Big Questions
August 27, 2010
Given the economic roller-coaster ride of the past two years, the idea that capitalism promotes morality might seem like an oxymoron. The imperfections of the market system, the wild swings of the boom-and-bust cycle, and the "animal spirits" of irrational investors have revealed the gulf between economic theory and financial reality — and have put the advocates of capitalism on the defensive.
But let's not get carried away. As every economist knows, the market system, based on the free exchange of goods, is the greatest prosperity-generating machine ever invented. Nor are markets just a necessary evil that we must regretfully tolerate. To the contrary, trade itself leads directly and measurably to greater virtue — to higher levels of generosity, fairness, and trust. But don't take my word for it. There is plenty of experimental evidence to back me up, and it points to the deep evolutionary foundations of the market's moral effects.
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