Wednesday, April 15, 2009

Free Markets (7) - Morality

  • Markets are not moral.
  • Markets are not immoral.
  • Markets are amoral.
Markets cannot think, choose, or act.
  • People do these things.
People participating in a market are never amoral.
  • They can be moral
  • They can be immoral.
A market needs just one value from people to function: honesty.

When someone makes an offer on a market, the key moral consideration is whether they are honest or dishonest. Are they lying or speaking the truth?

We all know this. We generally just assume that most people are honest. Provided the price is not too high, we run the risk and trust most offers. We reduce the risk by going back to traders that have been honest in the past. When we find that someone is dishonest, we avoid them and tell our friends to do the same.

For a big purchase, we do other things to reduce the risk of being cheated by a dishonest person. When buying a car, we get it inspected by a motor mechanic. When buying a house, we get it inspected by a carpenter and we employ a lawyer to check the title is valid. This is normal.

Sellers that want to build a business that will last have to be honest.

Bad news travels. If a business rips people off, its customers will be disappear.
Making money in a free market by ripping people off is difficult. The rip-off artist cannot stay in the same community for long, but has to keep moving on to places where their dishonesty is not known. Modern communication makes this hard. In practice, it is easier to make money by making people better off.

A market only needs just one value to function. It does not need compassion, kindness, gentleness or love. So even if these values are missing from society, people can still buy and sell in safety, provided most traders remain honest.

This full series is at Markets and Morality.

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