Enabling Ethical Behavior Through Free Markets

This essay won Third Place and a prize of $1500 in the 2007 APEE Economics Essay Contest.

Contrary to widespread belief, free markets do not substitute self-interest for morality. Free markets enable moral action by channeling existing self-interest into conduct benefiting both the individual and those around him. Free markets harmonize self-interest and morality by ensuring that individuals prosper by bringing valuable services to others. Furthermore, free markets have inaugurated some of history's greatest moral advances - including the advent of religious toleration in the Western world. Free markets accomplish widespread moral improvement by facilitating peaceful coexistence of divergent beliefs, preferences, and behaviors - eliminating enforced homogeneityof ideas, tastes, and actions.

Self-interest does not characterize market systems alone; humans exhibit self-interest universally. Frederic Bastiat noted that "[s]elf-preservation and self-development are common aspirations among all people."[1] Self-interest is simply the desire to improve one's condition; by itself, it does not necessitate any particular course of action. The behaviors resulting from self-interest can vary dramatically depending on the incentives individuals face. Do the incentives enable individuals to gain through their own hard work and honesty? Or do the incentives favor individuals plundering one another? Bastiat notes, "[S]ince man is naturally inclined to avoid pain - and since labor is pain in itself - it follows that men will resort to plunder whenever plunder is easier than work."[2] Thus, all human societies face the challenge of establishing incentives whereby individuals will always perceive work as easier than plunder. Individuals of diverse moral persuasions will agree that earning one's wealth via honest production is superior to seizing it from another. Hence, a system that enables honest production to prevail over plunder would accomplish tremendous moral improvement relative to alternatives.