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Book review
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Moral Markets: The Critical Role of Values in the Economy.
MORAL MARKETS: THE CRITICAL ROLE OF VALUES IN THE ECONOMY. EDITED BY PAUL J. ZAK. PRINCETON UNIVERSITY PRESS, 2008.
The prevalence of the Homo economicus model of humanity has crowded out considerations of important noneconomic aspects of human nature--most importantly the moral dimension of human thought and conduct. As a result, our understanding of the present ills besetting the business world and the market economy is incomplete, and the policy prescriptions flowing there from are often suboptimal (if not counterproductive). This Book Review situates Moral Markets within the larger debate over human nature generally, and shows how, through the presentation of biological evidence and evolutionary theory, Moral Markets repudiates the Homo economicus model and supports the Aristotelian position that human beings are fundamentally moral creatures. After demonstrating that free markets cannot thrive in the absence of virtue, Moral Markets concludes that free markets must generally be populated by virtuous actors. This Book Review asks whether another conclusion might be drawn: that the free markets of today lack a critical mass of virtuous actors, hence the current spate of corporate scandals and economic woes. INTRODUCTION Enron. ImClone. Global Crossing. Tyco. WorldCom. Several prominent commentators have concluded that the scandals these names have come to represent are not mere market aberrations, but rather symptoms of a deep, systemic problem with capitalism today. (1) As this Book Review goes to press, other names are becoming synonyms for scandal--Samuel Israel, Marc Dreier, Bernard Madoff, and surely more with them--leading to a renewed focus on the market's shortcomings. (2) To understand this problem fully, and to select an appropriate means of treating it, we must first accurately diagnose its root cause. As I and others have suggested, this cause is essentially moral in nature: "a loss of belief in objective ethical standards," as one commentator summarized it; (3) "'a mentality ... [of] putting profits ahead of all principle," in the words of another; (4) and a rejection of the commandment to "love thy neighbor," according to the former President and CEO of the Federal Reserve Bank of New York. (5) And a problem that is fundamentally moral in nature counsels in favor of a solution that is, at least in part, also moral in nature. To others, morality does not enter into the equation. Or, even if it does, morality certainly does not enter into the solution. To them, the problem is merely one of properly aligning cost and benefit structures in such a way as to punish wrongdoing more severely, reward appropriate conduct more generously, or both. (6) Adherents to a law-and-economics perspective, among others, take this approach. (7) What becomes clear is that, at its core, the dispute over what ails the modern market economy (and what ought to be done to address it) turns on our understanding of human nature. (8) And the prevailing modern understanding (at least within the context of economic thinking) is that human beings are little more than rational wealth-maximizers. (9) It is assumed that Homo economicus--"economic man"--populates the roles of consumer, entrepreneur, stockholder, employee, director, and officer in our modern economy. (10) Homo economicus "is cold and calculating, worries only about himself, and pursues whatever course brings him the greatest material advantage." (11) Homo economicus is a single-...See the full content of this document
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