Front Page Titles (by Subject) Virtue in the Market - Literature of Liberty, January/March 1978, vol. 1, No. 1
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Virtue in the Market - Leonard P. Liggio, Literature of Liberty, January/March 1978, vol. 1, No. 1 
Literature of Liberty: A Review of Contemporary Liberal Thought was published first by the Cato Institute (1978-1979) and later by the Institute for Humane Studies (1980-1982) under the editorial direction of Leonard P. Liggio.
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Virtue in the Market
“Can the Market Sustain an Ethic?: The Ethical Consequence of Alternative Incentive Systems.” (1977 D. R. Sharpe lecture on social ethics, Graduate School of Business and the Divinity School, University of Chicago, 26 pages available from the author.)
Capitalism and the free market are wrongly indicted for fostering immorality or corrupt behavior. Most social corruption directly results from government intervention in the marketplace. With government restricted to its classical liberal role as nightwatchman protecting individuals' person, property, and contractual rights, corporate officers would find no reason for “bribing” corrupt government officials. In fact, such “bribery” is a misnomer for government functionaries' “blackmailing” regulated businessmen: the businessman must pay a black market secret tax (a bribe) to obtain nonenforcement of an interventionist law.
Although the market reflects the diverse ethics of its buyers and sellers, its virtue is that it naturally limits corruption and harm through its corrective mechanisms. Under the free market's system of voluntary exchange, men feel natural incentives that promote the Golden Rule and reward fairness, kindness, and honesty. Honesty, in a voluntary market, “is the best policy” because the market severely punishes exposure of dishonesty through loss of the precious market commodity: a good reputation in the eyes of the consumer.
Politicians and government offer quite different coercive “incentives.” Whereas the free market's voluntary exchange for mutual benefit is a “positive sum game,” government intereference in men's lives is a negative sum game, a form of exploitation. Government power can benefit some only at the expense of others (taxpayers, consumers, pensioners, etc.).
The politician's game is an elaborate “swindle” which plays on the enormous “information costs” that the innocent citizen would have to pay to investigate each bewildering complexity of government. Thus, the politician depends on the ignorance and forgetfulness of citizens. It is utopian optimism to believe that when power is so concentrated into the politician's hands, he will always wield it with angelic, incorruptible, and selfless concern for citizens.
Ethically, the market serves as a training ground for moral maturity. It promotes individual autonomy by making each participant responsible for his or her own conduct. Each individual faces the responsibility and the humanizing freedom to make sound choices and avoid mistakes. The market acts also as a powerful civilizer of persons: commercial success depends on humane treatment of free and independent consumers who can take their business to competitors.
By contrast, government intervention infantalizes the moral conscience of humans. By posing as his “brother's keeper,” government usurps a moral person's responsibility for choosing his own conduct. Consider the government's campaign to compel all new car buyers to buy cars equipped with air bags. This example illuminates the ethical issue of how the market nurtures moral growth and how the government arrests it. Whether or not mandatory air bags will actually decrease overall safety (by encouraging risky driving and syphoning off $200 that some might spend better on home smoke detectors—those who already use seat belts or seldom drive), such government imposed decisions prevent individual choice. How can we develop an adult moral capacity if we are treated like children, forbidden to choose, for fear that we may make the “wrong” choice?
In short, government stunts ethical growth, fosters dependence, and leads to bureaucratic sovereignty; the market liberates man's moral potential, rewards autonomy, and leads to individual sovereignty. Although the free market does not motivate individuals necessarily by altruistic impulses, its voluntary principle guarantees that men will only deal with each other with brotherly respect. Government coercion, operating on an involuntary principle, resembles Big Brother.