Capitalism without Guilt

I recently listened to a podcast of a talk called Capitalism without Guilt given by Yaron Brook at the London School of Economics. I was interested, because I did not expect the Director of the Ayn Rand Institute to be speaking at the LSE. He said that the fundamental objection to capitalism is not economic, but moral.

People operate in the market to make money. Some will have a passion for what they do, but their basic drive is to make their own life better. The businessperson’s motivation is not the “common good” or “social utility”, but to make their lives better. The market is a place where people meet to fulfil their self-interest. Buyers and sellers both want to make their lives better.

We are taught that to be good or virtuous is to be selfless and to sacrifice to others. We were taught to think of others first and yourself last. According to philosophers, morality is about being selfless and caring for others. The more you sacrifice, the more noble you are. The more you give the better you are. According to most moral teaching self-interest is wrong. People honour philanthropy and community service, but denigrate business, profit seeking and entrepreneurship.

We tend to assume that all businessmen are evil. We feel safe because an elevator has been checked by a bureaucrat. We sleep at night because Ben Bernanke is in charge of a monetary system.

We have a morality that is inconsistent with capitalism. Very few people live a selfless life. They pursue self-interest. When you live one life, but believe you should be living another, you get guilt. Guilt is a powerful emotion. It is an amazing mechanism for controlling people. It is why rich people cote for increases in taxes. They need to redress their guilt, because they have this unrealistic morality.

We will continue to move away from capitalism, as long as our current morality is maintained. Brook does not agree with it. We need a new morality with the objective of making a human life as good as possible. Goodness lies in the pursuing self-interest. Ayn Rand said that the number one value is self-interest.

Capitalism is a moral system, because it allows each one of us to pursue our self-interest. This is good. Brook says that we need to reject to morality of living for others, and live instead for our own flourishing. I disagree, but his talk got me thinking. Capitalism has lifted economic well being in an amazing way, but capitalistic economic theory requires people to pursue their self-interest. Yet this does not fit well with Christian morality.

This is a conundrum that has puzzled me for a while. I found the answer in another book that I am reading. I will post on it in the next few days.

Free Markets (7) - Morality

• Markets are not moral.
• Markets are not immoral.
• Markets are amoral.

Markets cannot think, choose, or act.

• People do these things.

People participating in a market are never amoral.

• They can be moral
• They can be immoral.

A market needs just one value from people to function: honesty.

When someone makes an offer on a market, the key moral consideration is whether they are honest or dishonest. Are they lying or speaking the truth?

We all know this. We generally just assume that most people are honest. Provided the price is not too high, we run the risk and trust most offers. We reduce the risk by going back to traders that have been honest in the past. When we find that someone is dishonest, we avoid them and tell our friends to do the same.

For a big purchase, we do other things to reduce the risk of being cheated by a dishonest person. When buying a car, we get it inspected by a motor mechanic. When buying a house, we get it inspected by a carpenter and we employ a lawyer to check the title is valid. This is normal.

Sellers that want to build a business that will last have to be honest.

Bad news travels. If a business rips people off, its customers will be disappear.
Making money in a free market by ripping people off is difficult. The rip-off artist cannot stay in the same community for long, but has to keep moving on to places where their dishonesty is not known. Modern communication makes this hard. In practice, it is easier to make money by making people better off.

A market only needs just one value to function. It does not need compassion, kindness, gentleness or love. So even if these values are missing from society, people can still buy and sell in safety, provided most traders remain honest.

This full series is at Markets and Morality.

Moral Precision

I take a morality approach to economics. I am not interested in what will work. My focus is on what is right or wrong.

The consequence of this approach is that it is important to be precise about which actions are wrong and who is taking the wrong action. Vague statements will no do.

1. The exact action that is morally wrong must be identified precisely.
2. The moral actor who is taking the wrong action must also be identified.
3. Laws that legitimise immoral actions are particularly insidious, so they must be accurately identified.
4. The politicians responsible for passing the immoral law must be clearly specified.

This is why I have investigated the concept of bailment when discussing the banking system. I wanted to establish whether banks are acting immorally or not. My conclusion is that when a bank takes a demand deposit and records it as an asset on their balance sheet, they might not be stealing, but they are being very devious, because they make very little effort to explain to depositors the legal implications of their action. They do not say, “You have just become a creditor of the bank”.

On person made the following response.

The focus should be on fiat currency. That is where the fraud is occurring. That is where the thieving is going on.

This raises an important issue, but the comment is too vague. Fiat currency may be morally wrong, but we must specify more precisely the actions that are morally wrong. The moral agent responsible for the fraud or theft must also be clearly specified. Is it the government, or the banks, or people accepting the fiat currency?

Political Morality

A senior politician in New Zealand has been accused of having an affair.

Most modern commentators say that the private lives of politicians are not relevant to their political life. Personal stuff should be off limits to the news media.

The biblical approach to leadership is different. Elders are expected to be temperate and wise. The best way to discern a potential elder is to look at the way they treat their family and their attitude to money (1 Tim 3:1-7).

Politicians have been given responsibility to make laws for their nation. Laws are enforced morality. Therefore, the moral attitudes of parliamentarians are important. If a politicians will cheat on their spouse, why should theybe trusted to put the needs of their people ahead of their own benefit.