Mammon+&+Morality

**~ Thomas More in Robert Bolt's play, __//A Man for All Seasons//__**
 * "**** If we lived in a State where virtue was profitable, common sense would make us good, and greed would make us saintly. And we’d live like animals or angels in the happy land that //needs// no heroes. But, since in fact we see that avarice, anger, envy, pride, sloth, lust, and stupidity profit far beyond humility, chastity, fortitude, justice, and thought, and have to choose, to be human at all . . . why, then we must stand fast a little–even at the risk of being heroes” **

**"**** If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal ** ** controls on government would be necessary." ** **~ James Madison, Federalist # 51**

**"Greed -- for lack of a better word -- is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures the** **~ Gordon Gecko in the movie //__Wall Street__//**
 * essence of the evolutionary spirit. Greed, in all of its forms -- greed for life, for money, for love, knowledge -- has marked the upward surge of mankind. And greed -- you mark my words -- will not only save Teldar Paper, but that other malfunctioning corporation called the USA."**


 * In Italy for 30 years under the Borgias they had warfare, terror, murder, and bloodshed, but they produced Michelangelo, Leonardo da Vinci, and the Renaissance. In Switzerland they had brotherly love - they had 500 years of democracy and peace, and what did that produce? The cuckoo clock.**
 * ~Harry Lime in the movie //__The Third Man__// **




 * Economics has two great, but often forgotten, insights. The first is that virtue will not necessarily lead to happiness. The second is that the public interest -- a.k.a. collective rationality -- is not the simple sum of individual interests -- a.k.a. individual rationality. Conventional Wisdom* would tell you the opposite. Virtue -- acting morally -- will eventually lead to happiness. For example, most people believe that**


 * **Hard work will be rewarded and laziness will be punished; **
 * **Saving is responsible and spending is irresponsible; **
 * **Main Street Good, Wall Street Bad; **
 * **Capitalism & Democracy not only protect individual freedom, but deliver wealth to the greatest number of people. **
 * **What's Good for General Motors is good for America **

**Perhaps the famous short statement of this is Aesop's fable, "The Ant & the Grasshopper" where the virtuous Ant is survives the winter, while the Grasshoper who played all summer perished in the winter cold. Better to be an Ant than a Grasshopper. A shorter way to express this point is the expression that "there is no such thing as a free lunch." The fundamental economic problem is one of unlimited desires and limited resources. Therefore, we must make choices and tradeoffs. Charity and virtue come at a price. **

**The second insight notes that the whole is not equal to the sum of the parts. There are many things that are "smart for one, dumb for all" or "dumb for one, smart for all." For example, when in a burning building, the smartest thing for each individual is to rush to the exits to escape the fire, but if all do it at the same time, everyone ends up trampling each other trying to get to the door. Similarly, if one person stands up at a sporting event or musical performance, they may get a better view, but if everyone stands up, no one gets a better view. Individual choices have "externalities," so we cannot simply sum up each person's individual interest to determine the public interest. **

**1.1 WHY WE THINK VIRTUE WILL ALSO BRING US HAPPINESS **

<span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">** ..... In ancient times, a good harvest meant a good economy and a good harvest depended on the cooperation of nature to send the right amount of rain, sun, and soil. If the people did not behave morally, god/nature would send drought, plague, pestilence, or make you wander in the desert for 40 years. To appease the gods and restore prosperity, people offered contrition in the form of human or animal sacrifices ("scapegoats"). Happiness depended on good harvests; good harvests depended upon good behavior. This is the logic behind the Chinese "mandate of heaven," the Hindu idea of Karma, and Western notions of "suffering for sins." Most myths, fairytales, and fables all end with the good being rewarded and the bad being punished. If you ever thought that bad luck was coming your way because you were mean to someone, thank your primordial ancestors for your guilt complex.**

<span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">** 1.2 PHILOSOPHY IS NO HELP **

<span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">**Ancient philosophy did little better than religion. In Plato's most famous book,** **__//The Republic//__, he has Socrates arguing that a virtuous person can only be found in a virtuous city and virtuous cities had only virtuous people. A just person could not exist in an unjust world, nor an unjust world exist when people acted justly. Aristotle, in his books __//Eudaimean & Nicomachean Ethics//__ argued that only a virtuous person could be happy. Aristotle also observed that happiness is an activity, not an object. One could "be happy," but one could not "have happiness." Having possessions or money could not make one happy, one must be able to love or be happy first and this depended on being just and virtuous. The Stoics argued virtue and happiness were united, so that even someone wracked with a disease or tortured on the rack could be happy as long as they remained virtuous. Others could take your possessions, but they could not take your virtue. The Epicureans argued that virtue was to avoid pain and pursue pleasure was virtuous; if it made you feel good, it could not be wrong.**

<span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">** 1.3 THE BOOK OF JOB **

<span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">**A critical break in this line of thinking is the Book of Job. Even if you are not religious, this story is worth reading and knowing because it is among the first "modern" stories. It tries to explain why bad things can happen to good people and why bad things exist in a world that was created by a just, all-knowing, all-powerful god, or, for our purposes, why can bad things happen to good economies.**

<span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">**The story begins with the devil, having travelled the world, plopping down on god's couch in heaven. God asks the devil if he had seen his good servant Job on his journeys. In a modern setting, I visualize this as the devil as some stoner-slacker who comes home after curfew to be confronted by an impatient parent, played by god.**

<span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">**Devil: "I'm home"** <span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">**God: "Why can't you behave like your older brother, Job?"** <span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">**Devil: "Dude . . . why you bustin' my cabbage patch? . . . Job only does what you want because you gave him the keys to the Audi, the latest model Blackberry, and tickets to the Warped Tour, not to mention that no-limit credit card. If you took those away I don't think Mr. Goody-Goody Two-Shoes would act so nice."** <span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">**God: "I don't think so . . ."** <span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">**Devil: "Wanna put your money where you mouth is?"** <span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">**God: "Deal"**

<span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">**So god and the devil make a bet. The devil can do anything he wants to Job except kill him and if Job curses god, the devil wins. So the devil afflicts Job with disease and sores, destroys all his flocks and fields, and has lightning strike his mansion killing all his family inside. Act II shows Job as a homeless beggar living off the streets. His remaining friends come to visit him and urge him to repent, thinking like all early people that bad luck resulted form bad behavior. He must have done something really, really, really wrong for god to have sent this much bad luck his way. Job argues that he has nothing for which to apologize.**

<span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">**Act III has Job, unaware of the wager between god and the devil, a little fed up with god and begins to question the divine wisdom and justice. God replies, like many parents do when teenagers think the world is unfair, "I brought you in this world, I can take you out. Who are you to question my judgment?" The story ends with the devil losing the bet and god restoring Job's possessions.**

<span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">**Meanwhile, in Greece, similar stories like Oedipus, Agamemnon, and Medea give rise to the Tragedy ("goat songs") which also try to explain why bad things happen to good/great people. In a famous book titled __//The Birth of Tragedy,//__ the scholar- philsopher Friedrich Nietzsche -- who plays a major role in creating the modern world we live in -- explains as the combination of the orderly world of Apollo where virtue and happiness are united with the chaotic, irrational world of Dionysius.**

<span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">** 2.1 THANKS FOR THE LITERATURE LESSON, BUT WHAT DOES THIS HAVE TO DO WITH ECONOMICS. . . **

<span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">**The Middle Ages saw the rise of what is known today as a "moral economy." In bad times, Lords took less from their serfs and vassals, people should receive a "just and fair wage," and it was immoral to lend money with interest ("usury"). The contemporary arguments that criticize Wall Street because they do not produce anything tangible, or fault companies for shipping jobs overseas to exploit workers in the 3rd World and destroy the environment are modern versions of this way of thinking. Economic relationships were embedded in moral and ethical relationships. Virtue and Happiness were again one.**

<span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">**However, beginning with the Renaissance, various thinkers began to doubt this conventional wisdom. Machiavelli famously argued that the "end justifies the means," suggesting that virtue was unimportant as long as the result was good. For example, if everyone in a class received an "A" provided one person received a "F" Machiavelli would say that the collective benefit justified to the injustice to a single person. In addition, some have argued that torture is acceptable as long as the information saved lives. Whether one is Machiavellian or not, Machiavelli's point was that virtue and happiness are separable and must be calculated separately. Later, French social critic Bernard de Mandeville wrote a long poem entitled the "Fable of the Bees" that described a hive of selfish and immoral bees who were nonetheless better off because each pursued their own self-interest. When an outsider tries to impose morality on the hive, they soon find themselves in penury. The formula of "privates vices, public virtues" became a common theme of the Enlightenment. Finally, the social contract theorists such as John Locke, Thomas Hobbes, and Jean Jacques Rousseau countered the conventional wisdom supporting the divine right of kings. God appointed the King and so the King's interests were also the public interest which was also the best interest of the King's subjects. The idea of a social contract, where the people could replace an unjust or incompetent king, implied that the public interest and the private interest were not the same.**

<span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">**These ideas matter to economics because until one can distinguish happiness from moral behavior, economic choices are the same as moral choices. Just do what you are told. Similarly, until one can distinguish the public interest from the private interests of individuals, there is no reason why one should not listen to a wise philsopher-king or government planner instead of your own determination.**

<span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">** 3.1 CAPITALISM: ADAM SMITH'S GREAT LITTLE IDEA **

<span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">**Adam Smith is often credited as the founder of modern economics and his book//, The Wealth of Nations//, published in 1776 outlined the main features of the modern world//. The Wealth of Nations// is a classic -- a book that everyone refers to and few have actually read. Most of the "good stuff" is found in the first few chapters where he identifies the three key elements of modern capitalism: the DIVISION OF LABOR, the "INVISIBLE HAND," and the "LABOR THEORY OF VALUE." It should be noted that there is no reason to associate capitalism with a particular size of government. Capitalism -- and Socialism -- is consistent with both large and small, strong and weak governments. While Smith criticized Mercantilists for equating the national welfare with the balance of trade, Smith provides many instances where regulation is beneficial and necessary to promote economic welfare. However, first we should explain the three legs of the capitalism stool.**

<span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">** 3.2 THE DIVISION OF LABOR **

<span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">**Smith argued that most gains in economic productivity were the result of the division of labor. The division of labor is a little like the idea of teamwork. On a team, one player cannot do everything, even if they are the best in every area. Each player has a role and must play that role for the team to suceed. The division of labor is when a job is broken down into many different tasks and each worker specializes in a single task. For example, if the job was to put together a bike, one worker would put on the wheels, another would apply the chain, another would cast the frame, another provides the raw materials, and so on. Each worker improves their skill at their given task. No one loses time changing from one task to another and every one uses the specific technology to accomplish their task (a screwdriver can be used as a hammer, but it is much better used as a screwdriver). Workers organized by a division of labor are much more productive than each would be alone (Economic Insight # 2: The whole is not the sum of the parts).**

<span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">**The advantages of the division of labor can be seen if we compare the modern industrial mode of production with the way things were done previously. Before the Industrial Revolution, most people were independent farmers living in small but self-sufficient villages. They not only grew their own food, but they also made their own clothes, built their own houses, provided their own entertainment, and make their own furniture. While premodern individuals were no doubt more skilled and intelligent than their modern counterparts -- a point made by Jared Diamond in his book //Guns, Germs, and Steel// -- the reason that modern humans "have more cargo" is that while it is difficult to be a good farmer, cook, carpenter, seamstress and entertainer, it is much more difficult to be proficient at all at the same time.**

<span style="color: #000000; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">//"The greatest improvement in the productive powers of labour, and the greater part of the skill, dexterity, and judgment with which it is anywhere directed, or applied, seem to have been the effects of the division of labor."// ~ Adam Smith


 * <span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">Even if the division of labor makes us much more productive, we still may produce too much of something we do not want, like pollution and too little of something we do want, like underwear. Don't laugh, in the 1980s, there was a high level economic meeting in the Soviet Union to discuss the production of women's nylon stockings. If too many people make cars and not enough people make food, the consequences could be dire. After the Chinese Great Leap Forward (1950s), 20 to 30 million people died of hunger because farmers were given orders to operate small iron furnances instead of growing food. The Great Leap Forward made China much more productive, but not in the things people wanted or needed in the proper proportion. Additionally, if people can choose what they want to do, what is to prevent too many people becoming doctors and teachers and not enough becoming engineers or nurses? **


 * <span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">In the past, most people did not have to worry about these decisions; they just did what they were told. Under the Hindu caste system, you did what your parents did and most other places did the same because of custom and tradition. Under European feudalism, vassals and serfs did what they were commanded to do by their lords. Most societies placed a high moral and ethical value on performing one's given role: Warriors should be Warrirors; Bakers should be Bakers; Farmers should be Farmers -- and these divisions were enforced by dress codes, manners of speaking, and guild restrictions. Pity the Farmer who had the temerity to behave like a Noble and wear purple! While these mechanisms were adequate for simple, agricultural societies, they probably were inadequate for complex, industrial societies. **


 * <span style="color: #000080; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">Adam Smith argued that the organization of economic society was coordinated by a price system, also known as the "Invisible Hand." Individuals did not provide goods and services because they were running a charity operation, or serving a social function, or driven by a moral or ethical code, or they were following orders from a higher authority. They did it because they pursued their own self-interest. The Brewer, Baker, and Butcher did not provide us food because we are hungry, they do so because they want to increase their own wealth. Still, ordinarily, they do not wait for direct orders to produce their goods and services. Cattle Ranchers in Oklahoma do not call New York Restaurants to see how many prime rib steaks they require. They knew what I wanted because of the PRICE SYSTEM. The hungrier I am, the more I am willing to pay for food. This would raise the price of food and food producers would see that signal and produce more. If the price becomes to high for me, I will buy less and the price will go down. No one told me to consume more or less or the the farmers to produce more or less, we were all guided by the "INVISIBLE HAND" that guided all of us in the path to serve the common welfare. **

<span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">//"// //It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest . . . they intend only their own gain, and they are in this, as in many other cases, led by an invisible hand to promote an end which was no part of their intention. Nor is it always the worse for the society that it was no part of it. By pursuing their own interest they frequently promote that of the society more effectually than when they really intend to promote it." ~// Adam Smith

<span style="color: #000000; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">**<span style="color: #000080; display: block; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif; text-align: left;">To have reliable prices, you need markets, where our "natural propensity to truck, barter, and trade" allows us to make mutually beneficial exchanges. In addition, because we bear the full costs and benefits of producing and consuming different goods and services, we will all make better decisions about how to use our limited resources to satisfy some of our unlimited desires. (Economics Insight # 1: There is no such thing as a free lunch)media type="youtube" key="FmsjGys-VqA?fs=1" height="385" width="640" **