Are Markets Moral? … Reflecting on Economics and Virtue

Economy is Doing Well_Colleen Lane

Photo Credit: Economy is Doing Well, by Colleen Lane, Flickr

I’m not an economist, but am fascinated by conversations about economics. The reality is that we all live within economies, and yet rarely reflect on the morality of these systems within which we live.

Here are some of my reflections on the relationship between economics and virtue as I address this question: Are markets moral?

Healthy Cultures Included Healthy Economies

I would argue that healthy cultures are characterized in part by healthy economies. While most individuals quickly associate economies with transacted goods and services, the heart of economic systems is relational in nature—“the incredible social networks that capital both creates and depends upon.” Economies are the relational context within which we serve one another and contribute to human flourishing.

Healthy Economies Depend on a Healthy Environment or Culture

But one of the key challenges to healthy economies and markets is the environment or ecology that surrounds the economies or markets. If the surrounding ecology is healthy, this typically translates into a healthy economy. Conversely, if the surrounding ecology is unhealthy, this typically translates into a challenged and unhealthy economy.

Daniel Finn puts it this way: “An awareness of the interplay of markets and their contexts is critical for understanding under what conditions the outcomes of voluntary interactions of individuals and businesses in the market will be considered just.” Finn sees four dimensions the “context” or ecology surrounding economies:

  1. The Construction of Markets by Government (markets being properly defined by law)
  2. The Provision of Essential Goods and Services
  3. The Presence of Morality among Individuals and Groups
  4. The Existence of a Vibrant Civil Society

Depending on That which Markets Cannot Create

To answer the question of whether markets are moral therefore requires us to look outside economic markets. Markets depend on forces—such as individual and group morality—that markets themselves are not able to produce.

On this point William McGurn notes that the economy “depends on virtues—self-restraint, honesty, courage, diligence, the willingness to defer gratification—that it cannot itself create.” Restating it—healthy economy is dependent on something that the economy itself cannot produce.

Moral Markets Surrounded by Multiple Sectors

In light of such arguments by Finn and McGurn, health and morality of economic markets are dependent on the health and morality of the surrounding culture and ecology. As someone working to train leaders especially in the non-profit and church realms, I feel the need for leaders in these sectors to better understand their contribution to healthy economies and healthy cultures.

Such leaders play an important role in nurturing this dimension of virtue—virtue that serves as the social or spiritual capital upon which healthy economies are dependent. Just as the business and government sectors play vital roles, the non-profit and religious sectors also play a key role in nurturing healthy economies and the virtue upon which healthy markets may function.

Because of the power of healthy economies to contribute to human flourishing, it is vital for the people of God in religious sectors to engage in theological reflection and practical conversation that will help contribute to the social and spiritual capital upon which the incredible social network of the economy may flourish.

Virtues and Leadership

Though not specifically dealing with economics, for those wanting to engage the importance of virtue in leadership a bit more, I recommend you take a look at an article Jim Lanctot and I wrote for the International Journal of Leadership Studies entitled Character and Leadership: Situating Servant Leadership in a Proposed Virtues Framework.

The Moral Market and You

It is easy to look around and feel powerless to affect the economy in a positive and healthy manner. Drawing on the insights of William McGurn and others, perhaps a great first and best place to start is with your closest sphere of influence.

  • Are you working to nurture virtue and morality within your own life and the life of those closest to you (children, family friends)?
  • Are you using your place in the market as a voice and presence to help create what the market itself cannot create?
  • Are you engaging in your work and market activity with responsible action, a spirit of value creation (giving more than you take), and commitment to steward your gifts and talents in a way that productively contributes to the flourishing of the world around you?

Such action at the personal and local level leaves a powerful ripple in the markets and economies of which you are part.

So, are markets moral? It depends on the surrounding environment, which means it also depends on you. Let’s be a force for positive and healthy economic flourishing within our sphere of influence.

People, Planet, and Profit — Business Leaders and Sustainable Economics

United States Capitol

Photo Credit: United States Capitol, Justin A Irving, purposeinleadership.com

Today I had the pleasure of meeting with a group of business and political leaders at the United States Capitol in Washington, DC. Facilitated by The Washington Institute, a group of leaders who are interested in the integration of faith and work gathered to hear insights from key leaders in Washington.

Economics of Mutuality

One of these senior business leaders was Jay Jakub of the Mars Corporation who shared a great deal about the corporation’s thinking on the economics of mutuality. Jakub began by noting that if you want to make money for a year you ask one set of questions, but if you want to make money for 100 years you ask different questions. The 100-year questions revolve around mutuality and sustainability, and challenge the purely profit-driven approach to business rooted in Milton Friedman’s economic theory.

A Triple Bottom Line

To summarize the in-depth presentation we heard, Mars is aggressively piloting and pursuing a Triple Bottom Line approach to business and economics.  While a single bottom line approach is the norm in most business—particularly within publicly traded companies—Mars and other corporations are growing in also taking the bottom line of people and planet seriously as well. Taking profit, planet, and people seriously in the corporate environment means identifying and implementing metrics to measure performance in all three bottom line variables of People, Planet, and Profit.

Triple-Bottom-Line

The Triple Bottom Line & The Economics of Mutuality

Myopic Economics

Economic approaches that isolate only one of these variables will err. A profit-only approach to business burdens people and damages the environment. A planet-only approach to business often is unsustainable because it is not profitable, and because the lack of sustainability will not serve people. A People-only approach sounds helpful, but often lacks environmental consciousness and likely will fail in the long run due to an absence of profitability.

Holistic Economics

The key insight I took away from this interaction with Jay Jakub is to pursue business economics in a holistic manner. Pursuing only one bottom line priority is myopic (People, Planet, OR Profit) and is driven by short term questions in pursuit of short term solutions. In contrast to a myopic and short term approach, pursuing the Triple Bottom Line of People, Planet, and Profit leads to a business economic model that is bearable, equitable, viable, and ultimately sustainable.

I’m hopeful that Mars and many other companies will make a successful transition from the single bottom line to the triple bottom in the next decade. Societal, economic, and human flourishing in our world under God’s care will benefit greatly from such transformation!