The third pillar: How markets and the state leave the community behind

Abstract

In this age of academic specialisms thoughtful, wide-ranging books periodically appear that refresh or even redirect the mainstream of discourse in the social sciences.Here I include exceptional books like The condition of postmodernity by David Harvey (1989), Trust by Francis Fukuyama (1995), and Why nations fail by Daron Acemoglu and Robinson (2012).The third pillar could possibly become another one of those highly influential books.Raghuram Rajan-University of Chicago professor, former IMF chief economist, and former head of India's central bank-does a masterful job of demonstrating how, throughout history, dramatic changes in circumstances, often involving rapid changes in population or technology, can disturb the comfortable balance that evolves between the state, our various markets that allocate factors and resources, and the communities that we live in.This book digests a lot of material and the reader should be acquainted, at the very least, with the literatures of economics, political science, and sociology in order to fully appreciate his main concerns.Rajan has also produced a very eclectic volume: before now I can't recall ever seeing Aristotle, Charles Murray, and Taylor Swift mentioned on the same pages.However, it is clear from his opening remarks that Rajan has become disillusioned with mainstream economics: in fact, he recommends a transformation into socioeconomics (but not political economy), where research might better acknowledge that markets are embedded in a complex web of human relations that often stretch across both time and space.In his Preface and Introduction Rajan clarifies that he uses a somewhat restricted interpretation of community, which he views as any social group whose members reside in a known locality, who share the same government(s), and who have a common cultural or social heritage.He sees the (urban) neighbourhood as being the archetypical community unit of current times, functioning much like the manor in feudal times, or the tribe in even earlier times.The key attribute here is the physical closeness of members even though Rajan does not have the spatial bias of the geographer, human ecologist, or city planner.Certain popular uses of the term, as in electronic or religious communities, do not qualify because this condition of proximity is violated when members are so dispersed.As the subtitle of the book indicates, he sees that the state, on the one hand, and markets, on the other, have both steadily encroached on the community for nearly half a century, but especially so in very recent times.In fact, many activities once performed by members of the community-including the birth and schooling of children, the building of roads and houses, and the movement of people and materials-are now largely undertaken by markets although the rules and standards for those activities are initiated and monitored by the state.In any case, Rajan (pp.10-11) not only sees the community as "contributing to our sense of who we are" but offering "a richer range of transactions … than would be possible if everything had to be contractual and strictly enforced by the law."While making this observation the work of Oliver Hart on the value of contracts in social interaction is recognized but, surprisingly, no mention is made of the extensive thought given to social capital either by sociologists like Robert Putnam (2000) or by regional scientists like Hans Westlund and Johan Larsson (2016).Consequently, Rajan seems to view the recent demise of

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