voluntary free markets morality experimental


rights mice

Markets Strengthen Moral Values

by Fred E. Foldvary, Senior Editor, 20 May 2013

Pure markets enhance people’s moral values. In a pure market economy, all activity is voluntary for everyone, and involuntary acts, those which coercively harm others, are outside the market as an invasion of rights. A pure market includes the governance that enforces natural moral law, thereby promoting acts that are good or neutral, while minimizing evil acts.

Critics of markets have claimed that when people search for the cheapest goods, this reduces moral concerns. But in a pure market, the products offered are produced by moral means, i.e. by a process that does not involve coercive harm. Therefore searching for the lowest-cost goods is not evil. Only when goods are produced by immoral means, such as with slave labor, is the product morally bad, but that could not occur within a pure market.

Unfortunately, some economists who conduct research on human behavior leap to incorrect conclusions because while they have been trained in experimental techniques and mathematics, their graduate-school training did not include market ethics. For example, Prof. Dr. Armin Falk at the University of Bonn and Prof. Dr. Nora Szech at the University of Bamberg conducted experiments in which persons were offered a choice between receiving ten euros versus letting a laboratory mouse get killed. If a subject decided to save a mouse, the experimenters bought the animal (“Morals and Markets,” Science, DOI: 10.1126/science.1231566), allowing it to live a decent life.

In the experimental market with buyers and sellers, more people were willing to accept the killing of a mouse, than when individuals were simply offered an isolated choice. Therefore the researchers concluded that markets erode moral values. Guilt is shared with other traders who are also involved in transactions that kill mice. If a person refused a transaction to save a mouse, somebody else would step in, so the mouse would be killed anyway.

But no conclusion about markets and morals can be derived without first analyzing the morality of the particular act, i.e. killing a mouse. The basic issue for this case is whether animals have moral rights. There is no consensus on animal rights by ethicists, but my analysis of the universal ethic concludes that the morality of persons applies to all living beings (www.progress.org/fold62.htm and www.progress.org/fold244.htm).

Animals have moral rights, but lesser rights than those of human beings. Therefore most animals may be killed in order to obtain utility, such as for food, but not for the fun of killing or the perverse pleasure of inflicting pain. Mice may be killed if they have invaded a house and it is impractical to trap and release them outdoors. They may be killed if needed as food for pet snakes. But they may not be killed for the mere fun of it. If they are killed, it should be done with a minimum of pain to the animal.

In this research experiment, if the choice were between receiving money and avoiding crushing an ordinary rock, most people would accept the money, because it is not evil to crush a rock. Regarding the mouse, if the choice is money versus the life of the mouse, it is morally bad to kill the mouse, since the killing is not for utility such as food or protection from house damage.

There is an inherent ethic in a pure market, since it consists of voluntary acts, and the determination of what is voluntary requires a universal ethic. In a pure market, what is legal is the same as what is morally evil, and thus pure markets enhance moral values. In a pure market economy, the law prohibits general cruelty to animals, and it prohibits killing animals other than to obtain their utility, when the killing does not threaten the existence of the species. It would be illegal to accept money in exchange for letting a mouse be killed.

Suppose people were offered a million euros to let a mouse be killed. I conjecture that most people would accept the offer, where they would reject it if the offer were one euro. They would be obtaining the great utility provided by a million euros from the mouse killing, but that is offset by the loss of $1 million by the payers. It would not be a net gain for society.

There is a language problem in English, with the term “market” referring to any transaction, and also to pure free markets in which action is voluntary. Thus the buying and selling of slaves is outside a voluntary market, but it is a trade market in the sense of buying and selling. Trade markets in immoral goods may well erode morals, while pure markets enhance morals.

In a pure market, it is illegal to knowingly buy stolen goods. But suppose there is a trade market in stolen goods, and the stolen goods are cheaper than goods that are sold by proper owners. Such trade markets erode morals, as some people would knowing buy the stolen goods, thinking that if they don’t, others will. In a pure market, there would be high penalties and strong enforcement that would minimize transactions for stolen goods. Experiments in which the subjects buy stolen goods because they are cheaper, and when there is no penalty for doing so, do not imply that such transactions erode morals in a pure market, because the experimental context is in corrupted trading.

The awful working conditions in factories in Bangladesh and other developing economies raises the issue of whether it is morally wrong to buy products from such places. These economies are morally evil, but only in degree compared to the economies of the wealthier countries, which also have significant injustice, so it would be hypocritical to ban such products.

However, morality requires that the evil associated with the products be fully disclosed on the labels. A proper contract requires willing and knowing parties. With disclosure, morally conscientious persons would thereby be warned, and many would avoid the products, putting pressure on the importers to require better working conditions, and even legal changes in those countries. When people today buy such goods, there are no warning labels.

Another example of not understanding the concept of a pure market was the article “Markets Erode Morals, Let People Do Horrible Things: Study” by Mark Gongloff in the 13 May 2013 Huffington Post. After discussing the mouse experiment, the author states, “The devastating collapses of the dot-com and housing bubbles in recent years have finally led us to start questioning the value of unfettered markets.”

If market are unfettered, evidently the Federal Reserve does not exist, there are no income and sales taxes, no asset forfeitures, no government subsidies, and federal regulatory agencies such as the SEC, FDA, FHA, and Fannie Mae have never existed, never mind state-level agencies. The author presumes, with no analysis, that the housing bubble was caused by the market, whereas there is good reason to conclude that massive fiscal subsidies to real estate caused the Crash of 2008. The author also does not examine role of the cheap credit provided by the monetary expansions of the Fed during the 1990s and 2000s as causes of the bubbles.

Pure markets strengthen moral values because immoral acts are prohibited or penalized, pushing the culture towards favoring goods that are morally proper. Critics of markets do not distinguish between pure voluntary markets versus corrupted trade. The critics also fail to delve into the economics of boom-bust, pollution, poverty, and unemployment, presuming from the superficial appearance that the market is free and causes such problems.

The purpose of economic theory is to enable people to understand the implicit reality beneath superficial appearances. The economy seems to critics to be a free market because they observe buying and selling without questioning whether the objects traded fit the ethical criteria of the pure market.

-- Fred Foldvary

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Copyright 2010 by Fred E. Foldvary. All rights reserved. No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, which includes but is not limited to facsimile transmission, photocopying, recording, rekeying, or using any information storage or retrieval system, without giving full credit to Fred Foldvary and The Progress Report.

Also see:

If You Own, You're In Business
http://www.progress.org/2012/landdema.htm

Fighting Back Against Poli-Econ Tyrants
http://www.progress.org/2012/deanbake.htm

Free the Markets, Mr. Romney, End the Favors
http://www.progress.org/2012/reaper.htm

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