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Sunday, May 10, 2020

Tim Taylor: Some Thoughts on Commodification [feedly]

Tim Taylor: Some Thoughts on Commodification
https://conversableeconomist.blogspot.com/2020/05/some-thoughts-on-commodification.html


Interesting review of Three approaches to "commodities": 1) Marx (you can't see their real value), 2) Merram Webster: ("you are just asking about corn, or copper, right?"); 3) Clowny: (not the "priceless" things?)

"Commodification" is a high-sounding has several quite different meanings.

One meaning has Marxist overtones, because in fact it traces to the discussion in Karl Marx's Capital: for example, see "Section 4: The Fetishism of Commodities and the SecretThereof." Marx argues that "the products of labour become commodities."  He offers the homely example of a table. He argues that when commodities are bought and sold, society tend to forget that then only have value because of the labor embedded within them, and instead treat these inanimate objects as if they they were meaningful or valuable in themselves ("fetishization"). In this way, Marx argues, the commodification of labor conceals the underlying realities that all value is produced by labor and also about social relationships of different classes.

A second meaning of commodification, from the Merriam-Webster dictionary, is described as the "Financial Definition": "Commodification refers to a good or service becoming indistinguishable from similar products. ... To be considered a commodity, an item must satisfy three conditions: 1) it must be standardized and, for agricultural and industrial commodities, in a "raw" state; 2) it must be usable upon delivery; and 3) its price must vary enough to justify creating a market for it." Examples given include commodities like corn and soybeans, but also financial instruments like mortgages that can be bought and sold."

A third meaning of commodification is nicely phrased by Stephen Clowney in his article" Does Commodification Corrupt? Lessons from Paintings and Prostitutes" (Seton Hall Law Review, 2020, vol. 50, issue 4).  He writes: "Commentators fear that when we treat priceless things like fungible commodities—reducing them to dollar figures, putting them in advertisements, and stocking them on shelves—it becomes difficult to appreciate their higher order values." Notice that a concern over whether, say, distinctive works of art become underappreciated when they are bought and sold in monetary terms is quite different from whether markets for interchangeable soybeans and mortgages work well. In turn, both of these are quite distinctive from whether it is useful to think of economic output as nothing more than a manifestation of labor.

Clowney's essay discussed a number of cases where concerns have been raised about "commodification," including examples familiar to many economists like paying money for blood donations or for organ donors.   He interviewed a group of 20 professional art appraisers--that is, people whose job is to put a monetary value on art. His questions were meant to explore whether this process in some way affected or reduced their aesthetic appreciation of the art. He writes (footnotes omitted):
Does commodification corrupt? The central finding of my research is that putting prices on creative masterworks does not diminish appraisers' ability to experience the transcendent values of art. Of the twenty assessors interviewed for this study, not one reported that market work disfigured their ability to enjoy the emotional, spiritual, and aesthetic qualities of artistic masterworks. In fact, most appraisers insisted they can easily and completely compartmentalize their professional duties from their private encounters with art. ...  Contrary to the predictions of market skeptics, the appraisers in this study spoke with joyful enthusiasm about their experiences viewing exceptional works of art. Even the most senior appraisers—those who have monetized thousands and thousands of objects—remain passionate consumers of art in their personal lives. The professionals I interviewed all reported visiting museums for pleasure, and many collect art to display in their homes. As a group, they described seeing beautiful pieces as "a charge," "a rush," "a thrill," "fabulous," "a giggle fest," "exciting," and "delight[ful]."
Clowney concludes that the "market skeptics have overstated the power of commerce to corrupt the meaning of sacred goods." While I agree with that conclusion, saying that a concern is "overstated" is not the same as saying that the concern isn't a real and meaningful one.

The subject of economics is rigorous in stating that the monetary price of an object is not a measure of its value in an deeper sense. An early famous example is Adam Smith's diamond-water paradox, where he explains why some objects with extraordinarily high and even life-preserving value, like water, have low prices, while other objects that are just decorative, like diamonds, have high prices. Smith argues that value-in-exchange, which is an outcome of conditions of supply and demand, is a different concept than value-in-use.

In a similar spirit, one might plausibly argue that concerns over "commodification" are missing the point that "value-in-exchange" is not the same as "value-in-appreciation." Just as it would be a shortcoming of empathy and awareness to treat a painting as nothing more than a price tag, it would be a moral shortcoming to view another human being as nothing more than the exchange-value of their commodified labor. Similarly, it would be a category error to view human workers as interchangeable soybeans. Clowney's art appraiser say that they can "easily and completely compartmentalize their professional duties from their private encounters with art." For many economic purposes, a compartmentalization between professional and private is appropriate.

And yet, and yet. Markets reveal do attitudes about how others perceive value, and people are social attitudes. Even among the art appraisers, for example, one suspects that their compartmentalization is incomplete, in the sense that heir pulses beat a little faster when art prices are rising or falling dramatically.

As befits a term with several distinctive meanings, "commodification" is worth deeper thought. Ultimately, it seems to me that concerns about commodification may be less likely to hold true in cases of highly-skilled workers or high-quality or distinctive products, because in such cases the monetary prices are likely to reinforce and support the appreciation of these skills, qualities, and details. Conversely, concerns about commodification are more of an issue with lower-skilled workers and low-quality or extremely similar products. In markets for commodities like soybeans, crude oil, and mortgage-based securities, we can just sit back and appreciate how these market function smoothly. But when lower-skilled workers are treated as nothing more than the market value of their output, this seems troubling.

Even in a case like paying organ donors, the main concern about commodification seems to me not that a few donors would be compensated (perhaps by health insurance), while recipients of those organs personally recognized the virtue of the donors. The nightmare scenario is medical assembly lines to extract organs, backed by social or government pressure that low-income individuals are expected to raise money by doing so.

I also wonder if people (meaning me) may have a tendency to undervalue the pleasures of what is inexpensive or free, because the low or zero price put upon these goods does not reinforce their value. After a long walk on a hot day, does a glass of tap water over ice taste as good as a bottled water from from the refrigerator? Do I give enough value to sitting on my own lawn furniture at my own house? Serious thinkers from Samuel Johnson to Blaise Pascal have asked whether people are likely to chase diversions, rather than seek happiness in being at home.

Homage: I ran across a mention of Clowney's article in a post by Alex Tabarrok at the ever-useful Marginal Revolution website.  

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