Robinson Crusoe Economics

Bad Arguments Vol. 61

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Robinson Crusoe

When we first start reading into libertarian philosophy, we see examples of how things currently are, and the benefits, both practically and morally, that come from removing levels of state interference. We see arguments for the reinforcement of our rights, and clearer definitions of what rights we do and do not have. One of the most influential and reused examples is the Crusoe thought experiment. Time and time again, this particular example is used as the basis and backbone for many anarchist arguments as it serves well in its role of explaining how libertarianism works both with regard to human nature and to baseline economics. This doesn’t leave the argument without issues though.

For those that haven’t seen this argument used before, allow me to explain. Robinson Crusoe is a character, from a book of the same name, who had been stranded on a deserted island. In economics, we use this particular example to scale down our economic analysis to a single actor, then extrapolate from there. In situations where we need to analyze trade we, then, add his friend (a servant in the book) Man Friday. The inclusions of the second person also helps with reviewing how we establish trade rules, what happens with imbalances with wealth, and how we can potentially create ownership systems/which systems are better.

The best use of Crusoe examples is to simplify economic calculations for experimentation and modeling, however, this is not the only way they’re used. Often in libertarian literature, the arguments go into “what makes sense to do” or other a priori arguments about what Crusoe would do and how he would act if acting as a perfectly rational actor. Therein lies two of our issues. Basing key arguments on what we think someone alone on an island would do fails to account for how multifaceted and complex our interactions with each other are. Furthermore, having an a priori argument built on the idea of a perfectly rational actor rarely, if ever, accurately resembles how things play out with real people.

Reliance on the Crusoe example also ignores the concept’s history. While primarily employed by Classical, Neoclassical, and Austrian economists, the open concept of a single actor outside of our regular economic situations can be employed just as easily to discredit the free-market economics that it’s supposed to support. In the Crusoe example, when we add Friday, it’s usually used to show the benefits of trade. What if we reviewed this two-person economy, but as a communistic gift economy? Surely, these two would have a greater quality of life simply sharing the land, workload, and fruits of said labor communally rather than hoarding what they produce for the sake of measured trade over imaginary lines they’ve established. I’m sure arguments of similar weight could be drawn from Crusoe for several other economic models; each of which would stray further from the original pro-capitalist argument.

The Crusoe example can be a great tool for simplifying models for the sake of mathematical exploration or to make explaining a concept simpler as well. That said, we cannot treat it as an argument on its own lest we wish to find ourselves stranded.

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