
Does the free market corrode moral character? - robg
http://www.templeton.org/market/
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orib
Not in the ideal case. The best long term strategy in a free, highly
competitive market with knowledgable consumers and no externalities is to
build long term trust. The way to build long term trust is to be moral and
ethical.

Now, this breaks down if:

    
    
        - There are externalities
        - The consumers are uneducated and uncritical
        - There is a monopoly

~~~
pchristensen
#1 and #2 are basically the default. Not good news for moral character.

~~~
eru
No. Just his argument breaks down. Not all kinds of #1 and #2 dispose creating
trust (and educating your customers) as a viable strategy.

~~~
jhancock
"educating your customers" may be possible within certain domains. But is it
possible in a free market structure which must include all people?

Does the definition of "transparency" also imply that all mechanisms which
emerge in a free market must be "understandable" by all participants? That is,
even if you fully disclose financials, but the transactions and risks are so
complex the average "customer" can't or does not have time to make sense of
it, is it "transparent".

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hugh
Compared to what? As far as I can see, the only alternative to a free market
is some kind of controlled market, and a controlled market requires some
subset of the population to control it.

If you're a controller, then holding that much power is almost certainly going
to lead to a corrosion of moral character -- the reason power corrupts is
because it makes it too easy for an individual to get huge benefits (whether
personal benefits or just service of their own personal view of the greater
good) by doing (what look like) minor wrongs.

If you're not a controller, then it leads to a corrosion of moral character
because your own interests will be best served by sucking up to the
controllers, rather than by doing the right thing.

Of course, I haven't bothered to define what the hell "moral character"
actually is, but I think the above will hold for most sensible definitions.

~~~
netcan
_As far as I can see, the only alternative to a free market is some kind of
controlled market, and a controlled market requires some subset of the
population to control it._

Free markets do not create powerful people? I think if anything the supposed
US/Soivet case studies (both of which are imperfect examples of the ideologies
they were supposed to represent), is that both claimed to be removing excess
power from single hands. Both did the opposite. Both ended up creating a power
class.

In the case where powerful individuals are public as opposed to private people
you can at least complain. With free markets, as long as their actions are
legal, it's 'fair.' To create a framework for accountability, you need to
create a legal framework, which of course makes the 'market' a little less
'free.'

A patent troll doesn't need to justify his actions in terms of public good.
Nor does any other commercial entity. The free market theory as a _moral
theory_ might be summed up as: everyone do what's best for them. Between,
supply & demand and game theory, we'll hit the best result for everyone.

~~~
anamax
> Free markets do not create powerful people?

They do only if someone is selling power, something that happens in non-free
markets as well.

In a free market, willing participants make the deals that they want, pretty
much without regard for what other people want. In other words, they're not
affected by the powerful.

To me, the key point is not whether someone else has the money to pursue their
dreams, it's whether I have the freedom to pursue mine. Non-free markets
almost always place more restrictions on the little guy because rich guys buy
exemptions.

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andreyf
Your question parses, but makes no sense, semantically. Somewhat like " _do
colorless green ideas sleep furiously or seductively?_ ".

Firstly, free markets are not entities which can act, they are a social
systems which organize people, and secondly, "moral character" is a
complicated abstract concept linked to personal choice and ethics.

Rephrase your question more succinctly and the answer will be obvious.

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jrockway
I think "Freakonomics" answers this. If your goal is to get money, and there
is no monetary penalty for being "immoral", then of course people are going to
be immoral. It's the same reason corporations dump toxic waste -- paying the
fines is cheaper than not producing the toxic waste.

~~~
hugh
I don't think anyone defines a "free market" as meaning that there is no
penalty for getting money by immoral means (e.g. stealing your neighbour's
wallet). Polluting a river should, of course, also be penalized and/or priced
appropriately.

~~~
netcan
You don't need to _define_ free market as that. You just need not to define
free market as not that.

Penalties can either be legislated (eg fines) or consumer generated (eg Nike).
But internal morality is not part of how the market works. Sure you can have
Google not being evil. But if you have a sound an economic opportunity
presented by creating (fro example) waste. It will be taken up by someone.
Without legislation forbidding it, you can bet that there would be a business
in taking garbage from London & dumping it at sea.

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river_styx
The problem with questions like this is that "moral" character is kind of a
relative and arbitrary concept in the first place. What's immoral today might
be moral tomorrow, and vice versa. In fact, if a free market becomes ingrained
into the culture deeply enough, it will eventually decide what's moral. Not
the other way around.

~~~
netcan
_What's immoral today might be moral tomorrow, and vice versa_

Well then you've already made a big statement about morality. (its relative &
arbitrary). Welcome to the relativist school. You leave behind virtually all
humanist ethicists, much of the The Enlightenment and of course most western
religious traditions.

You are in an extreme minority. You will be accused of nihilism.

But even as a relativist, you could ask yourself questions like:

Does the free market cause individuals to be immoral according to their own
view of what is moral?

Does the free market cause individuals to be immoral according to their
friends & neighbours of what is moral?

Does the free market cause individuals to be immoral according to their
seniors view of what is moral?

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DaniFong
Excellent submission. It seems that the method they use for conducting
discussions: asking a whole bunch of people in parallel for an essay, and then
revealing them, allows to conversation to be a whole lot less contentious, and
a much broader set of viewpoints and arguments to be heard (rather than the
argument being dominated by fights over a few sticking points). I see that
there are many other questions asked by Templeton.org as well. Thanks for
pointing it out.

As for my opinion, I don't think the free market corrodes moral character,
because it can spring back. On the other hand, it can, and it does, confuse,
hide, and suppress it.

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steveplace
Non-transparent markets do.

~~~
eru
Fortunately there is money to be made (arbitrage) in creating tranparency.

~~~
steveplace
Unless you ban one end of that arb (shortselling).

~~~
eru
I agree.

But not all is lost. There are ways around that. Ever heard of Put-Call-Parity
and similiar relations that allow for the creation of synthetic products? (See
<http://en.wikipedia.org/wiki/Put-call_parity> and
<http://en.wikipedia.org/wiki/Synthetic_options_position>)

~~~
steveplace
I trade options, and I know that people cuold put on synthetics in lieu of
shorting outright. But the market makers on the other side of the trade have
to short the stock in order for them to properly hedge. Since it's much harder
to do, the spreads on options became pretty retarded after the short-selling
ban. This reduced liquidity, put the VIX, VXO, VXN, to all time highs, and
exacerbated the moves downward.

The past 30 days have essentially become one very long one.

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callmeed
No, I would say free markets expose existing moral/character flaws (namely
greed).

~~~
eru
Free markets turn greed into an urge to help other people (to get their
money).

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jonmc12
“The best index to a person’s character is (a) how he treats people who can’t
do him any good, and (b) how he treats people who can’t fight back.” — Abigail
van Buren (Pauline Esther Friedman), American newspaper advice columnist
(1918-2002)

One of my favorite quotes on character. Think of it this way - if you meet the
typical VC and they don't think you can make them money, what will they do?
Offer you intros? advice? help? feedback? no.. they will stop communicating
with you as quickly as possible because they are really busy and have to look
at more deals that help make them a higher return on their fund.

In this example, the forces of the free market are directly in contrast to
this definition of character.

~~~
DanielBMarkham
So if I understand you, everybody in the world should spend special time with
you or they're morally bankrupt?

I think you've twisted your definition of reality a bit. Obviously, even in a
world full of wonderful saints everybody can't spend hours with everybody
else. The math just doesn't work out. So the act of limiting one's time with
someone else cannot be immoral or bad -- in fact, it would seem to be a
defining good quality. The reference you quote could only be applied in those
cases where you're already spending time with each other: a restaurant, a
bellhop, in an elevator, etc.

You took a wonderful quote and made it into something it was never meant to
be.

~~~
jonmc12
I don't think my point came across as intended, and was probably not the best
example either. Just to be clear.. I ignore homeless people all the time and
do not see it as a reflection on my character.

Most people that you meet with the ability to help you with your venture will
do so - they will give you feedback, make intros, etc - often without the need
for anything explicit in return. Its human nature, and what I would consider a
norm for moral character. I think most people would say that given the
resources, they would help anyone they could - everyone has a need for basic
altruism.

However, when you introduce the need to capitalize on this same activity, it
requires a change in behavior. My point was that, the same guy who would help
you out for no reason as a norm, the minute he starts doing the same thing for
money he does not have the luxury to help you in the same way any more. Now he
has to make a business out of it and be efficient.

That is what I was trying to illustrate. This ability to be altruistic
inherently declines when you have to take on the same role to make profit. The
ability to treat someone well 1) 'who can do you no good' or 2) 'who can not
fight back' changes when the bottom line is profit. It does change the nature
of our character, and I think that is inherent to the nature of succeeding in
a free market.

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eru
Ah, I always read that foundations ads in the Economist. It's the first time I
actually see those essays they mention.

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known
Free markets will succeed only when race to the bottom is prevented in this
flat world.

~~~
anamax
Are you really willing to pay as much for rotten bananas as you are for good
ones?

The free market will satisfy both, at different price points. Since there are
uses for rotten bananas, this is a good thing. (The "race to the bottom"
people think that other people should do without things that the "race to the
bottom" people don't like.)

Don't buy what you don't want, but don't insist that other people share your
preferences.

~~~
known
Preventing race to the bottom = Social Safety Net

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mhartl
Finally, something I know the answer to.

 _No._

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miguelxt
Yes. I want money.

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kingkongrevenge
Obviously not. People treat each other horribly in the least economically free
countries. I think the pattern generally holds as you move along the spectrum,
too.

~~~
pchristensen
Correlation does not imply causation. The social and government restrictions
that allow capitalism to function (enforcement of contracts, property rights,
police/military protection, etc) also prevent lots of bad moral behavior.

