Opinion: the free market doesn’t corrupt morals

‘Why, when there is no evidence to suggest that economic liberalism is morally corrupting,’ asks Ryan Bourne on CapX, ‘is the myth that free markets make us selfish so persistent?’
free markets markets
Mario Draghi, president of the European Central Bank

‘A common, yet unfounded, attack on free markets is that they encourage us to be greedy and selfish, and erode moral values.’

According to philosopher Michael Sandel, free market values have led to ‘the crowding out of virtues such as altruism, generosity and solidarity.’

The Pope recently said that “libertarian individualism…minimises the common good.”

Even the British Conservative party seem to agree. “We do not believe in untrammelled free markets,” stated their 2017 manifesto, “we reject the cult of selfish individualism.”

But ‘the weird thing’ about these claims, argues Bourne, is that ‘no hard evidence is ever offered to prove that free markets encourage greed.’

Let’s get one thing straight, he says, there is good evidence to show that levels of prosperity and economic freedom are strongly linked.

‘Natural experiments’ in the form of geopolitical divides such as East and West Germany, North and South Korea, and Hong Kong and mainland China, have shown that ‘market economies tend to be much more prosperous than non-market economies,’ Bourne argues.

And simply put, more money means ‘more resources for compassionate causes,’ either through individual philanthropy or tax revenue.

To quote a former British Prime Minister…

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What do studies show about whether ‘markets facilitate greed and lead to selfish immoral behaviour?’ asks Bourne.

A famous study by Armin Falk and Nora Szech claimed to show that markets were indeed morally damaging.

Their experiment involved participants being given the option of paying cash to save a mouse from being killed.

They found that ‘people were more likely to enable the killing when the decision came about as a result of bargaining between buyers and sellers’ – making the mouse a third-party – rather than when they made the decision alone.

They concluded that “market interaction displays a tendency to lower moral values, relative to individually stated preferences,” because their guilt was spread, and there was more “competition” for their money.

This study was seen as proof ‘that markets eroded our humanity,’ says Bourne, but in real life, economic transactions are more like the individual judgement than the bartering scenario.

As Breyer and Weimann argued in their critique of the experiment, “in typical market situations, moral norms play a more prominent role than in non-market bargaining situations,” that are mostly zero-sum.

This alternative conclusion is supported by Herbert Gintis, who experimented with economic games with members of 15 ‘tribal societies’ from across the world.

He found that those ‘exposed to voluntary exchange’ in markets were ‘more highly motivated by non-financial fairness considerations than those which were not.’

“The notion that the market economy makes people greedy, selfish, and amoral is simply fallacious,” Gintis argued.

In fact, he added, “movements for religious and lifestyle tolerance, gender equality, and democracy have flourished and triumphed in societies governed by market exchange.”

In other words, says Bourne, ‘greed, cheating and intolerance’ are more likely to be prevalent in ‘societies where individuals can only fulfil selfish desires by taking from, overpowering or using dominant political or hierarchical positions to rule over and extort from others.’

‘Markets actually encourage collaboration and exchange between parties that might otherwise not interact,’ he concludes.

‘This interdependency discourages violence and builds trust and tolerance.’