Sunday, October 19, 2008

Free Market and Ethics?

A bunch of thinkers and experts give their opinions on whether "free market corrodes moral character."

Surprisingly none of them (of the ones I read) touch on what I would think is the main issue - the problem of alienation. Are human beings who participate in market really and truly autonomous moral agents? More often they merely follow the preset rules, exercising moral judgments often leads to inefficiencies which market can't tolerate. Of course the recent crisis has made the profoundly undemocratic (even anti-democratic) nature of financial markets pretty clear too but that is probably a separate issue.


km said...

Funny, I was reading this very ad in the New Yorker yesterday.

I don't quite get how this is a "big question". If one were to flip the question around, ("does a controlled market imply its players possess moral character?"), the discussion seems rather...pretentious. Does a Free Market necessarily equal bottomless greed?

Alok said...

It is not only a question of greed but participating in the market implicitly means that you are going the play by the rules preset in the market. So even if you think something is wrong, you still have to do it just so to survive in the market. This is alienation. of course in real life markets work okay (at least most of the time) because of the rule of law but even then you are just following the rules, not exercising your own free moral judgements and taking responsibility for those.

the basic point is that markets promote rule following and not moral behavior. often they coincide and that's how everything works but sometimes they don't and in any case rule following doesn't mean moral behavior.

km said...

participating in the market implicitly means that you are going the play by the rules preset in the market

Every system has its own morality. To me, imposing a morality from the outside seems immoral.

Sure, one can change the rules of the game but it is not expected of a player.

Alok said...

that is what i am saying, if you just follow the rules that is not building your moral character. you are basically defining moral behavior as anything for which you will be rewarded and not punished... and we have seen how people with conscience behave in situations like these. its the "moral law within" as Kant said.

i didn't talk of options. certainly a socialist or dictatorial state is even worse but probably if we lower down the stakes of competitions and make the pain of losing a little more acceptable, people wouldn't take risk with what they think are immoral decisions and actions.

wildflower seed said...

In "free markets", the "free" part means that the individual really is god - the originator, the decider. Dictating morals to such a god is absolutely not polite. All of this is really seeded at the very core of economic thought. In economic models of free markets, not only do individuals maximize utility functions (which I think is very reasonable), but they actually *know* these functions and these functions provide a complete ordering (now that's truly god-like, wouldn't you say?).

The "markets" part then is necessary because after having posited a free, self-willing god, the economist discovers that resources are scarce. So a set of rules is needed to regulate the combined noise of many independent originators whose originations may often be in conflict. Here is where the expediencies of mathematical tractability enter the fray. In order to devise a set of rules, economists turn to models which abstract a great deal from reality. But such abstraction always leaves out critical human ingredients that later reveal themselves as important qualifications to how the mathematically devised set of rules are meant to play out.

If you accept this, then the problem is not with the "markets" part, but rather with the set of rules that markets come to represent at any point in time, and to the extent that these rules emerge from a fundamental assumption that individuals have complete self-knowledge, the problem is with the details of the "free" part. Markets may always exist as a necessity for the expression of freedom, but the rules of behavior in markets can and should be fluid. Putting it differently, if you accept the economist's idea of a self-willing individual as a positive evolutionary model (as opposed to lived reality), then you have to accept the necessity of markets - and finally, that both markets and our notions of freedom have to co-evolve.

It is misguided, in other words, to claim that free markets curtail the expression of one's individuality, when really, the expression of individual freedom is precisely the charge of free markets. Alienation happens because the rules do not correspond adequately to our subjective notions of freedom, but that is because the rules themselves emerge from the objective world of mathematics. No matter, because these two aspects are converging slowly. The rules are constantly being revised, and such revision cannot but happen in a retrospective fashion.

Perhaps, this is a way of giving a new spin to the idea of "free markets" so as to insist that free markets are fundamentally a positive ideal, but this ideal is a work-in-progress, mostly because we have little understanding of how to adequately model the "free" part (what is freedom, really? what is autonomy?), which is the locus of all questions about ethics. Once we have the "free" part nailed down, the "markets" part will follow. These details are still being worked out. A deep economic crisis can accelerate such a critical revaluation, as is happening today, I think.

Alok said...

Alienation happens because the rules do not correspond adequately to our subjective notions of freedom, but that is because the rules themselves emerge from the objective world of mathematics. No matter, because these two aspects are converging slowly. The rules are constantly being revised, and such revision cannot but happen in a retrospective fashion.

I agree with this. I think it helps if we think of markets as a positive ideal, something towards which we are progressing (though it seems a bit optimistic to me). Autonomy and ethics ultimately reside in the freedom to say "no" to the utility maximising action if it conflicts with your ethical standard. That's why I said if we could in a society as a whole keep the stakes of that function a little lower, it will allow a greater leeway in individual decision making. Right now at least in US it is like do or die competition. The pain of losing on utility maximization and not conforming is just too high.

Alok said...

I think what I wrote about alienation is true of any interpersonal situation. There will always be norms and values which are alien to your own but then one can choose and decide whether to participate and compromise based on one's own free will. My point was to make the choice a bit easier for the individual. For example I wouldn't go to a fun party with random teenagers even if I have to spend time alone. It is not really a difficult choice then. There is a space where I can exercise my own judgment. In situations of extreme competition this is not really possible. If you think of Auschwitz as an extreme example where the price of non-conformity was torture and death, you can see how questions of ethics were turned upside down.

Chris said...

The theory of free markets (which wildflower seed rather wistfully describes) is one thing, the reality another. What "free" markets create is a web of fiefdoms, small (the local grocery store) and large (General Motors, Bertelsmann, etc.), mini-despotisms condoned for economic reasons: you must eat to live, you must work to eat, you must aquiesce to your boss to work, the boss must acquiesce to the marketplace to succeed, etc. And there is no fiercer tyranny than the marketplace, just as there is nothing more totalitarian than democracy. We are not "free" in any but the most trivial senses in either capitalism or socialism. We blame the failures of socialism, or of the "free" market, or we say that socialism is still being created, or that the markets are still "converging," as an excuse for our frustration. But success is not an option, and freedom is an illusion.
An old lyric, before the Wall fell:
East is East, and West is West, and never will they come together -
In the East, if you rebel, you are sent to the Gulag -
in the West, you are sent to the gutter.
Neither system rewards the genuinely free man: the man that despises it.

Alok said...

wow, wonderful and very grim, quite true too.

My own politics is that of "reformist left".. I do hope that it is possible to build a society where winner doesn't take it all and loser isn't sent to gutter. where people participate in competition on one's own free will and derive joy and meaning out of it. Though now that I have written it, I realize how laughably utopian it sounds.

billoo said...

alok, see M.J. Radin's 'market inalienability' (Harvard law review, 100, 1987) for a very good discussion.

Also, it's not clear that markets are , in practice, this moral freezone(Gauthier) (see D.Marsden's work on labour markets) but the same applies to credit and insurance markets.

I'd also like to add that economic theory is ambiguous about what is meant by maximizing utility -it actually just means doing the best but that is not making a substantive claim about what utility *is*...

For the idea that markets can lead to 'corruption' see A, Shliefer's work or Le grand, who makes the same point with tegard the public sector and the "crowding out" of moral motivations.

Alok said...

thanks for the pointers. I will try to see if i can find some of these on internet. I don't have access to a good library here.

I have been reading lots of essays on sociology (not in a very systematic way) and this seems to be a common theme right from Marx and Weber and Simmel to the Frankfurt School guys, Habermas, Zygmunt Bauman and others. The growing rationalization of society (of which market is just one aspect, though prob the most important and powerful one) and what it means for individual autonomy and self. Most of it is also very depressing to read, in fact Bauman is positively apocalyptic...reading him makes you think we are already in posthuman world and human beings exist only in theory!

billoo said...

alok, I like Bauman (well, only read liquid modernity) but yes, think you're right. There really is a plyaing up of this alienation and disenchantment. If you read enough of the gloomy stuff you might actually end up believing it! :-)

Which is not to say there isn't a lot of truth to what is being said; it's just that what is human, most human, isn't so easily eradicated.

In any case, there are others who thought of the market as a 'civilizing ' institution (see Albert Hirschman for a review) and even Smith was very different from the caricature of the cold-hearted advocate of self-interest (his views on sympathy, for example, are very profound). And there were other 'economists' (Genovesi) who saw the market as an arena for 'fellowship' and trust.

Alok said...

There is also I think lot of work being done in "Game Theory" to understand how cooperation evolves and functions in society or a community.

"civilization" is also a double edged sword...there is always a price to be paid for what we call civilization and "progress". Reading Bauman earlier this year was something of a shock to me. He is so pessimistic about our current state of civilization! Liquid Modernity is indeed excellent. I also liked "Modernity and the Holocaust" a lot...I used to always argue how "value neutral" science and technology are, he really made me rethink and reconsider all those positions.

billoo said...

alok, haven't read that book by buaman but have seen it. have you read agamben's remnants? I've only read a chapter but it was very good.

Game theory. Tricky. Yes, co-operation can be sustained in some games (infinite ones) if there is a 'trigger strategy' : if you cheat (don't co-operate) then I won't co-operate with you ever again. the potential losses make me co-operate. But once again, this is a narrow view of co-operation sionce it relises, ultimately , on the self-interest of the parties. [basically: why should I co-operate with you if it isn't in my interest to do so?}

Can't people also co-operate because of shared commitments or moral values? Here I have to turn to my guru: sen. See his excellent paper: rational fools.

But yes, you are right, they've now wheeled evolution in to try and explain how co-operation or altruism may have 'evolved'. Which really is, I think, another attempt to narrow the scope of ethics in favour of what some would call 'facts'.

Alok said...

I share your doubts and disapprovals. I used to think if questions of ethics could be reduced to facts everything would be so easy! But now I realize how wrong and limiting this view really is. Ethics is a different "game" altogether...its rules are different from that of science and mathematics.

I have heard of Agamben... Will definitely look him up. I have been trying to familiarize myself with bits and pieces of cont. philosophy over the last year or so.