All Commentary
Tuesday, January 1, 1985

Beyond the Market

This essay draws on a paper submitted to a recent meeting of the Mont Pelerin Society at Cambridge University in England on the topic of Moral Agreement in the Free Society concerning which many divergent views were expressed. The author was one of the founding members of the Society in 1947 and is a former editor of Barron’s and Fortune.

When the historian of the future comes to examine the mores and foibles of current American society he will, we trust, at least drop a footnote on the increasing popularity of the Adam Smith tie. This bit of haberdashery manufactured in blue and maroon colors and emblazoned with the profile of the founder of modern economics, has become the badge of honor of an increasing number of scholars, businessmen, and even politicians who have never struggled through the thornier passages of The Wealth of Nations. Its spread represents a quiet revolution in our affairs.

Forty years ago when Nobel prize winner F. A. Hayek published his seminal tract, The Road to Serfdom, all Western Europe seemed doomed for socialization and even in the United States the case for centralized government planning ran high. Today, though governments everywhere continue to do many foolish things, the tide has turned. Socialists and planners we still have aplenty in our midst but they are on the defensive. The battle for the market economy has been largely won, intellectually speaking.

This is an immense and hopeful turn in our thinking, presaging not only higher living standards for many of the world’s societies but also a curb on the overweening power and inefficiencies of government bureaucracy. Yet there lurks in this revolution of ideas a temptation and indeed a hidden danger. The danger is that we should come to regard the market as a kind of deus ex machina, attributing to it tasks it cannot reasonably perform and, in that very act, avoiding the deep moral issues which confront a free society and multiply the more as freedom of choice and options multiply.

An Uncertain Trumpet

On this score it would appear to me that the market, for all its healthy discipline, speaks with a very uncertain trumpet. There has long been and perhaps, short of a New Jerusalem, there always will be a market for prostitution. There is a “clearing price” for cocaine and heroin no less than for the more beneficent Coca-Cola. Free marketeers may argue that the profits of the drug trade and the pusher might be minimized by legalizing such drugs but this is a tactical point. The case against heroin is the same as against murder or suicide: it kills.

Moreover it turns out that the market itself, to be efficient, is dependent on a whole matrix of customs, laws, and moral convictions as to what is right and what is wrong. In his essay on “Our Moral Heritage,” Hayek points out that the market and the free society are dependent on at least two institutions and one virtue. The first is the legitimacy of private property without which there could be no capital accumulation or indeed capitalism as we know it, or for that matter much civility. Mark in this connection the high price we pay today for the spread of petty larceny which has brought in its train the security guard, the noxious office pass system and, incidentally, a booming trade in all manner of electronic devices to prevent burglary.

More interestingly Hayek pays tribute to the family as the means by which one generation passes on its experience and values to the next. Finally he has a good word to say for plain old- fashioned honesty, and one is glad to hear it mentioned. I call up my broker to buy or sell General Motors. He executes the order with no more than the sound of my voice as security. True, if either of us proved dishonest, legal action could be taken. But if we had to wait for the courts to decide such issues it is fair to say that the New York Stock Exchange would close down tomorrow and our intricate banking and credit system would collapse as well.

Beneath the Hidden Hand

The paradox thus emerges that while the market does not always generate ethical values, it is deeply dependent on them for its efficient functioning. This paradox has enormous significance in maintaining the free and open society whose central challenge is to grant liberty to individuals while still maintaining order and continuity in our affairs. The great contribution of Adam Smith was to show that if citizens are free to follow their own self-interest they will be led “as by an invisible hand” to fulfill beneficent social purposes that were no part of their original design. But this faith in the in visible hand never led Smith to doubt the legitimate functions of government in enforcing the rules of the road.

More important, his whole philosophic outlook implies one further factor that tends to go unnoticed—namely, the widespread acceptance of moral and indeed religious imperatives which in the England of his day were taken almost as a matter of course. It is these that have been undermined by what Walter Lipp-mann once called the “acids of modernity” and their reinstatement is required if the market is to fulfill its promise. Pretty clearly that job lies beyond the purview of economists however well equipped with demand, supply, and indifference curves.

The Greek Way

The late Frank Knight, Nestor of what is today known as the Chicago School of economists, was fond of quipping that the less moral issues were talked about the better, since they defy rational determination. But the men who launched philosophy on its wayward course, and who laid the foundations of logic, ethics and metaphysics, were subject to no such restraint. Living in Athens of the Fifth and Fourth Centuries B.C., they saw plenty of freedom around them, if we disregard the institution of slavery, but disliked what they saw: luxury, vice and the awful treachery of Alcibiades. Hence Socrates’ constant reference to the “inner voice” of duty in his endless arguments with the Sophist Thrasymachus who cheered for mere self-interest and the doctrine that “might makes right.” Hence Plato’s invocation of the overarching concept of the Good in his delineation of a Spartan republic. Hence, finally, Aristotle’s argument that the end of man is Happiness, but Happiness achieved through the pursuit of excellence and virtue.

Libertarians who of recent years have borne the heat of the day in trying to restore sanity to our economic affairs may well view with suspicion these Greeks bearing gifts. For admittedly there is scarcely a governmental folly of our times that has not been committed in the specious name of “reform”: the fair wage and the just price and the welfare state. More generally one must guard against those who think they have a monopoly on virtue and then invoke the power of the state to further their views. This is the sin, if it can be called such, of the Moral Majority who hopelessly mix up principle with pressure group tactics. Governor Cuomo of New York was quite right when he argued that his views on abortion as a Catholic gave him no license to legislate what many Catholics may not be able to enforce on themselves. Something might even be said for Thoreau’s avowal that he would take to his heels if he heard that someone was coming to do him good.

Liberty Is a Gateway

Nevertheless I would argue that the classical emphasis on ethical norms and standards is critical to our times and complements rather than contradicts the best of the libertarian tradition. Liberty is a gateway, not a resting place. Its use or abuse has far-reaching political consequences. The sharing of ideals may be of greater importance than the much discussed sharing or non- sharing of wealth.

Aristotle’s Golden Mean—nothing too much—was a crude attempt to restore harmony in men’s conflicting desires and passions. With the coming of Christianity, the Golden Mean gives place to the Golden Rule—do unto others as you would be done by—and to Kant’s categorical imperative: treat others as ends, never as servile means. The truth is that Freedom and the Good are two interdependent concepts in tension, and one will spin out of orbit without the other.

The question remains as to whether morality requires buttressing by religious faith. The Declaration of Independence implies as much by its reference to the Creator and to the “laws of Nature and of Nature’s God.” But we all know of many good men who are today held back from this final leap, whether through dissatisfaction with current orthodoxies, the sad “politicizing” of our churches as evidenced by their most advertised National Council, or through the fact that faith—“the substance of things hoped for; the evidence of things not seen”—so clearly transcends the power of reason. Yet there lurks here an even more important obstruction: the tendency of modern science, or in Hayek’s phrase “scientism,” to overreach itself and so make both religion and morality irrelevant. Two heresies of Western origin must be discarded if we are to preserve freedom of religious choice as guaranteed by the Constitution.

The first is the clanking materialism of Marx which might not have to be taken seriously were it not today armed with ICBMs. The second heresy is found, curiously, in modern Behaviorism. Behaviorism starts with the common sense notion that if we are to study man, we must take account of what he does no less than what he thinks and says. In the hands of John B. Watson and now of B. F. Skinner, behaviorism becomes something quite different. Because body and brain are associated with consciousness, we must, on Skinner’s view, eliminate the latter entirely from the discourse. Consciousness, mind, willpower, emotion—all that makes man man—is swept away. The human being becomes simply a series of knee jerks in a mindless universe, the Fifth Symphony simply horsehair scraped over catgut.

Needed: A New Metaphysics

This naive and indeed impudent reductionism is not science, which requires a perceiver no less than the perceived. It is a false metaphysics as old as Democritus who conceived of the universe as only a whirl of atoms. As Alfred North Whitehead once intimated in his Science and the Modern World, what is needed is a new metaphysics that would reconcile empiricism with man’s inner apperception of self-hood and his higher aspirations. Such synthesis of new and old may well come, restoring, if not God in his Heaven, at least faith in the mystery and reality of the many-colored world around us from which scientist, artist, and theologian make their start. When that breakthrough comes, it will outrank in importance the discoveries of Copernicus and Galileo.

Meanwhile, in view of political turmoil without and intellectual discord within, it would appear that libertarian and classicist, modern secularist and religious believer, face a considerable task in the immediate future: to honor Adam Smith’s invisible hand as against the mailed fist of the tyrant; to reaffirm the dignity and indeed the sanctity of the individual person; to hold the bar barians, who have said they come to bury us, at the gate and so preserve what Winston Churchill in a dark hour defended in the name of Western Christian Civilization.