Should you mix friendship and money? Family and money? In the latest EconTalk, I talk with sociologist Viviana Zelizer  about these issues and how differently economists and sociologists look at money, family and exchange. In the course of the conversation, we discuss this quote from Hayek’s The Fatal Conceit :
Part of our present difficulty is that we must constantly adjust our
lives, our thoughts and our emotions, in order to live simultaneously
within different kinds of orders according to different rules. If we
were to apply the unmodified, uncurbed, rules of the micro-cosmos
(i.e., of the small band or troop, or of, say, our families) to the
macro-cosmos (our wider civilisation), as our instincts and sentimental
yearnings often make us wish to do, we would destroy it. Yet if we were always to apply the rules of the extended order to our more intimate groupings, we would crush them. So we must learn to live in two sorts of world at once.
[Italics in the original]
Zelizer argues that in general, it’s a mistake to view money and intimacy as two separate worlds. As an economist, I think, she’s basically right—it’s not productive to view them as two separate worlds. But as a parent, husband, brother and son, I’m not so sure. So in a positive sense—how the world is—it’s good to remember that these worlds often intermingle. It can be fruitful to view a family as a firm, for example where goods of various kinds, some tangible and some intangible are exchanged. As a normative question—how we want the world to be (and this is what I think Hayek was talking about)—we don’t want to treat intimacy as a commodity.