The Moral Foundation of Economic Behavior


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If you aren’t familiar with the phenomenal podcast series available at www.econtalk.org, I highly recommend selecting an episode or two from the archive and listening during your daily commute or exercise. One could select virtually any of the podcasts as a rich starting point for discussion, but one episode in particular had a profound impact on my intellectual framework, and I would like to share it here: www.econtalk.org/archives/2012/01/david_rose_on_t.html

In this episode, economist/author David Rose discusses some of the central themes of his book, The Moral Foundation of Economic Behavior, with host of the program Russ Roberts. It’s best to listen to the hour-long podcast for yourself if you have the time, but here is the main idea of his argument:

“This book explains why moral beliefs can and likely do play an important role in the development and operation of market economies. It provides new arguments for why it is important that people genuinely trust others-even those whom they know don't particularly care about them-because in key circumstances institutions are incapable of combating opportunism. It then identifies specific characteristics that moral beliefs must have for the people who possess them to be regarded as trustworthy. When such moral beliefs are held with sufficient conviction by a sufficiently high proportion of the population, a high trust society emerges that supports maximum cooperation and creativity while permitting honest competition at the same time.” (Source: Amazon.com)

Before adopting Rose’s framework of evaluating economic behavior, I was much more influenced by utilitarian principles such as those espoused by legal theorist/economist Richard Posner. To take an example, Posner’s “efficient breach of contracts” theory – arguably the dominant view in modern jurisprudence - holds that one party should be legally (and morally) free to breach a contract and pay damages to the other party if the overall outcome is more efficient. In the amoral view of contracts, the ends justify the means of the breaching party. Simply evaluate the likely outcome of breach, and if the benefits outweigh the costs, then the actions were justified. Everyone wins in such situations, right?

Rose argues that there is no such thing as this free lunch. The costs of Posner ‘s utilitarianism are less easily quantified than the benefits, but nevertheless the costs are very real in the form of eroded social trust. A society in which people act according to a principled moral foundation, Rose explains, is more efficient because individuals will engage in a wide variety of economic behaviors they otherwise could not have in a utilitarian culture because of fear of being sacrificed to a “greater good” or prohibitively high transaction costs.

This is one reason why I reject utilitarian tolerance of skyrocketing social security disability fraud as the easiest way of "buying off" individuals who otherwise wouldn’t be able to find employment. I believe - and I think Rose would agree - that tolerating this deceitful behavior fosters a culture in which individuals will breach trust and cheat each other as long as they can identify some benefit outweighing those costs. It’s also why I reject utilitarian platform elements integral to the Progressive movement, such as affirmative action. If individuals fear they are in danger of being sacrificed to a greater good by the elite, they will no longer place trust in the system and they will instead engage in defensive, protectionist behavior with high social and economic costs for everyone.

In a world where promises are categorically kept, there is a much lower need for government protectionism. This is why I feel Rose’s position is more in line with libertarian and objectivist principles than Posner’s, and why we should reject progressive utilitarianism and its view that individual eggs are expendable in creating a more perfect social omelet.

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The Moral Foundation of Economics

David C. Rose (Oxford 2011)

Review

Thanks for notice of the book, Dan. It looks very worthwhile. Do you have a sense of whether the ethics of Rand could be substituted for the ethics of Kant in Rose’s book and yet come to his same results?

A related work is:

Kantian Ethics and Economics – Autonomy, Dignity, and Character

Mark D. White (Stanford 2011)

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Thanks for notice of the book, Dan. It looks very worthwhile. Do you have a sense of whether the ethics of Rand could be substituted for the ethics of Kant in Rose’s book and yet come to his same results?

I'm not sure. I posted with the hope of learning more about the degree to which Rand's moral framework fits in line with Rose's. The regulars here are much more familiar with the nuances of objectivist philosophy than I am.

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RB, that's a refreshing take on things (at least from my perspective)

But as Stephen implies, your boy's thinking is suceptible to the Prisoner's Dilemma.

You can salvage your theory however by positing an instrinsic Good, of course.

But that would run you afoul of Objectivism's strain of pragmatism.

Would you, jewy jewy jew-boy, be so inclined to affirm a sort of "Higher Good" or "rally point" by which individuals can shape their behavior in the service of something that might be bigger than themselves (and in everybody's larger (if subconscious) self-interest?))

You would be the first.

Good luck. :)

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Regardless of whether there is such thing as an intrinsic good, Rose argues that moral behavior should be instilled in people *as if there is such a thing as intrinsic good* because as soon as we get into outcome weighing, we're back into rank progressive utilitarianism. We should therefore encourage reflexive thinking in our children that we keep our commitments because BREAKING PROMISES IS BAD, and we shouldn't deceive others because LYING IS BAD; end of story. Likewise, the default position should be that the ends never justify the means, and people should be treated as ends in themselves. We might not live up to this standard all the time, but that should be the baseline.

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Regardless of whether there is such thing as an intrinsic good, Rose argues that moral behavior should be instilled in people *as if there is such a thing as intrinsic good* because as soon as we get into outcome weighing, we're back into rank progressive utilitarianism.

Correct.

This is what makes Objectivism vulnerable to the Prudent Predator argument:

http://forum.objectivismonline.com/index.php?showtopic=9997

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Regardless of whether there is such thing as an intrinsic good, Rose argues that moral behavior should be instilled in people *as if there is such a thing as intrinsic good* because as soon as we get into outcome weighing, we're back into rank progressive utilitarianism. We should therefore encourage reflexive thinking in our children that we keep our commitments because BREAKING PROMISES IS BAD, and we shouldn't deceive others because LYING IS BAD; end of story. Likewise, the default position should be that the ends never justify the means, and people should be treated as ends in themselves. We might not live up to this standard all the time, but that should be the baseline.

The "baseline" for raising children or more generally? Regardless, it's an intellectual brick wall and therefore utilitarian in itself. (A conservative utilitarianism?) Seems like without religion we've no base for morality except asseveration of some basic rules of conduct. With religion we can punch that all up with the authority of God and the fear of God, which is actually only the man of the house or clan or tribe.

Morality is properly derived from the nature of human nature with its political expression of individual rights' protection. The utilitarianism, and there is a hell of a lot of it, is derivative from that.

--Brant

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The "baseline" for raising children or more generally? Regardless, it's an intellectual brick wall and therefore utilitarian in itself. (A conservative utilitarianism?) Seems like without religion we've no base for morality except asseveration of some basic rules of conduct. With religion we can punch that all up with the authority of God and the fear of God, which is actually only the man of the house or clan or tribe.

Religion is the simplest way at arriving at the target destination, where people police themselves according to inviolable rules of moral conduct instead of utilitarian calculus. The problem is that modern science is cleaning religion's proverbial clock and people are finally waking up to the reality that the "God" concept is a bunch of hooey. We know from countless examples in the 20th century that abolishing religion haphazardly doesn't lead to a better society - quite the contrary because it is easily replaced by a collective where the state fulfills the role of God. We need to replace religion with something else. The way I would explain morality - when it is questioned in depth by the more thoughtful members of our society - is that we need it to preserve a culture in which individuals can remain free and be prosperous. So a type of anti-collective collectivism, aimed at communal behavior that empowers the individual rather than represses and sacrifices him. It's only utilitarian in the broader sense. What we must avoid is individuals behaving out of their own utilitarian weighing and what seems to achieve a greater good in the moment.

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The "baseline" for raising children or more generally? Regardless, it's an intellectual brick wall and therefore utilitarian in itself. (A conservative utilitarianism?) Seems like without religion we've no base for morality except asseveration of some basic rules of conduct. With religion we can punch that all up with the authority of God and the fear of God, which is actually only the man of the house or clan or tribe.

Religion is the simplest way at arriving at the target destination, where people police themselves according to inviolable rules of moral conduct instead of utilitarian calculus. The problem is that modern science is cleaning religion's proverbial clock and people are finally waking up to the reality that the "God" concept is a bunch of hooey. We know from countless examples in the 20th century that abolishing religion haphazardly doesn't lead to a better society - quite the contrary because it is easily replaced by a collective where the state fulfills the role of God. We need to replace religion with something else. The way I would explain morality - when it is questioned in depth by the more thoughtful members of our society - is that we need it to preserve a culture in which individuals can remain free and be prosperous. So a type of anti-collective collectivism, aimed at communal behavior that empowers the individual rather than represses and sacrifices him. It's only utilitarian in the broader sense. What we must avoid is individuals behaving out of their own utilitarian weighing and what seems to achieve a greater good in the moment.

"We" ain't replacing religion. Religion will evolve to something more rational to keep up with a flock evolving to more rational. Reality will replace God even if still called "God." Churches will continue on if only for social reasons, one of the big reasons they exist today.

--Brant

pantheist

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Brant,

I believe organized religions also exist to provide moral food through storytelling and analysis on a regular basis.

I used to think you chose a moral principle, then you only needed to want to apply it and you did.

Now I believe it is important to listen to it over and over after you accept it. There are so many principles we need that it's easy to forget a principle when a situation arises and an automatic reaction surges.

If you have repeated the principle for a long time and looked at it from many angles in many different stories and analyses, it comes to mind quickly.

But for people to come back to a place week after week, they need the moral authority to be at the head of the show. Otherwise they drift away. That's one of the reasons I don't think art will ever replace religion as spiritual fuel like Rand tried to do. There's no periodicity and no head honcho. She got the storytelling and analysis right, though. And boy did she.

Michael

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In a way she did try to be the "head honcho," but didn't really understand what she was doing for if she if she would have stopped. Instead she drove people away. When she died 800-900 people showed up at the funeral home to pay their respects. When Victor Hugo died hundreds upon hundreds of thousands filled the streets of Paris. He got the body right. Rand, the head.

--Brant

simplicity has its uses

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Regardless of whether there is such thing as an intrinsic good, Rose argues that moral behavior should be instilled in people *as if there is such a thing as intrinsic good* because as soon as we get into outcome weighing, we're back into rank progressive utilitarianism.

Correct.

This is what makes Objectivism vulnerable to the Prudent Predator argument:

http://forum.objectivismonline.com/index.php?showtopic=9997

This is why I think self-esteem is really the only thing Objectivism can claim to offer. Pretending that adopting Objectivist ethics is the only way to true personal gain contradicts the premise that values are objective, which then serves as the foundation for objective morality.

If values are objective, and you can obtain these objective values in ways that contradict the Objectivist ethics... well, then clearly there needs to be another reason why an individual would selfishly subscribe to such a code of ethics.

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This is why I think self-esteem is really the only thing Objectivism can claim to offer. Pretending that adopting Objectivist ethics is the only way to true personal gain contradicts the premise that values are objective, which then serves as the foundation for objective morality.

If values are objective, and you can obtain these objective values in ways that contradict the Objectivist ethics... well, then clearly there needs to be another reason why an individual would selfishly subscribe to such a code of ethics.

Back in college I played devil's advocate and asked the Objectivist Club why society shouldn't just kill disabled people who drain resources and can't work. They couldn't come up with anything resembling a coherent answer within the objectivist framework. Ayn Rand's dogmatic insistence that rational self interests always align is quite clearly not the case. I view the real value of objectivism as instilling an appreciation for individualism over the good of the collective.

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I view the real value of objectivism as instilling an appreciation for individualism over the good of the collective.

I think the conflation of means and ends can serve to misrepresent an ideology or school of thought.

For example, Keynesian theory holds production as the ultimate goal of economic policy, where Austrian theory values consumption. When we focus on the means irrespective of its relation to the end--out of context--we can be easily misinterpreted.

I think the value of the individual, as far as individualism is concerned, comes from the role the individual plays in society: the individual is a value to society, and I am part of society. Collectivism takes a different approach: society is everyone other than me, and therefor must be restrained (so that it may provide me with value).

All the "Yes we can!" and "Change/Forward!" is about ways we can all protect ourselves from society--safety nets, regulations, restrictions...

It does not take an individualist to realize society is made up of individuals. That's essentially a tautology. Whether or not that group of individuals is "for me" or "against me" is the value premise that puts one on either side of the fence. And this is based on whether or not one identifies oneself as part of society.

I don't know if you've noticed, but I have, that collectivists are the ones who complain about how sick "society" is... They view society as something that controls them--not quite consonant with Rand's expression that "The good, say the mystics of muscle, is Society." They want society changed--that is not what one wants of something "good".

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This is why I think self-esteem is really the only thing Objectivism can claim to offer. Pretending that adopting Objectivist ethics is the only way to true personal gain contradicts the premise that values are objective, which then serves as the foundation for objective morality.

If values are objective, and you can obtain these objective values in ways that contradict the Objectivist ethics... well, then clearly there needs to be another reason why an individual would selfishly subscribe to such a code of ethics.

Back in college I played devil's advocate and asked the Objectivist Club why society shouldn't just kill disabled people who drain resources and can't work. They couldn't come up with anything resembling a coherent answer within the objectivist framework. Ayn Rand's dogmatic insistence that rational self interests always align is quite clearly not the case. I view the real value of objectivism as instilling an appreciation for individualism over the good of the collective.

Two egoists walk into a bar.

At the door, one says "After me". The other replies "No - after me".

First egoist: "I insist, sir, after me!"

Second: "No, bud - before you!"

[...]

Poor one, but then I just made it up now...

RB, I think the distinction is that 'rational self-interest' - qua concept - always "aligns" between rational egoists (most surely) but that "rational self-interestS" certainly might not - and don't have to - align at any given instance. When men compete on the basis of reality, they understand that no one man emerges

the 'winner' or the 'loser', but that they both finish up winners in the long run.

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  • 3 weeks later...

It all comes down to One Question: Why be honest?

Ba'al Chatzaf

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It all comes down to One Question: Why be honest?

Ba'al Chatzaf

Or, why be dishonest? This makes two questions, not one. It cannot be reduced to one question, only to an individual who is a creature of choices. One question = no free will. Two = free will. This is the essence of any human freedom. Or, is one free? Or not?

--Brant

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This is why I think self-esteem is really the only thing Objectivism can claim to offer. Pretending that adopting Objectivist ethics is the only way to true personal gain contradicts the premise that values are objective, which then serves as the foundation for objective morality.

If values are objective, and you can obtain these objective values in ways that contradict the Objectivist ethics... well, then clearly there needs to be another reason why an individual would selfishly subscribe to such a code of ethics.

Back in college I played devil's advocate and asked the Objectivist Club why society shouldn't just kill disabled people who drain resources and can't work. They couldn't come up with anything resembling a coherent answer within the objectivist framework. Ayn Rand's dogmatic insistence that rational self interests always align is quite clearly not the case. I view the real value of objectivism as instilling an appreciation for individualism over the good of the collective.

If you couldn't answer your own question you were not playing devil's advocate.

--Brant

the problem with Objectivism--as per your illustration--is lack of true anti-catechismatic critical thinking, which is a cultural problem generally, and this lack dissolves away its ostensive radicalness and individualism and is manifest from the beginning in the comportment of the heroes of Atlas Shrugged and its author's narrative and intellectual voice most especially in "Galt's Speech"--men as gods = men not as gods = hoi polloi better get with the god program or "Get out of [God's] way!"

rational self-interest is merely the basic Objectivist ethical principle which, left to itself, begs the question of what else logically goes on top of that?--the answer(s) is (are) found in a valid and extensive liberal arts education, one Rand didn't have, know of, need or want for she had her philosophy and was satisfied, though not with the non-responsive or incorrect responsive--thus her philosophy hammer could only see nails and the ethics grossly undeveloped for whatever good was in there, and there is a lot of good in there

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It all comes down to One Question: Why be honest?

Ba'al Chatzaf

Or, why be dishonest? This makes two questions, not one. It cannot be reduced to one question, only to an individual who is a creature of choices. One question = no free will. Two = free will. This is the essence of any human freedom. Or, is one free? Or not?

--Brant

Why or Why Not be Honest?

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It all comes down to One Question: Why be honest?

Ba'al Chatzaf

Or, why be dishonest? This makes two questions, not one. It cannot be reduced to one question, only to an individual who is a creature of choices. One question = no free will. Two = free will. This is the essence of any human freedom. Or, is one free? Or not?

--Brant

Why or Why Not be Honest?

Sure, but I can't have fun lecturing you with that.

--Brant

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  • 2 months later...

Autors like Seneca, Plutarch, Samuel Smiles and others explains that the moral ruin of a society causes the economic ruin too. The moral ruin of a person, causes his physical and economic ruin. If you want to find a country where you can verify the Rand's assertions to the practice...come to Spain, please!! Sex, drugs and alcoholism are the result, and the social degradation too,and finally the economic ruin. I read Isabel Paterson's work "The God and the machine" who explains that empires like Roman empire, or British empire or a great nation like United States, is great not by laws or force, but by morality (o tempora o mores). Farewell.

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