FEATURED ARTICLE | AUGUST 6, 2007
A Tale of Two Worlds: The Rules of Personal and Impersonal Exchange
When I say that we all live two lives, I'm talking about the two different spheres of relationships we cope with daily. On the one hand we have the relationships between our family and our close, personal friends. On the other hand we have those relationships with other members of society on a mostly impersonal level. Interacting simultaneously with these two spheres requires living by two separate codes of conduct, essentially living two lives. Unfortunately, the dividing line is rarely clear. And it can seem natural to use the codes of conduct from one life and apply them to the other. Yet this natural impulse can have disastrous effects on our standard of living, even our way of life.
The first life we live is among our families and our closest friends. Some of those friends may be co-workers, neighbors, or schoolmates from years ago. Close relationships are usually those that people value the most and clearly have the strongest emotional attachment. Becoming involved in someone's inner circle comes with the obligation to live up to the standards of trust and reliance that being so close to another person requires. Consequently, these relationships are some of the most demanding, but are also some of the most emotionally and personally rewarding.
Forming and maintaining these close relationships requires a set of implicit rules or cultural norms to govern our behavior. These are rules about openness, equity, fairness, and love. They reinforce certain priorities, like putting family first, and they instill in us the idea of self-sacrifice and belonging to a group.
These rules take on practical meaning for us around the home, at the dinner table, or out with our friends. They're also useful in coping with times of extreme joy, stress, and even tragedy. They tell us to skip a concert to attend a funeral, to share the last piece of cake with our brother, and to watch our niece so our sister can celebrate her anniversary.
Everyone understands these rules pretty well; they're taught to us by our parents from a very young age. Another factor helping us understand and live by these rules is that they're also part of our biological hardwiring. They are a legacy of our evolution, common patterns of behavior and ways of thinking that were developed by our ancestors and passed on to us.
These rules, about surviving in a close-knit group, helped mankind survive in the small bands of our distant ancestors. They governed how our ancestors dealt with problems from coping with natural disasters and cataclysmic events to dividing up resources among people. In primitive societies, for example, the amount of food or goods was fixed by what had been gotten in hunting and gathering, so distribution was based on fairness and equity. These rules shaped how our ancestors related to one another, which was often in a hierarchal fashion, like a family.
The second life we live is when we go out and interact with the vast multitudes of people who aren't in that tight-knit circle of friends and family. People in this group come from our workplace acquaintances, people we see and talk to on the train, or meet at the gym. Transactions and interactions we make with people in the marketplace, whether the grocery story, the pharmacy, bookstore, hairdresser, etc. comprise the largest sector of this life.
Adam Smith's quote is from Book I, Chapter 2, "Of the Principle which gives Occasion to the Division of Labour" in An Inquiry into the Nature and Causes of the Wealth of Nations, paragraph I.2.2.
But this life isn't just about buying and selling, it's about how to get along with people we don't personally know, and that's most people. Adam Smith may have said it best, "In civilized society he [each one of us] stands at all times in need of the cooperation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons." So just like our first life, this one is both demanding on us and highly rewarding, but in a substantially different way.
The rules governing this impersonal sphere allow for the right amount of trust and latitude to make impersonal relationships possible. These rules are about privacy, reciprocity, property, and respect. These rules are much more general, though, and tend to support a fluid framework of interactions. They support polite, but perhaps not cordial, relations among people, as well as a respect for each person pursuing his own interests.
These rules make possible the huge, complex nexus of marketplace interactions. These rules both allow and facilitate impersonal interactions and exchanges so that they take place as effectively as possible. In the absence of such rules, dealing with strangers would be more costly, causing us to rely more on ourselves and less on others, thereby losing all the benefits of interaction with other people. If we limited ourselves to interactions and exchanges only on a personal basis, we would be in groups of a few dozens. Rather than dozens, however, impersonal exchange brings together literally millions of people to produce the multitudes of goods and services we use. As chaotic as production and exchange seems in the economy, it follows certain rules, and when we interact with one another in this setting, we follow rules as well. Without these rules, much of the complexity of this system and the advantages we get out of these impersonal relationships would be lost.
Like the other rules, these have been taught to us since childhood. Even though they are common and familiar to all of us, we do not necessarily understand them. These rules are not part of our biological past, so we have no intuitive, almost instinctual attraction to them. They are a legacy of our evolution, but evolution on a cultural level, not biological. They are purely learned behavior, and are the result of cultural factors as mankind grew and developed along with civilization.
Their existence has helped mankind achieve the large and prosperous civilization we enjoy today. By learning to respect each other's property and privacy, we have made trade more fruitful than just sharing. Exchange also opens up the possibility for producing more resources, rather than dividing up whatever can be found.
To examine the kind of rules that govern the two spheres of relationships, let's look at an example. Jack and Jill are playing in a sandbox. Jill has a shovel and is happily digging and throwing sand into the air. Jack wants to have the same fun, so he reaches over and takes the shovel out of Jill's hand. Jill lets out a scream and their respective mothers rush onto the scene.
Jack's mother takes the shovel out of his hand and smacks the offending appendage. "No," she says, "that's Jill's toy! Jiiiiiilllllssss." Jack, slowly but surely, is learning about the importance of respecting other people's property. This lesson will have some effect, but probably not as much as he will learn from losing something of his own.
Jill's mother, at the same time, is teaching Jill a completely different story. "Jill, honey, you have to share. Jack is your friend and we don't keep our toys just ourselves. Remember, sharing is caring." Jill is about as impressed with her lesson as Jack was with his.
It's likely that Jack understands that stealing is wrong when it's someone else taking his toy, and Jill understands that sharing is good and that it is easy to share when she already likes the person she's sharing with. What these mothers hope to show their children is that the rules they understand in some cases apply to almost every similar case. Jack will have to learn about respecting other people and the benefits of reciprocity, and Jill will come to understand the importance of sharing to forming close bonds with other people.
The interesting thing is that rules about sharing and rules about respecting property don't always fit together neatly. Jill's mother taught her to share what she has freely with Jack. Jack has been told to leave what is Jill's alone. These two ways of viewing property are in direct conflict. Jack is being taught that what Jill has is hers to do with as she pleases. If she keeps it, if she shares it, that is for her to decide. Jill, on the other hand, is being taught that what she has is something for everyone to use. Whether she wants to keep it for herself or not has to be put secondary to making everyone happy by sharing.
For more discussion of these issues, listen to Russell Roberts's EconTalk podcast with Princeton Sociologist Viviana Zelizer.
These two sets of rules can't exist regarding the same object in the same context. They are mutually exclusive. Human beings are capable of living with two sets of rules, but we have to know which set to use when. If both Jack and Jill understand how each relates to one another, then there won't be such a conflict, because they will separately use the same rules. In dealing with complex relationships, we've learned when sharing and when leaving alone are appropriate. That knowledge is something cultivated from interacting with people.
So far I've made it sound like these two lives we live are completely separate. In reality, they blur and intermix quite frequently. We often see the impersonal blending into the personal, and vice versa. Many of us count co-workers as close friends, and water-cooler talk is all about making the business world more home-like. There are even more subtle ways they overlap. For instance, going to the same store to shop often leads to a more personal relationship with the clerk or the manager. These relationships sometimes result in direct benefits, like special offers, but often they're just about being on friendly terms with another person.
However, mixing isn't always a good idea. Economist F. A. Hayek, in his book The Fatal Conceit, stipulates some dire consequences when we mix imprudently. He says, "If we were to apply the unmodified, uncurbed, rules of the micro-cosmos (i.e., of the small band or troop, or of, say, our families) to the macro-cosmos (our wider civilization), as our instincts and sentimental yearnings often make us wish to do, we would destroy it. Yet if we were always to apply the rules of the extended order to our more intimate groupings, we would crush them. So we must learn to live in two sorts of worlds at once." Let's look at a few examples.
Most people would be aghast at the idea of bringing in prices or bargains to settle household decisions. A related example is gift-giving at the holidays. My father still groans when he asks me what would be a good gift for my brother, my cousins, or even for me. Nowadays, I tell him that gift cards are a great way to show someone you thought about them, but that you don't think you know what they'll like. Many people still balk at the idea of a gift card as a suitable present. But why? The simple answer most people would give is that it's obviously tacky and cheapens the personal nature of the relationship. But why is it obviously tacky? What is the usefulness of the rule that says "When dealing with friends and family, give gifts but not gift cards?" One answer might be that we don't want to quantify our close relationships the way we do our marketplace relationships. Whatever the reason, it's clear that using money can be unhealthy for our close relationships.
A similar situation can creep in with the case of allowance. Some parents give allowance to teach children responsibility with money; others do it to reward the children for good behavior or doing chores. However, if one were to ask parents why they don't pay their children higher wages, he'd probably get some funny looks. "Wages? But my kids don't work for me..." Or do they? Our intuition says that they obviously don't; our children aren't our employees. But if children are given an allowance in return for some type of behavior, it looks a lot like a job. There's something different about the relationship between employee and employer and between child and parent. For starters, most parents would never fire their children.
The examples of gift giving and allowance are concrete instances of a general principle. There's something going on in the blending of impersonal-like language and interactions with people we have a deeply personal relationship with. It doesn't always work to govern our personal lives the way we govern other interactions. With family and friends, we don't worry about debts and contracts the way we do with others. If your brother comes over to help you move, or to help you finish a project on the house, you may literally owe him a favor in return. But it would be quite a different thing if the person who helped were not family but a professional contractor.
It's an easy matter to imagine situations where the impersonal can invade on the personal and leave us feeling a little uneasy. So why doesn't it sound strange when we take something that's obviously impersonal and make it the subject of a personal relationship? Take, for instance, the idea of taxing for redistribution. We can charge wealthier people higher taxes and then use those tax dollars to make poorer people better off. It's just like sharing the casserole at dinner time, right? Jack took too much on his plate, leaving very little left for Jill. So dad comes in and gives some of what Jack took to Jill.
This example doesn't rankle because it all sounds so natural. And it is a very natural way to think about the problem. Remember from before that the rules we use to regulate our personal interactions are in part programmed into our genetics. Thinking of society in all its complexity as a tribe, or a big family, naturally makes sense to us. Part of our evolutionary past is seeing the world as having a fixed amount of resources that have to be distributed. If Jack has more, then Jill necessarily has less. We also like the idea of Dad, or the chief, coming in to fix the problem; it fits with the hierarchy of primitive societies in which mankind developed.
But no matter how natural or good that idea sounds to us, it can be counter-productive to society. In order for society to function as it does now, we have to rely on rules about dealing with strangers and impersonal relationships. Trade makes people better off, and if we undermine the security people have in trade (by taking from them), they won't do it as much. When people don't trade, we all suffer. Modern society also isn't organized like a tribe, with one clear ruler who ultimately owns everything. Power is distributed to individuals, and we have to interact with one another more or less as equals.
But the economic incentives for growth and progress aren't the only argument against blurring the lines. Perhaps more important is to remember that society is a different thing from the tribe or our families, and one major source of that difference is the rules under which we live in those different contexts. The rules of personal interaction and the respect and love shared among family members helps to sort out problems and disagreements. In modern, impersonal society, the trust, respect, and love may be lacking, but the rules of politeness and etiquette work with the market economy to solve similar problems. If we were to treat society as a family, though, where there is love and respect in the family, in politics there is power and coercion.
People get upset and edgy when the world of impersonal encroaches into their personal relationships. And that makes sense. But is it any more appropriate to apply the rules of the family to impersonal society? Yes, it might appear to make it warmer and more personable, but it cuts against the very rules that have shaped that complex society in the first place. We all live two lives, and we get from each of them valuable and important relationships. When we try to push them into each other, we risk both.