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Society, Politics & Law

Some economies are nicer than others

Updated Monday 29th June 2009

Michael Sandel's 2009 Reith Lectures inspired Mark Banks to take a further look at markets and morals.

One theme explored by Michael Sandel in his recent Reith Lectures is the link between morality and markets. But – given current concerns about the rampant excesses of various money-makers, city traders and financial speculators – one might be forgiven for thinking that no such link exists. Capitalists have created an advanced market system that over-rides moral concerns in the interest of profit – end of story. Yet if we look closer we can see that even markets need morals.

One argument developed by the American economist William J Booth, and more recently developed by UK social scientists Russell Keat and Andrew Sayer, is that economies are intrinsically moral, in so far as they are reliant on norms, values and ethical presumptions for their effective exercise. How might we demonstrate this?

Haggling in a Marrakech market Creative commons image Icon wanderer_by_trade under CC-BY-NC-SA licence under Creative-Commons license
Getting a fair price: Haggling in Marrakech

Firstly, (as I discussed in my posting on Karl Polanyi) economies can be judged moral because they are socially embedded within non-economic institutions (for example the state, but also institutions of family, religious, voluntary, charitable or communitarian origin) that help set norms and ethical frameworks for acceptable economic conduct. Despite coming under ideological attack from market-liberals, these institutions remain important for checking capitalist tendencies for unfettered accumulation of profit.

Secondly, because people are socially embedded, moral beings (and not just ‘rational’ economic actors), moral presumptions and conventions external to economic rationality are always heavily implicated in everyday patterns of economic exchange. These moral presumptions and conventions would include such motivations as love and care for others, respect, fairness and justice). So people must continually strike a balance between ethical and economic imperatives when transacting. In practice this means that most of us wouldn’t choose to sell our own mother!

Thirdly, economic institutions themselves operate according to intrinsic moral norms and conventions (even if this often appears hard to spot); for example in capitalism there are ethical standards that affect the application of property rights, reward systems, distributions of rights and responsibilities, as well as norms and values shaping the way we treat other people in economic situations (the exercise of ‘professionalism’, ‘business ethics’ and so on) – and these are not merely contractual in origin but involve ethical judgment. For economies to function there has to be moral framework for economic action.

What should properly concern us is not the absence of morality but the particular quality of morality...

However this is not to say that because the economy is ‘moral’ that it is intrinsically ‘good’. The persistence of greed, fraud, corruption and other economic crimes and misdemeanours indicate that this is not the case. But, equally to assume that economies are devoid of ethical substance is to misunderstand their character. To paraphrase Russell Keat what we should recognise is that "all economies are moral but some are nicer than others." What should properly concern us is not the absence of morality but the particular quality of morality inherent to different kinds of economic system. Providing we accept that any kind of economy is shaped by the norms of the community of which it is a part, then the political issue becomes not whether an economy is moral per se, but whether or not the particular moral principles of an economic system are compatible with (say) our own understanding of equality and our requirements for social justice.

Why is this important? By recognizing the moral basis to economic life we retain the theoretical ammunition we need to conceive of alternative economic futures – for if economies always have some kind of moral principles (derived from being socially embedded), this means they are amenable to transformation from within the social contexts that created them. This helps counter the market-liberal myth that certain ‘self-governing’ economic processes (e.g. ‘free hand of the market’) lay beyond social determination, but also checks ‘market fatalism’ – the belief we are powerless to transform capitalist economic institutions and practices.

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