Standardization—the first step toward commodification—allows the market to accommodate a larger number of players. Arguably, the greatest friction in this marketplace is that buyers and sellers cannot easily assess what they are buying. It is challenging to quickly determine at a distance whether a chicken is high quality or low quality, particularly where buyers and sellers are strangers and where there is low trust between the various players in the marketplace.
Say that we bring together the buyers and sellers of chickens, and they agree on common definitions about what is traded in the marketplace. Rather than selling different types of chickens in nonstandard quantities, they specify something that we’ll call a Standard Chicken Lot (SCL). The SCL is a fixed unit of chickens having certain qualities: the chickens might need to be above a certain weight, to not have any diseases, and so on. They hire some inspectors to go around to places where chickens are sold to make sure that people are conforming to this standard. On their own, chickens are a heterogeneous thing. Some are tall and some are short. Some are thin and some are heavy. Some are of one breed and others are of another. The SCL ensures that the chickens traded in our market are of a commonly understood quality and quantity.
This may not sound like a whole lot, but it changes everything. Suddenly our chicken marketplace is capable of enabling large numbers of buyers and sellers to quickly transact chickens at arm’s length by simply knowing how many SCLs are on offer and for how much.
Standardization does not just allow the market to expand effectively. It also produces the second step in the process of commodification—abstraction. SCLs are abstract—disconnected from the process of production and the unique identity of the producer. Because the units of chicken being bought and sold are now standardized, a prospective buyer no longer needs to know the specific characteristics of a farmer to move ahead on a transaction. SCLs are interchangeable: an SCL produced by our island chicken farmer is the same as another SCL produced in a different place.
Abstraction enables arrangements that might never otherwise emerge in our original island chicken marketplace. This kind of abstraction facilitates speculation. Groups with little interest in raising chickens or consuming chickens might choose to engage in buying and selling SCLs to make money from fluctuations in price. One could buy the rights to an SCL in the marketplace and sell the rights at some later date, without ever seeing or moving the actual chickens. The trade in SCLs—which are abstract assets—can take place far away from where the chickens are hatched and where they end up.
This is more than a just-so story; the dynamics of commodification are very real across many different kinds of markets. Perhaps one of the most dramatic historical examples, as documented by William Cronon in his book Nature’s Metropolis, is the emergence of large-scale grain markets in Chicago during the middle of the nineteenth century.30
Before 1850, grain was bought and sold in large, open-air marketplaces near the waterfront of Chicago.31 These marketplaces transacted grain in very much the same way as our island chicken farmer sells chickens. Grain was sent by the sackful from a farm to a merchant, who would haggle face-to-face with buyers in an effort to obtain the best price. The merchant acted as a middleman for the farmer, who retained ownership over his grain and paid the merchant a commission for each sale.
As Cronon explains, the rise of the railroads transformed this mode of exchange and “transmute[d] wheat and corn into monetary abstractions.”32 Railroads allowed crops to be efficiently transported from outlying farms into Chicago, rapidly increasing the amount of grain that entered the city’s market. When it became clear that bulk grain was more efficiently sold at market, traditional grain sacks were abandoned and farmers pooled their crops into freight cars.33 But combining grain from different farms raised the question of how to deal with the ownership of the grain that each farmer contributed to a given carload.
A private industry consortium, the Chicago Board of Trade (CBOT), eventually solved the problem through standardization. The CBOT designated three categories of grain and four levels of quality (“Club,” “No. 1,” “No. 2,” and “Rejected”).34 Farmers putting grain into a train car received a receipt indicating a quantity of grain and a quality level. The receipt was redeemable for an equal quantity of the same quality grain—not the same grain, but its functional equivalent.
Once standardized, grain became abstracted into a commodity. The receipts could be bought and sold without regard to the specific identity of the farmer who originally produced the grain. People with no interest in grain production could make a profit by buying and selling receipts. Famously, the CBOT also facilitated the rise of a vigorous trade in “futures,” speculative contracts betting on the future price of grain. According to Cronon, grain came to be seen “as a commodity, not as a living organism planted and harvested by farmers as a crop for people to mill into flour, bake into bread, and eat.”35
Another outcome of grain commodification was an explosion in the size and importance of the market itself. Chicago commodified faster than other grain markets, outstripping its longtime rival St. Louis in 1855.36 Before commodification, grain produced in the northern United States was sold to markets in southern states. After commodification, the trade reversed direction. “No place was more important than Chicago to this redirection of agricultural trade,” Cronon writes.37 The CBOT remained the world’s dominant commodities market and futures exchange well into the twentieth century.38
The economics of nineteenth-century grain may seem far removed from the online advertising markets of the twenty-first century. But the huge distances of time mask deep parallels. Attention—a varied, heterogeneous, hard-to-define thing—underwent a similar process of commodification
