Wednesday, November 09, 2011

Markets and Morality from an Unexpected Source

Nelson Jones writes in New Statesman HERE

“Morality and Markets”

For whatever the virtues of personal relationships the great moral insight of the market economy derives from its very impersonality, which for the first time made possible a kind of objective ethics. And the market is reciprocity in action. As Adam Smith famously said, "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest."

The title of the St Paul's report, Value and values, is a reminder of how much of our moral vocabulary consists of metaphors derived from the marketplace. Value is a measure of what something is worth. And a "worthy" person is morally an upright one. If someone does you a favour you are in their debt, you owe them. And there's no such thing as a free lunch. Sooner or later will come payback time. You will be held to account for your actions. Respect, in life, has to be earned. Conversely, we believe that criminals should "pay" for their crimes, that betrayal is a sell-out and that politicians who lecture the rest of us while enjoying the privileges of office are morally bankrupt.

The moral language of the markets is as old as the Bible. The Old Testament reports that a king of Babylon was "weighed in the balance and found wanting", and tells us that the price of a virtuous woman is "far above rubies". In the "parable of the talents" (a talent being a large quantity of silver), Jesus speaks of spiritual capital as a sum of money with which you should speculate to accumulate. As for Muhammad, he worked for most of his life as a trader.

What all this suggests to me is that the trading relationship that developed in the first market economies enabled people to think about ethics and morality in new and interesting ways, and has thus been a source of moral progress.

Before the formalisation of relationships in the marketplace, there were "primitive", intuitive forms of social relationship: parent and child, sexual partnership, the wider kinship systems of the tribe, and the relationship of subordinate to superior in a dominance hierarchy. All such "natural" relationships are mediated by, and encourage, pre-moral forms of reciprocity: bribes, threats, genetic claims, feelings of social solidarity, etc.

Such relationships may contain the seeds of morality, but by themselves are not moral; in fact they can impede morality as we now understand it. We think it's wrong to bribe or threaten others or promote our relatives against better-qualified non-relatives, for example. For most of human history, and in some places even today, this would not have seemed obvious. That it seems obvious to us is one of the moral lessons of the market.

"Personal relationships good, impersonal market forces bad" is thus at best a simplification and probably highly misleading. A properly functioning market will expose and punish underhand behaviour. The main problem with today's financial markets is that they have become dysfunctional.


Comment
An interesting line of argument from, at least to me, an unexpected source. The New Statesman is a leftish commentator, with a circulation long past its hey days of the 1960s, but still likely to espouse leftish views as if they matter.

The oft-quoted reference to Adam Smith’s, is as often misunderstood. Smith was not downplaying the morality of benevolence (see his Moral Sentiments, 1759), his focus was on the inability of benevolence to feed, clothe, and shelter all those who need these things every day.

Nature is niggardly; it releases its bounties to a degree by toil only. Humankind has spent many millennia slowly discovering how to release Nature’s bounties, with the achievement of complete global success some way off, though the commercial system (later called capitalism in its varied forms) began to achieve this from the 15th century, following its earlier phases that were terminated in the thousand-year interregnum from the Fall of Rome in the 5th century. From the 1800s the spurt in per capita incomes, unequally enjoyed no doubt, began to reach unprecedented levels, first in North West Europe, later across Europe and parts of the globe (see Deirdre McCloskey. Bourgeois Dignity: why economics cannot explain the modern world, 2010).

Taking the age when the Bible’s books started to be written dates vary, but c.6-800 BCE appears to be accepted, i.e. the books that eventually made up the Hebrew Bible commenced about 2,800 years ago, that is, a very long time after humans left the forest for shepherding and farming (Cain and Abel’s supposed time) that commenced in a small segment of South East Europe and the Near East, from c.11,000 BCE. The Hunting and Gathering hundreds of millennia is often somewhat idealised (and sanitised) in moral terms by many anthropologists, using fieldwork among today’s tiny remnants of pre-historic societies. Shepherding and farming commenced to develop their long-existing primitive exchange relationships, which Smith identified as being present from its earliest forms by the faculties of reasoning (not rationality!) and language (WN I.ii.1.2: 25).

Exchange in its full sense (not just as market ‘trade’) depends on the development of crude morality as an alternative to the sharing of the bounties of nature and the fruits of toil (labour) by violence, though the alternatives of plunder or trade existed in parallel in varying degrees for tens of millennia to the present. Exchange in its market forms presumes the existence of property and, increasingly, of justice, as enforced by ruling norms of violence. The early great ‘civilisations’ were also great examples of tyrannical armed-state violence, which, Smith wrote, protected the rich against the poor (WN V.i.b.12: 715), to which we should add by observation and the evidence, also to protect the rich against each other! The proportion of family deaths from dynastic quarrels about primogeniture challenges must have been significant in all civilised societies (e.g., Europe either side of the Roman Republic and Empire).

Market relations composed of long and complex supply changes were fundamental to the formation of moral relationships correctly identified by Nelson Jones. I am not so sure about identifying reciprocity with “bribes, threats, genetic claims, feelings of social solidarity”, but this may just be a matter of brevity. Reciprocity is a fundamental building block for the emergence of bargaining as defined by Adam Smith, and strongly features in pre-history, as it does in signs of reciprocity relationships in some earlier animal species (bats and primates). It certainly existed in early humans that descended from the common ancestor leading to humans and today's chimpanzees. I have called this implicit ‘quasi-bargaining’ (from my unpublished essay: The Prehistory of Bargaining, 2003).

Humans learn their moral standards in society in discovering what behaviours are acceptable/unacceptable to others. Adam Smith develops this theme in his Moral Sentiments (1759). Our predecessors practised the norms of the acceptability/non-acceptability of certain behaviours long before modern religious movements imposed their theological imprints of divine accountabilities and God’s sanctions after death. Workable standards of inter-personal relationships were formed millennia before Bronze-age tribes invented monotheism. After market relations became dominant they did not diminish moral behaviours, contrary to some current assertions in many leftish magazines and newspapers. Pointing to notable counter-examples, as if they are uniquely practised or caused, or congenital to markets (e.g., Karl Polanyi) is fallacious.

That is why I was struck by Nelson’s article in the leftish New Statesman and I congratulate them for that.

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4 Comments:

Blogger airth10 said...

Thank you Mr. Kennedy: You ferret out the most interesting stuff.

What has impressed me is how humankind has learned its morals perversely. It has not been enough that we have been given moral dictates from on high, like from the Bible or some other source. Instead, we have had to go through the motions in order to truly and sincerely learn how to behave towards each other. Ironically it has been from the hurly-burly of 'market place' and the networking that has fostered that our moral skills and values have developed.

No other economic system — traditional or communist, has developed the universal moral skills like capitalism has, the moral skills that are inclusive and transcendent. Perverse, isn't it?

Some decry the 'invisible hand' for giving us loose morals and unintended consequences, like Norm Chomsky pointed out. Nevertheless, what the invisible hand has also given us is 'push-back', the push back on which we can renew and improve the system.

Kant talked about the 'moral imperative'. However, we would never have fully understood it if it wasn't for the 'invisible hand' and what it has facilitate.

7:27 p.m.  
Blogger Gavin Kennedy said...

airth
I agree with you up to the point of involving 'an invisible hand' in your statement. Such a metaphor is unnecessary and was not used by Smith in the sense that you imply.

We are born into society - not alone in the woods. Society is the "mirror" that reacts to our behaviours - chastising unacceptable behaviours (punishing severe transgressions, commenting on minor ones) and showing pleasure at appropriate ones. Different societies develop different standards of what is acceptable to them (the British form orderly queues; Italians prefer disorderly scrambles).

It is the market that develops within that society's moral mirror, not by 'an invisible hand' but by local moral culture, codified over millennia and learned individually in what Smith called the 'school of self-command' (from when children interact in the 'playground' and learn to avoid displeasing their school mates).

As we learned, we pass on to others.

Gavin

8:04 a.m.  
Blogger airth10 said...

"(the British form orderly queues; Italians prefer disorderly scrambles)."

That reminds me of standing in a disorderly queue with an Italian next to me. I said, this is chaos. The Italian responded, We are used to this; I'm Italian.

2:24 p.m.  
Blogger airth10 said...

"Such a metaphor is unnecessary and was not used by Smith in the sense that you imply."

And how did I use it in the manor I shouldn't have?

Who famously said that life is a metaphor, or something like that?

2:33 p.m.  

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