Is There an Intrinsic Morality of the Free Market?

Is There an Intrinsic Morality of the Free Market?
The free market thrives on the trading floor of the Chicago Mercantile Exchange.
image: Getty
November 6, 2012

The debate over markets and morality has a long pedigree.

Karl Marx thought, of course, that there was something intrinsically immoral about what he called capitalism based on his notion of “the labor theory of value” which contends that workers are alienated from what they produce by the private ownership of the means of production. A small ocean of ink has been spilt over that debate.

Many of those who see the importance of the free economy for the sustenance of society are quick to outline the defects in Marx’s argument, showing how the economic value of a commodity is not, as Marx contended, predicated on the amount of time, labor and effort a given worker puts into his production but rather, on the subjective use-value of the commodity to the consumer himself.

So far, so good.  But another conclusion is often embedded in this legitimate reply to Marx. His critics conclude that rather than the market being intrinsically evil, it is in fact, intrinsically good.  That it is intrinsically good, they argue,  can be seen by the astounding efficiency of a free economy, in its production of a greater amount of wealth and even a wider distribution of that wealth of the whole of society. Can anyone deny, this line of reasoning continues, that free exchange and the expansion of markets is primarily responsible for the rise in living standard throughout the world when measured in terms of access to things that make life better and easier and even happier? They will point to exhaustive studies that have been done empirically demonstrating the relationship between lower tax rates and less regulation to the general prosperity of nations.

"Isn’t all this a good thing?" they will conclude.  Doesn’t this constitute the intrinsic morality of the free market?

There is no doubt in my mind about the veracity of the empirical claims of these arguments. But the question before us is not the instrumental benefit that economic liberty can produce for people. It is, rather, whether the market is itself intrinsically moral. Many well-intentioned people do not, initially, make the distinction between an instrumental good and an intrinsic good.

The intrinsic quality of a thing is something related to the nature of the thing itself, something without which the thing would not be itself.  To be able to assess the intrinsic morality of the free market one needs to look deeper than to the merely positive (or even negative) utilitarian effects of what a free market can produce. One must look at its very nature.

When we look beneath the instrumental effects of the free economy, which is not, in the first place about money, its allocation or production and distribution, we discover that at its most fundamental level economics is about human action --the way people act to satisfy their needs.

A simply analogy might help to clarify this. Ask yourself this question: Is a hammer intrinsically moral?

Your reply would most immediately be: “It depends on what it was used for. If employed to bash in the heads of people you do not like, the answer is no.  If employed to help build a house for a homeless people, your answer might be yes. In either case, the precise answer is to say that the hammer is neither moral nor immoral; it is the person who chooses its use that can be evaluated morally.

Attending to these Big Questions will enable us to more deeply evaluate the economic organization of society. So the real issue here is not a financial one, but an anthropological one: What is man? Who am I? Why am I here? Where did I come from? Where am I going? What are my responsibilities to myself and others? How we answer these kinds of questions will have an enormous impact on every facet of our lives, including how we work and buy and sell, and how we believe such activities should be directed— in other words, on economics.

Only from this starting point can we look at the relationship between markets and intrinsic morality.  Related Questions Which Beliefs Contribute to Virtuous Behavior? Can Virtuous Habits Be Cultivated?

The most apparent thing about human beings is that we are physical. We live in a physical word which is a limited world. This existential reality is what gives rise to the economic question – what is the proper allocation of scarce resources?

Were physicality the only dimension of the human reality, we could be satisfied with the economist’s abstract construction of the homo economicus (man as solely an economic reality). It’s a metaphor which serves a purpose in the economic literature--in the same way that a cartoon, with its primary colors and exaggerated distinctions, can bring into high relief a crucial feature that might otherwise go unnoticed.

But this metaphor is not an accurate portrait of the rich, immense and subtle complexity that constitutes the human reality.  The bloodless and cold abstraction of the homo economicus who is only moved to act to “maximizing utility,” as the economist might say, is seeking to satisfy only material desires. The economic aspect of  man is true but it is not the whole truth about who human beings are.

Looked at more deeply, at an intrinsic level, it becomes clear that people are motivated by higher aims and goals, aims and goals not to easily reduced to an accountant’s ledger – as important as that ledger is for economic health of the family, the firm or society as a whole.

Imagine for a moment what life in society would be like if people were motivated to act only by some kind of sensual satisfaction.  The streets would simply not be safe; indeed, to the extent that some people are motivated solely by their sensuality, many streets are not safe.

This anthropological perspective puts us in a better position to discern what is intrinsically good in relation to the human person: what helps man to flourish in his fullness is the standard by which we can determine what is moral.

Turning our attention now to an understanding of the market, we need to be clear as to what it really is in order to answer the question before us. The market is essentially the expression of human economic preference. Questions of the morality of the market often arise simply because the market is so closely connected to human decision making and betterment - on the material level. And here is where the confusion frequently arises as to its morality. Humans are more than their material reality, yet to the same time, their material reality is something without which a human being cannot well exist. Still, the abundant material benefit a person may enjoy is not a sufficient indication of his moral well-being. While these two dimensions of human existence are distinct they are not unrelated.

Another way of looking at this is to understand that freedom itself is not a virtue, but rather the context in which virtue (or vice, for that matter) becomes evident. If a free market is the expression of the liberty of economic actors to satisfy their needs, then the morality of the market will depend on whether or not those desires and their fulfillment was moral in the first instance.

Questions for discussion:

Do you believe the market has an intrinsic morality? Why or why not?

If‘ "what helps man flourish" is the question to determine what is moral, what is the role of the corporation?

If individual motivations make the market moral, how do we cultivate individual morality?

How might we foster the morality of the free market?