Moral Economics - Essays On The Relation of Economic Theory to the Moral
Perspective in POVERTY AND DEVELOPMENT: AN INTER-FAITH PERSPECTIVE.

This is the second of an occasional series of short essays about how
economic theory interacts with a moral perspective by Michael Pierce
McKeever, Sr. Readers are invited to repost widely, but please quote the source.

SECOND POINT: DEVELOPMENT STRENGTHENS VIRTUE

People of all faiths believe that any economic development is based on, and
has as its aim, the strengthening of virtues such as trust, altruism,
honesty, tolerance, forgiveness and mercy. "Development processes which are
not based on such moral values are not only useless, they are dangerous."
(POVERTY AND DEVELOPMENT: AN INTER-FAITH PERSPECTIVE, World Faiths
Development Council, 1999, Section 1.2)

ECONOMIC THEORY AND VIRTUES

Economic theory and practice have an ambivalent relationship with most
virtues. On the one hand, free market economics postulates that the common
good will be furthered when buyers and sellers each act in their own
self-interest, while on the other hand, free market economics does not
address directly the issue of poverty or income disparity. Conversely,
socialist economics forces choices about these issues on the entire
population while producing at less than efficient levels.

VIRTUES OF FREE MARKET ECONOMICS

The position that the greatest benefits to society will come to all when
both buyers and sellers act in their own self-interest has been supported by
the principle of 'caveat emptor' or buyer beware; virtue is supposed to come
to buyers and sellers in this system since buyers will be able to
distinguish between 'high' and low quality merchandise and 'high' quality
merchandise will drive low quality goods from the market place. Producers of
'high' quality goods will prosper because they provide goods which meet or
exceed buyers' expectations; producers of low quality goods will fail.
'High' quality goods are seen as virtuous because they meet consumer
expectations of effective products that do no harm in their use or making,
not because they are expensive or otherwise distinguished from other products.

CONDITIONS ON FREE MARKET VIRTUES

Unfortunately, two facts interfere with this more or less automatic virtue
enforcer: one, it applies only to competitive markets where buyers have
legitimate choices; and, two, it fails to take account of the potential harm
done by low quality producers before market forces drive them from business. 

Buyers in markets where there is little or no competition can be forced
through lack of alternatives to choose low quality or dangerous goods, or
merely goods that are overpriced. Also, if there is little or no regulation
of businesses which produce potentially harmful goods, many people can be
hurt or killed before market forces drive the low quality producers from the
market. 

FREE MARKET MORAL ECONOMIC POLICY

Economic theory and policy can help provide virtue in the market by ensuring
that markets are competitive and that producers of products which have the
potential to harm people are closely regulated. Thus, pro-competition and
anti-monopoly rules and regulations become supportive of virtue and thus moral. 

VIRTUES OF SOCIALIST ECONOMICS

Socialist economies provide for all citizens many of the benefits of
civilization: health care, education, freedom from hunger, etc. These appeal
to the basic human desire to see all people treated fairly. However,
socialism has at least two major flaws: one, it forces choices on the entire
population; and, two, it is an inefficient producer of goods and services.
Most economies produce more high quality goods and services under a market
system whether it is pure or modified than they do under a socialist system.


ECONOMICS AND CHARITY

The virtues of altruism, charity, tolerance, forgiveness and mercy are not
directly addressed in free market economics, although they are addressed in
socialist economics. Free market systems usually leave these virtues to
individual choice or to the political system to implement while socialist
systems force choices about virtues on the entire population. 

A moral economic system is one that avoids the extremes of either ignoring
common virtues or forcing centralized moral choices on the entire population
while still addressing the issues of poverty, health, income disparity and
misery and producing an efficient quantity of high quality goods and services. 




Michael Pierce McKeever, Sr.

Economics Instructor, Vista Community College, Berkeley, CA
MIEPA URL: http://www.mkeever.com/
Corp Ethics List: http://www.egroups.com/group/corp-ethics/



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