A standard line in economics, which I\’ve certainly emphasized often enough, is the remarkable ability of the social institution of markets to transmute self-interested behavior into social welfare. When firms are seeking a profit, they try to provide a combination of price and quality that appeals to customers. When people work at a job, they try to provide the combination of effort and skill that will result a certain mix of wages and work conditions. When customers shop for the best deal, they provide an incentive for firms and workers to act in these ways. The result of these interacting forces is a set of incentives that translate into improved standard of living. Of course, the narrow pursuit of self-interest can also lead to connivance, fraud, crime, violence, war, and politics. Jack Hirshleifer made this case in a memorable 1993 speech entitled \”The Dark Side of the Force,\” in which he argued that economists were too sunny in their view of self-interest, and needed to look more closely at both sides.
But as economists have quarreled over how society might best shape and direct the force of self-interest, they have opened themselves to an attack from the philosophers who argue that rather than assuming that people are motivated by narrow self-interest, why don\’t we seek a world in which people are motivated by virtuous behavior? Luigino Bruni and Robert Sugden seek to counter this critique in \”Reclaiming Virtue Ethics for Economics,\” which appears in the Fall 2013 issue of the Journal of Economic Perspectives. (Full disclosure: All articles in the JEP are freely available online courtesy of the American Economic Association. I\’ve been Managing Editor of the JEP since its inception in 1987.)
Bruni and Sugden point out that the critique that economic behavior is instrumental, rather than virtuous in itself, goes back a long way. For example, they quote Aristotle’s Nicomachean Ethics:
“The life of money-making is one undertaken under compulsion, and wealth is evidently not the good we are seeking; for it is merely useful and for the sake of something else.” They sketch the views of modern philosophers who also argue that economic behavior lacks virtue because it is not an end in itself, but instead is an activity that is in some sense socially compelled and performed for the sake of something else. As Bruni and Sugden note, responding to this argument by saying that markets raise the standard of living would miss the point.
Instead, Bruni and Sugden seek to confront this argument about virtue and market behavior head-on. They point out that virtue is typically defined in the context in which a person operates. Thus, even if a soldier or a doctor earns a paycheck, the virtues of their professions lie in courage or in healing. Of course, describing virtues in this way does not mean that all soldiers or all doctors are are virtuous!
Bruni and Sugden then argue that market behavior contains the possibility of intrinsic virtue as well, which lies in the action of participating in an activity in which mutual gains are realized. They write: \”But economic freedom is not the freedom of each person to get what he wants tout court; it is his freedom to use his own possessions and talents as he sees fit and to trade with whoever is willing
to trade with him. We suggest that the common core of these understandings of markets is that
markets facilitate mutually beneficial voluntary transactions. … [A] market virtue in the sense of virtue ethics is an acquired character trait with two properties: possession of the trait makes an individual better able to play a part in the creation of mutual benefit through market transactions; and the trait expresses an intentional orientation towards and a respect for mutual benefit.\” With that perspective in mind, here is the list virtues that they see in market behavior:
Universality. \”If the market is to be viewed as an institution that promotes the widest possible
network of mutually beneficial transactions, universality has to be seen as a virtue. Its opposites—favoritism, familialism, patronage, protectionism—are all barriers to the extension of the market.\”
Enterprise and Alertness. \”[E]nterprise in seeking out mutual benefit must be a virtue. Discovering and anticipating what other people want and are willing to pay for is a crucial component of entrepreneurship. … The virtue of alertness to mutual benefit applies to both sides of the market: for mutual benefit to be created, the alertness of a seller has to engage with the alertness of a buyer. Thus, the inclination to shop around, to compare prices, and to experiment with new products and new suppliers must be a virtue for consumers.\”
Respect for the Tastes of One\’s Trading Partners. \”The spirit of this virtue is encapsulated in the business maxim that the customer is always right. This virtue is closely related to the idea that market transactions are made on terms of equality, and opposed to the paternalistic idea that the relationship of supplier to customer is that of guardian to ward.\”
Trust and Trustworthiness. Because the monitoring and enforcement of contracts is often difficult or costly, dispositions of trust and trustworthiness (qualified by due caution against being exploited by the untrustworthy) facilitate the achievement of mutual benefit in markets. If that is right, these dispositions must be market virtues.\”
Acceptance of Competition. \”[A] virtuous trader will not obstruct other parties from pursuing mutual benefit in transactions with one another, even if that trader would prefer to transact with one or another of them instead.\”
Self-Help. \”Thus, it is a market virtue to accept without complaint that others will be motivated to satisfy your wants, or to provide you with opportunities for self-realization, only if you offer something that they are willing to accept in return. … Seeing self-help as a virtue makes it easier to understand how people can find satisfaction in work that they would not choose to do if they were not paid for it.\”
Non-Rivalry. \”Thus, it must be a market virtue to see others as potential partners in mutually beneficial transactions rather than as rivals in a competition for shares of a fixed stock of wealth or status. A disposition to be grudging or envious of other people’s gains is a handicap to the discovery
and carrying through of mutually beneficial transactions. The corresponding virtue is that of being able to take pleasure in other people’s gains—particularly those that have been created in transactions from which you have gained too.\”
Stoicism about Reward. \”But an adequate account of market virtue cannot maintain that what a person earns from market transactions is a reward for the exercise of virtue, in the sense that a literary prize can be seen as a reward for artistic excellence. A person can expect to benefit from market transactions only to the extent that she provides benefits that trading partners value at the time they choose to pay for them. To expect more is to create barriers to the achievement of mutual benefit. Thus, market virtue is associated with not expecting to be rewarded according to one’s deserts, not resenting other people’s undeserved rewards, and (if one has been fortunate) recognizing that one’s own rewards may not have been deserved.\”
Again, just to be clear, Bruni and Sugden are certainly not claiming that everyone who participates in markets is virtuous in these ways. They are also certainly not claiming that those who are most virtuous in these ways will accumulate the highest riches.
What Bruni and Sugden are trying to do, it seems to me, is to point out the possibilities of virtue in the everyday lives that most of us lead. It\’s easy to talk about virtue in the context of those spend their lives working in a leper colony, or creating great art, or educating impoverished children. But some of the philosophers who criticize economic behavior for its inordinate focus on self-interest and lack of virtuous behavior seem to say fairly explicitly that the everyday life of, say, a bricklayer or a factory worker or a file clerk must necessarily lack even the opportunity for virtuous behavior, because their efforts to make a living are without a possibility of intrinsic merit. Indeed, the argument that economic behavior cannot be virtuous seems to shade into a claim that only those who don\’t need to work for a living can be virtuous. In contrast, Bruni and Sugden argue that market behavior of everyday life has its virtues worth defending, too.
For a contrasting argument that expresses concerns about how markets may infringe on other important social values, the same issue of JEP has an article by Michael J. Sandel called \”Market Reasoning as Moral Reasoning: Why Economists Should Re-engage with Political Philosophy.\” I posted on one aspect of Sandel\’s argument a couple of weeks ago in \”Is Altruism a Scarce Resource that Needs Conserving?\”