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People Can Improve Their Lives Through Markets

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Do Markets Corrupt Our Morals?

Abstract

This chapter demonstrates that the market is an arena where individuals can work to improve their lives. People who live in market societies are wealthier, healthier, happier, and better connected than people who live in nonmarket societies. Additionally, these benefits are not only enjoyed by the privileged few in these communities. The least advantaged in market societies are better off than the least advantaged in nonmarket societies and may be better off than the most well-off in some nonmarket societies. This material fact, we argue, is of moral significance.

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Notes

  1. 1.

    Consider, for instance, that Blockbuster, once a Goliath of the video rental industry, could not keep pace with changes in technology and customers’ preferences and filed for bankruptcy in 2010. Toys R Us, a toy store, ceased its operations in 2018 in the United States, citing, “shoppers flocking to online platforms like Amazon.com Inc (AMZN.O) and children choosing electronic gadgets over toys” as two of the main reasons for its closure (Ruckinski 2018). For similar reasons, Borders, a bookstore, and Tower Records, a music store, went out of business in 2011 and 2006, respectively. Additionally, California’s Division of Occupational Safety and Health opened an investigation against Tesla, the electric car company, based on current and former employees’ concerns about the Fremont factory prioritizing production over worker safety (Ehrenkranz 2018). In 1997, Ernst & Young revealed in a report that workers at a Nike shoe factory in Vietnam “were exposed to carcinogens that exceeded local legal standards by 177 times in parts of the plant and that 77% of the employees suffered from respiratory problems” and “were forced to work 65 hours a week, far more than Vietnamese law allows, for $10 a week” (Greenhouse 1997). Apple has worked hard to address similar criticisms and improve its reputation on this margin in the recent years, but another supplier to Apple has been accused of subjecting its employees to work in “an unsafe environment for long hours earning low wages” in early 2018 (Chong 2018).

  2. 2.

    According to Wilkie and Farnsworth (2005: 306),

    Wylly saw himself as enlightened and benevolent, and perhaps – compared to planter peers who included a couple that tortured a teenaged slave girl to death – he was. In the rules of Clifton Plantation, he set out a series of behavioral and work conditions that had to be met by the enslaved community. The benefits [Wylly] offered in return [to the slaves] included the right to worship according to [their own] religious doctrine, the right to live in a house of [their own] construction, the limited right to learn to read and write, the right to support oneself on a small parcel of land, and the right to participate with his blessing in the Nassau market.

  3. 3.

    See Thiagarajan (2017) that describes life and work of a modern-day salt harvester.

  4. 4.

    Satz (2010) defined noxious markets as those markets that are “toxic to important human values” (Ibid.: 3) and that “undermine the conditions that people need if they are to relate as equals” (Ibid.: 94). In Chap. 7, we discuss Satz’s notion of noxious markets with more detail.

  5. 5.

    The practice of provision plots and weekend markets also contributed to the advantages that Bahamian slaves had over slaves elsewhere (Storr 2004). The practice involved giving the enslaved use rights to a plot of land on the plantation, allowing them to grow crops for their own use in their “free time,” and allowing them to sell surplus crops in weekend markets.

  6. 6.

    Of course, Estonians were worse off than their neighbors in more significant ways. During the Soviet era, there were forced deportations of Estonians to other parts of the Soviet Union and colonialization by Russians. Moreover, the political system remained an oppressive one throughout.

  7. 7.

    Although state-level corruption continues to persist, it is undeniable that South Korea also has healthy political and legal systems. For instance, it successfully removed a corrupt but democratically elected president, Park Geun-Hye, from office through nonviolent legal means in 2017 (Caryl 2017; Choe 2017).

  8. 8.

    PISA assesses skills and knowledge of 15-year-old students in mathematics, reading, and science around the world every three years.

  9. 9.

    In comparison, American teens ranked 25th in science, tied for 39th in mathematics (below OECD average), and tied for 23rd in reading in the 2015 PISA test.

  10. 10.

    Average Internet speed in Korea is 27 Mbps. In comparison, the global average Internet speed is 7 Mbps.

  11. 11.

    North Korea has a public food distribution system, where an average North Korean worker receives a daily ration of 700 grams of cereals. The World Food Program views a survival ration to be 600 grams per day per person. During periods of extreme food shortages, North Korea has drastically reduced the ration to its ordinary citizens (to as little as 150 grams per person per day) (Large 2011).

  12. 12.

    Adam Smith ([1776] 1981) expressed his confidence in the market’s ability to help societies to weather shortages and famines. In fact, using corn production to illustrate his point, Smith (Ibid.: 526) professed that anyone who studies the European history of scarcities and famines would readily conclude that “a famine has never arisen from any other cause but the violence of government attempting, by improper means, to remedy the inconveniences of a dearth” and that “a dearth never has arisen from any combination among the inland dealers in corn.” He believed that only by restraining the market from operating freely can a shortage be turned into a famine. According to Smith (Ibid.: 527),

    The unlimited, unrestrained freedom of the corn trade, as it is the only effectual preventative of the miseries of a famine, so it is the best palliative of the inconveniences of a dearth; for the inconveniences of a real scarcity [from war and other such events] cannot be remedied; they can only be palliated. No trade deserves more the full protection of the law, and no trade requires it so much; because no trade is so much exposed to popular odium.

    Studies on famines in modern-day economies appear to support Smith’s claim. For instance, Frost (2018) discussed how the root cause of the Great Famine (1959–1961) in China was the suppression of markets (thus disrupting the price mechanism and economic calculation) and how the famine may have been prevented had the government permitted markets to function freely.

  13. 13.

    The relative difference in access to healthcare, nutrition, and other basic necessities has left a mark on the two Koreas. South Korean men are, on average, 3–8 cm (1.2–3.1 in) taller than their North Korean counterparts (Schwekendiek quoted in Knight 2012). More starkly, in South Korea, the life expectancy is 82.4 years, with an infant mortality rate of 3 deaths per 1000 live births and a maternal mortality rate of 11 per 100,000 live births; by contrast, life expectancy for North Koreans is 70.4 years, with infant mortality rate of 22.9 per 1000 live births and a maternal mortality rate of 82 per 100,000 live births (Central Intelligence Agency 2018).

  14. 14.

    Leeson (2010) uses a similar approach as we do to advance a similar claim.

  15. 15.

    Schumpeter was not alone in his belief that entrepreneurship is essential for economic progress. For example, Murphy et al. (2006: 12) noted that per capita wealth in the West grew exponentially “[w]ith the advent of entrepreneurship.” Nelson and Pack (1999) pointed to entrepreneurship (coupled with a favorable policy environment) as an essential ingredient to the rise of Asian Miracle countries in the late twentieth century. Based on 57 empirical studies on entrepreneurship, Van Praag and Versloot (2007) concluded that entrepreneurs serve an important, but specific, role in the economy by spurring innovation, creating more employment, and generating higher productivity growth relative to their counterparts for the economy. Furthermore, at least some outside the academy also seem to agree that entrepreneurs are important for economic growth. For instance, Sappin (2016) detailed the seven ways in which entrepreneurs drive economic development.

  16. 16.

    Bjørnskov and Foss (2008) complicate this conclusion and found that some measures of economic freedom are not significantly correlated with entrepreneurship.

  17. 17.

    South Koreans, Schwekendiek (2009) reported, consumed a total of 3040 kcal per capita per day according to FAO 2001–2003 estimates, with daily consumptions of 89 kcal in proteins and 78 kcal in fat, while North Koreans consumed a total of 2160 kcal per capita daily, with daily consumptions of 63 kcal in proteins and 35 kcal in fats.

  18. 18.

    It is believed that North Koreans were 1.1–1.4 cm (approximately half an inch) taller than South Koreans before the separation of the peninsula (Kimura 1993). If true, then the height and weight differences between the two Koreas would be even more striking. Furthermore, Kimura (1993) and Schwekendiek (2009) were not the only scholars who tied height discrepancies to institutions. For instance, Komlos and Kriwy (2003) discussed how adult East Germans were shorter than West Germans by 1 cm (about 0.4 in); the Berlin Wall physically separated East and West Germanys between 1961 and 1989.

  19. 19.

    Ljungvall (2013) and Lawson et al. (2016) complicate this relationship. Ljungvall (2013) reported how economic freedom shares a positive (and statistically significant) relationship with the level and changes in average body mass index. Similarly, Lawson et al. (2016) showed that, although life expectancy increased with economic freedom, body mass index, and, thus, obesity increased with economic freedom too. As obesity is linked with numerous health issues, it is a challenge to reconcile their findings with the findings mentioned above.

  20. 20.

    Admittedly, the data and literature on happiness and subjective well-being that we cite here are not without issues. See Kahneman and Krueger (2006) for a discussion of the strengths and shortcomings of efforts to measure subjective well-being. See also Badhwar (2014) for a useful neo-Aristotelian account of well-being, where happiness is not reducible to subjective perceptions of well-being but consists in living an objectively worthwhile life.

  21. 21.

    Social capital is a type of capital, much like physical and human capital, that can be used to produce goods and services. It refers to a stock of social relations that are grounded in norms and networks of trust and reciprocity and that facilitate cooperation and collective action between people. Social capital, subsequently, has a direct impact on the economic progress and overall well-being of a country.

  22. 22.

    According to Putnam (2000: 235–237), changes in the “dependence upon television for entertainment” are closely correlated with the decline in civic engagement because “[t]elevision competes for scarce time … [t]elevision has psychological effects that inhibit social participation … [and s]pecific programmatic content on television undermines civic motivations.”

  23. 23.

    We should note, however, that it is not true that the market or its fruits are standing in the way of community and so making it impossible for Americans to form social bonds or to engage in civic activities. Indeed, the bowling leagues that Putnam celebrates depend on markets for bowling alleys, bowling bowls, bowling shirts, and more.

  24. 24.

    There are numerous studies that also question whether social capital has declined as Putnam described (e.g. Ladd 1996, 1999; Paxton 1999; Rotolo 1999; Clark 2015). See Fischer (2005) for more references to empirical works that oppose Putnam’s declining social capital argument.

  25. 25.

    As we discuss in Chap. 5, evidence from some economic experiments validates this point that subjects from market societies tend to show more trust and other prosocial sentiments than those from nonmarket societies (Henrich et al. 2004; Barr et al. 2009; Ensminger and Cook 2014).

  26. 26.

    It is, admittedly, difficult to figure out how to measure poverty and to identify which particular people are poor. For example, Atkinson (1987) specified three issues that arise when measuring and assessing the extent of poverty in a society: where to draw the poverty line; what poverty measure(s) to utilize; and the potential confound between poverty and economic inequality. Certainly, how many people and who are affected will depend on the variable that is chosen and the threshold value that is set.

  27. 27.

    Still, there is the worry that the poor might be forced to enter into exchanges that they would prefer to avoid because of the power disparities that exist between them and the rich. Munger (2011) pondered a paradox in our moral and ethical understanding of exchange: individual exchanges and their immediate (and potentially and likely unequal) profits that made the involved parties better off are morally good, yet we condemn an aggregated consequence of these exchanges, namely, the unequal distributions of wealth. Munger (Ibid.: 194) rebutted this view, claiming that,

    All objections to the morality and justice of the uses of voluntary market exchange are mistaken, because they are misdirected. Euvoluntary exchanges [i.e. exchanges that are both morally good and truly voluntary] are always justified, and the consequent distributions of wealth are always just. But even exchanges that are not euvoluntary are beneficial, and they benefit most of all the welfare of those who are least well off. Euvoluntary or not, exchange is just, and restrictions on exchange harm the poor and the weak.

  28. 28.

    OECD’s Better Life Index (2018a) and The Economist (2013) reaffirm our point here.

  29. 29.

    McCloskey also pointed out several errors in Piketty’s analysis and directly challenged his ethical presuppositions. His analysis, she (2014: 82) claimed,

    is conclusive, so long as the factual assumptions are near-enough true: namely, only rich people have capital; human capital does not exist; the rich reinvest their returns—they never lose it to sloth or someone else’s creative destruction; inheritance is the main mechanism, not creativity raising g for the rest of us just when it results in r shared by us all; and we care ethically only about the Gini coefficient, not the condition of the working class.

  30. 30.

    Economic inequality in the United Kingdom, for which information on income distribution from as far back as the Middle Ages is available, also shows an overall decline in economic inequality as the country modernized (Roser and Ortiz-Ospina 2017).

  31. 31.

    Several studies complicate these results. Bergh and Nilsson (2010) empirically showed that a positive relationship between country-level economic freedom and inequality exists, as did Bennett (2016) for the relationship between state-level economic freedom and inequality in the United States. However, Sturm and De Haan (2015) found no effect of economic freedom on inequality. Bennett and Nikolaev (2017) attributed the inconsistent and ambiguous results in this literature to the use of different econometric models and measures of inequality.

  32. 32.

    This statement should not be read as meaning no American or British man has ever worked for his socioeconomic status or that no Scandinavian or Canadian man has ever inherited his socioeconomic status. There are, of course, “self-made” American and British innovators and there are Scandinavian and Canadian heirs. We merely intend to illustrate what the different values of father-son earnings elasticities mean with this statement.

  33. 33.

    Companies such as Paypal Holdings Inc., Amazon, and Apple Inc. could not have existed in 1955 prior to the invention of the Internet in 1983 and the technological improvements to the computer.

  34. 34.

    By less sanguine economic developments, they mean changes in antitrust policies and deregulations of certain industries that lead to a high volume of hostile takeovers, divestitures, and leveraged buyouts in the late 1990s.

  35. 35.

    Goldthorpe and Erikson (1992: 388) challenged the view of systematic differences in social mobility across countries and maintained that cross-country variation in social mobility largely reflects “effects specific to particular societies at particular times.”

  36. 36.

    Cowen (2018) offered a moral argument for economic growth that is consistent with our own here: wealthier societies are happier, live longer, are more autonomous, and live more fulfilling (or fun, as he wrote) lives. However, Cowen was primarily concerned with how “[w]e have strayed from the ideals of a society based on prosperity and the rights and liberties of the individual, and [that] we do not know how to return to those ideals” (Ibid.: 15). Proposing pluralism as a core moral intuition, he sought to reconcile the seeming inconsistency between the “messiness” of a pluralistic moral core and the rigid ideals of prosperity and liberty (Ibid.: 17).

  37. 37.

    All the parties are also more likely to be insured in wealthy societies which mitigate some of the tragedy that would result from any loss of life.

  38. 38.

    Rennix and Robinson (2017) called the trolley problem thought experiment a horror show that we are forced into.

  39. 39.

    Russell (2014), similarly, spoke to the role of “good institutions” in allowing us to escape social dilemmas. As Russell (Ibid.: 268) wrote, “without [good institutions], the everyday challenges of feeding, clothing, and sheltering ourselves become daily dilemmas. With them, we have better things to do with our time than coping with dilemmas—and a lot less to regret.” By good institutions, Russell had in mind private property and the rule of law, the institutions that undergird market societies.

  40. 40.

    See, for instance, Schmidtz (2000) and Schaler (2009).

  41. 41.

    See Nieli (1986: 620). See also Forman-Barzilai (2005) for a criticism of Smith’s account.

  42. 42.

    According to Hayek (1976: 113),

    [t]he benefits from knowledge which others possess, including all the advances of science, reach us through channels provided and directed by the market mechanism. Even the degree to which we participate in the aesthetic or moral strivings of men in other parts of the world we owe to the economic nexus.

  43. 43.

    The just savings principle also insists that we must be concerned with future generations.

  44. 44.

    Rawls also had a concern with equal opportunity (at least regarding our access to positions of power); see the second part of the second principle. This can arguably be recast as a concern about crony capitalism and privileges.

  45. 45.

    Alternatively, Tomasi (2012) proposed market democracy as the set of social and economic institutions that are most likely to satisfy a Rawlsian style conception of justice as fairness. Stated another way, he argued that market democracy is a system that will both ensure basic liberties and most benefit the least advantaged. “Market democracy,” Tomasi (Ibid.: 267) explained,

    takes a fundamentally deliberative approach to the questions of political life. Rather than seeing society as something private, market democracy sees society as an essentially public thing: political and economic structures must be justifiable to the citizens who are to live within them, whatever their social class. … This democratic outlook leads market democracy to affirm a thick conception of economic liberty, with such liberties scoring fully on par with the other basic liberal rights and freedoms.

    Similarly, Shapiro (1995) argued that Rawlsian liberals should adopt free market capitalism.

  46. 46.

    Rawls (2001: 135) contrasted the property-owning democracy that he championed with a capitalist welfare state and a laissez-faire economic system. It is possible, however, that Rawls viewed Western constitutional democracies as coming closest to satisfying justice as fairness (see Rawls 1985; Schmidtz 2006: 195). If so, then we are not disagreeing with him in any fundamental sense. These countries tend to be market societies. Admittedly, this leaves open the question of which kind of market system (e.g. one with a larger welfare state vs. one with a smaller welfare state) comes closest to satisfying justice as fairness.

  47. 47.

    Alternatively stated, there tend to be more equal shares in market societies than in nonmarket societies and so market societies appear to do a better job of satisfying the difference principle.

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Storr, V.H., Choi, G.S. (2019). People Can Improve Their Lives Through Markets. In: Do Markets Corrupt Our Morals?. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-18416-2_4

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