The use of Robinson Crusoe in economics

by on September 27, 2012 at 11:11 am in Books, Economics, History | Permalink

From RM, I received this query:

I’m still trying to figure out when the Robinson Crusoe analogy entered the economic discussion in history.

I would have thought Karl Marx was the origin, or perhaps one of the utopian socialists.  Any better ideas?  Maybe this expensive book can tell us.

revver September 27, 2012 at 11:23 am

Its a matter of convenience IMO. In the name of simplicity.
A man stranded on a desert island, making decisions, facing trade-offs, offered a simple illustration of economic concepts.
Since Robinson Crusoe was a fictional character most commonly associated with such a scenario, his name was used.

Thor September 27, 2012 at 11:27 am
Cliff September 27, 2012 at 1:28 pm

Wikipedia suggests others were closer to being the “real” Robinson Crusoe that inspired Defoe.

Dredd September 27, 2012 at 11:33 am

Perhaps the Robinson Crusoe episode would today be the story of a sophisticate marooned on one of the five garbage continents floating in the oceans, the most recent one discovered in the southern ocean, previously believed to be pristine.

Karl Marx had much too high of an expectation of Americans whom he though would revolt once they found out their real economic status.

More likely they will stay marooned on an island of garbage a la a modern day Crusoe.

Cliff September 27, 2012 at 1:31 pm

Yes, too bad we have wiped out the beautiful and thriving ocean surface ecosystem, I hear there used to be so much life sitting on the surface of the ocean before it was destroyed by floating trash.

Doug September 27, 2012 at 2:57 pm

To the contrary Cliff, its well known that whales, dolphins, and other marine mammals spend their entire lives deep underwater, and many never visit the surface at all. Plus it is clear that the garbage islands all float perfectly on top of the water, with no particulate pollutions extending below the surface where fish live and consume plastic, mercury, etc.

MD September 27, 2012 at 4:22 pm

I thought the garbage islands floated gently above the ocean, kept airborne by trades and good intentions.

Roy September 27, 2012 at 3:45 pm

The Garbage Gyre (TM) isn’t what it is cracked up to be.

http://marinedebris.noaa.gov/info/patch.html

I’m not saying it isn’t a bad thing, but it helps to know what you are talking about

Jim September 27, 2012 at 11:48 am

Marx (in Capital, Volume I) suggested that Robinson Crusoe analogies were already old hat: “As political economists are fond of Robinson Crusoe stories, let us first look at Robinson on his island.” This is from page 169 of the Penguin Classics version of Capital, and a footnote is omitted from the quote. The footnote, which is Marx’s own, notes that Ricardo tells Crusoe-like stories, but Marx provides no indication that Ricardo himself analogized his fisherman and hunter trade partners as a Crusoe/Friday pairing.

Daniel Klein September 27, 2012 at 12:03 pm

BTW, man-in-isolation thought experiments were already common in moral philosophy, in discussions of moral development. I recall them in Rousseau and Hume. In Smith’s TMS, see 110.3 and 192.12 (or search on “Were it possible that a human creature” and “If it was possible, therefore, that a person”).

Willitts September 27, 2012 at 5:11 pm

Since Hume was 8 years old and Rousseau was 7 years old when Crusoe was published, it is plausible that both were influenced by the novel. It’s not clear that economic analysis of a man in isolation preceded Crusoe or wasn’t motivated by it.

Larry September 27, 2012 at 12:03 pm

Marx’s quips about “Robinsonades” go back to the Grundrisse (1858): “The individual and isolated hunter and fisherman, with whom Smith and Ricardo begin, belongs among the unimaginative conceits of the eighteenth-century Robinsonades …” — so the impression I get is that he’s accusing them of writing “Crusoe-like stories” but that they did not themselves use the name “Robinson Crusoe” for their isolated individuals. Bastiat talks about Crusoe in _Economic Harmonies_ http://www.econlib.org/library/Bastiat/basHar.html and of course Rothbard has his “Crusoe Economics”.

RM September 27, 2012 at 12:53 pm

I wish that was me. But it is not.

Brian Donohue September 27, 2012 at 1:08 pm

Since being exposed to the Robinson Crusoe thought experiment in macro, I have reflected, on most days of my life, on the wondrous material bounty we thoughtlessly enjoy and use all day long every day, and the amount of effort (measured in centuries) I would have to employ to produce this stream of stuff myself, as against the (not insignificant but comparatively tiny) effort I actually contribute in order to earn my daily bread.

GiT September 27, 2012 at 1:17 pm

Not really to the question, but a good political theory class I took (on early modern thought) assigned part of Robinson Crusoe alongside the other state of nature stories in Hobbes, Locke, Rousseau, &etc. It was a nice addition.

Jonathan September 27, 2012 at 2:07 pm

Henry George talks about the origins in his book progress and poverty.

Rich Berger September 27, 2012 at 2:32 pm

Those Robinson Crusoe Gedankenexperiments are so 19th century. Today we have econometrics and Ben Bernanke!

anon September 27, 2012 at 2:33 pm

I wonder how much the ebook would cost if I only wanted the “construction” part:

Robinson Crusoe’s Economic Man: A Construction

Brandon T. September 27, 2012 at 2:57 pm

Not to be glib, but might we trace their origin to…Defoe? Do we think he was just trying to tell a cool story?

John B. Chilton September 27, 2012 at 3:14 pm

My students don’t relate to Robinson Crusoe anymore. This generation gets Tom Hanks in Castaway. That’s how we start undergraduate g.e. and undergrade trade v. autarky.

Willitts September 27, 2012 at 5:23 pm

The problem with excessive use of isolation is that economics boils down to an optimization problem that could be equally suited for a lone nonsentient mechanism or nonreproducing organism.

Let’s not forget that economics is a social science. Interaction between various economic agents that are heterogeneous is what makes the science both interesting and practical. Competition over scarce resources is the very definition of the science.

Ryan September 27, 2012 at 5:38 pm

Correct which is why I prefer to use The Swiss Family Robinson.

Brian Donohue September 27, 2012 at 6:03 pm

I wasn’t aware of any ‘excessive use of isolation’ to which you refer.

It’s a frigging thought experiment, and more useful for illustrating WHAT an economy does than any BS twelve variable ‘scientific’ econometric analysis I can think of.

Willitts September 27, 2012 at 9:46 pm

I didn’t say or suggest the Crusoe model is useless. I said excessive use is problematic. It could be used to show, for example, Crusoe’s labor and leisure tradeoff. It could be used to show diminishing marginal returns to labor or production possibilities.

But beyond Chapter 1 of an econ text, it is virtually worthless. Exchange, comparative advantage, heterogeneity, market supply and demand all rely on multiple actors. In fact, basic economic models are atomless.

It is USELESS for explaining what an economy (with millions of actors) will do. It is a decent starting point for micro foundations which I believe are necessary for meaningful macro models.

As for multivariate models, the main determinants of demand are price, prices of other goods, income or wealth, preferences, and expectations. Is that too many variables for your feeble mind to grok? Are you unfamiliar with the concept of parsimony in models? Are you unaware of ceteris paribus – the main hazard of two variable analysis?

Is there no room in your world for public goods, externalities, asymmetric information, and other market failures? Those things don’t mean much if anything at all in a one person economy. The usefulness of RCM fades after one or two lectures and they provide almost no policy insights.

Brian Donohue September 27, 2012 at 10:37 pm

Golly, that sounds complicated mister. Must be SCIENCE.

dgl September 27, 2012 at 3:52 pm

It’s not as explicit, or an economic treatise per se, but I would say Rousseau’s “Emile.” Robinson Crusoe is an important feature in the student’s education about labor, work, economic processes, etc.

Highgamma September 27, 2012 at 3:56 pm

That is an expensive book. Perhaps we could read an earlier paper by one of the authors. Here’s the abstract:

“The tale of Robinson Crusoe strikes a responsive chord in the imagination of many economists. This paper argues that the story of Robinson Crusoe, and the joy economists take in his example, are indicative of the way the discipline deals with issues of race and gender. Crusoe is used to represent homo economics par excellence, yet his self-sufficiency conceals the labor of others. A close reading of the novel reveals the issues of power, sexuality and race that are hidden underneath the storyline of Crusoe’s relationship with Friday. The economists’ portrait of equal exchange ignores the elements of domination and exploitation between Crusoe and Friday. The absence of female agency in Defoe’s and the economists’ story masks a narrative structure that, in fact, relies in fundamental ways on gendered representations. This process of exclusion mirrors the lack of recognition in our culture of the economic contribution of women. If Crusoe is taken to be the quintessential economic man, the economists’ story imposes boundaries separating those who belong in economic discourse from those who do not. It also makes it easier for our discipline to avoid the ethical burden of addressing the disturbing issues of race and gender in our narratives.”

The Anti-Gnostic September 27, 2012 at 10:09 pm

“Ulla Grapard is Associate Professor at Colgate University, USA, where she teaches economics and women’s studies. A founding member of IAFFE, the International Association For Feminist Economics, her research concerns feminist critiques of economic theory and practice from a postmodern perspective.

Gillian Hewitson is a Lecturer in the Department of Political Economy at the University of Sydney, Australia, where she teaches in feminist economics, heterodox economics and the political economy of development. Her research is located at the intersection of feminist economics, postcolonialism and economics and the history of economic thought.”

Great stuff. Feminism can make water flow uphill!

DK September 29, 2012 at 1:44 am

International Association For Feminist Economics

Wow. Only in Academia! (Beats any Internet kookery).

bdbd September 29, 2012 at 1:55 pm

Research interests as Venn diagram

lgatch September 27, 2012 at 8:24 pm

“Robinson Crusoe’s Money” (1876) by David A. Wells is both edifying and illustrated with some nice Thomas Nast illustrations.

Subin Kim September 27, 2012 at 9:12 pm

Also Silvio Gesell re-summons poor Rob into a desert isle in his major work The Natural Economic Order. Keynes once praised the Gesell’s fable in the General Theory.

freethinker September 27, 2012 at 10:21 pm

the question posed was when the Robinson Crusoe story was first used to think about the economy and not about the appropriateness or otherwise of the story or whether Tom Hanks should replace Crusoe . Many comments are totally irrelevant to the discussion.

Torrey Byles September 27, 2012 at 11:15 pm

As David Klein mentioned, Rousseau and Hume already mentioned Crusoe, ~100 yrs before Marx. Defoe in part based the story on real life Scottish castaway Alexander Selkirk. More interestingly however, was that most likely he got the idea of the story from a Spanish Arab Muslim named Ibn Tuyful, who wrote a similar allegory of a castaway. In this story, it was about whether an isolated man would find God on his own, without the help of society. Crusoe’s theme was how a man through industriousness and thoughtfulness could find material comfort and sovereignty on his own. It became a parable for the individualist, modern economy. Defoe is one of the dead economists whose principles we all live by now, unknowingly. Tim Severin’s book, Seeking Robinson Crusoe is a recent backgrounder on this. A book published circa 1960 also is a good overview of the economics behind the story.

Alex Goldman September 28, 2012 at 12:46 am

It is propably the best gold price chart on the market for investment http://www.sh1ny.com

Alex Goldman
http://www.sh1ny.com Founder.

londenio September 28, 2012 at 9:39 am

Alex Goldman, a loyal MR reader, is asking about the value of gold as investment.

Barkley Rosser September 28, 2012 at 5:14 pm

Alex, go away. Boooring.

I have not read Hume or Rousseau on Crusoe, but one political economist prior to Marx writing on him was Nassau Senior who posed his problem as choosing either to catch fish now to consume or hold off doing so in order to make a fishing implement to help him catch more fish in the future.

online fiuricet October 23, 2012 at 10:14 am

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