Wednesday, July 27, 2011

"Moral Magnanimity and Moral Markets": a naive dilemma?

Dwight R. Lee, is professor of economics at Southern Methodist University, has posted (19 July) in the Moral Liberal (HERE):

The Economics of Caring and Sharing
Free Enterprise Zone
” (from The Freeman)

Market morality can be achieved, according to Adam Smith in The Theory of Moral Sentiments, “by sitting still and doing nothing.” And while markets reward kindness and caring for those with whom we have personal exchanges, the vast majority of the exchanges we benefit from are impersonal; we neither know nor meaningfully care for those on the other side of the exchange.


Actually, Smith applied this statement about “by sitting still and doing nothing.” to meeting the virtue of Justice.
Similarly, relations within our immediate circle of family and close friends tend to be most personal and close, and then successively diminishing as the people we transact with are further from our immediate circle.
Finally, we most certainly have to be concerned with those we transact with in market exchanges – see WN: I.ii.2: p27: ‘we address ourselves, not to their humanity. But to their self-love ,and never talk to them of our necessities but of their advantages’.

Disregarding (i.e., not caring) about those we directly transact with leads to poorer or no bargains. The anonymity begins beyond the immediate partner transactions – we care less about them because we do not know, nor need to know, of them – and so on along supply and demand chains beyond those with whom we directly transact, which is a creditable, as well as necessary condition, for complex transactions amidst modern opulence (and was true in Smith’s day too).

Dwight R. Lee:
Since these impersonal exchanges create enormous benefits from outcomes that emerge without conscious direction, people seldom give much thought to those benefits or the market morality on which they depend. Of course people do think about markets occasionally, but when they do it is seldom with appreciation for the benefits they are receiving. More often than not people think about markets when they are being inconvenienced by the market discipline—the requirements “imposed” on us, for example, in return for income—that makes their benefits possible. Few of us connect such discipline to the far greater benefits we receive as a consequence, particularly when we see others who appear to be reaping great rewards from the very discipline that is apparently making us so much worse off. Under these circumstances it is easy to conclude that we are imposed on unnecessarily by the greed of others. How easy it is to also believe there is something immoral with an economic system that not only tolerates greed but also rewards it.

It is forgetful of the history of what “worse off‘ meant compared to the societies our predecessors lived in for many millennia before the ‘Age of Commerce’ that Smith analysed that makes it too easy to write about today’s economic system “that is apparently making us so much worse off.’ Compared to what – Somalia, rural China, India, Brazil, North Korea?
Moreover, since when was “an economic system that not only tolerates greed but also rewards it” something new and unprecedented in the history of the human societies, right up to now? The vast majority of the history has often had no choice but to ‘tolerate’ the vile rulers of mankind since long before ‘market morality’ was introduced.

Dwight R. Lee:
When economists make the case for what they see as the most impressive feature of markets, they typically do so with the aid of Adam Smith in a way that reinforces the view that markets at best lack morality. Smith understood and appreciated magnanimous morality, as any reader of The Theory of Moral Sentiments, his first book, knows. But this would not be known to someone who knew only Smith’s “invisible hand” argument for markets in The Wealth of Nations'.

Given that “someone who knew only Smith’s “invisible hand” argument for markets in The Wealth of Nations” is living under an illusion, cruelly spread by modern economists, who saw this myth as the ‘advantage’ of capitalism over socialism during the Cold War decades (Samuelson, 1948, et al) and, ironically, by Marxists (Oscar Lange, 1946) as a convenient though false criticism of markets. The myths of the ‘invisible hand of the market”, which Adam Smith never articulated in Wealth Of Nations, nor in Moral Sentiments”, because, as we show endlessly on Lost Legacy, Smith had no such “argument”. It was “invented’ and popularized from-mid 20th century, but not in 1759, nor in 1776.

Dwight R. Lee:
“The advantage of markets, according to Smith, is that by pursuing their own interests in the marketplace, people unintentionally do more to promote the public interest (the interest of no one in particular) than if it had been their intention to do so. [GK: Agreed] This argument ignores every requirement for magnanimous morality, and the way economists phrase the argument makes it easy for people to conclude erroneously that the argument for the market rules out the more personal caring and sharing in which our personal relationships are rooted.”

Only if Adam Smith’s notion of “self-interest” elides into “selfishness”, which he consistently condemned as “licentious” and “wholly pernicious” referring to Bernard Mandeville, 1724i, n Moral Sentiments (TMS IV.ii.4.6: 308, etc.,) and popularized by Geko’s script writer in “Wall Street” and numerous modern economists and media people almost everyday.

Dwight R. Lee:
Calls for a more moral marketplace — sometimes referred to as capitalism with a human face—are invariably motivated by the hope of substituting the instinctive morality of the small group for the morality of impersonal markets. …

… The primary advantage of markets is that they provide each of us with the information and motivation to share with literally millions of people, without caring for them

Apart from the naïve reliance on “small group morality” of early hunter-gather societies as a model for the future, Professor Lee should add to the moral balance sheet the anthropological data of the death rates inside those small groups and with their neighbours was higher by far than that of what we regard as the very violent wars and urban murder rates experienced in the 20th century among males, not to mention the incidence rape and forced cohabitation among captured women in the very violent ‘wars’ of “small groups. There is no reason to believe that the 21st century (so far) has managed to approach the comparison death rates of the ‘small group’ societies of all previous millennia before capitalism.

Incidentally, these early societies were truly anonymous in every sense in their lack of knowledge or acquaintance of distant neighbouring other ‘small – even large – groups’, living hundreds of miles away across a continent, and were completely ignorant of other “anonymous” groups in distant continents. For example, when those small tribes left Africa and some walked over the generations to what we call Australia, they became ‘unknown’ and truly ‘anonymous’ years until Dutch and Chinese explorers found them for over 60,000 years later.

Today, their descendant children can see on television all the affairs of the otherwise “anonymous” children of those their ancestors left behind.

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