The Market and non-economic “costs”

The Market and non-economic “costs” January 15, 2008

In a short response piece in a 1999 issue of the Journal of Markets & Morality, my former professor Patricia Donohue-White raises a number of issues that must be taken into consideration while conducting economic analysis of markets. Her intention is not to defend or criticize the practical status of any given market, but simply to note non-economic “costs” that ought to be factored into any discussion of the impact of the free market on culture.

Donohue-White poses two questions that she thinks are often ignored or neglected in contemporary economic analysis:

1. “What effect does market activity have on the general culture?”
2. “Can economic analysis adequately consider non-economic ‘costs,’ particularly those having to do with moral, social, religious, and cultural values?”

Donohue-White submits (with good reason) that every “market economy is shaped by the culture in which it exists, and, in turn, it affects the daily practices and customs of the people that comprise it.” By the rather broad term culture, she means the sum of “customs, traditions, and practices of a people.” In turn, the market exerts an influence on the culture in which it subsists, fostering particular sets of virtues or vices. Market and culture–while certainly conceptually distinct–are inextricably bound up in the concrete, practical affairs of a people. On this view, the market cannot be properly evaluated without recourse to the culture and society that shapes it AND to the impact the market has on this same culture and society. The “economic rationality” exhibited by many contemporary corporations seems to be largely devoid of the consideration of non-economic “costs,” particularly with respect to treatment of workers (wage, outsourcing, lay-offs), wealth accumulation and disregard for local and expansive tradition.

What Donohue-White most cautions against is neglecting to consider what John Paul II has called the “structures of sin” (see Solicitudo Rei Socialis), which are grounded in personal sin and the concrete actions of individuals. These personal sins and unethical actions can be facilely consolidated into fortified economic stuctures within a given culture, making their removal or break-down immensely difficult. These structures of sin, wherever they may exist, tend to employ the “economic rationality,” carrying within themselves very little regard for the human person or other institutions in society. These structures, John Paul II tells us, burgeon and spread, affecting and influencing the behavior of people and society.

So when the question is posed “Does the free market undermine culture?” Donohue-White suggests that the presence of two “-isms” must be discerned. The first of these is individualism, where “blind to the needs of others, radical individuals live life completely for their own sake, failing to develop and maintain lasting social relationships.” Obviously, individualsim in its theoretical form and in its distilled, practical expressions is “contrary to human nature and the common good.” Individuals become isolated, alienated in the competition for desired goods and services, weakening the bonds of community. The exclusion of non-economic values, submits Donohue-White, fosters individualism in both economic analysis and corporate policy/identity.

The second “-ism” that threatens the common good is consumerism. Donohue-White admits that markets are not in themselves responsible for consummerist trends, but through any sort of subservience to moral deficiencies in society (e.g., idolization of wealth) the market aids in fostering a “consumerist mindset, which is the application of the economic way of thinking to non-economic areas.” There is no question that affluence “brought about by markets and human labor” can negatively impact the moral identity of an entire culture. Affluence is not an evil, but the manner in which it is attained and sustained may itself be immoral and dehumanizing. Only the consideration of non-economic “costs” (i.e., culture, tradition, family) will serve to illumine the moral status of its trajectory.

Drawing from the oft misinterpreted and misused enyclical Centesimus Annus by John Paul II, Donohue-White highlights the need for any market to be “circumscribed by a strong juridical framework that does not undermine the ethical and religious spheres of civil society.” This loaded teaching from the former pope certainly places the limits on “free” market, for the market is not a morally positive influence on a culture unless it is surrounded by and restricted by the ethical and religious traditions of the culture in which it subsists and which it helps shape. Contrary to the liberal democratic paradigm of political-economic activity (a la Locke, Smith and Mill), the market must be shaped by virtue, conduct itself with virtue and promote virtue. In this sense, it may be inappropriate to describe the Catholic vision of the market as “free” if one means “unbridled” by such, as Pope Benedict XVI has continually reminded us.

Donahue-White closes her piece by reiterating that she is not claiming that what is commonly called “free market” violates human freedom and dignity. Rather, she seeks for us to realize that “economic analysis by itself is insufficient to arbitrate weighty social, political, and cultural questions.” Economic growth is not moral without genuine human development, which is “human betterment and the increase of the common good. It implies social circumstances in which participation is maximized, opportunities created, unemployment lowere, and poverty eradicated.” Economic analysis cannot simply be the review of profit margins, statistics, job growth, industrial progress and purchase power. Rather, non-economic elements must be included, such as “family life, educational opportunites, social virtue, religious freedom, care of the eldery, and so forth.” Development, Donohue-White argues, is not a collectivist utopia that arbitrates market practice. Rather, human development is “freely planned according to the dignity of the person, legitimate social concerns, and market principles.”

I advocate such a view in theory, and I hope that more Catholic business owners and economists will articulate how to put this all in practice. There is a place for a market economy…but not without championing virtue and development in community. As Donohue-White notes, “Community does not simply denote an aggregate of individuals, but a unity of persons in a common culture.” The market must be for the unity of persons, not for the individual competitor.

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