Markets, morality and truth

In a recent post over at HHN Higgs writes

In economics, as in other areas of life, the pursuit and exploitation of truth depend on freedom. Every cognizant adult knows that virtually all politicians are habitual liars. Too few of us understand, however, that the free market itself is a grand generator of truth, and that, in general, government intrusion of any kind operates to substitute falsehood for this truth, with devastating consequences for the genuine flourishing of social and economic life.


This is, I think, a key component for a discussion about social interaction, individualism and collectivism.

Yesterday I attended the student Philosophy Club meeting at my institution. The topic was a debate - Is Capitalism Moral? I was intrigued to listen to students grapple with this important question.

What struck me was the absence of definitions of operative terms - capitalism, morality, criteria for evaluation . . . and

A remarkable misconception about self interest, organizations and interaction.

The students equated self interest with greed and used a false understanding of Adam Smith's invisible hand as the basis of their misunderstanding. Clearly non of the students had read The Wealth of Nations and, more striking, was the lack of awareness of his first book - The Theory of Moral Sentiments. This ignorance was remarkable in philosophy students, but that is another story.

The second misconception was the belief in corporations as evil malefactors that held monopoly power. Beyond a lack of understanding of monopoly, their comments showed a failure to understand Schumpeter and the power of competition in oligopolistc markets - think Coke and Pepsi and the result on price, quantity and product diversity in the soft drink market.

Finally, a strong confidence in the ability of collectivism was evident - the ability of central planners to improve what the students believed to be negative outcomes in our mixed economy.

While it is encouraging to hear young people interested in discussing this topic it is depressing to witness the result of interventionist ideology (that springs from media, education and government) on beliefs. This short meeting confirms the power that beliefs have in shaping what passes for analysis in young people (and old people) today.