Market Failure
During my summer holidays, I have read several books on Christian economics. Something that frustrates me about these books is the bland statements about what markets do and do not do. “The market does not produce enough health care”. “The market does not produce enough roads". These statements show that the authors do not really understand the nature of markets.
A market is not a moral entity that can be judged as right or wrong. A market cannot make decisions or take actions. A market is simply a place for information sharing. People provide information (including the price) of things they have for sale. Other people can look at what is offered and choose to buy if it is what they want and the price is right.
A market can take many forms. At a farmers market, sellers offer information by displaying what they have for sale. On Ebay, people display photographs and textual information about what they are selling. Whatever the form of the market, a sale is only completed, if both the buyer and the seller agree to the price.
There are three groups of moral actors involved in a market. First, there are the owners of the market. They set the rules under which the market operates. If their rules allow cheating or coercion, they are immoral. If people are not forced to sell on their market, then the price they charge cannot be immoral, because no one has to pay it.
The second group of moral actors are the sellers. They are morally wrong, if they sell stolen goods, or they lie about the quality of what they are selling. The third group of moral actors is the purchases. They are acting immorally if they pay for goods with counterfeit money, or if they use the threat of physical force to make someone sell at cheaper price. However, if both buyer and seller freely agree on the price, then nothing immoral has occurred. If someone who wants a good decides the price is too expensive, this is their privilege. The seller has not done anything wrong. The market itself is not a moral actor, because it does not act or make decisions.
Therefore to claim that the market has not done something that it should is a nonsense statement. Markets cannot do anything.
4 comments:
Hey Brother Ron,
From your bio/profile it appears we have much in common. I too am a Christian economist (former broker/financial planner for 16 years and Charitable Gift and Estate Planner...).
But I wonder from your coment if you have not been captured by the amoral-econonimic-abstractionists who zealously divorce all moral consideration from all Market Economies.
"A market is not a moral entity that can be judged as right or wrong. A market cannot make decisions or take actions. A market is simply a place for information sharing."
But Market DO reflect the aggregate "moral preferences" of those who comprise the market -- thus a whole secular, amoral, wealth-maximizing market will not be hesitant to manipulate, dump on and defraude the weak and less economically astute (caveate emptor) -- while a distinctively Christian society/culture/people will reflect their moral code in producing very a different Market -- one that seeks to protect and defend the ignorant, poor and vulnerable. Indeed, it is impossible for you to divorce Morality (pagan or Christian) from Markets.
This is why the great German Lutheran (I'm presbyterian, with a strong shot of reformed-catholic) Economist Wilhelm Roepke argued that (given the fallen nature of man and his natural bias toward self-interests)free markets consume their moral capital that must come to them from the outside and be steadily replace by the moral and charitable ministries of the Church/Gospel/Spirit...
This is why Roepke's _Humane Economy_ must be read carefully along with E. F. Schumacher's _Small is Beautiful_ -- if for no other reason than to offer a Christian balance to the amoral, secular Libertarians who'd have us believe in amoral economic abstractions.
In His Tender Mercies,
David Rockett
agsteward@juno.com
PS If you respond -- please copy my email address too -- pretty please.
Wow!! I have never been called an Amoral-economic-Abstractionist. Do these people go to AA.
More seriously, I do not intend to remove all moral considerations from market economics. I want to do the opposite. However, moral considerations can only be applied to moral entities. Making moral judgements only helps is some person or group of people are morally responsible. Moral responsibility must be assigned to people or groups of people who make decisions and take actions.
The concept of aggregate moral preferences does not make sense, because moral preferences are not additive. The good prefernces of five people cannot cancel out my evil desires.
Added up preferences cannot make a decision to buy or sell. The people themselves make decisions. We do not see aggregate moral preferences in a market. The moral preference (not a term I like) resides in the hearts of the people. There desires can be lawful or unlawful. They can be good or evil. All we can see in the market is the offers and sales that partly reflect the preferences in people's hearts.
Markets cannot dump on and defraud weaker people. Where dumping on and defrauding occurs, it is people that do it is and people who are responsible and accountable to God. Blaming a market does not help get to a solution, because markets do not make decisions, so they cannot be responsible. This means that no one is responsible. If something is wrong, we need to identify who took the action and who is responsible.
People get ripped off on EBay (a market), but it is not EBay that rips them off. It is a person trading on that market that does the ripping off and who is responsible. That person is the one who sinned.
If you are unhappy with the outcome of the various markets, there are two possible problems. There may be problems with the way that the market functions. The laws that set up the institutional boundaries that the markets work within may be at fault. In that case it is the people who made the laws who are morally responsible. Or if some of the transactions are morally, wrong, it may be that the people trading are sinning. In ether case, we need to sheet the problem home to he person or people responsible.
I have not read Roepke, but he sounds interesting. Certainly, a market is just a place where people can come to make and accept offers. I would not expect the piece of land on which a farmers market operates or the computer system that makes EBay function to add to the moral quality of the people who participate in these markets. The moral capital of the people operating in market will have to come from outside, preferably from the Holy Spirit.
A Christian society might still have a farmers market and an EBay. The way that they function may not change much. What would change would be the stuff being offered and the prices being paid. The prices of military hardware would drop away, and porn should disappear altogether. The outcomes of the trading would change, but the market itself might not change much at all, because a market cannot be born again.
Hey Ron,
Thanks for answering and the email headsup to it. Please forgive my short-hand of, "Amoral-economic-Abstractionist". While I suspect we'd agree on many if not most things economic, I will have to disagree with you about markets being moral 'collective groups" and thus morally responsible and accountable. God does this thoughout Scripture. Leaders, Edlers, Kings, yeah " Israel" is held morally accountable for their collective behavior. God does not deal ONLY with individual sins -- but collective ones also. Citizens who elect evil people are morally responsible. The Bible is full of it. But it does offend Modernist notions of hyper-Individualism. But rulers can make evil laws for which THEY are responsible -- just as we create "Markets" with laws, rules and that either are just per God's law, or are laws and rules that favor the Rich or the Poor and are thus "unjust' markets.
In His Mercies,
David
agsteward@juno.com
Sorry David, but you have misunderstood me.
I agree that kings and elders are morally accountable for their behaviour. They have a greater accountability because they have greater authority. Prsidents are have enormous moral responsibility, because they have enormous authority. I also believe that people who voted for George W share some responsibility for his actions, though a much diminished responsiblity.
Likewise the managers of large corporations are responsible for what they do. The directors who appointed the CEOs are responsible for what they CEO does. So to a lesser degree are the shareholders. I certainly do not believe that you are resolved of moral responsibility by participating in an organisation or corporation.
However, we cannot be held accountable, where we have no authority and have had no thoughts, made no decisions or taken no actions. Sometimes the action may just be to support in our hearts the actions of a poliitcal leader or to celebrate the success of an entity we belong to. That was the sin of the people of Israel.
The participants in a market have not agreed to to act together for a common purpose, whereas the shareholders of a corporation have agreed to do so. That is why the latter are responsible for their corporations actions. However, if I sell a book on EBay, that does not make accountable for the outcome of the EBay Market, because the particpants on EBay have never agree to act jointly for a common purpose.
If we are going making moral judgments about other people and groups, we should be precise about the way we use words. People, corporations, etc who particpate in markets are morally accountable for their actions. A market is not morally accountable, because it does not think, decide or act.
It seems that you are using "markets" as a codeword for the people and corporations who buy and sell. The problem with this is that it becomes easy for participants to absolve themselves of personal responsibility, because it is all the dumped on the "markets".
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