; but they have hips. This is a biological atavism: the tendency to exhibit, or revert to, ancestral type. In biology, an atavism is an evolutionary throwback, such as traits that persist because the evolutionary cost of retaining them is not high enough to engender their disappearance. Whales are descended from land (or, at a minimum, shallow water) mammals that returned to the sea. Their legs produced so much drag that evolution selected for “no legs.” But hips? Meh; not really a problem.
We humans were once constrained, in the absence of market institutions, to limited division of labor. Transaction costs limited us to groups restricted to about Dunbar’s number, something on the order of 150 persons or so. “Dunbar’s number” is that size of a group of people that can self-govern by norms of cooperation and reciprocity, because we can keep track of favors and what is owed.
Our minds, at an evolved emotional level, are not well suited to accept impersonal exchanges. Our reason allows us to exchange with people we don’t know, but our atavistic emotional lizard brains are screaming inside. It’s like when you get cut off in traffic: it’s dumb to want to get into a fight to “teach that guy a lesson,” if only because you’ll never see him again. But in the world of clans, and Dunbar’s number, your emotional response caused you to (1) provide the public good of norm enforcement, and (2) provide the private good of defending your rights, because you would fight even if you were likely to lose. The credible commitment problem is solved, in small groups, by emotions.
But it is the very nature of emotions that they are not rational. They have to be involuntary, in fact, if they are to serve their purpose. I was in Munich, in Germany, in 2009. Being just some yokel from the country, when I came to a crowd at an intersection, waiting for the light, I just looked both ways—no cars coming—and crossed the street.
There was a commotion behind me, and then I felt a “whap!” on my arm. A tiny Bavarian grandmother had tottered into the street behind me, and was hitting me with her umbrella. She was hissing loudly, “Kindermörder!! Kindermörder!!”
In her mind, the fact that I was ignoring the law meant that children might see me and also cross. I was a child murderer! Her small frail body was suffused with a cocktail of chemicals that essentially forced her to attack an adult male 30 years younger and 100 pounds heavier.
Frankly, I probably could have taken her. Instead, I was mortified as my own evolved emotional reaction—shame—kicked in. I tried to apologize, but by this time people were yelling at me from both sides of the street. I just scampered away, red-faced and humiliated. And I did not cross against the light again the whole time I was in Munich.
So, here’s my question: given that our reaction to “disreputable exchange” is in part an emotional reaction, and that reaction is a (possibly atavistic) product of norms that are preserved from an entirely different context of human interaction… what should we think about obfuscated exchange?
One possibility is the one I gave in my first post: obfuscation is a second best, and raises transaction costs compared to the “real” solution, where the transaction could be openly consummated.
But isn’t it true instead that obfuscation is a means of allowing the transaction, and to avoid being bashed with some oma’s umbrella?
In other words, isn’t it true that obfuscation is the lubricant for social intercourse?