Market and Morals; R. Donway

ROGER I)ONWAY MR. IRVING KRISTOL, speaking to the Mont Pelerin Society, raised the question whether a market society can survive, if it not only permits anti-market views, but actually fosters them insofar as they provide business opportuni ties. And on the assumption that it cannot,. he asks whether there is in the market philosophy any reason for an entrepreneur not to invest in, say, the publication of anti-market literature. We know, as a matter of fact, that the Right has generally protested actions such as Simon and Schuster's publication of Jerry Rubin, but could the Right do isoconsistently, if such a publication were prof itable? Mr. Garry Wills has carried the argument even further in Nixon Mr; Donway, a recent graduate of13rown Uni ver,sity, continues to deal ~s a free lance student and writer with the social implications of certain philosophical issues. Agonistes. The philosophy of the market,. he says, assumes that if it is profitable to supply some good, then that good will be sup plied; which means, will be sup plied by someone. But that as sumption is possible only if we also assume that the marketeer's sole standard for production is: whatever is profitable. And this means that the marketeer cannot regulate his actions by any other standard, for instance, by any moral code. Thus.' ~here Kristol says that the market society can not maintain the ethics on which it is based, as a generally. prevail ing social norm, Wills says that the marketeer himself cannot maintain any ethical views.

Now it cannot be denied that such critics have been given grounds for their arguments. Pro fessor Jeffrey. Hart, in his book The American Dissent, wrote the 195 196 THE FREEMAN April following, approving description of Wilhelm Roepke's thought: "To the extent that an economy is free, he points out, production goes forward at the command of the consumers, whose desires, re flected in the market, are then reflected in the decisions of the producers." Hart contrasts·· this with a collectivist economy in which production goes forward at the command of bureaucrats. It would seem, then, that under any system producers can have no standards of their own, and the only question is: by whom shall they be commanded? Similarly, in Hu,man. Action, Ludwig von Mises wrote: In his capacity as a businessman a man is a servant of the consumers, bound to comply with their wishes ... His customers' whims and fancies are for him ultimate law, provided these customers are ready to pay for them.

He is under the necessity of adjusting his conduct to the demand of the con sumers. If the consumers, without a taste for the beautiful, prefer things ugly and vulgar, he must, contrary to his own conviction, supply them with such things. I suppose one can understand why, as a matter of history, the defenders of capitalism adopted this line of argument. When the New· Deal was' culminating the long attack on businessmen as rapacious and exploitative, the image of a servant, or even a slave, may have looked like a good way to stylize the truth that business rnenmake profits only by satisfy ing demand. It was an intelligible if unfortunate move. (And it should be pointed out that the most powerful, pro-capitalist re jection of this image, Ayn Rand's novel, The Fountainhead, was written in the very teeth of the New Deal.) \. Consent vs. Coercion The inherent problem with the attempted accommodation was summed up in another chapter of Human Action. In a section en titled "The Metaphorical Employ ment of the Terminology of Polit ical Rule," Mises pointed out the vogue of describing entrepreneurs as "autocrats," or "kings"; and he also pointed out the fallacy of do ing so, by making the necessary contrast between economic action, which is based on consent, and government action, which is based on coercion. The irony is that this section occurs as part of a larger one entitled "The Sovereignty of the Consumer." The new critics of capitalism have shown us why it is as necessary to forego political metaphors about the consumer as it is to deny them about the entre preneur.

The questions raised by these attacks can be conveniently di vided into those concerning the 1974 MARKETS AND MORALS 197 trader, and those concerning the entrepreneur. And in each case, I believe, the correct answer can be seen to lie in a return to the basic principles of capitalism. In the case of the trader, this is fairly easy to see. In order for an exchange to take place, we need a buyer seeking a type of good, and offering certain prices for certain quantities of it. And we need a seller offering the type of good sought by the buyer, and offering it in at least one quantity for the price which the buyer is willing to pay. Weare often reminded in eco nomics that it may happen no mutually acceptable terms can be reached, and that then no trade will take place. Weare less often reminded, though it is equally true, that a person may have no supply schedule at all for the good sought, even if he is capable of supplying it. Indeed, if he believes it is immoral to produce the good, he may well have no supply sched ule for it, and there is no reason in capitalist theory to expect that he will.

Nor is there any reason to say that a person is "not acting as a businessman," if he refuses to supply a good when he believes it is immoral to do so. We know that trade results in mutual advantage; that is, each party values the situ ation following the trade more highly than he valued the situ ation preceding the trade. This l~ain, which Mises calls "psychic profit," is what the trader acts to achieve. But obviously there are Jpreconditions for experiencing 8uch again, and obviously too it is part of the businessman's job to ensure that those preconditions exist for him after the trade. There is thus no point in a trade 'whose very terms destroy those preconditions. And for that rea son, a trader cannot set any' price on his .own death; and for that same reason, .he cannot set any price on the suicide of his soul. Anticipating Demand In the case of the' entrepreneur, of course, one can and should make the same point. But an en trepreneur is also set at the oppo site pole from amoral pandering by another characteristic, which relates to the essence of his eco nomic role. The arguments against the entrepreneur assume that his activity is called forth by demand.

But it is not. As Mises says, "The only source from which an entre preneur'sprofits stem is his abil ity to anticipate better than other people the future demand of con sumers." We must remember that the en trepreneur acts in the present to meet future demand, and we' must remember that the time distinc tion is crucial. For then we can 198 THE FREEMAN April see how absurd is the critic's image of the entrepreneur as one who makes his profit by cynically catering to the consumers' irra tional desires. Under this image, we would have to imagine him telling his bankers : first, that he intended to produce a good which it was widely thought people would not buy (since profits arise from unanticipated demand) ; sec ond, that it was a good which peo,:" pIe did not really need ; .and third, that it was a good which people could not reasonably desire. In ef fect, he would be asking them to bet against general opinion, against people's needs, and against people's intelligence. And that is, when one thinks of it, a most un likely scenario.

A more plausible picture would be to note that because the entre preneur must always stand against general opinion, he therefore needs, all the more urgently, to enlist the other two factors on the side of his product, and not against it. But how can he predict what people will truly need, or could reasonably desire, except by knowing for himself what is truly val uable? And why, knowing that, would he risk offering anything else? Thus, when Garry Wills por trays the marketeer as "the late mover, the tester of responses," we may reply that, on the con trary, it is only through .a per sonal estimate of his product, and a confidence in the correctness of his values, that the entrepreneur can have confidence in the correct ness of his necessarily maverick judgment about the appeal his goods will have for others. And when Irving Kristolsays that the market offers no reasons against immoral trades, we may say that, first, the market .insists a trade shall take place only, wpen the terms are amenable to both parties, and in accord~nce with any standards they care to set; and second, that an immoral trade would by its nature, be a bad trade, because it would destroy the pre conditions of gain. The same point has also been phrased: what shall it profit a man if he shall gain the whole world and lose his own soul?

tl IDEAS ON LIBERTY Appeal to Man's Best ERROR always addresses the passions and prejudices: truth scorns such mean intrigue, and only addresses the understanding and the conscience. AZEL BACKUS HUMAN LIFE is a continuing series of choices between alternatives. This characteristic distinguishes human beings from other crea tures. Animals may opt for one alternative in lieu of another but no base mammal possesses the faculty of rational choice, nor do the beasts and birds know that they choose - they act by habit or instinct. Man alone· possesses, acquires and hones the innate and improv able capacity to perceive, study, measure, evaluate, and finally se lect between courses of action. True, some of our choices appear intuitive, instinctive or habitual upon superfluous examination: for example, a rational adult seldom lays his hand upon the activated burner of an electric range unless he intends to maim himself; we learn, often after being informed Mr. Foley, a partner in Souther, Spaulding, Kinsey, Williamson & Schwabe, practices law in Portland, Oregon.