by Gene Callahan
I happened to be reading R. G. Collingwood’s famous essay (at least famous in my circles!) with the above title. While similar in some ways to Mises’s philosophical analysis of the concept of action, there are some quite significant differences present as well, and I thought that Think Markets readers might enjoy a brief discussion of one of them.
Perhaps the most notable difference between Mises and Collingwood is that the latter denies the possibility of interpersonal exchange! Exchange, he contends, is always with one’s self. His analysis proceeds as follows: Let’s say you have a slab of bacon and I have a loaf of bread, and apparently what is going on is that we are exchanging the two items. But, Collingwood notes, what I am really giving up is not a loaf of bread, but my eating of the loaf of bread. And what I really want is not a slab of bacon, but my eating of the slab of bacon. (Consider how little I would value inedible bacon!) But I cannot possibly give you my eating of the bread, and you cannot give me my eating of the bacon. No, in this event, each person exchanges with himself — I exchange my eating the bread for my eating the bacon, and you do the reverse — and each of us, in terms of these intrapersonal exchanges, acts as a facilitator — by my dropping my claim to be the rightful eater of the bread, you are allowed to “pick it up,” and vice versa.
Now, this may seem like a verbal quibble, until you see where Collingwood goes next. Since, as he believes he has demonstrated, all exchange is really with oneself, and is always trying to exchange more for less — that is what makes the action economic — then the idea of a ‘just price’ other than the market price is logically vacuous — when one complains that a price one is offered is “too high,” one is complaining that someone else is doing the same thing one is one’s self — exchanging with himself in the most advantageous way possible.
Any comments on Collingwood’s analysis?
ThinkMarkets 
What does justice have to do with economics?
We believe in the subjective theory of economic value, and therefore there is no objective value!
Um … okay, where to start? The fact that you’re trading with yourself does not contradict that you’re trading with someone else — that’s just two ways to view the same act.
Second, you could just as easily say (and I think this would be the most comprehensive way to view it) that you’re trading public recognition of your right to the bread for public recognition of your right to the bacon. So?
Third, the justice of the exchange is predicated on the justice of the property rights involved in the exchange. The criticism of a price as “unjust” can be equivalently expressed as a criticism of the property rights allocations that led the good to be traded at the price. But then, I guess it’s more fun to strawman the criticism as whining about unfavorable terms, right?
There, did I miss anything?
“Um … okay, where to start?”
Just… don’t start! That solves the problem!
I’ll fire off two thoughts with the usual disclaimer that this is the Internet and I’m just procrastinating from doing my real work:
* Keep in mind that many modern Austrians (I know Rothbard stresses this not sure if Mises does too) are being on couching economics as the study of exchanges, and even Robinson Crusoe is exchanging with Nature. Not the same thing Collingwood is saying, but I think ultimately Austrians acknowledge that all action is motivated by the desire to move up one’s subjective preference scale.
* Assuming you’ve accurately described Collingwood’s view, I think it contains a slight hitch. The problem comes in when you say:
…by my dropping my claim to be the rightful eater of the bread, you are allowed to “pick it up,” and vice versa.
But you just took the trouble to set it up so that it wasn’t “eating bread” that was the valued thing, but “MY eating the bread.” And you can’t give away “MY eating the bread” to somebody else.
So it seems you (Collingwood) go out of your way to say, “This isn’t about the physical bread, it’s about the subjective experience” only to bring it back in when you need to, in order to connect it back to the physical exchange.
So I’m not sure what this gains us.
Does a arbitraging middleman exchange with himself?
“an”
I think he goes through far too much trouble for very little gain. The just price is the one that both parties agree on. If the exchange is voluntary and informed, it is just. Downplaying exchange with others downplays the productivity gains from trade, and is a rhetorical mistake. Trade is beneficial because adding more people to the web of trade alters the opportunity costs we face. You can’t get to Ricardian comparative advantage without others to trade with.
“Does an arbitraging middleman exchange with himself?”
Perhaps Collingwood would say there is no exchange in pure arbitrage, as there is no opportunity cost. What has one given up in order to pick up the twenty lying on the street?
“Downplaying exchange with others downplays the productivity gains from trade, and is a rhetorical mistake.”
Once one sees this kind of talk, one has left philosophical analysis behind, and has entered the realm of ideological propaganda — the point is not to grasp the conceptual realm at question fully, but to use rhetoric that “defends the market,” “forwards the revolution,” etc. etc.
Bob:
‘So it seems you (Collingwood) go out of your way to say, “This isn’t about the physical bread, it’s about the subjective experience” only to bring it back in when you need to, in order to connect it back to the physical exchange.’
I don’t think so, Bob. Collingwood recognizes that there are things in the physical world that facilitate the “subjective” satisfaction. He doesn’t recommend we just think really hard about having the satisfaction of eating the bread instead of going to get some bread, after all. I think it might be right to say he looks at the exchange as part of the production process of making the final good, the eating of the bread, just like the yeast, the flour, the oven, the plow, etc.
Gene wrote:
Once one sees this kind of talk, one has left philosophical analysis behind, and has entered the realm of ideological propaganda — the point is not to grasp the conceptual realm at question fully, but to use rhetoric that “defends the market,” “forwards the revolution,” etc. etc.
So if someone were to say of Colingwood’s analysis:
“Now, this may seem like a verbal quibble, until you see where Collingwood goes next. Since, as he believes he has demonstrated, all exchange is really with oneself, and is always trying to exchange more for less — that is what makes the action economic — then the idea of a ‘just price’ other than the market price is logically vacuous — when one complains that a price one is offered is “too high,” one is complaining that someone else is doing the same thing one is one’s self — exchanging with himself in the most advantageous way possible.
…you would be pretty upset at the ideologue, right? I mean, someone who uttered that kind of talk wouldn’t be judging the merits of Collingwood’s philosophical analysis, but rather would be seeing how it applied to the debates on the just price versus the market price.
I don’t find this useful, “[Collingwood] denies the possibility of interpersonal exchange! Exchange, he contends, is always with one’s self.”
Certainly, there would be no need for markets and prices if this were literally true. The whole point of having a market is interpersonal exchange. Every man would be an island to himself. As others have stated, I don’t see the advantage of thinking of all exchanges as always with oneself.
“Let’s say you have a slab of bacon and I have a loaf of bread, and apparently what is going on is that we are exchanging the two items. But, Collingwood notes, what I am really giving up is not a loaf of bread, but my eating of the loaf of bread.”
This seems twisted to me. Without the interpersonal exchange (that he denies the possibility of) there is no slab of bacon. I can only exchange with myself that which I own. If I don’t own bacon how do I exchange with myself the eating of bread which I possess for the eating of bacon which I don’t possess without engaging in interpersonal exchange? And after I have engaged in interpersonal exchange to possess the bacon, what if I don’t eat the bacon but give it to my family? Did I exchange something (the eating of bread) for nothing and why would I do that?
Mises and Collingwood aren’t saying anything different. I’ll try to bridge the apparent gap:
The exchange is ultimately with oneself — eating bread, exchanged for eating bacon.
Interpersonal exchange is one of the means to enact the ultimate personal exchange.