Economics of Convention: Sympathy and Social Norms as Mirrors to One Another in the Process of Non-Price Coordination

Abstract

Market exchanges are widely believed to rely on an overlap of interest, this paper argues that many market exchanges actually rely on a broader agreement between buyer and seller. The broader agreement includes the moral justification of the exchange and the associated norms of propriety. To arrive at this broader agreement markets rely on systems of non-price coordination. These non-price coordination systems, or orders of worth as we call them, can be thought of as emergent orders just like the price system is an emergent order; they are sources of justification that can be drawn upon to warrant the worth of diverse artifacts and the legitimacy of trading them. We show that Adam Smith’s theory of sympathy offers conceptual means for analyzing the emergence of such orders. To make sense of the emergence and functioning on these orders we draw on Smith's organon and link it with contemporary work in economic sociology by Luc Boltanski and Laurent Thevenot. We demonstrate how our theoretical framework can further our understanding of justifying exchanges of contested goods with two illustrative cases: contemporary art and surrogate motherhood.