Moderating the dark side of emotional morality with the bright side of market morality.

• Author: Lee, Dwight R.
• Position: Essay

Making a convincing moral case for markets is difficult. The approach most often taken is to point to the desirable outcomes motivated by markets, many of which can be described as moral. Markets are unequaled in reducing poverty, improving environmental quality, decreasing discrimination, and providing opportunities for social and economic advance based on freedom and responsibility. These and other desirable market outcomes result from a spontaneous process of widespread social cooperation that few understand. Thus, the benefits that markets generate are easily taken for granted, with little appreciation being shown for the markets' role in providing them. Even when market outcomes are appreciated, they are morally tainted in the minds of many because they are seen to result from motives that are morally dubious, if not outright immoral.

Stereotypical market behavior fails to satisfy the conditions that people associate emotionally with morality. One can make the case that given the right institutional arrangements, the pursuit of self-interest is a virtue on instrumental grounds, but few will be convinced. People do not evaluate morality entirely or even primarily in terms of outcomes, but in terms of the motives and means by which outcomes are generated. The motive of self-interest and the means of impersonal exchanges rank high on very few people's scale of morality. As Joseph Schumpeter pointed out, "The stock exchange is a poor substitute for the Holy Grail" ([1942] 1950, 137).

Yet there is a strong moral case for markets based on their ability not simply to produce wealth, but also to improve the emotional morality that is critical to harmony in small groups and adds meaning to our personal relationships. My argument is not simply that the wealth created by markets makes personal relationships more meaningful, although this benefit is an important one. I also argue that what is universally seen as morality and as the source of enormous human happiness also has a dark side that has caused enormous grief throughout human history. The morality of concern and caring for those with whom we identify as members of our community can also trigger hostility and hatred toward those who belong to other communities. The human decency based on our propensity to exhibit compassion and love and a willingness to sacrifice for some is coupled with an equally human tendency to inflict pain and suffering on others. What goes almost completely unrecognized, even by those most vocal in their desire to reduce human brutality, is that the morality of markets serves to moderate hostility between diverse groups by harmonizing conflicting objectives through positive-sum exchange. Markets make the instinctive morality we all embrace emotionally more moral than it would be otherwise.

Magnanimous Morality

Consider first the type of behavior that is emotionally recognized as moral and that is clearly appropriate for personal and direct interactions in small groups. I refer to this behavior as satisfying the conditions of magnanimous morality.

Magnanimous morality can be described as helping others in ways that satisfy three requirements: the help is provided (1) intentionally, (2) sacrificially, and (3) directly to identifiable individuals or groups.1 Helping others, no matter how great the help, is not considered moral if the help is provided unintentionally. For example, no moral credit would be given to someone for preventing a suicide bomber from carrying out his deadly mission merely by having a car accident with him. Also, providing help to someone for personal profit does not warrant moral credit. Pharmaceutical companies extend the lives and reduce the pain and suffering of millions, but because they do so with the intention of gaining profit, their actions are not considered worthy of moral praise. Finally, directly helping identifiable people or members of particular groups has more moral appeal than providing benefits indirectly to unknown beneficiaries. We see more morality, for example, in efforts to rescue identifiable victims of mining accidents than in saving more unknown lives at less cost by reducing U.S. Food and Drug Administration delays in approving new medicines and medical devices.

No serious person would deny the importance of magnanimous morality and of the caring and concern for others that it motivates. Our social interactions would be far less pleasant and productive, and the most meaningful and fulfilling relationships in our lives would be less meaningful and fulfilling if magnanimous morality were not hard-wired into our emotional makeup. As critical as magnanimous morality is to human happiness, however, it is suited primarily to our relationships with relatively small numbers of people, including family members and close friends and acquaintances. These individuals are typically the people we are most willing to help at some personal sacrifice and best able to help intentionally and directly because of direct contact and personal knowledge of their concerns and circumstances.

A plausible account of the emotional appeal of magnanimous morality is that it was passed down from our hunter-gatherer ancestors, who for most of human history lived in small bands consisting of 50 to 125 people (Rubin 2003). Survival in such settings depended on people's intentionally helping others in their band without formal arrangements for reciprocity. (2) Because of the survival value of this mutual assistance, emotional responses evolved that helped enforce such behavior, which thence came to be considered moral.

Magnanimous morality as discussed here provides an important element of social cohesion in what James Buchanan refers to as a "moral community." As Buchanan defines it, "a moral community exists among a set of persons to the extent that individual members of the group identify with a collective group, a community, rather than conceive of themselves to be independent, isolated individuals" (2001b, 17:188, emphasis in original). People can belong to many moral communities, ranging from their families to their countries, with the importance of magnanimous morality based on genuine concern for other members of the community generally weakening as a socially cohesive influence as the size of the community increases in size. Buchanan states, "[T]he innate moral behavior of humans, that which is motivated by genuine 'fellow-feelings' in an unthinking, unrationalized sense remains tribal in its extent. Human beings react instinctively toward members of their 'tribe' in a way that we might classify as 'moral'; they do not extend such 'morality' to those outside the tribal membership" (2001a, 17:204, emphasis in original). Indeed, the dark side of magnanimous morality is that the stronger it pulls people together in a community with which they identify, the more likely it is to motivate them to commit violence against other communities to which they do not belong.

Despite the instinctive tendency for humans to respond with hostility toward strangers and the long history of this tendency's eruption into violence and cruelty, human beings are obviously capable of cooperation on a global scale. Indeed, the standard of living that people in the developed countries take for granted depends entirely on a network of cooperation that spans the globe. Before I discuss this cooperation, it will be useful to consider the morality that makes this cooperation possible and on which market economies depend.

The Morality of "Sitting Still and Doing Nothing"

The morality of markets, which I call "mundane morality," has little, if any, emotional appeal. Mundane morality is described as simply obeying the generally accepted rules and norms of engaging in impersonal exchanges, such as fulfilling one's contractual obligation, accepting the consequences of one's choices, and not intentionally harming others by violating their legitimate rights. The behavior that satisfies these conditions is nothing more than what is expected of any responsible person, and it requires little that can be considered magnanimous. Referring to this morality as "justice," Adam Smith states: "Mere justice is, upon most occasions, but a negative virtue, and only hinders us from hurting our neighbor. The man who barely abstains from violating either the person, or the estate, or the reputation of his neighbours, has surely little positive merit. He fulfills, however, all the rules of what is peculiarly called justice, and does everything which his equals can with propriety force him to do, or which they can punish him for not doing. We may often fulfill all the rules of justice by sitting still and doing nothing" ([1759] 1982, 82).

Smith makes clear that he sees this mundane morality of the market as only a negative virtue in comparison with the caring and sacrificing for others of magnanimous morality. Many think of Smith as a champion...