On Winning the Argument and Losing the War
Count me in as one who feels that Peter Schiff and Richard Epstein have actually done our side a disservice. They are brilliant men and they have made a compelling utilitarian argument against the welfare state and against government regulation that strangles the economy.
But in their presentation style they seem to reinforce the core of the Marxist claim that we who believe in free markets and individual rights are greedy, selfish, and without virtue.
It is not true. Although true saints are seldom attracted to business as a divine calling, capitalism could not survive unless most of the people engaged in the private economy valued and practiced what Dierdre McCloskey and Gerry Miller call the bourgeois virtues.
We bourgeois do things, we build things that other people actually want, we value self respect, and we value the respect of others. We make the world a better place. We not only claim to be able to do these things, we do them. Marxists may love MANKIND, but we are far more likely to care about the people around us. We respect other people’s right to make their own choices.
Milton Friedman claimed that the duty of business is to make a profit for its shareholders. Does that mean that we followers of Friedman approve a CEO taking a $4 million bonus as the company and its shareholders are plunging into bankruptcy? Don’t we have an agency problem here?
And Friedman did not believe that people create and operate businesses merely to make money. Money is not a good; it is a means of exchange for other goods. Think of the analogy to Grotius’ Just War Theory. Once you are in a war, your goal is victory, and once you are in business your goal is to make a profit. But Grotius goes on to consider Jus ad bellum, and Jus in bello. Before you consider going into war, you must ask whether the cause is just, what are your chances of prevailing, at what cost, and what is the downside risk of defeat? We know that we seldom have enough information prior to the onset of a war to answer these questions definitively, but we must ask them. In business we need to do a feasibility study – if only on a single side of paper. Once we are in war, an ethical person considers what methods for pursuing victory are morally permissible. In conducting business we recognize similar restrictions on our actions as moral agents. Business is much better than war at least in part because there are no killing fields and so the downside risks are more ethically palatable. We conservatives know that the flowered fields of Flanders can be profitably used to grow flowers for export – but hopefully not poppies.
One of the reasons why bourgeois societies seldom go to war with each other is because they can trade to their mutual benefit. That is not possible without ethical players.
We are the defenders of individual liberty and free markets. Whatever the shock value of a Schiff and Epstein interview, it is probably better not to seem to abandon the moral high ground which is rightly ours. Schiff and Epstein may win the argument but lose the war for the hearts, as well as the minds, of people.
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Comments:
May '10
Re: On Winning the Argument and Losing the War
I love this post, and I agree. The latest Schiff video where he was speaking to the OWS demonstrators made me uncomfortable at points. He seemed ready to concede that everyone is just a greedy, self-interested agent. Is there no virtuous reason to want to make money?
Edited on November 2, 2011 at 7:52pmDec '10
Re: On Winning the Argument and Losing the War
Brandon Zaffini: Is there no virtuous reason to want to make money? · Nov 2 at 11:51am
Edited on Nov 02 at 11:52 am
Give me an example. I don't understand why we should apologize for self-interest. I don't understand why would should allow the guy who spends his personal time feeding 50 homeless people to occupy the moral high ground as oppose to the person who spends their extra personal time growing their business to the point where they are employing several hundred people.
IMO the true "war" to be won is getting people to judge others by the results of their actions, not their intentions.
May '10
Re: On Winning the Argument and Losing the War
Nyadnar17
I don't understand why we should apologize for self-interest. I don't understand why would should allow the guy who spends his personal time feeding 50 homeless people to occupy the moral high ground as oppose to the person who spends their extra personal time growing their business to the point where they are employing several hundred people.
Well, there is a degree of self-interest in us all. It's a good sort of self-interest because without it, we would hardly be able to take care of ourselves. In other words, I believe we are supposed to love ourselves. I just don't think that means, necessarily, that we are created to love ourselves more than God or everyone else, which equals a form of narcissism.
So yes, self-love has a hand to play in capitalism. So does love for others in the ways mentioned above. The problem I think CBC is getting at is this: Economists like Peter Schiff recognize that self-interest is a motivating force of capitalism, so they almost let critics assume it is the only motivating force--and, indeed, the most narcissistic, greedy form of self-interest.
Mar '11
Re: On Winning the Argument and Losing the War
I think half of this post is pitch perfect and the other half is the on-ramp on the road to perdition.
I agree that Richard Epstein's polemic, while technically accurate, probably did not persuade a single doubter.
However, trying to enforce some standard of morality onto the marketplace, or expect an intrinsic morality from it's players, only invites the type of meddling that ruined the system in the first place. Declaring that $4 million bonuses during a downturn are unethical just leaves an opening for more interference by the government.
What our side needs to acknowledge is that businesses and market players are not inherently moral, but become so through strong competition and robust institutions. Many businesses have few qualms about lying to their customers, or gouging prices, but they are forced to act "ethically" for fear of losing customers.
The market is only ethical when we as participants force it to be.
Edited on November 2, 2011 at 9:24pmMay '10
Re: On Winning the Argument and Losing the War
Mendel: trying to enforce some standard of morality onto the marketplace, or expect an intrinsic morality from it's players, only invites the type of meddling that ruined the system in the first place. Declaring that $4 million bonuses during a downturn are unethical just leaves an opening for more interference by the government.
What our side needs to acknowledge is that businesses and market players are not inherently moral, but become so through strong competition and robust institutions. Many businesses have few qualms about lying to their customers, or gouging prices, but they are forced to act "ethically" for fear of losing customers.
The market is only ethical when we as participants force it to be. · Nov 2 at 1:17pm
Edited on Nov 02 at 01:24 pm
Good points. But can we leave room for a self-enforcing morality too? I'm not sure I buy that the participants are always aware enough to force morality upon every business. It hasn't worked perfectly before. I think perhaps we may have forgotten that capitalism, as a system, will fail just like any other system if the players are godless. George Washington once spoke to this truth.
Dec '10
Re: On Winning the Argument and Losing the War
Brandon Zaffini
The problem I think CBC is getting at is this: Economists like Peter Schiff recognize that self-interest is a motivating force of capitalism, so they almost let critics assume it is the only motivating force--and, indeed, the most narcissistic, greedy form of self-interest. · Nov 2 at 1:10pm
I think that any discussion of the morality of people involved in economic decisions muddles the issue. When I talk about self interest I am not talking morality. I am simply explaining why people respond to certain incentives and disincentives in predictable ways. Acting in your own economic self-interest does not make you a good or bad person. In an of itself, economic self-interest is a morally neutral decision who only implication is whether or not you will be able to continue to do business in the future. Allowing morality to enter a discussion that should be exclusively about incentives, disincentives, and consequences is a failure on the part of conservatives to explain to people how the markets work(IMO).
Mar '11
Re: On Winning the Argument and Losing the War
Brandon Zaffini
But can we leave room for a self-enforcing morality too?
Perhaps. However, I must admit that, after seeing so many examples of obviously unethical behavior by apparently moral people (Bernie Madoff comes to mind), I have become pessimistic that relying on individual altruism is enough. I think the desire for mutual survival is a stronger driver of personal morality in the marketplace.
Brandon Zaffini
I'm not sure I buy that the participants are always aware enough to force morality upon every business. It hasn't worked perfectly before.
Agreed. Capitalism is still the worst economic system devised by man, except for all the other ones.
Aug '11
Re: On Winning the Argument and Losing the War
Mendel:
However, trying to enforce some standard of morality onto the marketplace, or expect an intrinsic morality from it's players, only invites the type of meddling that ruined the system in the first place.
My post was not meant to advocate enforcing standards of morality. No. No. No. This is not about more government control, but about the public's perception of capitalism and capitalists. With McCloskey and others I believe our capitalistic bourgeois economic system actually creates, increases, and encourages virtue. It rewards bourgeois virtues. Somehow the national rhetoric has defaulted to the Marxist position that we, simply as participants in a free economy, are not virtuous. It isn't true.
I did not mean to say that we should regulate the CEO's bonuses during a period when the company is going into bankruptcy. I only meant that his bonuses do not in fact maximize shareholder value if the company is going bankrupt. He doesn't pass the Friedman test of what a capitalist's primary function is. His shareholders have a moral and perhaps a legal claim on that bonus. We should not be defending him in the public square.
Dec '10
Re: On Winning the Argument and Losing the War
Mendel:
What our side needs to acknowledge is that businesses and market players are not inherently moral, but become so through strong competition and robust institutions. Many businesses have few qualms about lying to their customers, or gouging prices, but they are forced to act "ethically" for fear of losing customers.
The market is only ethical when we as participants force it to be. · Nov 2 at 1:17pm
Edited on Nov 02 at 01:24 pm
I think the broader point, is that no one is inherently moral. I'm curious about what example of "price gouging" you're referring to?
Edited on November 2, 2011 at 11:42pmDec '10
Re: On Winning the Argument and Losing the War
What does morality have to do with economics? When has examining the morality of a situation ever helped us pass better laws governing our economic systems?
cbc
I did not mean to say that we should regulate the CEO's bonuses during a period when the company is going into bankruptcy. I only meant that his bonuses do not in fact maximize shareholder value if the company is going bankrupt. He doesn't pass the Friedman test of what a capitalist's primary function is. His shareholders have a moral and perhaps a legal claim on that bonus. We should not be defending him in the public square.
If the CEO only agreed to enter into contract with a company under certain conditions and the company(and thus the shareholders) accepted those conditions why should we be defending the company(and the shareholders) from having to honor its obligations?
Edited on November 2, 2011 at 11:19pmThe company made a gamble when it hired the CEO that bonuses and service clauses would be cheaper than paying the CEO the salary they would have asked for without those incentives. The company made a bet, lost, and was forced to pay up. What is morally outrageous about that?
Feb '11
Re: On Winning the Argument and Losing the War
Morality or ethics in a free market discussion seem like a tangent. The conversation becomes confusing (convoluted) to me as I follow it. What about stewardship? It maybe a 1950s style word in America, but it fits the conversation better maybe?
In general Richard makes me uncomfortable when I listen to him, but it is always compelling to listen. I would not trade him or change him. He is ours. But, sometimes he rather reminds me of reading Victor Hansen when he leaves the subject of good battles.
Aug '10
Re: On Winning the Argument and Losing the War
But can we leave room for a self-enforcing morality too?
No. Any system that relies on the individuals to act in certain ways without incentives is doomed to fail. The beauty of capitalism is that it doesn't matter, because the market is a regulatory agency.
I'm not sure I buy that the participants are always aware enough to force morality upon every business.
Capitalism is amoral, as it should be. The market doesn't guarantee outcomes that fit in with your personal view of morality - it only guarantees outcomes that reflect the choices of the people operating in the marketplace. That doesn't mean that moral issues won't be settled in the marketplace - it's quite common for companies to lose or gain market share based on their moral behavior. Ford gained market share because it didn't take a bailout, and people like that. Other companies have been boycotted for behaviors their consumers don't like.
I think perhaps we may have forgotten that capitalism, as a system, will fail just like any other system if the players are godless.
We haven't forgotten it - it simply isn't true. Thank goodness.
Dec '10
Re: On Winning the Argument and Losing the War
I not sure what you mean by stewardship. I feel like the use of morality, ethics, and stewardship in regards to economics, without explicit definition of what you mean by those terms is simply setting the stage for grievances based on completely subjective grounds.
Aug '10
Re: On Winning the Argument and Losing the War
The case that needs to be made for capitalism is that the marketplace is self-regulating within certain boundaries. Our opponents frame the issue as a comparison between a system where smart, benevolent people in government control and regulate the market to protect us, and that the alternative to the regulatory state is anarchy and chaos, with the rich running roughshod over everyone.
We have to make the case that what you're really choosing between is a regulatory regime run by central authorities using force, and a regulatory regime that emerges from the interactions in the marketplace, free from coercion but just as powerful.
If we try to convince people that Capitalism only works because capitalists are good, moral people, we'll lose the argument. There are plenty of bad people running companies, just as there are bad people in government. If you try to use the 'capitalists are good people' argument, you'll get Bernie Madoff thrown in your face.
The free market has countless regulatory mechanisms. We need to explain to people how they work, and how they're a better alternative to central authorities. Bringing the morality of the actors into the argument is a distraction.
Feb '11
Re: On Winning the Argument and Losing the War
Dear Beasley,
Pull off the dusty shelf, "The Land Was Everything", by Victor Davis Hanson. It's a long definition, but it is stewardship within the context of economics. Morality, or rather amorality is much more subjective. Stewardship can be defined in more physical ways. It is also more succinct.
Often I can't read more than a few pages of this book at a time, but it is what find in listening to Richard Epstein as well, it is compelling.
Aug '10
Re: On Winning the Argument and Losing the War
To make the case for capitalism being self-regulating, ask your favorite lefty the following questions:
Why is it that most people make more than minimum wage?
Why do modern cars come with six to ten airbags, when the government mandates only two?
How come companies expend so much effort on quality, even in industries where the government has almost no regulation?
How come working conditions for most workers are set far higher than government minimums?
Why did the market punish so many companies in the wake of Enron and force them to revamp their accounting practices, long before the government regulatory machine passed new accounting regulations?
The answer to these and many other similar questions is because the market is self-regulating. For example, in the wake of the Enron scandal, investors began looking askance at companies that had similar accounting practices and large financial divisions. I was working at a big company at the time, and the blowback was immediate - we spent millions on outside auditors, the books were opened to the public, and our accounting practices were changed. This wasn't done to please regulators - it was done to halt the collapse in our share price.
Sep '11
Re: On Winning the Argument and Losing the War
I enjoyed this post. I think you end up with three basic tiers of rules:
1. Government rules (and free markets have government rules, like laws against fraud)
2. Moral rules (you may have a contract that enables you to screw your business partners, shareholders and the public - but that doesn't make it good)
3. Free rules (feedback of the marketplace)
I think Marxists and various lefty stripes see the only useful rules as government rules - with 'Free Rules' resulting in chaos and the exploitation of the poorly connected. To some degree this is true - boards of directors represent shareholders but are far more likely to be close to the CEO than those shareholders.
Right-wingers (like myself) tend to see 'Free Rules' and see government rules as stifling the creation those rules create.
What we often forget is the moral layer. It is the moral layer - the free acceptance of unspoken rules of behavior - that makes free societies function over time. It is also the acceptance of this rule that does a *FAR* more effective job of productively limiting the exploitation of Free Rules.
Feb '11
Re: On Winning the Argument and Losing the War
I agree with Dan Hanson, "morality...into the argument is a distraction".
Oct '10
Re: On Winning the Argument and Losing the War
Yeah, I've got to admit that Richard Epstein's PBS interview also stuck me as a total disaster. Everything he said was true, but that doesn't mean it was a good idea to say it in front of a lefty audience (especially when his words were so easy to twist).
He was a little too enthusiastic about what are, at their core, painful trade-offs. It did not represent our side well.
Aug '10
Re: On Winning the Argument and Losing the War
Adding morality to the discussion is only a tangent if you think that it is "coincidental" that Adam Smith wrote an excellent book on The Moral Sentiments, and an excellent book on Economics. If you think that is tangential or that morals and economics are unrelated, I have no idea where to begin the discussion.
On the other hand, if you are arguing that enlightened self-interest is a good thing and that it is different from greed, well that is another conversation entirely. Greed isn't good. The "natural and ordinary desire to acquire" if applied without limit can be destructive.
Capital markets, like our governmental system, set interests against interests. Morality is one of those interests. Social mores, regardless of transcendence or lack thereof, will affect price calculations.
One of the problems of our current economic system, is that things like 401k's separate the individuals rational self-interest from the individual transactions. People don't know what companies they own, and they have delegated their oversight. They have de-democratized the investment model.