Strengthening Constitutional Self-Government

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Rat Choice Theory: Once Again, It’s Magnificently Right

According to our pope, moral criticism in the absence of the technical knowledge of markets isn’t morality, it’s moralizing. But the truth is that market-based thinking isn’t enough to sustain markets, and so morality is part of the true science of politics and economics. That’s why Ratzinger makes more astute predictions than either our economists or our political scientists. (Thanks to Rob Jeffrey.)

Discussions - 10 Comments

A free market compels morality...

Tell that to Maldoff, who for years was running a 50 billion dollar ponzi scheme.

The Almighty himself declined to compel morality. It's unlikely then to believe a market can "compel" it.

If a creature desires to be nothing more than a ripoff, he'll find a way to do the ripping off, regardless of market forces.

Madloff?

The market is throwing him out..exactly as predicted.

The market is compelling morality right before your eyes...

Madloff will have to adjust his behavior to be accepted by the marketplace in the future

Madoff, by the way....

A morality based market system... now thats Darwinian conservatism I can endorse!

I find this interesting, but perhaps clarification of what is meant by market is necessary.

Markets cannot help but always exist. Even in the soviet union markets existed. A market in the broadest sense is a possibility horizon. In older days when folks took the cow to the market to trade and barter for a bundle of goods or gold...or when you take $100 to Wal-Mart essentially you are going to a market. You are looking to trade a particular good or money for another basket of goods. Negotiations, deals, contracts, exchanges some legal some requiring only hand shakes, some obviously illegal nevertheless all occur in markets. The way I see it putting a hit out on someone is something that occurs in a market. It doesn't matter that finding a hitman requires more effort than thumbing the yellow pages...I am not saying that we have a free market in kills, most people looking to put a hit out will deal with a monopolist or perhaps an oligopoly situation if he is well connected.

Now I accept that if we could openly advertise the desire to kill another and take bids from multiple sources well then we would have a more efficient market. Nevertheless we frown upon contract kills and law enforcement tries to disrupt this market. Nonetheless there still exists a market for those who are well connected.

A free market compels and rewards efficiency. For those who are law abiding, a free market compels morality, or at the very least rewards excellence in a field that society does not frown upon.

In some sense then nothing government or society can do can really abolish markets, on the other hand nothing that government or society does does not effect in some way the spectrum of goods offered on the market. By making some things illegal or more expensive via sin taxes or tarrifs or barriers to entry...by enforcing or neglecting to inforce contracts, by providing a police force...exetera. We incourage or discourage market participants in various fields and effect or intend to effect various changes in the supply and demand of goods.

We do have a morality based market system. The muslim does not buy pork, the baptist avoids alcohol and the catholic does not buy trojans, and the jew patronizes the butcher who offers kosher cuts...at least in theory. Most folks do not require the "invisible boot" of law enforcement to disuade them for seeking or becomming contract killers. The moral stands positions and principles of individuals affect and have considerable weight and influence upon markets because markets are ultimately composed of these individuals. Any particular market is a possibility horizon for the exchange of goods or services, and ethical stands and positions further refine and delimit this horizon.

Of course I am not sure this is anything a teenager mad at his parents and authority for fun/possibility killing morality isn't aware of.

The conservative labels the liberal the child in terms of the abortion market, and the liberal reciprocates when it comes to the conservatives and fossil fuels. Each would desire that society was governed by a moral code that restrained the possibility frontier of these markets.

A free market compels morality...




Is that a Ma Ying-jeou or Pinochet quote?

Comment 7 wasn't put together all that well, but at the end of the day markets are held together by contracts. In so far as morality delimits what folks are willing to contract in then obviously morality has a place in the functioning of markets. In addition to this howhever obviously deals and contracts require trust between parties that each will uphold his side of the bargain. I didn't focus on this as being the root of morality in economics in part because it seems to naturally be part of the excellence of any occupation. Trustworthiness is part of building a brand name or a good reputation, which ultimately also increases the amount one can charge for a good or service. On some level then trustworthiness or reputation is marketable, which means that it can to some degree be collapsed into market-based thinking. In so far as brandnames command a premium for trustworthiness or reliability (even in terms of currency, noting the strength of the dollar)...in so far as value added can be figured with refference to an otherwise homogeneous good...or in so far as human beings can be charged different rates of interest based upon credit scores... then to this degree determining trustworthiness is at least somewhat possible, or at the very least there exist barometers which folks accept in various fields.

The most interesting part of the article to me is the following paragraph: "The market cannot form accurate long-term expectations; at best it can imagine future outcomes. The quality of its imagination in this case depends on cultural factors that transcend economic judgment."

This might be true, but it seems cultural factors are already inbedded in economic judgements, and furthermore price discrepencies arrise out of such assumptions. Credit scores and college ratings and future contracts, GPA, past performances, standardized test scores...barometers of various credibility standards abound. Even if these barometers are not perfect they take on a life of their own because they are accepted as coin of the realm by various institutions. In other words one could say that these barometers are effective substitutes for throwing darts at the wall.

In some sense one could say that guys like Madoff help sustain the premium that folks are willing to pay for trutworthiness and known competence. In this sense then trustworthiness itself is given a price. In an idealistically moral/competent world folks would not be willing to pay a premium for the services of a Warren Buffet, assuming that in such a world all financial advisors are equally competent trustworthy and essentially homogenous. In other words folks like Madoff prey on those who are willing to take a chance on greater returns, but not all unknowns without reputation are bad bargains, and not everyone who trusted in the name brand credibility of our financial sector got out smelling likes roses.

I don't really know how well the market can work in terms of acertaining the credibility of individuals, in some sense I am inclined to say that the market is dependent on discerning individuals, and ultimately there are enough suckers that will get burnt both ways(by keeping money is pillows under the bed)? In other words the market, like individuals corrects itself whenever it gets burned, but there is no guarantee that in its learning it does not countinuously overcorrect. The market being composed of individuals and institutions might be held in check by learning opposite lessons simultaneously.

There has been a great deal of pious moralizing about the economic crisis.

But an advanced economy based on free markets requires that the Madoffs of the world be an exception and not the rule. It also requires a general respect for private property and contracts that gets embodied in the legal code.

Ultimately, people have to feel secure enough to tolerate the uncertainties of the marketplace. This can only happen where families are strong.

We seem to be moving in the direction of some kind of serfdom to the nanny state that accommodates unlimited expression of disordered sexuality.

Friedman or Hayek, you silly person.

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