Distribution and Exchange
TheC a g z & v z -Analysis
of Exchange Systems
Our exposure to economic thought for two cen-
turies has led us often to assume that the exchange of economic goods and
services occurs in a market. Even in our own market-dominated society,
however, we must contend with several forms of exchange that defy analysis
by traditional economic categories of supply and demand, price, interest,
profit, rent, and rational calculation of economic gain:
I 1. The gift for a bride or baby, the services of a friend's wife who
prepares dinner, the "good turn7'-all are exchanges of goods and services
- of potential market value. To offer to pay in such exchanges, however, is
both inappropriate and insulting. Furthermore, any calculation that enters
these exchanges is better attributed to the "rationality" of social reciproca-
tion or status-seeking than to the calculation of economic gain.
2. The redistribution of wealth through charity or progressive taxation
is again an exchange of potentially marketable commodities. While the
economist may analyze the repercussions of these exchanges in the market,
his categories of maximization, prices, and returns seem distant from the
social rationale which initiates such redistribution.
3. The mobilization of economic resources for public goals-through
eminent domain, taxation, direct appropriation, and selective service-
involves the transfer of economic goods and services without the intrusion
of an economic market. These exchanges affect the level of production,
prices, and income in the market, but the concepts of the market do not
explain the original exchange.
On the other hand, we still observe the market in varying degrees of
perfe~tion,~~and we know the value of the economists' theoretical appara-
tus for explaining and perhaps predicting the course of market behavior.
What, then, is the scope of economic analysis in the matter of exchange?
What are the spheres of economic calculation that justify the postulate of
economic rationality? No matter what our final answers, we must conclude
in advance that contemporary economic theory cannot generate specific
solutions for all the flows of goods and services, even in societies amenable
to economic analysis.
In societies where the self-regulating price market is inconspicuous or
absent, the categories of economic analysis grow paler. What can we say
52 O~ganizationalChange: The Effect of Successful Leadership (Homewood, I11 :
Dorsey, 1962). For a comparison of the studies by Gouldner and Guest, cf. Guest,
"Managerial Succession in Complex Organizations," American Journal of Sociology
(1962), 68: 47-54, with comment by Gouldner and rejoinder by Guest, pp. 54-56.
53 Above, pp. 9-10.
QL
about fluctuations of production arid prices iri thc Soviet IJnion? Certainly
the soltitions for Free-market econorriies liavc thcir limitations. Evcn morc,
what can we say about the traditionalized and reciprocal gift-giving among
island ~ e o ~ l e swhich does not hint at economic calculation. ~rices.or eain?I I , "
What can we say about the post-harvest distribution in ~ i d i a nvillages in
which the guiding principle is caste organization? What can traditional
international trade theory say about the isolated trading port with fixed
exchange equivalencies that rule out price-determination by supply and
demand?
Economic anthropologists have been providing ethnographic descrip-
tions of non-market exchange systems for some time." In the past few years
a new interest in comparative exchange has been stirred by the appearance
of a volume edited by KJd-Po-i, Conrad Arensberg, and Harry Pear-
son.55 Roaming through the recorzs of Babylon, Mesopotamia, Greece,
Mexico, Yucatan, the Guinea Coast, and village India, they sketch a pic-
ture of the separation of trading practices from the familiar practices of I
free-market exchange. In addition, the authors prepare a critique of the
analytic power of traditional economic theory and suggest some alternative 1
categories for a better comparative economics.
On the basis of their studies, Polanyi and his associates suggest that
economic activities fall into three main-patte_msp_f-??change. The first,
which they call reciprocative, is i1l~strated-b~the r i t G E d gift-givingt , k ~ ~- t - c ~ k
among families, clans, and tribes-as analyzed, for instance, by Malinowski :+ 2*S ii
and Mauss.56 Another illustration is found among farmers of many civiliza-
tions, who frequently "pitch in" to work for one another, especially at har-
vest times. Economic calculation, price payments, and wages are typically
absent in these types of exchanges. Goods or services are given because
it is traditional to do so; the only principle of calculation is the loose
principle that the giving and receiving of goods or services should "balance
out7'among the exchanging parties in the long run.
The second pattern of exchange is redistributive. This involved /kd4~Lh''+
bringing economic goods and services to a ~ t r a !s_ou~e~u_sua~l~_,gov~m-&,-d<d,
mental-and then redistributing them throughout the populace. Polanyi,
"Arzberg, and Pearson identify several instances of this exchange pattern ,
in ancient Asian and African civilizations. Modern examples are organized '1Q
charity and progressive taxation. Like reciprocative exchange, redistributive t,
patterns are characterized by an absence of economic calculation and price
payments. In this case the principle of calculation seems to be one of
"justice"-i.e., what each class of recipients traditionally deserves.57
The third pattern of exchange, more familiar in modem Western 5 , $ , b g ii,q
civilization, is termed, simply, exchange. In this case economic goods and
services are brought into a market context. Prices are not standardized on
the basis of tradition, but result from bargaining for economic advantage.
Polanyi, Arensberg, and Pearson argue that formal economic analysis
is equipped to handle only the third type of exchange, and that a different
54 Above, pp. 17-18.
55 Trade and Market in the Early Empires (Glencoe, Ill.: The Free Press and the
Falcon's Wing Press, 1957).
5.G Above, pp. 18-19.
57 For a criticis~nand extension of the notion of redistribution, see my review
article, "A Conlparative V~ewof Exchange Systems," Economic Development and
Cultural Change (1959), 7: 173-182.
must modify the assumptions of traditional economics, which have evolved.-
in the study of market economies alone, if we are to create a more compre-
hensive comparative economics.
Non-economic Elements in Market Systems
Thus far we have focused on exchange systems
that are dominated by sanctions other than economic supply and demand.
~ Even in exchange systems dominated by the price complex, we can obsewe
the intrusion of sociological variables. In the remaining discussion of distri-
e shall sample the m irical research that illumi-
'iu rkets: the market forilabor' i P s_emices,the market for
and the market foriconsumers' goods.
i----
The Labor Market
A central theme in the imperfection of the labor
I
market is the accent on security. This theme underlies workers' concerns
with controlling the supply of jobs through closed shop and apprentice
control, seniority, layoff rules, severence pay, guaranteed annual wage, and
their broader concerns with maintaining full employment through public
policy, compensating for unemployment, and so on. Unlike markets for en-
trepreneurial services (which is built on risk), capital funds, and consumers'
goods, then, the labor market is dominated by a concern with security.58
Why should this be so? Labor supply emanates above all from the
;st./. household or family unit.59The family, moreover, has as its central func-
/:. . - 4- s ,?. . k ~ -tions-in modem society almost as its only functions-the wization of
i
the young and the expression of temotions and tensions of the family
members. The loss of income or-mployment seriously threatens the
,. 4
,,,.r ?,=L -< 8 J performance of these delicate functions. "W e find in most societies certain
, , , institutionalized arrangements-poor laws, minimum-wage laws, insurance,
charity, compensation, welfare funds-that insure a family against "bank-
- , , . ruptcy" in the usual business sense. A family may break up, but it is felt
3.7 L-r #{ ;; that it should not do so for reasons of pure and simple insolvency. Thus
we frequently find institutional arrangements that guarantee a "floor" of
economic security for families and an element of stability of its income
); and employment. Such arrangements stem from the distinctive sociological
/ ' functions of the family.
Why should not the market for consumers' goods-which involves
the household as well-be characterized by a similar preoccupation with
security? The answer lies in the nature of occupational roles. The bread-
-58 Lloyd G. Reynolds, Labor Economics and Labor Relations, 3rd ed. (Engle-
wood Cliffs, N. J.: Prentice Hall, 1960), pp. 10-12. This is not to say that the concern
with secunty "explains" everything that unlons ask for and do. See above, pp. 52-53,
for a comparison of several schools of thought on the origln of industrial disturbances.
Talcott Parsons and Ned J. Smelser, Economy and Society (Glencoe, 111.: The
Free Press, 1956), pp. 53-56.
60E. wightLBakke, Citizens Without Work (New Haven: Yale University
Press, 1940),pp. 109-242.
over a wide range of items, none of w
com~arableto the work role of its breadwinner^.^^ All the family's eggs
are never in one consumer's basket.
So much for the factors that condition the broad structuring of the
labor market. Considerable research has been conducted on detailed aspects
of allocation and performance within a labor market-especially on labor
mobility (or turnover) and absenteeism.
Several economic and social factors influence the rate of labor turn-
over. During times of prosperity the rate of voluntary labor mobility from
job to job rises; during depression this rate falls. Involuntary layoffs increase
during depression and decrease during prosperity. Economic fluctuations
constitute perhaps the most important single determinant of labor mobility.
Other influences are occupation (the average turnover of teachers, for
instance, is much lower than that of factory workers); age (older workers
tend to change jobs less); sex (women move in and out of the labor force
more than men, but probably do not move geographically and occupation-
ally so much); and race (Negro men tend to show higher mobility rates
than white men). Labor unions directly reduce rates of quitting by their
pressure for seniority, their opposition to newcomers to plants, and their
grievance procedures that help solve labor problems short of forcing the
laborer to quit work. Insofar as unions agitate for full-employment pro-
grams (and prosperity), however, they indirectly increase voluntary rates
of quitting and decrease involuntary layoffs.03
Research conducted under the auspices of the Tavistock Institute in
London focuses on the internal conditions of the "factory as an industrial
institution," as a source of determinants of labor turnover. Particular
determinants that are stressed are the factory's authority patterns, internal
conflicts among departments and within departments, and so on-all of
which presumably augment quit rates. Several items of research appear to
strengthen their arguments, but others challenge their concl~sions.~~
Some of the conditions that appear to encourage absenteeism are high
wages (which lead to the backward-sloping supply curve and a preference
for leisure); distance of residence from a plant; size of firm (which is un-
doubtedly related to morale); occurrence of holidays (absenteeism drops
just before holidays); age (young men display absenteeism more than old);
marital status (single more than married men); and arduousness of work
61 These statements must be qualified by the facts that some fam~lieshave more
than one breadwinner and that, especially in modern times, some unemployment com-
pensat~onoften awaits the unemployed.
62 In expenditures on health and education, however, both of wh~chare ~ntimately
tied to the family's own functions, the same concern with security appears.
63 Reynolds, op. cit., pp. 311-312, 390-392; Herbert S. Parnes, Research on
Labor Mob~lity(New York: Social Science Research Council, 1954), pp. 140-143;
Hilde Behrend, "Normative Factors in the Supply of Labour," 'The Manchester School
of Economic and Social Studies (1955), 23: 62-76.
64 A. K. Rice and E. L. , y t , "Inst~tutionaland Sub-inst~tutionalDeterminants
of Change in Labour Turnover, Hunzan Relations (1952), 5: 347; Hllde Behrend, "A
Note on Labour Turnover-. - .and the Individual Factory," Journal of Industrial Economics
(November 1953), 2: 58-64.