Home > ethics, The Economics Profession > How free markets corrode your character

How free markets corrode your character

from Lars Syll

For centuries, economists have argued that nothing beats a free market for efficiency. Unfettered competition leads to lower prices and better products, more innovation and greater choice. But market forces may also make people less ethical and more selfish.

There is no shortage of speculation on the topic by philosophers and social scientists. But the supply of empirical evidence on the topic has not kept up with the demand. Armin Falk and Nora Szech, two behavioural economists from Germany, have made a contribution.

In a series of experiments, a group of German volunteers were offered a choice between  saving the life of a mouse or receiving a cash payment and having the mouse killed. When asked in private, 54 percent chose to forego 10 euros to keep the creature alive. But when the value of the murine life was negotiated by two volunteers in a marketplace, only a quarter of the people chose mercy. And when multiple buyers and sellers were around, the monetary value of a mouse’s life quickly fell far below 10 euros. For people deciding on their own, the experimenters had to offer 47 euros to induce a similar willingness to accept a mouse-death.

The economists used so-called “surplus” mice for their experiment, which would ordinarily have been killed because they cannot be used for research. They noted in an article entitled “Morals and Markets” in the magazine Science that, “as a consequence of our experiment, many mice that would have otherwise have been killed right away were allowed to live for roughly two years.”

The experimental economists drew the stark conclusion: “Market interaction displays a tendency to lower moral values, relative to individually stated preferences.” It seems that the impersonal market diminishes the feeling of personal responsibility. Guilt is divided when trading takes the place of explicit individual decisions. The observation of others engaging in ethically questionable behaviour might increase the willingness to follow suit.

The disconnect between conscience and price can be seen outside of the behaviour economists’ laboratory. The same people who are privately appalled by the horrific working conditions of textile workers in poor countries are quite happy to search for bargains on the latest fashions.

The mice saved in the Falk and Szech experiment lived an additional two years. The sociological lesson could last much longer. Even if free market forces can make activities such as education and health care more efficient, bargaining and competition bring with them a significant hidden moral cost.

Olaf Storbeck

  1. Lucy Honeychurch
    July 16, 2013 at 8:06 pm

    Free markets DON’T lead to lower real prices if your income is dropping as well, which it WILL, by definition.

  2. Rhonda Kovac
    July 17, 2013 at 8:21 pm

    On the general topic of competition is a fascinating book, “No Contest, The Case Against Competition,” by Alfie Kohn. In it the author thoroughly reviews the literature of research on competition–including that by a number researchers who are clearly much in favor of it–and found consistently negative results. (cf. http://teacherrenewal.wiki.westga.edu/file/view/Competition-Alfie+Kohn.pdf)

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