Ethical Foundations of Free Market Societies.apee (1)

8/10/2019 Ethical Foundations of Free Market Societies.apee (1)

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The Ethical Foundations of Free Market Societies

Nicholas Capaldi

Introduction

I hold that the free-market economy is the greatest force in the modern world; it

has transformed the ethical landscape by improving the material conditions of life and by

institutionalizing individual freedom. One would think, therefore, that such a

phenomenon deserves special praise and attention. But the free market economy is not

understood even by many of those who are surrounded by it. One eplanation is,

ironically, that it has been defined largely by its critics; so much so that even the

defenders of free-market economies have often unwittingly adopted the framework of

their critics. At present there exists no positive, internal, comprehensive framework

for understandin free!market economies and the larer cultural context of which

the" form a ma#or part$%

! market economy does not eist in a vacuum. "oo little attention has been given

to understanding the relation between markets and the totality of our culture. #hat is not

usually made clear even in very illuminating discussions of specific economic issues is

that a market economy depends upon and presupposes a framework of ethical

presuppositions. $conomists have sometimes unwittingly contributed to this pervasive

misunderstanding. It also seems at times as if free market societies are intrinsically

incapable of legitimating themselves and of providing mythic potency.% &onflicts within

our own culture often reflect ignorance, misunderstanding, or deep disagreement over

what the ethical presuppositions are.


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#hat we need to provide is a comprehensive framework or grand narrative that

would identify the ethical presuppositions of a market economy; to do this would be to

fill a ma'or lacuna in the contemporary intellectual environment, provide more solid

support for the market economy, and significantly influence public policy discussion.

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Internal Ethics vs$ External Ethics

I shall begin by distinguishing between the internal ethics of commerce and the

larger eternal ethical frameworks from which to 'udge the practice of commerce. !n

analogy will help us here. #e can distinguish between the internal ethics of boing

(meaning the rules that prizefighters have to follow) and the eternal *uestion whether

there should be a professional sport of boing (about which some have reservations). "he

eistence of these eternal reservations by no means shows that boing as a practice lacks

a set of clearly defined internal norms.

! number of writers have done an ecellent 'ob of identifying the internal norms

of commerce in a free market society+ !ustrian economists in general, ukuyama on

Trust, ane acobs, and eidre /c&loskey to name a few. #hat I want to discuss is what

I see as a larger eternal ethical framework that encompasses free market activities. /y

claim is that I am identifying the dominant ethical paradigm that operates in the world

today.0 Of course, some might *uestion whether what I call the dominant ethical

paradigm is itself ethical, that is, whether it coheres with their alternative paradigm. I

address this *uestion directly at the end of my paper, but I contend, without argument at

this point, that I believe this dominant ethical paradigm is consistent with the ma'or

!brahamic religious faiths of the #est and with the ma'or !sian religious traditions with

which I am familiar.1

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The &arer External Ethical Framework of Free Market Societies

#hat is the larger ethical framework2 3ere is the Big 4icture (otherwise known

as a grand narrative). 5ince the 6enaissance, the modern western world has endorsed the

technological pro'ect. By the technoloical pro#ect'I mean the program identified by

Bacon, escartes, and 7ocke. escartes in his Discourse on Methodproclaimed that

what we seek is to make ourselves the 8masters and possessors of nature.9 Instead of

seeing nature as an organic process to which we as individuals conform, escartes

proclaimed the modern vision of controlling nature for human benefit. It is the same

pro'ect that Bacon had in mind when he observed that knowledge is power. In 7ocke:s

version, 8od, who has given the world to men in common, has also given them reason

to make use of it to the best advantage of life, and convenience


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a protest against it, especially cell phones and computers@ A there is, in short, no going

back now; second, to the etent that ethical problems are raised by our relationship to the

environment I believe that those problems have been creatively addressed by ulian

5imonand practically engaged in market friendly ways by organizations such as 4$6&.

inally, lest any one think that the "4 is insensitive to or ecludes other cultural domains,

I call attention to 7eonardo da Cinci as among the first to embrace all and to ecel in all

of these aspects of modernity.D

"he technological pro'ect has been a success in two senses+ first, remarkable

technological advantages have been achieved; second, those advantages have enabled

subscribers to the pro'ect (mostly !merican and #estern $uropean) to Espread: this

pro'ect around the entire globe. "he spread has not been a simple matter of the powerful

imposing on the weak; the weak have largely come to embrace the pro'ect on their own.

#e understand ourselves to be living in a world which has accepted or is in the process of

accepting and coming to terms with the technological pro'ect. "he thorny issues of

globalization would not have arisen outside of the contet of the technological pro'ect. It

is the technological pro'ect, not market economies per se, that places enormous side-

constraints on any narrative that attempts to capture the way the world is. "he analogy I

would draw is with "oc*ueville:s observations about democracy in the nineteenth

century, namely, that like it or not, assets and liabilities aside, it is the political fact with

which all theorists must come to terms.

5ome of you may have observed that I make reference to rench thinkers such as

escartes and "oc*ueville. "wo of my other favorite rench "hinkers are /ontes*uieu

and Ben'amin &onstant. !fter the mid-nineteenth century it:s all downhill after them;

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and it makes me sad to observe that all bad ideas come from rance; but notice, I did not

say that all ideas that come from rance are bad.

"he "4, not the market, is the starting point for our narrative. "here have always

been markets, but it is only since the G> thcentury that markets have come to play such a

dominant role in our lives. #hat I am arguing is that it is the presence of the "4 that

eplains the centrality of markets.

#hy is this2 ! free market econom" His the most effective means of carrying

out the technological pro'ect. /arkets have been around for a long time, but the concept

of the free market did not become an important theoretical construct until the modern

period and the rise of the technological pro'ect. "he technological pro'ect re*uires

constant innovation, and the free market economy maimizes such innovation through

competition and specialization. ! free market means that there is no central allocation of

resources and tasks, and it means that resources remain largely in private hands (i.e.,

private property). Innovation, by definition, is something that cannot be planned. !

competitive market where individuals may eperiment is the best guarantee of fostering

creativity.

"he crucial theoretical argument for the centrality of a free market was made by

!dam 5mith in the Wealth of Nations. 3is eample of the manufacturing of pins eplains

how an assembly line of narrowly focused specialists is far more productive.

5pecifically, 5mith pointed out that once we are focused on one part of a process creative

individuals are led to invent labor saving devices. !nother way of putting this point is

that the market economy provides the contet and the incentives for maimizing creative

activity in the technological pro'ect. "he practical or empirical argument for the

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advantages of a free market economy is GHDH, the implosion of the 5oviet nion. !lmost

everywhere it is now believed (or at the very least people have to pay lip service to the

view) that a free market economy is the most efficient method for engaging in the

technological pro'ect. $conomists can point out the other virtuesGJof a market economy,

perhaps give more comple arguments of a purely technical kind, but the fact remains

that the market is what works vis-K-vis the technological pro'ect.

#hat is the role of government in this narrative2 overnment operates in two

domains, domestically and internationally. 7et us look at the domestic role. "he

government:s domestic role with regard to the economy is carefully circumscribed. "he

role of the government is to serve the free market economy. It does this by providing

personal security, and providing a legal system for the protection of rights, most

especially property rights, for the enforcement of contracts, and for the resolution of

contractual disputes. 6ather than employ ideological slogans like the night watchman

state or boundary-less and relative metaphors like the Eminimal: state, it is more

advantageous to recognize that state action is always to be understood in terms of

whether it serves the interests of a market economy within the technological pro'ect. "his

focus is evident in our political life as well. #hatever else they may pretend to be,

political parties are primarily a collection of economic factions; everything else is a side

show.

! free market economy flourishes best under limited overnment,GG where

Elimited: means restricted to actions that enhance a market economy within the

technological pro'ect. "he most successful instantiations of limited government have

come about because of the rule of law, the promotion of individual (rihts),G%where


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rights are understood to be restrictions upon government action, and reliious toleration.

"he rule of law is not to be confused with the mere eistence of a legal system, and most

certainly it is not the rule of lawyers. !s 3ayekG0has made so brilliantly clear, a legal

system that constrains governmentis said to ehibit the rule of law. It stands in contrast

to despotic rule. "he rule of law typically divides the powers of government among

separate branches, has an independent 'udiciary, entrenches individual rights (notably due

process and the e*ual protection of the law) behind constitutional walls, and provides for

the orderly transfer of political power through fair elections. !s further elaborated by

/ichael Oakeshott,

G1

the rule of law eists only in a modern state that is a civil

association, that is, one in which there is no collective good, no phantom of social 'ustice,

only the goods of its individual members. /oreover, the laws are not instruments for

some collective good or purpose but rather prescribe conditions to be observed by

individuals who pursue their own purposes, alone or with others.GF "he laws are neutral

or indifferent with regard to whether the purposes are achieved. Once the law is

construed as an instrument for achieving particular economicG>or political ob'ectives, the

rule of law will disappear.G In other contets, I have argued that affirmative action as

*uotas is a preeminent eample of the violation of the rule of law. GD "here are

unfortunately too many other eamples.

It is important to note that the rule of law does not entail a particular form of

government, such as democracy, monarchy, etc. !ny of these forms may or might not

ehibit the rule of law. "hat is why it is important to stress that the .5., for eample, is a

6epublic and not a democracy, at least not yet. emocracy was understood originally by

advocates of limited government as part of a system of checks and balances GH that

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prevents one interest from imposing its will upon others. emocracy, as /adison made

clear inFederalist # 10, is a negative device for blocking one powerful interest group

from imposing its will on others. emocracy was never intended as a positive device for

articulating a suspect common good.

emocracy later came to be viewed as a potential threat ("oc*ueville, /ill), %Jfor

it harbors within it the formal notion that what is right is what the ma'ority decides or that

the common good is what the ma'ority decides it is on a given occasion. "he ma'ority

can clearly redefine the fundamental values. "wo ways are available for preventing the

abuse of democratic procedure+ one is the political and legal machinery of checks and

balances (we have recently been reminded of the role of the $lectoral &ollege) and the

other is a larger cultural contet in which the fundamental values are somehow

safeguarded or maintained even in the process of change and reform. 4olitical machinery

ultimately depends for its proper use on the larger cultural contet. #e are, therefore,

brought back to the need for a public ethic that preserves something like the importance

of individuality.

#e turn now to the international domain. ! national government is obliged to

serve the market economy not only at home but abroad. !s 3ume, 5mith, Lant, and

&onstant argued one of the conse*uences of modern commerce is the potential end of

war, what Lant referred to as perpetual peace. #ith commerce we create wealth through

the "4 not by stealing it from our neighbors. ust as a domestic market leads to

constructive competition and specialization so an international market will do so as well.

!s Lant pointed out, commercial republics do not go to war with each other; this is a

hypothesis that has enormous support+ it has been argued that in the last two hundred

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years since Lant wrotePerpetual Peace, there have been no ma'or wars where all of the

combatants have been commercial republics. "his is also sometimes called the

8/conald effect,9 since no two countries where /conald:s fast food is available go to

war with each other. /oreover, if the whole world consisted of commercial republics,

then there would be no need for a world government or even a world court; all

contractual disputes could be resolved through national courts.%G

5o far I have maintained that the "echnological 4ro'ect re*uires a free market

economy and that the free market economy re*uires limited government and the rule of

law; now I am maintaining that everything rests upon a larger cultural contet that

promotes individuality. "he notion of individuality has historically and logically

depended upon a larger cultural contet in which an ethical consensus has operated. "he

ethical consensus contains a commitment to personal autonom". By autonomy is meant

self-rule. !n individual is free to the etent that heMshe imposes order upon

himselfMherself. 4ersonal autonomy is lacking in cases of heteronomy, including the

eploitation of others. !lthough the concept of autonomy is classical (5toicism) in origin,

its &hristian roots are most relevant for the modern period. It is the culmination of the

&hristian doctrine of free will and responsibility both secularized and transposed to the

civil sphere.%%

"he clearest epositors of autonomy are Lant, 3egel, and ohn 5tuart /ill. #hat

3egel (who was by the way an avid reader of 5mith and no totalitarian) %0added was the

claim that what autonomous individuals want and need is recognition of and respect for

their autonomy. "his can only come from other autonomous individuals. "his insight not

only eplains the modern transformation of human relationships and institutions but it

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solves the ma'or problem of modern political economy. "hat problem is to resolve the

conundrum of the potential conflict between the interest of any one individual and all

other individuals. 3egel:s solution is brilliant.%1 Our greatest ultimate and ob'ective good

is autonomy; in order to sustain my own I am obliged to promote yours; since autonomy

is not a zero-sum entity, %Fthere is no conflict between mine and yours; finally, promoting

your autonomy does not mean redistribution; it means e*uality of opportunity not

e*uality of result; it means holding you accountable for your action not condescension; it

means teaching you how to fish, not giving you a fish.

"he basic ethical concept that emerges is the concept of personal autonomy.

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"he

concept of autonomy presupposes that human beings are in some non-trivial sense

possessed of free will; the possession of free will is not an obvious fact but something we

come to discover about ourselves. "his discovery is only possible for those who learn to

control their impulses and who re'ect the idea that standards are eternal. "hree important

features of autonomy are worth noting. irst, to govern oneself is not to be confused

simply with defining oneself. !utonomy is often misrepresented by its critics (usually

advocates of teleology) as a form of self-indulgence. !lthough it is true that advocates of

autonomy deny an intrinsic teleology and recognize an enormous number of ways in

which we pursue fulfillment, all of these ways avoid heteronomy and therefore any

notion of imposing on others. "he usual litany of counter-eamples always turns out to

be composed of forms of heteronomy.

5econd, recognizing, pursuing, and sustaining autonomy are the spiritual *uests

of modernit"and the technological pro'ect. "he ultimate rationale for the technological

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pro'ect is not material comfort or consumer satisfaction but the production of the means

of accomplishment. #ediscover that our greatest sense of fulfillment comes from freely

imposing order on ourselves in order to impose a creative order on the orld! We have

no come full circle! We started ith the TP and no e have e"plained that even the

TP e"presses a fundamental ethical presupposition namely the centrality of the

autonomous individual!

I ask the reader to perform the following thought eperiment. Imagine we

discover another part of the universe with intelligent life but where the laws of physics

and the truths of the social world are different from our own. !mong the differences, the

most efficient economy is a centrally planned economy. !sk yourself whether under

those circumstances you would still choose to live in a free market society. /y

contention is that most of you would still prefer freedom even if it were less efficientN%

"hird, autonomy, or more precisely the lack thereof, eplains the eistence of

dysfunctional people in free societies. "he standard diagnosis ?usually this means the

politically correct eplanation@ for the eistence of dysfunctional people and I might add

every conceivable social problem is the lack of resources or the lack of positive rights.

"he default remedy, given the standard diagnosis, is some form of redistribution. But if

we%Dare right, the eistence of these dysfunctional people and a whole host of social

problems is the presence of people who have not yet developed a sense of personal

autonomy. I believe that this is true both domestically and internationally.

I would add to this that the greatest obstacle to globalization is the resistance to

cultural change that seeks to substitute the notion of personal autonomy for more

collectivist conceptions of the self. 5ome will argue that this amounts to western cultural

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hegemony. /y responses would be, first, that autonomy is a fundamental truth about

human nature and that its prevalence in the west is an accident of history. 5econd, those

non-westerners who have eperience and embraced personal autonomy recognize that it

is an irreversible transformation of the self, not one choice among many; in fact, the

notion of choosing an identity only makes sense if we have the capacity for autonomy.

"hird, cultures are not rigid structures but historical artifacts that change over time, most

especially when confronted with alternative cultures. inally, as C.5. aipaul has put it,

the 8idea of the pursuit of happiness


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Alternative Ethical +iews

3aving now laid out a positive, internal, comprehensive ethical framework for

understanding free-market economies and the larger cultural contet of which they form a

ma'or part, there may still be some skeptics among you. Is this 'ust a story we tell

ourselves, an eercise in apologetics, or does it help us to deal with critics in the practical

domain2

7et:s test it by application to a specific practical problem, namely, the minimum

wage. I:m sure all of us in this room understand that minimum wage laws do not achieve

the end for which they were designed and that such laws are, in addition, counter-

productive. If it so obvious to us, why is it not obvious to everyone2

"here are two parties to this dispute, and they have very different philosophical

and ethical frameworks. I shall briefly spell them out (although I note that the other side

never does this).

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I call your attention to the communitarian principle that subordinates production

to distribution. iven that principle, no amount of empirical evidence of the counter-

productive conse*uences of minimum wage laws will have any effect. In fact, you will

be greeted with the counter-assertion that even more intrusive redistributive policies are

necessary to counteract those effects, ad infinitum.

#hich of these two positions is true2 5upporters can be found for both sides

offering elaborate arguments in favor of each. Included in these debates are many of my

friends A !ristotelian realist defenders of the market, 6ights theorists, and, among

economists, positivistic reductivists. o body ever wins these arguments. #hy not2 "he

reason is that the argument cannot be won. !t this point readers may be perpleed and

wonder why I am opting for a form of moral epistemological skepticism when I want to

defend a particular ethical view. !s you will see in what follows, the skepticism will be

7IB$6"!6I!

Individual persons have free will

ltimate oal+ 4ersonal !utonomy

reatest ear+ "yranny

$ach Individual creates his-her own substantive

meaning; public practices are instrumental to

the private good not ends-in-themselves

4olitics+ protect individual rights

7aw+ protect contractual freedom and individual

liberty

7egislation+ maimize e*ual opportunity

&ommerceproduction of profitable product or service

maimize shareholdervalue

&O//I"!6I!

5ociety defines (is constitutive of) the individual

ltimate goal+ 5ocial ood

reatest ear+ eploitation and alienation

Individuals fulfill themselves within social

institutions; every institution and every

practice must reflect the larger social good

4olitics+ democratic determination of the social

good

7aw+ distributive 'ustice (fairness)

7egislation+ maimize e*uality of result

&ommercesubordinate production to distribution

multi-fiduciary duty to stakeholderswithin the

social good

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the basis for a different kind of argument in defense of personal autonomy.0J

I now offer the following case against the possibility of a purely philosophical

resolution of ethical diversity. It is not simply the case that there are significant ethical

disagreements about substantive issues. /any if not most of these controversies do not

appear to be resolvable through sound rational argument.0G On the one hand, many of the

controversies depend upon different foundational metaphysical commitments. !s with

most metaphysical controversies resolution is possible only through the granting of

particular initial premises and rules of evidence. On the other hand, even when

foundational metaphysical issues do not appear to be at stake, the debates turn on

different rankings of the good. !gain, resolution does not appear to be feasible without

begging the *uestion, arguing in a circle, or engaging in infinite regress. One cannot

appeal to conse*uences without knowing how to rank the impact of different approaches

with regard to different ethical interests (liberty, e*uality, prosperity, security, etc.). or

can one uncontroversially appeal to preference satisfaction unless one already grants how

one will correct preferences and compare rational versus impassioned preferences, as

well as calculate the discount rate for preferences over time. !ppeals to disinterested

observers, hypothetical choosers, or hypothetical contractors will not avail either. If such

decision makers are truly disinterested, they will choose nothing. "o choose in a

particular way, they must be fitted out with a particular ethical sense or thin theory of the

good. Intuitions can be met with contrary intuitions. !ny particular balancing of claims

can be countered with a different approach to achieving a balance. In order to appeal for

guidance to any account of ethical rationality one must already have secured content for

that ethical rationality.

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ot only is there a strident ethical diversity defining debates regarding all

substantive issues, but there is in principle good reason to hold that these debates cannot

be brought to closure in a principled fashion through sound rational argument. !s one

author has put it, 8"here seems to be no rational way of securing ethical agreement in our

culture.90% "he partisans of each and every position find themselves embedded within

their own discourse so that they are unable to step outside of their own respective

hermeneutic circles without embracing new and divergent premises and rules of

inferences. /any traditional thinkers find themselves in precisely this position. "hey are

so enmeshed in their own metaphysics and epistemology, so convinced that they are

committed to Ereason: when what they are committed to is a particular set of premises and

rules, so able to see the Eflaws: in the positions of others who do not accept the same

rules, that they *uite literally do not understand the alternative positions or even how

there can be other positions. /ore important, they fail to understand the character of

contemporary ethical debate. #hat is peculiar about contemporary ethical debate is not

'ust the incessant controversy but the absence of any basis for bringing the controversies

to a conclusion in a principled fashion. "his is what it means to live in a post-modern

world.00

#hy is ethical pluralism both inevitable and a welcome result2 "he reason ethical

pluralism is inevitable is that there is no such thing as human nature, only the human

predicament. By Enature: here we mean an ob'ective built-in teleology universally

present in all human beings that would form the basis of a common ethicality.01 "his we

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deny. ?It is strange to live in a world that promotes cultural diversity but refuses to

recognize ethical diversity.0F@ "here may be truths about the human Epredicament: but

these do not amount to a Enature: in the classical sense of the term. One fundamental

feature of that predicament is human freedom. "hat is why no individual is a cultural

automaton, and why any child makes up new sentences, that is, sentences not previously

heard. reedom is part of the ordeal of consciousness within which we create ourselves

continually and our understanding of the world based on our eperience of it. "he way in

which this task is accomplished is through learning. 3owever, what distinguishes us

from animals is that e are free to choose ho e interpret e"perience!

$%

&"perience

does not come to us in pre'pac(aged units .0 "his is why any reductive scientistic

account of the mind or learning (e.g., artificial intelligence or evolutionary biology ) is

bound to fail, as is the case with most educational reform. Our freedom is employed in

our imagination and intelligence; these faculties are used in defining ourselves as

individuals and in giving meaning to our eperience of the world we inhabit; this

engagement is called learning and is the source of our humanity. !n individual freely

chooses meaningful ways of understanding himself and the world around him. #e must

use our imagination in order to learn, but it is the uni*ue ordering of our eperience in

imagination that makes us uni*ue individuals.

#hat role does our cultural inheritance play in all of this2 It is only through

interaction with our inheritance that we become who we are. ! cultural inheritance is a

set of cultural achievements and practices, not a doctrine to be learned. "he content of an

inheritance can only be conveyed in the form of meanings. One of the most important

GD


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ways in which we utilize our imagination is in reconstructing the inheritance. "he

inheritance is re-created through its appropriation; it is not homogeneous; there is no final

or definitive formulation of it; and within it there are many voices.

"he foregoing discussion of ethical diversity is welcomed because it enables us to

address the issue of ethical diversity. $thical diversity is not a problem to be solved; it is

instead a reflection of a fundamental truth about the human condition. "he ultimate truth

is human freedom. It is this truth that is the only possible ob'ective foundation of any

ethical position.

"o the etent that a universal civilization eists, it is based upon procedural norms

on which most of us can agree; and these procedural norms (most especially the rule of

law), are compatible with a wide variety of different substantive ethical views, but not

every substantive view. It is a free market society that is most compatible with this kind

of ethical diversity. IN S-.T, TE ETICS -F A F.EE!MA./ET S-CIET0

IS A 1.-CE23.A& ETICS4 TE F-3N2ATI-NS -F S3C A S-CIET0 A.E

C-M1ATI5&E 6IT AN E7T.A-.2INA.0 +A.IET0 -F S35STANTI+E

ETICA& AN2 .E&I8I-3S 6-.&2+IE6S. Only the fanatic, the authoritarian,

and the totalitarian are ecluded. #hat unites the latter three (the fanatic, the

authoritarian, and the totalitarian) is their inability and unwillingness to embrace the

challenge of freedom and responsibility. It is not we who have to apologize to them; it is

they who will eventually have to apologize to us. It is, therefore, high time for us to

take back the ethical high-ground and demand that apologyN

Conclusion

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Our grand narrative eplains and encompasses other narratives. It is compatible

with a plurality of different substantive narratives. It does not re*uire the delegitimation

of the plurality of substantive views. o one is ecluded ecept those who eclude

themselves. "his is the ethical foundation of free market societies.

icholas &apaldi 7egendre-5oulQ istinguished &hair in Business $thics

&ollege of Business !dministration

7oyola niversity ew Orleans

>0>0 5t. &harles !venue &ampus Bo GF

ew Orleans, 7! JGGD

(o) (FJ1) D>1-HF

(h) (FJ1) 1D>-FJG1a+ (FJ1) 1D>-%0>

ncapaldiRmindspring.com capaldiRloyno.edu

www.cba.loyno.eduMfacultyM&apaldi

%J
mailto:[email protected]:[email protected]://www.cba.loyno.edu/mailto:[email protected]:[email protected]://www.cba.loyno.edu/


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8.AN2 NA..ATI+E

The Ethical Foundations of Free Market Societies

5asic Arument

"echnological 4ro'ect ("4)ree /arket $conomy (/$)7imited

overnment (7)(Individual 6ights S 6ule of 7aw (67) S "oleration)

&ulture of 4ersonal !utonomy (4!)

Technoloical 1ro#ect(Bacon, escartes, 7ocke)

G. "echnology

%. $nvironment

0. #ealth (resources; issues of distribution)

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Free Market Econom" (in the contet of "4 A 3ume, !dam 5mith)

G. 4rivate 4roperty

%. &ompetition

0. Innovation

&imited 8overnment(4olitical $conomy)

omestic

Individual 6ights (civil association vs. enterprise association A Oakeshott)

individual good vs. common good vs. collective good (ames /adison

ederalist TGJ)+ 6epublic vs. emocracy

.ule of &aw(Oakeshott, 3ayek)

International

International division of laborworld peace (Lant, &onstant)

oreign 4olicylobalization (#"O vs. 4rotesters)

Culture of 1ersonal Autonom"(Lant, 3egel, .5. /ill)

a. Inner-directed individual (escartes, Ignatius 7oyola, /a #eber)

b. 3egel on the relation of master-slave (solves problem of relating the

individual good to the common good)

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c. "4 needs autonomous individuals

i. Intermediate institutions like family and religion foster

autonomous individuals

d. !utonomy as the spiritual *uest of modernity and the "4 as an

epression of 4!

e. "he anti-individual U the culture of 4overty (Oakeshott, 7ewis)

%0


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G"he best work to date is that of 3ayek, Oakeshott, and ukuyama.

%"his is a concern epressed by 4eter Berger in The )apitalist *evolution+ Fifty Propositions ,bout

Prosperity &-uality and .iberty (ew Vork+ Basic Books, GHD>).

0

"he reason this paradigm comes in for so much criticism is precisely because of its dominant position.

"hose who adhere to it should be flattered by the attention. "his also eplains the curious phenomenon

that while most academics re'ect all or part of this paradigm and that this opposition is deeply

entrenched and pervasive in the academic world, the very same academics view themselves as

embattled and do not concede their own dominance in the academy.

1I have organized a conference on this theme to be held une GJ-G0 at 7oyola niversity in ew

Orleans.

F "he so-called industrial revolution is but an epression of the "echnological 4ro'ect. "he more

fundamental idea is the notion of transforming the world. 5ee 6ene escartes, Discourse on Method+

rancis Bacon, &ssays /,mherst, . V. GHHF) nos. G0, G>-G, and The reat nstauration and Ne

,tlantis, ed. erry #einberger (!rlington 3eights, Ill. GHDJ)

>ohn 7ocke, 2econd Treatise, &hapter "hree ("he 6ight of 4rivate 4roperty), sections %>, %, 01, and

1J.

ulian 5imon, 8&an the 5upply of atural 6esources be Infinite29 in 3ltimate 6esource % (4rinceton+

4rinceton niversity 4ress, GHH>), pp. F1->H.

D"yler &owen,n Praise of )ommercial )ulture(&ambridge, /!+ 3arvard niversity 4ress, %JJJ).

H"o the etent that the classical liberal narrative is primarily a political narrative with implications for

the economy rather than a narrative that recognizes the primacy of the technological pro'ect and the

role of the market economy within it and therefore implications for the political domain, the classical

liberal narrative is in my estimation a defective one. /oreover, the classical liberal narrative is pre-

Lantian and pre-3egelian and therefore inade*uately encompasses autonomy.


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GJ"he promotion of innovation is not the only thing which makes markets valuable. 3owever, my

claim is that innovation is of paramount importance because of its relevance to the "echnological

4ro'ect.

GG

E7iberty: is the absence of arbitrary eternal constraint. "o have political liberty is to be able to

restrain or limit the government. Ereedom: (hereafter, autonomy) is an inner condition, the condition

of imposing order on oneself. 7iberty is a means to freedom. 7iberty degenerates into license only

when it is not in the service of freedom.

G%or a variety of reasons I would like to avoid or do away with 8rights9 talk altogether. It appears as if

this can be best done by absorbing what I want to say about 8rights9 into the discussion of the rule of

law, especially as formulated by 3ayek (GHH1) and Oakeshott (GHD0).

G0.3.!. 3ayek,.a .egislation and .iberty (7ondon+ "aylor U rancis, GHD%) and The *oad to

2erfdom, (&hicago+ niversity of &hicago 4ress, GHH1), &hapter 5i 84lanning and the 6ule of 7aw9.

G1/. Oakeshott, 8"he 6ule of 7aw,9 in 4n 5istory and 4ther &ssays(GHD0), pp. GGH-G>1; 5upplement

(4n 5uman )onduct, pp. GGH, G0H, GDG, GF0-FD ?mentions uller@, %01-F, %D>, and 0GF). F>pp.

GFree economic activity, effective economic competition and free markets unfettered by monopolies

are, in Oakeshott:s words, 8not something that springs up of its own accord,9 but are 8the creature of

law.9 "hey are &6$!"$ by the systematic rule of law. $conomic competition can only eist,

Oakeshott maintains, by virtue of a legal system 8which promotes it.9 "his underscores the fact that for

Oakeshott 8a connection is drawn between the rule of law and a free society9 as a whole. "his eplicit

language of promotion, creation, connection, suggests some causal relation between rule of law and

economic and general freedom. rom the vantage point of the economist, it could be argued that one

direct 464O5$ of the rule of law is to maimize economic utility. 3owever, this of course directly

conflicts with Oakeshott:s famous insistence that the rule of law is a mode of ethical association in

terms of the recognition of the authority of known, O-I5"6/$"!7 laws. 5uch ethical

association are fundamentally distinguished by Oakeshott from purposive or enterprise associations. !s


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Oakeshott points out in his *ule of .a, many apologists of the rule of law, 8recognizing the

inconsistency of attributing the virtue of a non-instrumental mode of association to its propensity to

produce, promote or encourage9 a substantive outcome, have insisted that the 6ule of 7awPs specific

virtue is precisely its promotion of the outcome of either peace, order, economic efficiency or more

prominently freedom. But such outcomes, Oakeshott maintains, are not the conse*uences of an

association of legal persona, but instead are I3$6$" I I"5 &3!6!&"$6, thus characterized by

it. iven these subtle differences, the *uestions arise+ what precisely is the difference, especially in

terms of outcome, between an inherent substantive condition and one resulting from a purposive

action2 /ost importantly in this contet what difference would these differences, if any, make to

economists2 3ow would Oakeshott view of the relation between the legal non-instrumental mode of

association and freedom affect the economists understanding of the relation between law and economic

systems2 #ould it make a difference to economics whether a free market system is I3$6$" I

"3$ &3!6!&"$6 of an association of legal persona, or whether it is the eplicit purpose of a legal

system2 oes it matter to various economic theories to be aware of Oakeshottean distinctions, or are

they irrelevant2 "hat to me is one of the most interesting points implicitly raised by Oakeshott. "he

beginning, only the beginning, of an answer, would be that all talk about the purpose of law is

unconfirmable and irresolvable metaphysical mischief. "he law and economics defenders (e.g.,

4osner) do not have to provide additional arguments for their contention; their position is inherent in

the very idea of the rule of law. !nother way of putting this is that the familiar claim that there is no

government that respects individual freedom unless there is first a free market should be rendered as

free markets only eist where there is a government that respects individual freedom. "he notion that

authoritarian societies ehibit free markets is a mistake; sometimes such societies are characterized as

capitalist (/arist concept), but no society where one group can arbitrarily and Elegally: eclude others

from the market can be said to be a free market society.


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G>/isleading caricature in 7aw and $conomics; to say that free market economic ob'ectives are

promoted by the rule of law as a conse*uence is not to say that a specific conse*uence is the ob'ective

or purpose of the law.

G

Oakeshott notes that no society perfectly instantiates the rule of law. /oreover, the rule of law is

threatened by ever-increasing government bureaucracies, war, and the anti-individual.

GD. &apaldi, 4ut of 4rder6 ,ffirmative ,ction and the )risis of Doctrinaire .iberalism (Buffalo+

4rometheus Books, GHDF), %JGpp. ,ffirmative ,ction6 2ocial 7ustice or 3nfair Preference8 (ew

Vork+ 6owman U 7ittlefield, GHH>), G0J pp. &o-authored with !lbert . /osley. 4ointM&ounterpoint

series.

GH5en:s parado (GHJ) presents a more precise formulation of why democracy is a negative device

rather than a positive one. /arists have always been rightly contemptuous of democratic socialism

because shifting ma'orities literally makes even the faWade of economic planning impossible.

%J4ublic &hoice economics helps to eplain the structure of that degeneration.

%G"he current is not what Lant had in mind; most of the countries that belong are not commercial

republics (rance included A mercantilist); the 5ecurity &ouncil, five of whose members have veto

power, has veto-power members at present who are opposed to the ethical ideals of free market

societies. ! similar problem haunts the $, an organization seemingly committed to mercantilism and

to rench cultural hegemony. ! world court is unnecessary; if all countries are committed to the rule of

law, and if all contracts specify where disputes are to be resolved, a world court would be a needless

duplication.

%%/any economists and social scientists will epress some resistance at this point. #hile those social

scientists in general and economists in particular who are committed to scientism (or etreme versions

of positivism) may concede that religious belief has in fact played a significant role in affecting market

behavior and social institutions in the past and present, they may also think that it 8ought9 not to have

this influence in the future. iven a larger contet than this one, I would argue (a) that the spiritual


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dimension is a Enecessary: condition for the continued vitality of free societies; (b) that any form of

scientism is intellectually deficient (see . &apaldi, The &nlightenment Pro9ect in the ,nalytic

)onversationA GHHD); (c) that scientism cannot generate an ade*uate account of ethical principles.

%0

ukuyama A The &nd of 5istory and the .ast Man (ew Vork+ ree 4ress, GHH%) (Lo'eve:s

interpretation of 3egel inspired ukuyama); see also 3egel:s discussion of !dam 5mith in The

Philosophy of *ight.

%15ee 3egel:s discussion of the master-slave relationship in the Phenomenology of 2pirit. I urge free market

economists to recognize that their passionate attempt to spread the benefits of the market economy is not so

much an epression of self-interest as it is a moral crusade to promote universal human autonomy.

%F!s avid &rowther ?8"he ialectics of &orporate Calue /easurement,9 in !rnold, . and avies, /.

(eds.), :alue ;ased Management6 )onte"t and ,pplication(&hicester+ #iley U 5ons, 7"., %JJJ), pp.

GJF-G0%@ indicates, in 8&lassical liberal philosophy


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$conomic rowth,9 ,merican 2ociological *evie, October GHH0), 7awrence Iannaccone (8!n

Introduction to the $conomics of 6eligion,9 7ournal of &conomic .iterature5eptember GHHD), and

6obert elson (&conomics as *eligionA %JJG) .

%

/ichael #alker has reminded me that earlier editions of 5amuleson:s widely used tetbook on

economics raised a version of this issue by pro'ecting that the 5oviet nion would overtake the .5.

economically by %JJJN

%D"his eplanation is borrowed from /ichael Oakeshott:s discussion of autonomy in the 8/asses in

6epresentative emocracy,9 where he identifies the dysfunctional as anti-individuals.

%H"he /anhattan Institute for 4olicy 6esearch, "he GHHJ #riston 7ecture, 4ur 3niversal )ivili


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0G"his point has been persuasively made for the filed of bioethics by 3. "ristram $ngelhardt, The

Foundations of )hristian ;ioethics (7isse+ 5wets U Xeitlinger, %JJJ)+ see p. 0D and &hapter One in

general.

0%

!lasdair /acIntyre,,fter :irtue(otre ame, I+ niversity of otre ame 4ress, GHDG), p. >.00"he implicit recognition of this point has led many economists and social thinkers to embrace

relativism, or to substitute politics for ethics, or to abandon the discussion of normative issues

altogether and to remain mum.

015ome defenders of a free market society adhere to such a teleological view. I have three ob'ections to

such views+ (a) they are empirically false A such views are at best interpretations of the facts; (b) they

fail to see that there are alternative teleological views with very different conclusions from the defense

of the free market, views that would 'ustify massive intervention and redistribution to help everyone

achieve those purported ends; and (c) they fail to show how they prove any one of these views.

0FOf course, it is not so strange if the supporters of cultural diversity use that epression to mask a

private hegemonic political agenda.

0>"his view is adapted from /ichael Oakeshott. 5ee especially his educational essays in The :oice of

.iberal .earninged. by "imothyuller (ew 3aven+ Vale niversity 4ress, GHDH).

0"his is the message and implication of Lant:s &opernican 6evolution in philosophy or of what

contemporary philosophers refer to as the Emyth of the given.:

Documents

Ethical Foundations of Free Market Societies.apee (1)