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Market Society & Embedded Economy

As the summer kicks off and with my first semester of graduate school under my belt, I decided to dedicate time to researching more political economy literature. I came across a Law & Political Economy syllabus from Law professor and scholar Amy Kapczynski at Yale Law School1 and thought I would try to use it as a guide to familiarize myself with what will eventually become a subarea of research. I’m trying to see what I could learn from each part of the course so that I can both write about them and sharpen my own views on political and legal underpinnings of the broader economic machine and the law’s role in making markets.

The course is broken up into the following constituent parts:

  • Market Society and & Embedded Economy
  • Law, Markets, & Power
  • Neoliberalism & The 20th Century Synthesis
  • The Politics of Market Supremacy : (1) Wealth Maximization and Theories of Value (2) The Separation of Efficiency and Distribution, and Cost-Benefit Analysis
  • Beyond The Twentieth Century Synthesis: New Left Imaginaries and Non-Reformist Reforms
  • The Political Economy of the Welfare State
  • The Political Economy of Work
  • The Carceral State & Abolition Democracy
  • Constitutional Political Economy
  • The Legal Foundations of Global Capitalism
  • The Green New Deal

Market Society and & Embedded Economy

This first section in the series should cover readings from Polanyi, Ellen Wood, & Cedric Robinson– all important figures in economic history. Some may consider Polanyi required reading since so many other great works stem directly from his own findings, so I’m excited to finally have a change to look into his most famous work, “The Great Transformation.” There are several questions in the syllabus Professor Kapczynski encourages students to keep in mind as they read, so I will be addressing them below.

Let’s jump into it. A major concern in the “Great Transformation” is what Polanyi means by “embedding” in a market economy2, but first we have to define what a market economy is. If there’s anything I’ve learned so far while trying to develop a more critical eye while reading and communicating economics, it’s that no seemingly minute detail is off the table nor should it be assumed. A market economy is what orthodox economics would explain as an ecosystem of interactions determined by supply and demand as resources are allocated to their most efficient uses. For all its flaws, this is the general understanding. By contrast, Polanyi understands an embedded economy as expresses the idea that the economy is not autonomous–disjointed from human activity and up to the “laws” of supply and demand–but rather a product of politics, religion, and other social relationships. To be sure, he also emphasized that markets themselves were not self-regulating, an increasingly abandoned idea today. Polanyi went on to further discuss that self-regulating markets and a disembedded society could simply not exists because of the circumstance of human interaction and other social relationships that create economies. The state plays an essential and core role in regulating and creating markets, and in the societies these markets exist in, the state plays the role of the referee, which is itself based entirely on political decision-making.

Polanyi strengthens his argument in one way by highlighting what he calls “fictitious commodities.” He counts land, labor, and money as being fictitious commodities because they supposedly are not marketable. That is, their production was not intended to be sold. Polanyi asserts that economics recycles the myth that these fictitious commodities have an identical function to real commodities, but Polanyi shows that this comes with its own negative consequences. He makes a moral argument: its morally wrong to reduce the value of the environment (nature) and human beings to mere objects whose price is wholly determined by a market.

Polanyi concludes his arguments against the usefullness of a disembedded economy by talking about what he calls the “double movement.”

This movement characterizes market societies as being governed by two contending movements—the laissez-faire movement (which seeks to limit government “intervention” in the market and restrict its expansion) and the protective countermovement which tries to resist this disembedding of society and economy. This movement is primarily driven by the working-class (although Polanyi explains that almost all classes have participation in this).

Polanyi gives everyone good reason to doubt any policy or politician that attempts to disjoint society and social relationships and politics from the dynamic function of the economy and its maintenance by the state. The state is the only entity with the legal capacity to change economic conditions within an economy (which could be driven by societal changes and activism) and has an overwhelming obligation to take care of its people. It can be surpassed as it has in the 19th and 20th centuries, and I agree that free-market capitalism cannot be a viable choice. The only barriers to a better socioeconomic ecosystem are political.

  1. Law & Political Economy Syllabus: https://lpeproject.org/wp-content/uploads/2020/08/Kapczynski-LPE-Syllabus.pdf
  2. The Great Transformation y Karl Polanyi: https://inctpped.ie.ufrj.br/spiderweb/pdf_4/Great_Transformation.pdf

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