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Saturday, May 07, 2005

Another Professor, a Supporting Opinion

A supplementary analysis supporting commerce tempered by morality.

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Responding to Capitalism and Judeo-Christian Religion, Professor Peter J. Boettke emailed a message to provide additional arguments supporting the contention that, in a society of political freedom, commerce must be self-restrained by personal morality in order to approach Aristotle’s summum bonum.

Professor Boettke is Director of Graduate Studies (PhD Program) in the Department of Economics at George Mason University in Fairfax, VA.  You may wish to visit his website.

I should point out that Professor Boettke is the editor of “The Review of Austrian Economics.” The late Friedrich Hayek (whom he mentions below) was a well known adherent of the Austrian school of economics.  Hayek’s early mentor, Ludwig von Mises, wrote the seminal analysis of socialism, demonstrating its complete impracticality.  That analysis, titled simply “Socialism,” was published in 1922, before the onset of hyperinflation in Germany, when Germany’s socialist Weimar Republic was still in good repute and Western intellectuals looked to the Soviet Union as mankind’s Promised Land.

Professor Boettke wrote:

This is a subtle point you have made and an important one—- though I would generalize a bit more.

First, you might want to read Hayek’s “Individualism: True and False,” in Individualism and Economic Order (Chicago 1948).  This essay is very relevant to the idea that Smith’s project was one of constraining such that bad men can do least harm.  In the journal Markets and Morality (published by the Acton Institute), I along with Peter Leeson co-authored a paper on Liberalism and Robust Political Economy (Liberalism here meant in the classical sense).

Second, to make your point more forceful just consider the mistaken view of individuals such as Garrett Hardin, who in his classic article on the “tragedy of the commons” mistakenly attributes to Smith the idea that self-interested behavior will always and everywhere lead to social benefits, and thus Hardin believes that he has shown an example where Smith is proven wrong. But Adam Smith never said that.  It was always the pursuit of self interest _within_ the context of a system of natural liberty—or Hume’s system of property, contract and consent.  In short, your claim that the invisible hand only operates effectively within a specified institutional setting (where institutions are defined as both the formal rules of property contract and consent, and the information rules of mores, conventions and norms).

Third, I think it is important to stress—- as you have—- that a free society works best when the need for the police is least.  The reason for this is that the population has internalized a moral code which respects personhood and property and the freedom of exchange.  Work in scientific economics on norms and self-enforcing contracts has taughts us much about the conditions under which the great benefits of markets can be realized and how sensitive outcomes are to the issue of rules of the game and their enforcement.

Finally, you may want to look at the work of my colleage at GMU—- Larry Ianaconne and in particular his new Center for the Economic Study of Religion.

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