Human Nature and the Moral Economy

Economics is inextricably tied to moral behavior, though few economists will say that. It’s time someone did.

Eric Michael Johnson in Scientific American:

In every financial transaction–whether you’re selling a car, paying employees, or repackaging commodity futures as financial derivatives–there are ethical calculations that influence economic activity beyond the price. Sure, you can cheat a potential buyer and not mention that your 1996 Ford Mustang GT has a cracked engine block, in the same way that your boss can stiff you on overtime. If you get away with it you will succeed in making a short-term gain or see a bump in the next quarterly earnings report. But, if you eventually develop the reputation as someone who consistently defrauds the people you do business with, there is a good chance that the value of your net worth will be as negative as the moral values you embraced.

But why is it that businesses that are “too big to fail” don’t seem bound by the same moral economy as the rest of us? It turns out that anthropologists may have some insight, not only on this question, but also how we might integrate our economic and moral values that so often appear at odds. Researchers have found that the interconnection between economics and morality is seen most clearly in small communities where everybody knows each other, everyone has a free choice in who they deal with, and gossip can make or break reputations. This is even the case forsocieties that look very different from our own.

More here.