Markets, Morals and Guido Calabresi’s The Future of Law and Economics

Guido Calabresi is a dear friend and mentor, and like everyone else who knows his justly famous work, I was delighted to hear that he has a new book. One central theme of the book is his critique of conventional economists– for not doing what they say they do. They say they treat all preferences alike, but then they ignore some widespread popular preferences because, well, because these preferences just don’t fit well into a conventional economic focus on markets. According to Guido, people widely prefer not to use markets for some kinds of matters, for reasons of humaneness, justice, and generosity. Thus, for example, many people think that no one should be able to buy and sell babies or kidneys; they think educational opportunity should not depend on money; and they think health care is best supplied by altruistic institutions. Guido’s critique is that these uncomfortable non-market preferences are still preferences, and if economists really mean what they say about their neutral treatment of preferences, then economists should count these preferences too. But they don’t, and Guido takes them to the woodshed for this inconsistency. Then later he relents and suggests some ways to change their ways.
This is a quite resounding critique, written with Guido’s customary combination of incisiveness, bravado and charm. It was a great read, not only for this critique of conventional economics but also for many other fascinating discussions. Nevertheless, I found myself having a few qualms about the depiction of market transactions.
In the book, market transactions generally come off as cold, impersonal, and ruthlessly dog-eat-dog, by comparison to the market-rejecting sweet moral preferences for humaneness, equality, and altruism. I found myself wanting to say, hey, wait a minute, markets aren’t so bad! To you, reader, I would ask something like the following: Consider your circle of friends: haven’t you met a lot of them at your workplace? Perhaps even your spouse? Who are all those people whose work gets you a safe airplane ride—not just the TSA (please!), but all the factory workers, mechanics, flight personnel, baggage handlers, the lot. Why do you feel so confident about them?
I think there is a reason: markets and morals are not so separate. In fact, to a very considerable degree, they are all mixed up together. It is not hard to make the case that markets depend on moral values, and they teach moral values too, and in fact some of the same values that inform those preferences that supposedly reject market transactions.
To be sure, some disagree. Shortly after the breakup of the Soviet Union, a joke circulated in Russia, pondering why people accepted the blatant corruption springing up all around them. The answer was that everyone had been hearing for seventy years that capitalism is theft, and they wanted capitalism.
But wait, it was a joke! Capitalism is not theft at all, because cheaters and con men do not develop anything like viable commercial practices. Successful market practices rest on a culture of honesty, fair dealing, promise-keeping, and acceptance of limits on self-interest. At the outset of market relationships, there has to be a little nugget of generosity: someone has to take the risk of making that first “nice” move in the tit-for-tat game. If no one does, nothing gets off the ground; and if someone cheats later, things fall apart. Fair dealing and generosity are the factors that can start a cascade of reciprocity, building trust and trustworthiness, enlarging relationships–and subtly teaching the value of all those good things.
And speaking of teaching, market behavior has a relationship with democratic values, too. There is a lot of claptrap out there about how democracy needs capitalism, blah blah blah, without much thought about why. But insofar as there is something to the claim, a big part of it has to be a moral one. Market activity teaches the participants to attend to what the others want, to find overlapping interests, to put aside divisive but irrelevant disputes, and to proceed on the basis of consent rather than force. Those are practices and attitudes that democracies need, too. We do not have very many institutions that can act as schools for democratic decision-making, and we need to give proper credit to the ones we have. Markets are among them.
I know, I know, I am an apologist for doux commerce and the bourgeois virtues. Yes, indeed, markets can be vulnerable to meanness, cheating and overreaching. But those are not features that make markets work—quite the contrary. In any event, restraints on markets can be prim and stifling, while altruism can be smarmy and devious, and all a source of resentment and evasion. It won’t do to judge market activities by their flaws and non-market arrangements by their virtues.
But Guido knows these things as well as anyone I know. His book observes the costliness of non-market preferences and makes creative suggestions for mixing market and non-market approaches, and he certainly avoids the worst of some anti-commodification canards about markets. I just wanted his book to say more about market morality, and how markets too can teach the good human qualities he applauds.

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