Markets and Morals

Oliver Griffiths surveyed the issue of corporate morals, in the wake of President Sarkozy’s recent assertion tha “raising the moral standards of the financial capitalism” is necessary for a viable financial system.

I suspect that while markets may need morals, humans are not particularly qualified to provide them.

Humans are prone to “local optimisation” and “immediate gratification”:

• All companies prefer to be monopolies, but none would be able to operate efficiently if they all had to deal with monopolies in their businesses.
• All companies would love to pay as little wages as possible, but none of these businesses would exist if the employees are no longer consumers.
• When only the rich become richer, they all become poorer. One need only to look at corrupt developing countries where the rich drive expensive 4WD over dilapidated roads, live in gilded cages because of fears over personal safety, and contrast it with a countries with more social welfare. 

I’d choose rules over morals, any time of the day.

If rules have failed, why is it that we haven’t seen more bankers in jails? Either the rules aren’t there, or they aren’t enforced, or simply the disincentives aren’t strong enough.