Socialist or capitalist? Yes.

Obligation and the circles of familiarity

Back in August I wrote a post about the relationship between locus of control and the self and society. My basic argument was that the farther you moved from the self, the less control you had over the outcomes. Today I want to borrow the visual from that post and look at it in a slightly different way. I’ll call the above visual the circles of familiarity. When I describe my political alignment to people, I often say I believe in free market economics. In other words, I’m a capitalist. But that’s not quite accurate. I’m also a socialist. Which identity is operating depends on where we are on the circles of familiarity.

This series of concentric circles generally represents the intimacy of knowledge we have about the social world. We know ourselves best, then our family, then friends, the community we live in, and then beyond the community, there are strangers whom we know little to nothing about and whom we may interact with only once and then never see again. The circles also generally represent our social obligations. Please remember I am speaking generally - there are lots of exceptions - but if I were to say to whom does a person have a greater social obligation, their neighbor or their child? I think most of us would answer, in general one would assume their child. I will also say that the boundaries between the circles are murky. I have close friends whom I would drop everything and head to the airport to go help five minutes after they called if they needed it, and distant family whom I wouldn’t recognize if I walked past them on the street. So for this argument, let’s say these circles are generally correct, allowing for exceptions. We have the greatest obligation to our children, to our spouses, to our parents, siblings, and then we may start to blur between friends and extended family. At the outer edge of friendship are people we know only casually, and people we recognize as belonging to our community, however we might define that. And beyond community is the rest of the world, full of strangers whom we know little about, and generally feel little positive obligation toward. 

Cicero remarks in De Officiis, “for ‘enemy’ (hostis) meant to our ancestors what we now call ‘stranger’”. Cicero raises this because, of course, there is a difference between a stranger and an enemy. You may not have a positive obligation to a stranger, in the sense that you are obliged to look out for their well-being in the way you would for your family or friends, or even a member of your community, but you do have an obligation not to actively seek to do a stranger harm (commutative justice obligations - as discussed previously). With an enemy, you have no obligation not to do him harm. In fact, you might be regarded as a coward if you do not attempt to harm him, or at least run him off. The change from enemy to stranger is an important evolution in human affairs. The ancient Romans were quite warlike, and could be staggeringly brutal, but they also were traders. A stranger is someone you can potentially make a deal with, and with whom you could have a commercial transaction. That is valuable because commercial transactions make both sides richer when they are done without threat of violence or coercion. If you can trade with more people, you are almost always going to be richer for it.

And this gets me to the point I want to get at today: when is it appropriate to trade and when is it appropriate to share without expectation of return? When is it appropriate to be a capitalist and when is it appropriate to be a socialist? Should I negotiate an hourly wage with my wife for her housekeeping? Should she make me a cash offer for the dinner I cook her most nights? (With at least a 20% tip, of course.) The idea of collecting cash from my wife is absurd in part because we share the same bank account. It is also crass. I cook her dinner because I love her and want to make her happy. She does her share of the homemaking for the same reason. 

But we do keep mental notes of equity - not just the two of us, but couples in general do. It’s a source of harmony or discord in families and sometimes leads to divorce. The idea of exchange based on price (whether cash or barter) is offensive in our most intimate relationships. Within the circles of familiarity, the Marxist slogan applies: "From each according to his ability, to each according to his needs". This works because we know what the ability of each is through our familiarity, and we know the true needs of each as well. All good people are socialists in the home. But with strangers, we know neither.

If I go to my local coffee shop where the barista knows me by name, and maybe even starts pouring my morning coffee as she sees me coming in the door, I better have my wallet out when she hands me my cup or there is going to be trouble. The barista may know me, and even like me a little, but we’re not family sharing a household. We’re engaging in a commercial transaction. She is giving me something of value, and I am giving her money in exchange. She’s doing this to make a living, not because she loves me. As Adam Smith put it, 

It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.

I don’t talk to the barista about how much I need the cup of coffee and expect her to give it to me for free or give me a discount. She’s not running a charity, and she’s not under any obligation to give me the coffee. She’s not worried about my needs, only what I can pay for. If I want her to give me a discount or even give it to me for free, I have to offer her some reason to do so. For example, if I were an influencer and I told her I would take a picture of it and post it to my Instagram account, she would want to just give it to me. But then, she is not really giving it to me for free, but still in exchange for my service of helping her advertise. We are engaging in barter rather than cash exchange, and I am talking to her about her advantages, not my needs.

At the center of our concentric circles of intimacy is the relationship with our family. Here exchanges are primarily based on sharing, generosity, and love. It’s important to note, here at the center, I know the most about the people I am sharing with. I know very well if they work hard or if they are lazy, I know what they need, I have a pretty good idea when if they are addressing themselves to my “humanity”, whether that need is genuine. And I can evaluate whether our bonds justify my gifting resources to them. If one of my kids calls me up and says she needs $X for an emergency, I can judge pretty accurately if they are being honest about their need, and I can judge if it is my responsibility. My kids are honest and hard working, so if one of them were to ask me for money, I would give it to them. Not just because they are honest and hardworking, of course, but also because they are my kids. If a stranger walks up to me on the street and asks me for $X (the same amount), unless it is a really small amount, I am likely to just say no. I don’t know if the stranger’s need is genuine, I don’t know if he has other resources, and so forth. And I don’t have an obligation to give money to a stranger. I might just be helping him feed his addiction. 

As we progress out from the center of the circles, the information I have about the people I am dealing with becomes less certain, and I am also under less obligation to provide for them. Now just to be clear, if I see a stranger fall down on the sidewalk and they are having trouble getting up, I actually have something of a moral obligation to help. The immediate need is clear, and the information is clear, but the obligation is not open ended. I should help him get back up, make sure he is ok, and if necessary help him get medical assistance. But I’m not obligated to pay for his medical care, for example. Having clear information about an immediate need shifts the moral imperative to care. Often when a stranger approaches you and asks for money, it’s hard to know what their true situation is. Sometimes I give out small amounts, sometimes I don’t. I can’t really pretend I have a system for this - if I’m being honest, it often depends on my mood.

The thing that triggered this whole post was that I just finished reading a new book by Cato Institute fellow Johan Norberg called The Capitalist Manifesto. It’s a fun romp through the benefits of capitalism. Toward the end of the book, Norberg presents a summary of some research that has been done about the pro-social effects of commercial exchange on societies. (If you’re not familiar with these arguments and the following sounds interesting, I recommend the book.) 

Historically in economic theory people were assumed to be completely rational. Then along came some economists who decided to apply the tools of psychological lab tests to these economic assumptions. (The field became known as experimental economics, and one of the founders, Vernon Smith, taught at George Mason where I earned my PhD, so there was a lot of interest in this among the faculty I learned from.) One of the experiments Smith ran for people is called “the dictator game”. It’s not much of a game, but here’s how it works: the experimenter gives two people a pot of money. One of the participants, the dictator, gets to choose how to divide the money. The other participant, we’ll call her the recipient, can only accept the offer or veto the offer. If the person accepts the offer, she gets the money. If she vetoes the offer, neither participant gets anything. So you see, it’s not much of a game. 

Let’s imagine how the dictator game might play out. Imagine the pot of money is $10. In economic theory, if both parties are rational, the dictator should give himself $9.99, and his opponent $0.01, and the opponent should accept the $0.01. The logic is that $0.01 is better than $0.00, which is what the recipient would get if she vetoes, so the recipient should take the offer. Now, if you are reading this, you are most likely from a commercial, mostly capitalist society, so you probably have some feelings about this. Specifically, veto that jerk, girlfriend! That’s not a fair offer. And that is what Smith and other experimental economists found. Economic theory did not hold up in experiments with real people. Not only did the the recipient players reject offers that were not close to something like equal shares, but the dictators felt bad if they made offers that were not close to equal shares. The dictators also had a pretty good instinct that their offers would get rejected if they did much less than 60/40 splits. The recipient would rather lose her share to punish an unfair dictator than accept a rational, but “unfair” allocation. It’s important to note this was true even when the players were strangers, and even when the two players were anonymous to each other - i.e., playing over a computer screen or kept in separate rooms. People from commercial societies have deep-seated beliefs about fairness and those deep-seated beliefs applied not only to the inner circles of familiarity, but to strangers as well. 

Now at this point you are probably saying, no kidding. But here’s the twist: these experiments were performed in less developed countries with people who lived far from markets where they would trade regularly with strangers, and where the participants lived in tight, traditional, tribal societies. These people lived their lives principally at the center of the circles of familiarity, where most of the people they dealt with were part of an extended kin structure. When these people were put into the dictator game and allowed to be the dictator, and they were told the person they were playing against was a stranger, they tended to follow economic theory: they made very stingy offers, nothing close to 50/50. And when they were in the recipient position where they could veto an offer, they accepted almost anything. These studies led economists to the conclusion Norberg shares: “Those who are not used to interacting with outsiders often consider them a threat or a chance for short-term gains” (p. 277). Like Cicero’s comment about his ancestors, stranger means enemy, not potential trading partner. 

Patterns of commercial activity, capitalist societies, condition people to treat strangers like potential trading partners rather than objects of potential exploitation. The French Enlightenment philosopher Montesquieu called this doux commerce or sweet commerce. Treating strangers as potential trading partners (or even potential friends) is a beneficial approach for society. If people assume they won’t be cheated in commercial transactions, they spend less time and effort verifying each transaction (be honest, when was the last time you went line by line through your grocery receipt? Not often because it would be a waste of time and effort - sometimes there might be an error, but the vast majority of the time not, and when it happens, it happens because of incompetence, not maliciousness). Treating strangers fairly is the default in most advanced economies, and in life it is a generally beneficial stance. 

Treating strangers fairly does not mean giving away goods and services. Market exchange is based on self-interest. As we move back into the circles of familiarity, we subordinate the self to some degree for the good of the whole. Exchange becomes less market-based. Obligations become more complex and dependent on patterns of relationships. We want to be good and just and be seen as good and just within our community, our circle of friends, and our family. With strangers we only need to be seen as fair. Within the circles of familiarity, the standards of behavior are much higher than with strangers. Within the circles, we give of time and resources in order to be seen as good, and to perceive ourselves as good. It’s true we sometimes sell things to friends or family, but the purpose of selling something is not to make a profit, but to transfer a good in a fair manner. Often we sell to a friend or family member at a price far below market value - what we could have sold the good to a stranger for. The difference is a gift (trust me, that’s how the IRS sees it, too). 

So what are our obligations? To close family, almost anything. To friends, it depends. To community, each of us must subordinate our selfish interests to some degree for the good of all. So to strangers, fairness. As we progress outwards along the spectrum of familiarity, we move more toward market exchange because of our ignorance, and we operate as self-interested capitalists. So the circles of familiarity instruct us to be both socialists and capitalists, and to move back and forth and along the continuum constantly throughout our day. Am I capitalist? Yep. Am I also a socialist? yes to that, too.