According to Herodotus, there is a race of men located
……..beyond the Pillars of Hercules, which the Carthaginians are wont to visit, where they no sooner arrive but forthwith they unlade their wares, and, having disposed them after an orderly fashion along the beach, leave them, and, returning aboard their ships, raise a great smoke. The natives, when they see the smoke, come down to the shore, and, laying out to view so much gold as they think the worth of the wares, withdraw to a distance. The Carthaginians upon this come ashore and look. If they think the gold enough, they take it and go their way; but if it does not seem to them sufficient, they go aboard ship once more, and wait patiently. Then the others approach and add to their gold, till the Carthaginians are content. Neither party deals unfairly by the other: for they themselves never touch the gold till it comes up to the worth of their goods, nor do the natives ever carry off the goods till the gold is taken away.
Trade, if Herodotus is to be believed, takes place with neither sight nor sound of the other. Hence, the term silent trade or dumb barter. Ibn Battuta, the 14th century explorer, relates that on the Volga River he was told of a land of darkness, forty days journey hence where those
who go there do not know whom they are trading with or whether they be jinn or men, for they never see anyone.
An Italian prelate, Paulus Jovius, reports silent trade was common among the Lapps, writing
They bargain with simple faith with absent and unknown men.
Taking these and other accounts at face value raise at least three questions:
1) If the accounts are to be believed and trade is anonymous, why doesn’t one or the other party `defect’ and steal the goods offered by the other?
2) If trade was mutually profitable and longstanding wouldn’t this be an inducement to communication?
3) How do the parties decide the location of the `trading post’ in the absence of communication?
I cannot see an obvious answer to at least two of these questions, and for this reason would expect that any account of silent trade be greted with skepticism. Indeed, some historians argue that the silent trade described by Herodotus and others may be a myth (see for example de Moraes Farias, but his focus is on Africa). If so, why are such tales passed on uncritically? Amazingly, there are instances of merchants sinking princely sums in schemes to participate in such trades based on these tales. The most famous of these are the attempts by Europeans to participate in the silent trade of Wangarra.
Setting aside the veracity of these accounts, one can still ask inquire an institution such as silent trade is even plausible. A starting point, perhaps, might be Kandori (RES 1992) and Ellison (RES 1994). We have an infinitely repeated game where, in each period, players from two communities are randomly and anonymously matched to play the prisoner’s dilemma (PD). Each player observes only the actions played in his own match and nothing more. Interestingly, cooperation can be sustained through community enforcement. If a player is matched with a rival who defects, he punishes all future rivals by switching to defection forever. In this way, information that someone has defected spreads until there is a complete breakdown in trade (how to do this for games other than the PD is discussed in Deb & Gonzalez-Diaz). Indeed, at least one historical account reports a complete cessation in trade for three years in response to a `defection’. So, it appears the first of the questions I listed above may have an answer. The second question, I have not the wit to answer. The third invites an analogy to coordination games. The historical accounts suggest that river banks are a popular choice because they operated as a natural border between different communities. However, river banks are not the only focal points.
13 comments
May 7, 2011 at 2:44 am
Matthew Evans
offer AN answer to the second question, though Herodotus obviously made a lot of things up.
But suppose trade is mutually beneficial but both sides actively aim to capture slaves. Thus contact would risk enslavement. By leaving goods only when it is clear no one is present, the Carthaginians avoid danger. By leaving gold only when the Carthaginians are back on board ship, the natives do not run the peril of being carted off.
For trade to continue both sides know they must trade fairly, so the iteration makes sense. But both sides also know that if they come in contact, the danger of being enslaved outweighs the gains from the trade.
Or it could be that the natives are British and then as now they are notoriously standoffish with foreigners.
May 8, 2011 at 10:34 am
rvohra
Dear Matthew
Fear of the stranger is also the explanation offered by Sir Phillip Grierson in his history of Silent Trade (available free on-line for a number of sources). Indeed, one sentence stands out: The stranger is everywhere looked upon as a being without rights.
However, I think that the common enforcement scheme in Kandori and Ellison might work to get around the fear of the stranger. One side could send one of their own out with the goods. If that `lamb’ is captured, all trade is suspended. How they pick the lamb is another question. Another issue is how does one determine what the other side will value the first time.
BTW, natives are always British. The true sign of a Britishman is that no matter where he is, he considered everyone else a foreigner!
May 7, 2011 at 11:17 am
svwashout
On (1) if the exchange is in small lots and margins on both sides are huge, why risk killing the golden goose? On (2) does the smoke signal count as communication? Perhaps anything more risks drawing the attention of the tax authorities? On (3) I’m sure the people who develop shopping malls can provide details.
May 8, 2011 at 10:36 am
rvohra
Agree on (1). On (2), goes against the literalness of `silent’, but those who think literal silent is fiction point to some accounts that mention drums and smoke. On (3), the shopping mall wallah’s benefit from road maps and population records.
May 8, 2011 at 11:15 am
svwashout
Thanks, a couple of followup questions (4) what happens if a “no deal” situation is reached? Or are the sunk costs for the exchange so onerous that such an outcome is as unlikely as defection? (5) how did the first exchange take place? I can almost imagine by accident (e.g. shipwreck, subsequent recovery team stumbles upon the pot o’ gold, and its honest captain figures it out). And back on (2) let me try again– what if the goldmine was run by a leper colony?
May 8, 2011 at 9:36 pm
AMW
Perhaps it was an instance of gift-giving that turned into trade. Foreigners come to a new land and see some natives, who scamper off to re-group and consider what to do moving forward. The foreigners want to show they bear no ill-will, so they leave gifts within easy reach of the natives and go off a safe distance. The natives return and reciprocate by leaving gifts of their own and retreating a safe distance.
May 9, 2011 at 10:54 am
rvohra
Dear AMW
If gift exchange, then to what purpose? Presumably to build upto a meeting. In the accounts this is not the case. In many cases, the transactions are repeated eg salt for gold and supposedly no further interaction beyond that.
May 15, 2011 at 11:49 am
svwashout
Maybe only one side sees this activity as trade, while the other as a kind of religious experience? Sure beats cargo culting!
May 9, 2011 at 10:53 am
rvohra
On (4), once the costs are sunk, it shouldn’t matter (if I understood you correctly). In any case, you small lots idea would reduce the costs associated with no trade or theft. Your (5) is a capital question. The historical accounts don’t say. Its hard for me to see how. First the parties must coordinate on time and space. Then they must coordinate on what goods are to be exchanged. Regarding the lepers, yes, some accounts claim the other party to the transaction are hideous and deformed and that is why they conceal themselves. This is the story for Wangarra where salt was exchanged for gold. However, no evidence of hideous beings.
May 8, 2011 at 3:37 pm
Assorted links — Marginal Revolution
[…] links by Tyler Cowen on May 8, 2011 at 4:36 pm in Uncategorized | Permalink1. Silent trade.2. David Beckworth responds on the liquidity trap.3. Susan Athey is now chief economist for […]
May 8, 2011 at 9:35 pm
Walt
Heinlein borrowed this scenario for his novel “Citizen Of The Galaxy.”
May 9, 2011 at 10:56 am
rvohra
Dear Walt
did not know, thank you. However, Heinlein was not the first include it in fiction. Your namesake, Walter Scott incorporates it in one of his novels.
May 22, 2011 at 5:33 pm
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