The social excellences that I have suggested can be derived by considering the effective functioning of a free society make a conventionally appealing set: respect for others’ rights, candor, probity, patience, nonlitigiousness, loyalty, and reliability. But it should not be thought that every widespread intuition—“prevailing ethical belief”—about social ethics is thereby confirmed, or even most of them. A couple of examples of prevailing ethical beliefs that are contradicted by the argument from the needs of a well-functioning free society will help make clear the sort of social ethics that is implied by this line of thought.
People in our society today often have strong notions of “fairness” that are not economically rational. An example is the prevailing attitude that it is “unfair” for a merchant or producer to raise the price of a good that suddenly becomes scarce for any reason. For instance, in 2007–2008, the Nintendo Wii game console was so popular that the company’s production facilities could not keep up with demand. Despite producing 1.6 million Wii units every month in 2007, and increasing production to 2.4 million units per month in 2008 (per Wikipedia), new shipments sold out immediately and the Wii was hard to find in stores. Why did the company not simply raise the price to solve this problem? Economic analysis would say that raising the price would increase economic efficiency: Wiis would be distributed to those who valued them most, as evidenced by their willingness to come up with the requisite cash, instead of to whoever happened to be in the store at the opportune moment; moreover, the additional revenue would automatically supply the capital needed to increase production. But the company did not raise the price, presumably because it feared—with good reason—an angry public backlash spurred by the feeling that it was taking “unfair” advantage of the situation. The company probably reasoned that it is better to forego the additional revenue in this instance than to incur potentially long-term public anger, even though the public anger should be due to economic ignorance and irrational attitudes about “fairness.” Unnecessary shortages of this sort, caused by public perceptions of fairness, are common, as evidenced by the frequency of the charge of “price gouging.” There are various other economic distortions caused by widespread-but-economically-irrational public attitudes about fairness, well-explored and -summarized by Kahneman, Knetsch, and Thaler (1986). The point is that these attitudes, despite being prevailing ethical beliefs, are not endorsed by the present ethical analysis. Rather, they are regarded as false and counterproductive; it would be better for society and its members if people could be educated out of them.
Again, the present ethical analysis suggests that it is inappropriate to make economic decisions on the basis of sympathetic altruism. The free market is most effective at satisfying the needs of all when every individual acts to best satisfy his own interest as he understands it. Continuing to buy the same quantity of candles after one has acquired electric light bulbs—or forcing other people to do so through legislation—out of sympathy for the candle makers, wastes resources and impedes beneficial social change. Lowering the price of gasoline or some other essential commodity below the price set by free market forces, in the name of ensuring access by the poor, really only ensures that there will be continuing shortages, as noted above, and that gasoline (or whatever) in general will not be allocated where it is most needed. Raising the price of labor above what it would be in a free market, as with minimum wage laws, in order to help the poor, really only prices certain workers—indeed, the most vulnerable—out of the market. It is true that the operation of the free market in these cases entails painful local circumstances for certain people: the candle makers, the poor who can’t afford gasoline and have to find another way to make do, people with few skills. But the economy as a whole functions best when people pursue their own interests through voluntary exchange, and in the long run those who locally suffer are better off as well. The candle makers find something more productive to do, the price of gasoline falls due to the profit seeking of the producers, the unskilled acquire skills on the job. More importantly, the unskilled who work for low wages can enjoy cheaper, better electric lights—as well as, for similar reasons, cheaper, better food, housing, transportation, entertainment, and so forth. This is true of everyone in society, but, as noted once before, it is the most vulnerable to whom these benefits make the most difference. It is a fact of life that resources are always limited and not everybody—indeed, nobody—gets everything he wants. It is in a free market society that the greatest of people’s needs are most widely satisfied.
Nevertheless, this can seem harsh. Individuals are instructed to pursue only their own profit and those who do not succeed are left in the cold. This is without doubt the free society’s greatest PR problem. This is what inspires titles like, “With Charity Toward None,” (in reference to Ayn Rand) and nasty critical remarks such as, “harder-line, more brashly self-confident, less concerned with getting things quite right, and without sympathy for losers,” (written by Nobel economist Robert Solow in reference to Nobel economist Milton Friedman [back cover blurb to Burgin 2012]). This sort of sentiment is the precise target of Hayek’s analysis, described earlier, according to which on the one hand the abstract moral principles of several property and personal responsibility are late cultural developments, which we find emotionally painful to adhere to but are necessary to maintain the “extended order” of large scale society; while on the other hand the visceral moral principles of solidarity and altruism come naturally and feel good but are appropriate only to the smallest of social units. Trouble ensues when we evaluate the operation of the extended order by the standards of the latter, micro-group principles, but this is hardly avoidable given their primeval origins, and supposedly rational intellectuals are not least among the offenders. According to the present analysis, it would seem that Hayek may have this broadly right. (For a recent empirical study along these lines, see Petersen et al. 2012.)
To conclude, the Aristotelian moral vision for a free society rejects the view of Nozick and Frank and Gauthier that material self-interest is the fundamental principle in terms of which motives for action, insofar as they are rational, must be grounded. Moral rules, such as those which demand respect for individual rights, are not arbitrary side constraints required to set up the free market, and the free market is not an anything-goes free-for-all of selfish desire satisfaction subject only to the said side constraints. Rather, the Aristotelian view is that the important thing is to be a good human being, and this means that all of one’s pursuits should be constantly structured by the human excellences, both pro-individual and pro-group. This has two consequences. First, we have a reason in terms of what is important in life to respect others’ rights and to adhere to a variety of additional principles that contribute to the good functioning of a free society, such as being candid, scrupulous, patient of others’ faults, nonlitigious, loyal, and reliable. These values are not arbitrary. They are of a piece with all other fundamental human values; they consist in functioning well as a human being. The free society is not grounded only or even primarily in the selfish needs of individuals (though it is grounded in them, too), but in the pro-group excellences that are required for effective social functioning. Second, the fundamental values we pursue as individuals are not—or not merely—desires or utilities, but excellences required for good human functioning throughout life. Thus, the Aristotelian individual pursues not merely desire satisfaction but a happy, meaningful, fulfilling, fruitful, and even noble life. He is trying to be good and do good, to accomplish something, build something, make whatever mark he can on the world, achieve something really valuable. (This point is perhaps the principal burden of McCloskey 2006, her presentation of “a libertarian version of Aristotelianism” .) These pursuits could be called egoistic in a broad sense. The functions in question are pro-individual, and their excellent performance could be characterized as individual thriving or flourishing. But their meaning is of a piece with the pro-group excellences; they are all part of being a good human being.
There is thus moral guidance within the free society, not just to create it. Personal conduct within the free society context is not an anything-goes free-for-all, nor is the encouragement to “virtue” merely instrumental, as in “the early (thrifty, prudent, industrious, entrepreneurial, bourgeois) bird catches the worm.” Rather, the pro-individual excellences are intrinsically valuable components of living a good life, the life of a good human being. There is thus no conflict between the values that are necessary to create and maintain a free society and the values one pursues within it. Both stem from the same fundamental source and contribute to the same goal.
It is unfortunate that the free society has been represented, since almost before it existed—at least from the early 18th century with Mandeville—as a “Yee haw!” pursuit of unconstrained desire satisfaction. I hope here to have shown—in a preliminary way; I know the case I have given is sketchy—that this is a gross distortion. Both the ethical principles that create and perfect the free society, and the ethical principles that promote the best life within it, stem from the same source in excellent human functioning (whether social or individual). The free society is neither a place of unlimited toleration nor a morally free zone. Far from it. It is a moral place, created and promoted by moral principles and enabling the pursuit of a flourishing and meaningful life. It deserves to be recognized and defended as such.
- Burgin, Angus. 2012. The Great Persuasion: Reinventing Markets since the Great Depression. Harvard University Press.
- Kahneman, Daniel, Jack L. Knetsch, and Richard H. Thaler. 1986. “Fairness as a Constraint on Profit Seeking: Entitlements in the Market.” The American Economic Review, 76 (4): 728–741.
- McCloskey, Deirdre N. 2006. The Bourgeois Virtues: Ethics for an Age of Commerce. University of Chicago Press.
- Petersen, Michael Bang, Daniel Sznycer, Leda Cosmedes, and John Tooby. 2012. “Who Deserves Help? Evolutionary Psychology, Social Emotions, and Public Opinion about Welfare.” Political Psychology, 33 (3): 395–418.