Paul Zak On Why And How Markets Promote Morals

See Moral Markets: Virtuous Business is Not an Oxymoron. Excerpt:

"Encroaching on this "all about me mentality" comes a number of books that argue that profitable businesses promote virtues. A compelling one I read recently was T.R. Malloch's Spiritual Enterprise: Doing Virtuous Business. Malloch shows, though theory and examples, that being in business for the long-haul not only means creating economic value, but creating spiritual value. The theme of Malloch's book is that transcendent values matter for managers, employees, and their customers; as a result, businesses ignore values at their peril. My late colleague Peter Drucker promoted the view that businesses were societies in miniature, and were therefore places individuals sought to fulfill human needs such as the desire for accomplishment and respect, well beyond simply earning a living (see The Essential Drucker: The Best of Sixty Years of Peter Drucker's Essential Writings on Management. Malloch's vision takes this a step further by advocating for the provision of transcendent needs.

Through a series of interesting case studies, Malloch shows that fostering virtues such as compassion, generosity, and trustworthiness results in fewer days lost to sickness, improved morale and higher productivity. All this occurs by changing "work" from a task that one must do, to a calling that draws on our better social natures. Seems reasonable to me, and the companies that have done this are impressive.

Of course, I'm biased. I recently put together book called Moral Markets: The Critical Role of Values in the Economy. This book was the culmination of a three year research program by a transdisciplinary group of scholars funded by the John Templeton Foundation and organized by the Gruter Institute for Law and Behavioral Research. Anthropologists, neuroscientists, philosophers, lawyers, psychologists, and economists came together to ask if there was any relationship between morals and markets. Spanning disciplinary boundaries, we found not only that markets require morals, but that markets can promote moral behaviors. Markets require morals because in modern impersonal exchange, a police officer or lawyer cannot be in every transaction-it is too costly. Thus, most exchange occurs in the shadow of enforcement, but absent explicit oversight and thus requires that parties transact in good will. Anthropological studies have also shown that people in small scale societies are more likely to "play fair" in experiments run in the field when they engage in market exchange. This suggests that they understand that uncoerced exchange benefits both parties, and they have applied the win-win idea to other aspects of their lives (see Joe Henrich's and coauthors' book Foundations of Human Sociality: Economic Experiments and Ethnographic Evidence from Fifteen Small-Scale Societies."

More on this topic at Reason by Ronald Bailey:

Do Markets Make People More Generous?: A recent study of 15 small-scale societies suggests yes

Science Shows That Markets Make People Fairer