The Moral Foundations of Economics
Some people would like to separate economists from politics, but they are unable to do so. Another name for economics is political economy. As we mentioned in earlier chapters, a sound economy cannot exist without a political state to protect it. Foolish political interference with the economy can result in general poverty, but wise political encouragement of the economy helps a society toward prosperity.
Similarly, some people would like to separate economics from morals, but they are unable to do so. For unless most men and women recognize some sort of moral principles, an economy cannot function except in a small and precarious way. Moral beliefs, sometimes called moral values, make possible production, trading, saving, and the whole economic apparatus.
All human creations and institutions have some connection with moral ideas and moral habits, for human beings are moral creatures. Concepts of right and wrong haunt us in everything we do—whether or not we wish to be concerned with moral questions.
So it is that the final section of this final chapter of [Economics] on the first principles of economics suggests that material prosperity depends upon moral convictions and moral dealings.
Adam Smith, the principal founder of economic science, was a professor of moral philosophy. He took it for granted that moral beliefs should affect economic doings.
The success of economic measures, like the success of most other things in human existence, depends upon certain moral habits. If those habits are lacking, the only other way to produce goods is by compulsion—by what is called slave labor. Let us examine briefly some of the moral qualities that make possible a prosperous economy.
Any economy that functions well relies upon a high degree of honesty. Of course, some cheats and charlatans are found in any society, yet on the whole, in a prospering economy most people behave honestly. “Honesty is the best policy,” Benjamin Franklin wrote in the eighteenth century, echoing an old English proverb. He means that honesty pays, in an economic sense.
For any advanced economy is based upon contracts: agreements to sell or to buy, promises to pay, deeds of sale, all sots of “commercial instruments.” Many commercial contracts are oral, rather than written. Today’s markets especially depend upon implied contracts (as distinguished from detailed written contracts). You may have seen a public auction, at which a bidder may pledge a large sum of money merely by raising one hand or nodding his head. The auctioneer trusts the bidder to keep his promise to buy at a certain price. On a much vaster scale, the complex apparatus of stock markets depends on such implicit contracts—and on ordinary honesty.
On the other hand, those societies in which theft, cheating, and lying are common do not ordinarily develop successful economies. If production and distribution can be carried on only under armed protectors and without any certainty of being paid, then little will be produced and distributed above the level of subsistence. When bargains are not kept and loans are not repaid, prices are high and interest rates are higher—which discourages production and distribution.
Another moral quality or habit important for the success of an economy is the custom of doing good work—of producing goods of high quality. The Romans had a word for this: industria, a moral virtue, from which our English word industry is derived. Goods should be produced, and services rendered, for the sake of turning out something satisfactory or even admirable—not for the sake merely of cash payment. This affection for quality is bound up with the hope of pleasing or helping the purchaser or customer: doing something kindly for other people, even though producer and distributor may never see most of the customers. This belief in working faithfully and well is connected with the virtue called charity. For charity is not a handout, primarily; the word means “tenderness or love, affection for other people.” The producer who creates first-rate goods is serving other people and can take satisfaction in that service.
One more virtue of the marketplace is a kind of courage: what the old Romans used to call fortitude. This economic courage includes the willingness to take risks, the ability to endure hard times, the talent to hold out against all the disappointment, harassment, ingratitude, and folly that fall upon people in the world of getting and spending.
It would be easy enough to list other moral beliefs and customs that are part of the foundation of a prosperous economy, but we draw near to the end of this book. So instead we turn back, for a moment, to one vice we discussed earlier—and to the virtue which is the opposite of that vice.
The vice is called envy; the virtue is called generosity.
Envy is a sour emotion that condemns a person to loneliness. Generosity is an emotion that attracts friends.
The generous man or woman is very ready to praise others sincerely and to help them instead of hindering them. Generosity brings admiration of the achievements and qualities of other people.
Now, generosity, too, is a moral quality on which a sound economy depends. Producer and distributor, when they are moved by generosity, do not envy one another: they may be competitors, but they are friendly competitors, like contestants in some sport. And in a society with a strong element of generosity, most citizens do not support public measures that would pull down or repress the more productive and energetic and ingenious individuals.
A spirit of generosity toward others is still at work in America. But in much of the world, a very different spirit has come to prevail. In Marxist lands, envy is approved by the men in power. Private wealth and personal success are denounced on principle. The Marxist indoctrinator deliberately preaches envy. By appealing to that strong vice, he may be able to pull down constitutions, classes, and religions.
Because the market brings substantial success to a good many individuals, the Marxist hates the market. A consistent Marxist declares that when two people exchange goods in any market, both are cheated. Yes, both—that is what the Marxist says. Exchange itself is “capitalist oppression,” the Marxist propagandist proclaims. Certainly there is little profitable exchange in Communist countries. Envying the market’s popularity and success, the Marxist denounces the market furiously.
In the long run, the envious society brings on proletarian tyranny and general poverty. In both the short run and the long run, the generous society encourages political freedom and economic prosperity.
Also, a successful free economy makes possible material generosity: it creates a material abundance that gives wealth to private charities and enables the state to carry out measures of public welfare.
From the generous society comes plenty. The old Greeks often represented in their sculptures and paintings the symbol of the cornucopia, the horn of plenty, a large goat’s horn overflowing with flowers, fruit, and grain. To this day, the cornucopia is the symbol of a prospering economy.
The American market economy, whatever its shortcomings, has put a cornucopia into most households in the United States. The rewards of the market economy have been generous.
If the horn of plenty is to continue to overflow with good things, it must be cherished with courage and intelligence. Crushing taxation, imprudent meddling, malicious envy, or revolutionary violence might destroy the horn. To protect the cornucopia, it is necessary to understand economics tolerably well. Otherwise, a society of generosity may give way to a society of envy.
In our time of troubles, many strange economic doctrines are preached. Yet there is reason to believe that the productive market economy will be functioning well a century from now. The errors of command economies and the blunders of utopian welfare states have become obvious to a great many people, while Adam Smith continues to make economic sense. So long as many people work intelligently, with good moral habits, for their own advantage and for the prosperity of a nation, an economy will remain healthy. But hard work and sound habits may be undone by foolish public policies or by the violent envy of totalist states. There is a strong need for watchfulness on behalf of the economy.
This book has not been able to tell you everything about the Goose with the Golden Eggs. But we have been able to offer some information about the care and feeding of this creature; and we have cautioned you not to slaughter her.
Nowadays this Goose goes by the name of Market Economy. It seems probable that she still will be preening her feathers when you are ready to take your part in the world of work. If you treat her kindly and intelligently, she will continue to lay for you.
Posted: December 25, 2007 in From Russell Kirk.
Reading Recommendations for 2014