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JustifyingPublicInterventionwithoutMarketExternalities:KarlPolanyi'sTheoryofPlanninginCapitalismAuthor(s):ErnestSternbergSource:PublicAdministrationReview,Vol.53,No.2(Mar.-Apr.,1993),pp.100-109Publishedby:BlackwellPublishingonbehalfoftheAmericanSocietyforPublicAdministrationStableURL::19/01/201010:44YouruseoftheJSTORarchiveindicatesyouracceptanceofJSTOR'sTermsandConditionsofUse,availableat://=black.EachcopyofanypartofaJSTORtransmissionmustcontainthesamecopyrightnoticethatappearsonthescreenorprintedpageofsuchtransmission.JSTORisanot-for-profitservicethathelpsscholars,researchers,andstudentsdiscover,use,andbuilduponawiderangeofcontentinatrusteddigitalarchive.Weuseinformationtechnologyandtoolstoincreaseproductivityandfacilitatenewformsofscholarship.FormoreinformationaboutJSTOR,pleasecontactsupport@jstor.org.BlackwellPublishingandAmericanSocietyforPublicAdministrationarecollaboratingwithJSTORtodigitize,preserveandextendaccesstoPublicAdministrationReview.~yMaarkeExtemla~lilesKalnCapitalismErnestSternberg,StateUniversityofNewYorkatBuffaloShouldplannersandpolicyanalystsrelyprimarilyonmarkettheoryinaddressingpublicissues?ErnestSternbergarguesthatKarlPolanyi'sworkoffersaformidablealternative.Writinginthe1940sand1950s,Polanyirejectedthenotionthatthemarketwasthesoleinstitutionalmechanismforsatisfyingeconomicwants.Hepositedamuchbroaderperspectiveonpub-licpolicy,takingsocial,environmental,andotherfac-torsintoaccount.SternbergoffersanoverviewofPolanyi'sthoughtanditspotentialforjustifyingandguidingpublicsectorplanningandpolicymaking.Laissezfairewasplanned;planningwasnot.KarlPolanyi,TheGreatTransformationInatimeofthereascendenceoflaissezfairephiloso-phies,weshouldreexaminethemeaningsofpublicinterventioninsocietiesdominatedbythemarket.WemaygainfullydosobylookingtoKarlPolanyi,whowroteasmallbodyofworkontheoriginsandconse-quencesoffreemarkets.Hisideasareofevergreaterrelevancetothoseconcernedabouttheapplicationsofplanning-ofcoherentforethoughtandintelligence-totheresolutionofurban,economic,andenvironmentalcrises.Polanyi'sworklaysthefoundationsforanespeciallyintriguingandstronganswertowhatisnowthedomi-nantjustificationforpublicplanningincapitalism.Accordingtothisidea,planningiswarranteduponthefailureofcompetitivemarkets,especiallyinthepres-enceofnegativeexternalitiesorpublicgoods,butonlyifthebenefitsofsuchinterventioncanbeshowntoexceedthecosts.Planninginterventionistobejusti-fiedintermsofmarketprinciplesandfulfillsasub-sidiaryfunctionatthefringesofeconomicsproper.KarlPolanyiwouldarguequitedifferently.Tohim,thecapitalisteconomyhasatitscoreaself-regulatingmarketthatoperatesbytreatinghumanlifeandnature,whichareinherentlyuncommodifiable,asiftheyweremerelycommodities,merelylaborandland.Thisveryefforttotreatthemascommoditiestransformshumanlifeanditsnaturalandbuiltenvironment.Inthispro-cess,culturesaredestroyed,lifebecomesinsecureandthreatening,theenvironmentisrazed,andthemarketeconomyitselfbecomesunstable.Sucheffectsarenotexternalitiestoself-regulatingmarketsbutareinherenttotheverypossibilityofsuchmarkets.100PublicAdministrationReview*March/April1993,Vol.53,No.2Atscatteredpointsinhiswork,Polanyiexplainsthatcom-modificationhassuchdebilitatingeffectsbecauseittearslifeandnatureoutofthegreaterwholeinwhichtheyareinter-twined-awholeheoccasionallyreferstoashabitation.Thecommodificationinherenttoself-regulatingmarketsfragmentshumanhabitation,therebybringingeconomic,social,andenvironmentalcalamity.Toprotectthemselves,marketsoci-etiesturntoplanning-includingpublicpolicy,sociallegisla-tion,andconcertedsocialaction.InPolanyi'swork,therefore,planningisnotamarginaltechnicalcorrectivetomarketoper-ationsbutanurgentmoralnecessity.Inwordsthatareterse,passionate,andatpointsobscure,Polanyiprovidestheelementsofasoundjustificationforthepriorityofplanningwithincapitalism.Thelogicbywhichhedoessoisofresoundingsignificanceforplannersandpolicyanalysts.Notably,Polanyidoesnottreatthemarketasamythorasthecreationofadominantclass.Hedepictsit,rather,asaninstitutionalizedprocessthatcanprovideprosperity,butcanalsodegradehumanlifeanditsenvironment.Whileheiscrit-icalofcapitalism(whichheseesasasocietydominatedbythemarket),healsorecognizestheallocativeefficiencyofmarketformsofeconomicorganization.Histheoreticalworkiscompatiblewiththedefenseofthemarketonthegroundsthatittendstodecentralizepowerandpreservedemocracy.Polanyi'sworkisevenconsistentwithcallstopreserveandstrengthenselectedmarkets-thosemarketsthatplayvaluablerolesinsocietywithoutoverpoweringhumanexistence.Polanyisuggestsa