Morality and Markets

Robert Skidelsky on the morality of the capitalist system:

The moral vulnerability of markets, by Robert Skidelsky, Project Syndicate: Today, there seems to be no coherent alternative to capitalism, yet anti-market feelings are alive and well, expressed for example in the moralistic backlash against globalization. Because no social system can survive for long without a moral basis, the issues posed by anti-globalization campaigners are urgent — all the more so in the midst of the current economic crisis.

It is hard to deny some moral value to the market. ... It is morally better to have our goods supplied by free labor than by slaves, and to choose our goods rather than have them chosen for us... The fact that the market system is more efficient at creating wealth and satisfying wants than any other system is an additional bonus.

Moral criticisms of the market focus on its tendency to favor a morally deficient character type, to privilege disagreeable motives, and to promote undesirable outcomes. Capitalism is also held to lack a principle of justice.

Consider character. It has often been claimed that capitalism rewards the qualities of self-restraint, hard-work, inventiveness, thrift, and prudence. On the other hand, it crowds out virtues that have no economic utility, like heroism, honor, generosity, and pity. ...

The problem is not just the moral inadequacy of the economic virtues, but their disappearance. Hard work and inventiveness are still rewarded, but self-restraint, thrift, and prudence surely started to vanish with the first credit card. ...

No doubt it is unfair to blame the market for bad moral choices. ... But the market system relies on a particular motive for action — Keynes called it “love of money” — which tends to undermine traditional moral teaching.

The paradox of capitalism is that it converts avarice, greed, and envy into virtues. We are told that capitalism discovers wants that people did not realize they had and thus moves humanity forward. But it is truer to say that the market economy is sustained by the stimulation of greed and envy through advertising. In a world of ubiquitous advertising, there is no natural limit to the hunger for goods and services.

The final moral issue is capitalism’s lack of a principle of justice. In a perfectly competitive market..., all the factors of production receive rewards equal to their marginal products, i.e. all are paid what they are worth. The full competition and information requirements ensure that all contracts are uncoerced (there is no monopoly power) and all expectations are fulfilled, i.e., people get what they want. Justice in distribution is supposedly secured by justice in exchange.

But... There is always some monopoly power, insiders have more information than outsiders, ignorance and uncertainty are pervasive, and expectations are frequently disappointed. Justice in exchange has to be supplied from outside the market.

Moreover, the endowments that people bring with them to the market include not just their own innate qualities, but their starting positions, which are radically unequal. That is why the liberal theory of justice demands at a minimum equality of opportunity... As a result, we rely on the state to provide social goods like education, housing, and health care.

Finally, the claim that everyone is — under ideal conditions — paid what they are worth is an economic, not a moral, valuation. It does not conform to our moral intuition that a CEO should not be paid 500 times the average wage of his workers, or to our belief that if someone’s market-clearing wage is too low to support life, he should not be allowed to starve to death. ...

While the market today has no serious challenger, it is morally vulnerable. It has become dangerously dependent on economic success, so that any large-scale economic failure will expose the shallowness of its moral claims. The solution is not to abolish markets, but to re-moralize wants. The simplest way of doing this is to restrict advertising. This would prune the role of greed and envy in the operation of markets, and create room for the flourishing of other motives.

Restrict advertising?

We won't ever create a system that everyone regards as fair since we all have different notions of what is equitable. What we can do is create a system, e.g. capitalism, investigate its properties thoroughly, and let society decide if that system needs correction, i.e. if it is moral and equitable according to widely agreed upon principles, or more radically if another system is needed (which doesn't happen easily). The economic system may match our ideas of fairness, and it may not. For me an important attribute is that everyone have an equal chance to compete and maximize within the system, to have an equal opportunity to claim a share of the goods and services society produces. Thus, based on this, to the extent that the economic environment favors one person or one group over another, I think we should step in and correct the inequity. If we can fix unequal opportunity ex-ante, i.e. make changes so that nobody is affected from that point on, that is best, but in some cases that may not be possible, at least not immediately, and some sort of ex-post redistribution to correct the outcome may be necessary, and this includes measures such as an estate tax.

But calling for equal opportunity and corrections where it doesn't exist doesn't do much to separate one economic system from another, equal opportunity as expressed in te previous paragraph could be satisfied within most economic systems so long as everyone begins on an equal footing. So beyond equal opportunity, I also like the idea that people should have a right to the value of what they produce - something that a purely competitive model promises, but this breaks down when market power or other market imperfections intervene in the marketplace. So, on this basis, I also advocate aggressive correction of market failures of all types. For example, if everyone has an equal opportunity to become a CEO (they don't), and it the market for CEOs is perfectly competitive (it isn't), then I wouldn't get too excited about their salaries. Taking part of it away would be unfair (though I understand that others could easily argue, as above, that a 500 to 1 difference is immoral according to their notions of equity). But if the salaries exist due to unfair advantages, then taking part of the salary away to give to others so that they too can have the opportunity to, perhaps, become a CEO someday, is a correction of an inequity that arises because of imperfections in the system. So I don't see these types of redistributive efforts as immoral in the sense of taking away something that the person has some moral right to keep.

For me, those two principles - equal opportunity and the ability to keep what you produce - take us a long way so long as we step in as necessary to make corrections when these principles are not satisfied, so I'll stop there [update: can I add freedom of choice?]. As to the character issues discussed in the article, those don't concern me too much (and I disagree with some of the assertions, e.g. that capitalism undermines thrift). What moral principles do you think an economic system ought to satisfy?

Comments

[oops]

i pretty much agree with you mark. when i first came to this blog that probably would not have been the case.

[Bruce Wilder]

I recognize that a great many people map moral concepts and systems onto economic concepts and systems. Theoretical economics does help to define and develop some key normative concepts.

But, in terms of understanding how an economic system actually operates, I would tend to think it might be best to catalog the ways economic systems deviate from the expectations of our moral intuition with at least as much thoroughness and moral fervor as the apologists for capitalism apply to developing the pious case for patient thrift, etc.

It might well be that moral intuition suggests that free labor is superior to slavery. But what does that have to do with capitalism? I can assure you that capitalism, historically, was perfectly happy to nurture slavery. Brad DeLong has some lovely charts plotting out the explosion in cotton textile production, which constituted the beginning of the industrial revolution in Britain. The cotton came from capitalist plantations in the capitalist USA, utilizing slaves, slaves bought and sold in auction markets, slaves insured and used as collateral like any other capital asset.

Does anyone living amidst 21st century market capitalism not think that market capitalism provides as much scope for fraudulent glad-handing as for earnest hard-work?

I live in the movie capital of the world. Keanu Reeves is a fine, handsome fellow. What bizarre form of Social Darwinism congratulates itself on making of Keanu Reeves an extremely wealthy man?

I am fine with restrictions on advertising. But, that's simply because I regard advertising as, at the margin, a "bad" (as opposed to a "good"), a noxious waste viewed from the perspective of social welfare. Half the working population or more is engaged in some form of salesmanship; would we have have less "goods", if we simply dialed back all of that effort? If buses were painted to look like buses? If we had 50 channels of nothing to watch on TV with fewer interruptions, instead of 500 channels and more interruptions? Would it be so terrible to gaze at an unobstructed landscape or a less cluttered streetscape? If we all took 6 weeks of vacation a year instead of 2?

[robertdfeinman]

There are two issues which are getting conflated. One is how productivity is organized. The other is governance.

There have been successful economic systems with various types of organization, ranging from communes and clans, to feudal ownership, to state ownership.

What makes them "moral" is that the people who participate are free to chose the system that they want. So far the only form of governance that assures this is democracy. The problem in the US right now is that the public has minimal say in how the society is run. We have a partial, or imperfect, democracy. Not only is the choice of elected officials limited by various institutional factors (such as the need to have access to large amounts of money to run for office), but there are biases based upon a person's inherent characteristics.

Many institutions are not democratically run at all, this includes all for-profit firms, non-profits and foundations, religious institutions and colleges and universities. People have very little control over the institutions which form their lives.

So, it makes little difference if the capital of a company is raised from private sources, or from the government, or from the workers as long as the way the firm is run reflects the will of the people.

In our present situation, given that firms are undemocratic, the control of management needs to be balanced by other forces. This should include the nominal owners (who presently have no real power), the workers and the customers. There can be proxies for these groups. Owners should be protected by government as, for example, by the SEC. Workers should be represented by organized labor and customers should be represented by agencies which protect against harmful products, such as the FDA, EPA, etc.

Since our democratic government institutions are not functioning properly the agencies which were intended to serve the public interest are not responsive. Hence a runaway situation.

Restore true electoral democracy and things will get corrected. Depend upon $1 billion to run elections and things won't change much.

[piglet]

"It is hard to deny some moral value to the market. ... It is morally better to have our goods supplied by free labor than by slaves, and to choose our goods rather than have them chosen for us..."

Yawn. Bogeyman argument. If you want to discuss criticisms of capitalism, why don't you start by - discussing criticisms of capitalism. So far I haven't heard anybody accusing capitalism of giving too much freedom to its workers (aka wage slaves) so there was really no need to "debunk" that one. Last time I looked, critics of capitalism focused on issues like class, power and exploitation. And the "tendency to favor a morally deficient character type" is certainly not what Marx had in mind when he pointed out that the structure of capitalistic social relations imposes itself on the people involved (whose characters, he said, were just "masks"), not the other way round.

Maybe Marx's 125th death anniversary is indeed a good occasion to take some time and reflect on the capitalist system and its future.

[KThomas]

"...Restore true electoral democracy and things will get corrected."

That's far too idealisitc, rtd, though I too make this wish.

[James Killus]

It is hard to deny some moral value to the market. ... It is morally better to have our goods supplied by free labor than by slaves, and to choose our goods rather than have them chosen for us

As Bruce Wilder observes, slave markets in the old South put the first part of the argument to hash. As for the second part, hmm, where is that electric car that I wanted? People were begging to purchase the prototypes, but GM called them back and scrapped them. Yeah, there was choice in action.

And how many people here are using a Microsoft operating system? How much choice were you given? And don't chime in about Linux, because that's been a volunteer effort, conspicuously devoid of the sort of market forces that Skidelsky reveres.

The pea is under the shell where property is defined. Once, some human beings were defined as property, so there was a market in people. Right now there's a market in health care denial, so there are divisions of insurance companies whose sole purpose is to find policy holders with expensive conditions and to find some loophole to yank their coverage. There are parents working long hours at jobs they despise because that is the only way to provide health care for their children (Lest anyone claim that they should have thought of that before they had children, I will observe that many things change between the birth of a child and the end of parental responsibility for said child. If everyone planned for their child developing an expensive illness, there would be almost no children born).

I will be generous and say that markets are amoral, an observable social force, as gravity is an observable physical force. Greed and rapacity, however, are not intrinsic to markets. It's human beings that bring those to the table.

[Robert Edele]

No coherent alternative???

There are many alternatives out there. A non-exhaustive list includes feudalism, socialism, communism, capitalism, and mercantilism. All of these economic forms cross with the political forms (democracy, anarchy, dictatorship, and plutocracy + others) to give quite a myriad of possibilities.

Mercantilism + plutocracy gives you England in the 19th century.
Capitalism + democracy gives a textbook market economy.
Capitalism + plutocracy/dictatorship gives fascism.
Communism + dictatorship gives Stalinism (or Maoism).
Communism + anarchy gives anarcho-syndicalism or anarcho-communism.

Not all of these systems are stable and some are duplicated (communism + anarchy is pretty much identical to communism + democracy), but picking and choosing an economic and a political system gives you essentially all government forms that have happened and that have been theorized.

[Sam Z.]

The elephant in the room is the interplay between lack of information and social conventions in determining "market" wages. Simply claiming equivalence to marginal product is rather empty: in most real-world situations, no one even really knows how to value a given labour input. Pretty much any good or service represents an impossibly complex mix of contributions from many sources, with some over long time-scales. What share should go to each contributor? When a new car is sold, how much of the profit belongs to the people who designed the car? To the people who built it? To those who developed the mathematics, physics and robotics that made the whole thing possible? To the community that provided the general climate in which the firm could succeed?

The information problem is so acute that I think we tend to fall back on social convention as much as anything else in determining wages. For almost any occupation you will find wide differences in pay scales across countries and through time. Why should the marginal product of a CEO or MD be so very different between developed countries? Perhaps it's not, and the differences are driven by different cultural contexts.

I guess the question I have is this: is it *ever* really the case that a wage determined purely by market forces is an accurate reflection of the contribution made?

And if not, how can we make any moral claims about the resulting distributional picture?

Sam.

[cm]

After all, markets are a mechanism, and one facet, of social interaction. To the extent that market transactions are stripped/decoupled from their social component, moral restraints disappear from the picture. That is only natural as morality is governing social interaction, by definition.

Compare also electronic communication (email, forums, etc.). People say things they would hardly dare say to somebody's face or in somebody's physical presence. Well, mostly.

[Gil]

Eh. P. Krugman hit the nail on the head awhiles back - Capitalism's success comes from its modular design. Capitalism doesn't especially require a central authority, a particular type of currency, a specific number of people or some sort of hierarchy, that people have to be free or enslaved, etc.

[Transformation]

Capitalism is capable of productively employing both moral and immoral people. Altruistic and selfish people both produce near their capacity under capitalism.

Under "moral" economic systems, only moral people produce at anything near their capacity. Moral economies thus fall far behind capitalism, and not enough consumer goods are available to meet demand.

Moral economic systems will not be economically viable until that day when a way is found to first transform all mankind into moral people. Previous attempts to transform people via economic systems just resulted in a paucity of consumer goods.

The key to transforming society is to teach children to be morel. Then most of them will follow what they have been taught when they mature into adults. There is currently no systematic attempt to teach moral virtues in children by the public school system. Since the task of teaching most of the nation's children has been effectively delegated to the public school system, the results are predictable.

[Lee A. Arnold]

I believe that lack of information, or rather, lack of time and ability to process information, EVEN IF YOU HAVE ACCESS TO IT, is a bigger problem for the market system than we think. I'm not referring to the market failure of asymmetric information, i.e. when one person in a transaction knows more than another. I'm referring to the fact that you have to know so much in order to make an informed choice in all the goods and services that you need and want, in order to properly create their "demands." You are not omniscient, and you simply don't have the time. The libertarian or Hayekian idea is that prices communicate this information adequately and without need for your reflection, but this is only with regard to the base allocation of resources along and among the supply chains, and it has no bearing on the morality of them, nor on the adequacy of the consumer's final decision. Without very strong regulations formulated by experts who study the problems, your alternative is to find the time and resources to determine whether the tuna you want to buy is killing dolphins in the fishery, or the plastics for your children's toys have phthalates or some other poison in them (most do -- beware the U.S. products!,) or whether your mortgage broker is giving you all the information to make an informed decision. Even if the information were properly posted in each good and service, there is not enough time to read it all, and you're not equipped enough to judge it all. There are not enough hours in the day. I am reminded of a very prescient critic of the market system, Hazel Henderson, calling it the "increasing social transaction costs" of a complexifying society, back in the late 1970's. It has come to pass, and it is going to get worse. And corporations, being driven by profit, are very happy to let it go, and to dispute information based on long-term or statistical analyses. We are losing the ability to make good decisions, and the price system does NOT make up for this. It is hard to avoid the conclusion that market economics is half of a control theory for parts of localized transactions, but that the subject matter of economics proper includes an entire half which is almost unstudied, a theory of nonmarket institutions that save time and costs. Public choice is a tiny part of it.

[yamada]

The new system as below must institutionally be established.

1. Every economic unit’s(including banks) assets that caused the bubble(real estate or CDO et al) on balance sheet should be evaluated on mark to market basis by the authorization of a third party(maybe auditor), which brings about quite a few insolvent(i.e. debt section surpasses asset section) economic units.
2. FRB decide to write off a certain amount of the loans(trade claim) to the banks, which amount distributed to each bank according to the rate of banks’ insolvency, calculated on 1.
3. Every bank that gets profit from written off should next enforced to, by using the profit as original fund, write off its loans(trade claim) to its each debtor, according to the rate of insolvency of the debtors. If the bank is unable to use all the written off profit it earned, the remainder is taxed all.
4. Other economic unit that gets profit from the written off by the bank should next enforced to, by using the profit as original fund, write off it’s loan(or trade claim) to its each debtor, according to the rate of insolvency of the debtors. If the economic unit is unable to use all profit it earned, the remainder is taxed all. These processes are to be repeated operationally.
5. In consequence, the bubble portion of the targeted asset is extracted from the economy, and is transformed to tax.
6. It’s up to the Government how they dispose of their above tax claims, considering the situation of economy and of each economic unit. Talking about the latter two, the Government should examine the possibility of the economic unit's turnaround, together with the other creditors, remaining desirable debt on the economic unit(empirically it's ten to fifteen times annual earnings before interest, taxes, depreciation and amortization, known as EBITDA, of the economic unit), writing off the rest debt, with taking into account the value of disposable collateral(that do not accrue earnings), of guarantor and of consolidated basis.
7. Every write off must be supervised and traced by centralized function. So every write-off must be executed through this function, which might exist on internet.
8. In case inflation expectation exists, the system enables FRB to on one hand raise benchmark rate to cope with inflation expectation, on the other hand restructure the balance sheets of economic units.

For details, please see the blog as below:

http://reversewealtheffect.blogspot.com/

[Lafayette]

Article: The paradox of capitalism is that it converts avarice, greed, and envy into virtues. We are told that capitalism discovers wants that people did not realize they had and thus moves humanity forward. But it is truer to say that the market economy is sustained by the stimulation of greed and envy through advertising. In a world of ubiquitous advertising, there is no natural limit to the hunger for goods and services.

MT: Restrict advertising?

We should shoot the messenger?

Modern society is typified by its headlong rush to conspicuous consumption, which creates jobs and therefore is self-generating because it is self-affirming.

Who amongst us will not keep up with the Jones? Who amongst us would refuse to enter the Valhalla of wealth?

Who? Point them out. For there goes a courageous person. But, also, one esteemed a fool even by friends.

[We have met the enemy and he is us. (Pogo)]

[hari]

MT - ...What moral principles...an economic system ought to satisfy?

Let's take case of Sweden - it's NOT equalitarianism which is focul point of their economic system but fairness and justice in distribution of income - so a citizen cannot sue due to poverty!

I'd agree it's easier in Scandinavia to reach such a political/moral consensus. The evolution of state and society has been relentless towards fairness in income distribution, literacy, health care and care for elderly.

Criticism of capitalism is very easy to make. However to find an alternative social system is more difficult. Yet, we're trying with EUs Revised Treaty (when ratified by 27 sovereign states!) to establish a more cohesive and structured European society in which basic freedoms are guaranteed to the citizen. (You can acccess the various sections of the Treaty on their blog).

[Blissex]

«In a perfectly competitive market..., all the factors of production receive rewards equal to their marginal products, i.e. all are paid what they are worth. The full competition and information requirements ensure that all contracts are uncoerced (there is no monopoly power) and all expectations are fulfilled, i.e., people get what they want.»

That is the key bit of propaganda on which (nearly) the whole trade of Economics is based, as the central truthiness of Economics is based on both much tighter assumptions, some of which are contradictory among themselves as well as with reality, and on plain old mathematical mistakes.

As some important theorems (well proven) show there is no given relationship between productivity productivity and income in the general case, even in Neoclassical Economics.

There is however a (well proven) empirical relationship between stating the opposite as a fact and getting a prestigious chair in Economics and becoming a chairman or the economics advisors to the President :-).

[Economic layman]

"Modern society is typified by its headlong rush to conspicuous consumption."

Morality can be and is part of conspicuous consumption. In the upper class you have to be in favor for the environment, peace, against discrimination... In lower classes you are patriotic, you have strong faith, you rail against homosexuals...
I really don't think we need the state to make people virtuous.

"And the "tendency to favor a morally deficient character type" is certainly not what Marx had in mind..."

Right. Marx main idea was that capitalism is only productive up to a point, beyond this communism will be more productive and take over. Marx was not into a moral critic of capitalism, but an economic one. He was wrong about wages and profit, but I think Marx' critic is still valid in all cases of rent-seeking.

"What bizarre form of Social Darwinism congratulates itself on making of Keanu Reeves an extremely wealthy man?"

Keanu Reeves wealth is based on rent-seeking. Keanu has a monopole on his face.
The good news is that because his income is based on rent-seeking you could tax most of it away without any disincentives.

[Robert Edele]

"Capitalism is capable of productively employing both moral and immoral people. Altruistic and selfish people both produce near their capacity under capitalism."
- Transformation

And what happens when those immoral people come into positions of power (management, political, etc), or moral 'follower'-types are under the influence of immoral people in power? Think about it.

[Transformation]

Robert Edele..."And what happens when those immoral people come into positions of power (management, political, etc), or moral 'follower'-types are under the influence of immoral people in power? Think about it."

I have. When bad people rule, they use their positions of influence to degrade the population. It is particularly bad when they infiltrate a nation's public school system, as children are especially vulnerable to picking up bad habits. Ideally, a nation's politics and school systems would be kept insulated from bad people's influence. Laws would protect employees from abuse. Nations have only had limited success here. Problems still remain.

[Cynthia]

Believe me, I wouldn't shed a tear if I were to wake up tomorrow to see that advertising had literally dropped off the face of Earth. Seriously though, I do find it a bit disturbing that today's market has reached a point where advertising of products/services is becoming more valuable than the products/services themselves. Then again, this may very well be yet another sign that the virtual world is on the verge of overtaking reality...

[Robert Edele]

Taken from a psychological instead of an economic perspective, advertising is lose-lose. A person's happiness is based (in part) on how well they fill their perceived wants. Want not and ye shall be happy.

Advertising does just the opposite. It creates and inflates wants. In many cases, even when those wants are filled (which requires expenditure of scarce resources), the person is less happy than if they had never had the desire in the first place.

While it might be a little heavy-handed to use propaganda to reduce wants (though all considering, I would support it), it's both heavy-handed and downright wrong to use it to increase wants.

[Robert Waldmann]

I would like to object to a particular assertion made by Skidelski

"On the other hand, it crowds out virtues that have no economic utility, like ... honor." I think that, so long as an apparent sense of honor can't be simulated by the dishonorable, a sense of honor is highly rewarded by the market system. Clearly if we can tell who is honorable, honorable people will enter into mutually beneficial agreements even if they are not effectively enforceable in courts. Thus they would succeed compared to dishonorable people.

Now, in theory, it is possible for someone with no sense of honor to simulate one until the gains from behaving dishonorable outweigh the reputational cost. Such an agent would do better than the genuinely honorable and the openly dishonorable.

Now, on the topic of economists and moral sentiments I invoke Adam Smith. I pretty sure that, if someone had told him about game theory, he would have argued in "The Theory of the Moral Sentiments" that, in the long run, rewarding both true honor and effectively simulated honor will promote true honor as a habit of mind.

Also, I think that the theoretical argument makes unreasonable demands on mere human efforts to be rational (as usual). I think that the vast majority of dishonorable people are not capable of effectively simulating honor (nor are honorable people able to hide that sometimes inconvenient characteristic). Psychologists say we have an amazing ability to detect people who are trying to cheat us. True honorability is favored in a market system full of people with that ability.

A deeper problem is that mores can evolve, so that the requirements of a sense of honor change. Once it was dishonerable in the extreme to charge interest on loans. The new mores under which made it is honorable (indeed which make interest free loans suspect) was selected. If Skidelski objects to the market because it promotes behavior which he has promised himself he won't do, he objects because it does not favor his ideal of honor, not because it does not favor honor in general.

[anne]

"I think that, so long as an apparent sense of honor can't be simulated by the dishonorable, a sense of honor is highly rewarded by the market system."

I must memorize this and recite it in the shower, sort of like my Catechism which has always made Confession a problem or the reason why my Grandfather taught me never to trust the British. What ho?

[anne]

"Psychologists say we have an amazing ability to detect people who are trying to cheat us. True honorability is favored in a market system full of people with that ability."

Be still my heart; but, so much for psychology in a sentence.

[wjd123]

No doubt it is unfair to blame the market for bad moral choices. ... But the market system relies on a particular motive for action — Keynes called it “love of money” — which tends to undermine traditional moral teaching.

As any sociologist knows when looking for the realm of the moral, look for the external signs: sanctions. It's not that most people obey moral strictures because they fear punishment, no, most people internalize laws they obey because they see the good in them. For instance, most people see the good in not polluting public resources.

Nevertheless, let's go on a sanctions hunt to find morality in the marketplace. There are the informal sanctions such as losing ones customers if the word gets out that you do shoddy work or ignore your fiduciary responsibilities. There are work codes and boards of ethical practice, but a lot of conduct escapes their purview and informal sanctions are the last refuge for people who haven't internalized right conduct.

Formal rules and regulations with their sanctions are easy to spot as areas of morality in the market.

When the market breaks down as it has recently with the housing crisis and credit crisis it would be easy if we could assign blame by punishment. Society said that these type of actions are illegal, you broke the law, you receive its punishment.

The problem with market crisis is that it usually stems from lacuna to be found in the law. Conduct that the law doesn't cover or is unclear about.

The lacuna are usually there because market participants convince law makers that punishments aren't necessary: laws and regulations will hurt competition and informal sanctions are more than adequate to control bad behavior. After all they argue, most market participants practice good ethics and don't need the sanctions of the law.

Our recent market meltdown would indicate that they are wrong. That incentives without punishments can cause people to lose sight of right action or cheat a little. Enough so that it can destroy the market.

The higher the incentive "it's the way to riches, or the way to get ahead" the easier it is to rationalize those actions. Get enough people rationalizing actions that can hurt society and you can usually find a powerful club for sociopaths responsible for it.

So what is the best prescription to keep markets moral. More rules and regulations to inform people of right action and to speed the internalization of it. After all we have to get ahead of a the growing power of the club of sociopaths that want to spread their rationalizations through society.

Perhaps in time with the right socialization we won't have to spend so much on enforcing morality in the market. At present you have billion dollar executives trying to justify their salaries and more and more people growing desperate. That's a bad environment for morality in the market. That's a good environment for tighter rules and regulations. It's doubtful that we can over do a regulatory regime.

[Lafayette]

Trans: Laws would protect employees from abuse.

It would help, yes, if the US Congress ratified --- finally, after 6 decades since its inception by the UN's General Assembly --- its signature of the Declaration of Human Rights.

What's is Congress afraid of, pray tell?

Trans, read Article 23 of the Declaration.

[Lafayette]

And, for Education, read Article 26 and for decent Health Care, read Article 25. Interesting stuff, is it not?

Now you know why the US never has ratified its acceptance of the Declaration.

[Lafayette]

anne ... why my Grandfather taught me never to trust the British.

Hmmnnn ... wise man.

Perfidious Albion and all that.

[Lafayette]

I ask

Article: Finally, the claim that everyone is — under ideal conditions — paid what they are worth is an economic, not a moral, valuation.

And also, that because one "earns money", they should be allowed to keep as much as possible without minimal taxation. There is no Moral Absolute in that notion, either.

The Moral Absolute that prevails in most systems of taxation is that those who earn most should be taxed most. Their debt or dues to the society that has provided them the means to enrich themselves is their moral recognition of membership in it.

What fairness, I ask, is there that they should pay the same rate as someone less fortunate than they? And, given the current Tax Labyrinth, they often pay less.

What utility, I ask, is there that so much be amassed by so few? The analyses show that they save it, not spend it. Is its purpose not better served if taxed and redistributed to better the public well-being at all levels -- that is on Education, Health Care and Decent Housing? And, that this may be done in a manner so as not to displace Personal Initiative with unlimited Public Assistance?

What fairness, I ask, is there that inheritance should not be also heavily taxed, since it represents unearned income - the inheritor did no work to earn it. Their right to unearned wealth is merely an accident of birth. Some logicians would opine that that right to that wealth ends with the spouse and is not transferable to offspring -- not in its totality, at least.

Measures of this kind would significantly modulate the desire in some, or the greed in others, to accumulate wealth. Just how much should a person possess? Enough to place themselves safely beyond the vicissitudes of life (if their wealth is judiciously managed). And, what is that amount?

Methinks it be in millions, not billions.

says...

EL: I really don't think we need the state to make people virtuous.

But you need a state to make people want to be virtuous. If taxation does not limit wealth accumulation, then there is simply too much temptation to do just that.

That's difficult for most Americans to understand. It is better understood in Europe.

Society decides the rules/values upon which it is founded. There has not been, historically, any real Social Solidarity or even Social Ethic in the US. That, and a significantly large market economy, is the reason that it is the way it is.

The handmaiden of Unbridled Capitalism.

[Patricia Shannon]

Lee A. Arnold

I believe that lack of information, or rather, lack of time and ability to process information, EVEN IF YOU HAVE ACCESS TO IT, is a bigger problem for the market system than we think. I'm not referring to the market failure of asymmetric information, i.e. when one person in a transaction knows more than another. I'm referring to the fact that you have to know so much in order to make an informed choice in all the goods and services that you need and want, in order to properly create their "demands."

Very true! Excellent comment.