Best Books of 2020: Virgil Henry Storr and Ginny Seung Choi – Do Markets Corrupt Our Morals? (Palgrave MacMillan, 2019)

Most people see markets as dens of greed and moral corruption. In their new book, Do Markets Corrupt Our Morals?, Virgil Henry Storr and Ginny Seung Choi, of the Mercatus Center at George Mason University, argue the opposite. In fact, they go one step further: Markets make people more moral. Make that two steps further: Because markets have moral benefits, restrictions on markets have moral costs. They back up their argument with a healthy mix of theory and evidence. Along the way, they make a case for rethinking how people approach markets. Their arguments, rather than traditional “markets are efficient” arguments, are the liberal movement’s best hope for the future.

Storr and Choi describe their main thesis on p. 225:

But the evidence suggests that the consensus is wrong. Markets do not corrupt our morals. Not only are people wealthier, healthier, happier, and better connected in market societies, market activity makes us better people. Markets are spaces where we discover who is virtuous and can expect many of our vices to be revealed. Additionally, markets reward virtue and punish vice. As such, markets are moral training grounds.

In short: Less of Alfred Marshall’s supply and demand graphs, and more Adam Smith’s Theory of Moral Sentiments. Less Homo economicus, more Homo sapiens.

Their phrase “moral training grounds” is important. One of the most common mistakes in economics is the Nirvana fallacy. This says that because markets are not perfect, government can make things better. Storr and Choi know that perfection does not exist. Markets fail, but they also have a built-in improvement mechanism. Markets are an ongoing discovery process. People have to learn from experience what works and what doesn’t. They make mistakes, learn from them, and make changes. But because conditions are always changing, the adaptation process never ends.

People use markets to learn how to trust and to be trustworthy. This takes practice. It takes trial and error. The feedback people get from profit and loss help. So does learning what it takes to earn someone’s trust or their repeat business. Evidence from experimental economics shows that people who participate in markets learn these things more quickly than in other systems.

In one-shot games in lab experiments, people can cheat and get away with it, like doing a dine-and-dash at a restaurant in a town you’ll never visit again. Despite this, people in these studies who come from market-oriented societies cheat far less than one would expect from a traditional blackboard-economics model. They also cheat less than people from non-market societies who play the same games.  

Repeat-play games give the opportunity for cheaters to learn from their moral decision. Other players can punish cheaters in future rounds. They will often do so even when punishment also comes at a cost to the punishers. Upholding honesty is important enough that most people are willing to pay for it. In the long run, this reduces cheating. In fact, it happens almost automatically.

Without coaching, players often spontaneously settle on a tit-for-tat strategy. You start by assuming the other players are trustworthy, but if they cheat, return the favor. Depending on a game’s rules, this may mean punishing cheaters, or simply refusing to do business with them again. Regardless of whether the players come from countries with free markets or not, they tend to behave better in repeat-play games than in one-shot games. And again, players from market societies cheat less often than players from non-market societies.

Storr and Choi also take a tour of the different ways in which markets affect morals. The obvious one is that because people in market societies are richer, they can afford to be more moral. They can afford to give to charities. They can also afford a fuller life. Education, literature, the arts, and world travel all cost money. Dollars are nice, but they aren’t really wealth. Wealth is being able to treat others well, to have leisure to spend time with family, and to pursue friendships, hobbies, and to try new things. Market societies can afford far more of these life enrichments than non-market societies—and these experiences positively shape people’s characters.

Moreover, people in market societies have longer life expectancies, lower infant mortality, are more respectful of women’s rights, minority rights, and LGBT rights, are more religiously tolerant, go to war far less often, and have lower crime rates. All of these are moral outcomes. All of them are backed by abundant data. All of them are made possible by embracing markets. The moral conclusion is obvious.

Storr and Choi represent the future of the liberty movement. The Cold War is a generation in the past now. People still throw around the word “socialist,” but usually just to mean they don’t like something.

But markets are still very much under attack in the current political realignment. The in-groups and out-groups people are using are different now; capitalism-vs.-communism is out, and populist nationalism-vs.-liberal cosmopolitanism are in. Yet, most libertarians are still using the same materialist arguments.

Yes, markets are efficient and create more wealth than other systems. That’s important, but that also isn’t the main point. Markets have other positive effects that are ultimately more meaningful—and more persuasive in today’s society. Not only is Storr and Choi’s moral defense more versatile in today’s intellectual climate, it is more in tune with most people’s values. As CEI founder Fred Smith argues regarding values-based communication, it is important to speak to people in their language.

Most people don’t care about adding an extra decimal point to this quarter’s GDP growth, even though that is important in the long run. They do care about their kids growing up to be decent people. They don’t care that subsidies and taxes cause market distortions. They do care about having a well-rounded life.

Many market liberals only speak a niche language of efficiency. This is one reason why they remain a curiosity. Their disconnect is a major reason why so many people continue to oppose markets despite their moral benefits—hardly anyone makes the moral case.

Storr and Choi are not the only thinkers trying to correct this oversight. CEI Julian Simon Award winners Deirdre McCloskey, Johan Norberg, and Steve Horwitz are among them. But Storr and Choi just might be the ones to do it best. They deserve far more company.