Market Economy vs. Market Society

As we said in our last post, capitalism, as a system, is neither moral nor immoral—it is just one economic system, one that seems to us fallen creatures to be the best that humanity has created thus far. Christians can, and probably should, support free market capitalism.

But I want to quote Gideon Strauss of CARDUS (formerly the Work Research Foundation), who makes a very important distinction. I think that those Christians on the two extremes of the economics debate (those who believe that markets need to be completely unfettered with no intervention and those who are wary of free market capitalism because of the abuses and vices that occur in the system) can learn from this very balanced assessment of the reality of where we are and what we should do.
We believe markets to be the best way—no, the only sane way—to structure interactions in economic life. We don't only believe this because of the historical evidence from the complete failure and ghastly horror of socialism and fascism, but even more because we consider markets to be built into the very design of economic life. Markets as the proper setting for economic interaction, for buying and selling, are in our view a feature of the structure of reality. So we flagrantly support the idea and the reality of a market economy.

But this does not mean we support the idea of a market society. Human life is not all about economics. Contrary to rational choice theory, we human beings do not make all of our decisions simply in terms of cost/benefit analyses.

While economic life needs room to flourish, and needs protection from the encroachment of excessive government intrusion, it also needs limits. The sphere of economic life does not only provide businesses with a space for their wealth-generating manufacture of products and provision of services, and labor unions with a space for negotiating fair participation in these activities—it also sets the outer limits for business and labor.

There are many spheres of human life where economic considerations appropriately play a role but do not dictate decision-making. Families, schools and hospitals all have to balance their books—but they don't exist to balance their books. In each of their cases, love, learning, and care, respectively, trumps the bottom line.

One of the great challenges facing us is cultivating a society in which economic markets can flourish, but without overwhelming other spheres of human life.

What do you think?


Blessed Economist said...

I dont chop life in the same way as Gideon Strauss. The same principles apply in business and education and health care. They also apply in the family, just the balance is different.

First, cost/benefit permeates the whole of life I go to a prayer meeting rather than stay in bed, because the benefits outweight the cost. If the prayer meeting loses the plot, I will stop going.

Jesus said we should count the cost before we decide to follow him.

A doctor working in an emergency department will do triage, to ensure that he puts energy into those who will benefit from his care. A caring hospital will manage costs extra carefully, so it can help more people.

A good teacher will put efforts into activities that will benefit learning. He will have to decide whether how the costs/benefits of shakespeare compare with those for trigonometry.

Parents have to make choices between working to provide for their family and spending time with their children.

Benefits and costs are inescapable because everything we do has benefits and costs.

On the other hand,cost/benefit must not dominate any area of life, including business. Economic considerations should never totally dictate decision-making even in business. Responsibility to God trumps cost/benefit in every area of life, including business.

A businessperson may not steal, even if the benefits outweight the costs. They cannot use violence or threats agaist their staff, even if the benefits outweight the costs. They cannot use sexual favours to get ahead. A manager is still required to care for his/her family.

Second, we cannot divide into life business where prices and free exchange prevail and other areas (health and education) where caring and giving prevail. Life is not that simple.

In every area of life, whether business, health or education, we are free to give away our services for free or sell them for a price. We must not force other people to provide services for nothing. A doctor (or pastor) will sometimes sell his services for a fee. At other times he may choose to give them for free. The choice is his. We must not force him to provide his services for free, and he must not charge exorbitant prices to people desparate for care. He is always accountable to God for how he uses his gifts and calling.

The same applies in families. Parents will do most of what they do for their families expecting nothing in return, but sometimes a father will say, I will take you to the game, if you wash the car. A parent must nevver treat their children as slaves. Parents are accountable to God as parents.

The businessperson has a duty to care for the poor, even if, like the good samatitan, he uses his own money to pay someone else to provide care for the needy person. He must not take other people's money to care for the poor, because that would be stealing.

A manager should sometime give an employ a hand up that he cannot repay and does not deserve.

(The maculine pronouns are due to my being tired at the end of the day.)

Bob Robinson said...

Point well taken. We are constantly making cost/benefit analyses.

But many of these "costs" are not monetary in nature. I fear that we are so steeped in a Capitalistic mindset that we are in danger of making all of our decisions based on monetary cost and benefit.

I think that if we allow everything we do to be determined through the monetary grid then everything begins to be seen as a commodity, thus stripping us of making decisions, as Gideon says, from the standpoint of "love, learning, and care."

Capitalism is fine for buying and selling, but should we make all our decisions through a capitalistic framework?

Not all spheres of life should be commodified and seen through a strict monetary grid.

Michael Kruse said...

I think Strauss makes some good observations. When some folks say the society ought to do such-and-such, what the mean is government out to do it. That is a false equation of government, an institution within society, for society itself. The same error can be made for the economic system. Everything is economics but economics isn’t everything.

Like Ron, I do take some exception to the suggestion that business is only about money while families, schools and hospitals, have a measure beyond money. As human beings, we must eat and drink to live, but we don’t live to eat and drink. If a for-profit business has money as its only goal, it will fail. Money and profit are the means toward accomplishing whatever mission the business has with regard to its customers. The distinction between for-profit and not-for-profit lies elsewhere.

For-profit businesses have a direct feedback loop. Customers purchase goods and services for their own use. Sales and profits are direct indicators of how well the firm is meeting customer needs. Owners/shareholders of the business get rewarded based on how well the meet customer needs.

Not-for-profits do not have a direct feedback loop and most have two customers groups. They have donors who contribute funds and they have recipients of services. Since the ones giving the money are usually a different population from those receiving the services, money doesn’t tell you about the effectiveness of service and other measurement criteria are needed to assess outcomes. From a legal standpoint, not-for-profits don’t have shareholders among whom profits are distributed but, like for-profit firms, they must still make a profit.

All that said economics is largely about transforming matter, energy, and information from less useful states into more useful states. It is central to our co-creative dominion call. But many people like children, the elderly, and those who are mentally or physically without economic capacity (temporarily or permanently) are part of our communities. So are the caregivers who tend to these folks. Production and exchange can’t meet every need.

In families and in some small settings it is possible to live a communal or semi-communal lifestyle. But successful communes require folks with a high degree of affinity for each other, with constant routine interaction, and the ability to restrict the size of the community, and thus the access to communal property. Sociologists tell us that we can’t maintain an ongoing social network with more than about 150 people (at the extreme limit.) When a group begins to approach this size, affinity and familiarity with at least some folks dissolves; that is to say they become strangers. This is where government refereed market transactions become so critical in coordinating life beyond the immediate community.

There are a myriad of ways we can organize our interactions with each other at the micro level but the market economy is essential for society. Just as trying to conceive of society as a family writ large, so is it inappropriate to see a family or small community as market economy writ small.

Blessed Economist said...

The price/cost/benefit grid is useful in every area life, but it should never dictate our decision in any area of life.

Prices bring together information about costs, usefulness and value to other people in an imperfect but informative way. Money is a scale that allows us make comparisons between vastly different objects. How do you compare the value of rose with a computer? Having a common value scale that allows us to make and approximate comparison between disparate things in away that helps us to make decisions. This scale is never perfect, so it should never be the only factor that feeds into decisions.

This grid is useful in every sphere of life. If a friend who lives 20 miles away asks you for pastoral care, you will drive to see him, because you care. If he lives a hundred thousand miles away, you would first find out the cost of the airfare. You might decide that you could not help the person enough to justify spending the money it would cost. You might suggest he get help from someone who lived closer. On the other hand, if the person was really close to you and think you could really make a difference, you might go regardless of the cost. The money/price grid must not dictate your decision, but it should inform it.

The same is true in business. A person will not buy a new business just because the benefits outweigh the costs. They will need to have an affinity for it. It will need to fit in with what they think is an important. Very people will devote their life energy to something they do not think is important. Many factors other than cost benefit will affect the decision to buy a business. Other values may be important in most buysiness decisions that are made. Price/cost is just one factor to that will feed into a decision making process.

Business people should not become cost benefit machines, and I doubt that there are many that are. Certainly, they are not portrayed that way in business biographies that I have read. The cost/benefit driven business person is mostly a straw man set up by envious Christians. People in business know that life is much more complicated than that.(Of couse there are some crooked people in business, but there are also a few devious pastors around.)

As I said, we must not segment life. The price/money grid is useful for all of life, but it is just a tool. It must not be our supreme guide. Only God can take that role, whether we are a pastor or a plumber.

None of our decisions should be made solely on the basis of the price money/grid. That would be foolish. On the other hand saying that there are areas of life where it is irrelevant is equally foolish.


Bob Robinson said...

I don't think that Gideon Strauss would deny that every kind of human relationship has an economic aspect, and that economic considerations are part of the decisions that we all must make in those relationships. The point is more about how economic considerations should not be the leading considerations in relationships outside the market proper. So, a family must steward its household economy very carefully, but economic considerations follow the lead of parental love and filial piety. Whereas, in a business, the proper leading questions include, "Can I produce a good product or service and sell it at a profit?" "Can I make enough of a profit to (appropriately) innovate my product or service and/or (if appropriate) grow my share in the market for this kind of product or service?"

Eugenio Rodríguez said...

If we accept Max Weber's thesis on the origin of capitalism in this country, then we must recognize that world of the Protestant Ethic belongs to an unretreviable past.

Predestination, a precursor of the profit motive, belongs to what now seems the Dark Ages on this side of the Atlantic Ocean.

We now live in a perversion of this nation's original conception of work and profit.

In his new book,"A Capitalism for the People," University of Chicago professor Luigi Zingales argues that we must curtail the present American capitalism immorality not with government regulations but with social condemnation. Make the excesses socially sanctioned just as we now do with smoking, for example.

Who would argue otherwise. But how can we create such awareness? Even religion has been penetrated by the market-society mentality.

Take this past election: 78% of white Evangelicals voted for Romney, who made his money not the old-fashioned way --working very hard until finally succeeding in making a small business into a success-- but the new Wall Street way.

This is a very long stretch from the Protestants who initiated what's been called the ongoing American story.

So, what do I propose? Salvage Protestantism in this country first. Cleanse it of any market society contamination. That's a good way to start creating moral awareness.