... the example of an Israeli day care center that started charging parents who picked up their kids late in an attempt to drive down tardiness. In fact, the problem became worse. Parent's adopted a marketplace mindset that saw them reason--at some level or other--that the price was worth paying. Before the fee structure, when there was only the social price to pay--guilt--, they felt beholden to the community.This brings up a few points. First, note that market transactions as such constitute only one of the many kinds of human interaction possible, and even only one of the many possible economic interactions -- i.e., those involving an exchange of goods and services. The alternative to the market, therefore, isn't necessarily the state, as assumed so often by the liberal-left, and other forms of voluntary interaction are not only entirely in keeping with a classically liberal (very small-l libertarian) perspective, but may be preferred, as the cases above illustrate.
But, second, note that market interactions have some distinct advantages over other forms of exchange, primarily in the way in which they simplify cost/benefit calculations, and thus can be more easily extended over a wider range of social contexts. The situations above may appear to be counter-examples of this, but I think in fact they illustrate the general principle even if it's misapplied in their particular cases -- in general, donation and obligation are both, by comparison, vague, difficult to predict, and prone to the stress of free-riding, for both sides of the exchange.
Here is where Mauss' anthropological study of "the gift" is instructive. His short, famous book makes it quite clear that the exchange of "gifts" in what he calls "archaic societies" is not the simple altruistic gesture we often take it for, but is rather a complex process, fraught with interpersonal significance and tension, and forming the basis for social hierarchy and political power. Market exchange, by contrast, is a much more delimited and transparent interaction. But its comparative surface simplicity is complemented by a much deeper social/political sophistication, that provides the necessary legal and cultural framework to support an extensive, even global network of trust underlying such exchanges. Simpler or more primitive cultures have usually relied on a combination of looting and sharing, supplemented by "gifting" -- the appearance of market trade provided the foundation for that rich process of development that Matt Ridley celebrates in this talk.