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
0
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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;
F
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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
D
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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
GJ
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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.
%>
"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
GG
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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
G%
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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).
G1
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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
GF
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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.
G>
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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
G
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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
GH
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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 &us 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)
%G
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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.: