Transactions Costs in Strange Places: Geertz on the “Bazaar Economy” of “Modjokuto”

Today I teach the Coase Theorem in my undergraduate Politics and Markets class. In a directed grad reading on Indonesian political economy, we are covering Clifford Geertz’s Peddlers and Princes. I did not anticipate that the two would have much relevance for one another, but they do. Specifically, the description of transactions costs in a bilateral exchange. From Chapter 3 in Peddlers and Princes, describing the pasar [= bazaar] in the fictionalized town of “Modjokuto” (actually Pare), East Java:

The sliding price system, accompanied by the colorful and often aggressive bargaining which seems to mark such systems everywhere, is in part simply a means of communicating economic information in an indeterminate pricing situation. The continual haggling over terms is to a degree a mere reflex of the fact that the absence of complex bookkeeping and long-run cost or budgetary accounting makes it difficult for either the buyer or the seller to calculate very exactly what, in any particular case, a “reasonable” price is. Pricing is much more a matter of estimates in a situation where highly specific comparative and historical data are simply not available; instead of exactly calculated prices, one finds the setting of broad limits within which buyer and seller explore together the finer details of the matter through a system of offer and counteroffer. The ability to operate effectively in the gap of ignorance between a price obviously too high and one obviously too low is what makes a good market-trader: skill in bargaining—which includes as its elements a quick wit, a tireless persistence, and an instinctive shrewdness in evaluating men and material on the basis of very little evidence—is the primary professional qualification.

Even more important, however, the sliding price system tends to create a situation in which the primary competitive stress is not between seller and seller, as it is for the most part in a firm economy, but between buyer and seller.

The rest of Chapter 3 describes various types of firms and firm-like things, from the toko [= shop] to the perusahaan [= enterprise] and many others. It also describes the problem facing many entrepreneurial Javanese traders as one of organization, not market orientation. (This compares nicely with my characterization of the Arab trading communities in Java, which draws in part on Geertz’s other work on Modjokuto.)

There was a time in which anthropologists and economists really could learn from one another. Sadly, not so much anymore, given trends in both disciplines.

Posted in Economics, Indonesia, Politics, Teaching
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