Free Markets & Free Will
Recently at the Brookings Institution, a panel which included former Bush chief speechwriter William McGurn asked the question: does the free market corrode moral character?
Though the opinions of the panel varied significantly on many points, a unified conclusion was reached. The conclusion was that the free market does allow for the corrosion of moral character to a degree. In fact, the free market survives and thrives, to some measure, because of greed and selfishness. However, as Friedrich Hayek suggests, in comparison to other systems the market system is the best that we have.
William Galston, a panel member and senior fellow at Brookings, discussed the market system as a flawed, but workable institution. He said, “In my view, the market is to economics as democracy is to politics: the worst arrangement, except for all the rest. And we therefore have no choice but to accept its flaws including some of its flawed consequences and do what we can to ameliorate, if not correct, them.”
The free market creates an atmosphere in which recklessness, and even immorality, can exceed beyond expectation, the panelists agree. This is the nature of the system. Rebecca Blank, also a senior fellow at Brookings, offered a deeper explanation of the nature of free markets. She said, “The market itself is the way in which we particularly organize our economy; it is a system which we use to buy and sell the goods that we characterize as commodities. And there is nothing in that system that is inherently moral or immoral.”
Blank also added that free markets naturally lend themselves to flexibility, and because of this flexibility ambitious, and often immoral, people will succeed. The question is not, according to Blank, whether or not the corrosion of moral character is encouraged in a free market system. This has been established. Rather, “what do you do, if you care about certain moral principles, to make sure that those are the principles that are most recognized and most rewarded inside the market?”
She offers two answers to this question. “One is to establish a civil society that encourages those principles in individuals, so you establish a set of social norms that say intrepid reliability, and hard work, and respect for others, and telling the truth are good things and they are to be rewarded, and you are expected to do that. And indeed there is some shaming involved if you do not.” She went on to explain that leaders must establish social institutions, be they Sunday schools, kindergartens or something else, which teach children these social norms.
“Secondly, the good intentions and the good behavior of individuals are not by and of themselves enough to guarantee good outcomes, in part because…people don’t always live up to their best behaviors.” She continued, “You do want to set up a set of structures that surround the market and provide the encouragement and incentive for certain types of behavior. Many of these are created by the public sector.” She went on to describe a situation in which dishonesty would be punished quickly and severely and in which laws would more effectively regulate business practice.
William McGurn summed up the thoughts of the panel with a brief question and answer—“Can freedom corrupt? I think the answer is ‘of course.’” The answer is not so simple, however, because there are also incentives for moral behavior. “Sometimes these incentives are inherent. Transparency is one incentive, because if people know that others are going to look in at what you do, they have the incentive to behave a little better.”
He concluded, “There are good incentives for behaving better. It’s important when we can’t have rules that we have to try to build the incentives for people to be virtuous.”
Daniel Allen is an intern at the American Journalism Center, a training program run by Accuracy in Media and Accuracy in Academia.
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