Published by EH.Net (July 2012)

James Halteman and Edd Noell, Reckoning with Markets: Moral Reflection in Economics. New York: Oxford University Press, 2012. xvi + 218 pp. $35 (hardcover), ISBN: 978-0-19-976370-2.

Reviewed for EH.Net by J. Daniel Hammond, Department of Economics, Wake Forest University.

Reckoning with Markets provides an overview of moral reflection in the economics literature from classical Greece to the current time. At just under 200 pages the book would seem relatively compact for a survey that covers more than two millennia. But given the paucity of moral reflection since economics became a stand-alone discipline two centuries ago, the book?s length is sufficient to the task at hand.

The target audience is undergraduates and economists who find themselves sharing the authors? uneasiness with the state of economics they encounter in textbooks and in the scholarly literature. What is clear from the outset is that this uneasiness is grounded in the lack of moral reflection in ?mainstream? economics. But what becomes evident as one proceeds through the book is that a second and somewhat separate concern of the authors is with the limitations of rational choice analysis as an explanatory apparatus. Whether this is a separate issue is a question to which I will return after describing the book?s structure and contents.

The book opens with James Halteman recounting his on-the-ground experience in the Soviet Union during the Glasnost period of Mikhail Gorbachev?s government. Halteman learned first-hand that a thriving market economy requires more than markets. There must be a culture that supports commercial relationships, most of which are with people one does not know and cannot effectively monitor. This culture is necessarily moral. To paraphrase Jesus?s parable from Matthew?s Gospel, chapter 13, for markets and social life to flourish the cultural soil must be morally rich rather than thin and rocky.

Halteman draws the implication that economists cannot hope to gain deep understanding of standard economic questions about wealth, poverty, and growth so long as they are restricted to a value-free theoretical apparatus. Markets and social life are bound together by moral ?glue.? Therefore economists need to pay heed to moral standards. Reckoning with Markets introduces economists and their students to the history of moral reflection in economics. The news here since the Middle Ages is not very good. Thus the authors hope to restore moral reflection and dialogue to economics.

The first chapter is set up as a dialogue between economists and philosophers who have written on economics ranging from the ancient world to the modern era including figures such as Aristotle, Aquinas, Smith, Marx, Mill, Bentham, Marshall, Keynes, Hayek, Friedman, and Sen. Each of the figures is given space for a brief comment on morality and economics by way of a quotation from their writings. Seven of the eight chapters that follow this dialogue take the reader into greater historical depth, beginning with the ancients and moving chronologically up to the present. In the final chapter Halteman and Noell provide a sketch of a broader and richer approach to economics than rational choice that they call ?sociopolitical economy.? At the end of each chapter is a highlighted idea from the subject of the chapter, along with a set of questions for reflection and discussion.

In chapter 2, ?Moral Reflection in the Ancient Mediterranean World,? we encounter ideas from Aristotle, along with Plato, Hesiod, the Stoics, and the Old and New Testaments. Telos, the final cause or that which a part of nature or a person?s design points to, is prominent in this discussion. Considerations of virtue, justice, and happiness proceed from this reference point. Humans find happiness through the practice of the virtues and by living as they were designed to live. For the ancients what we think of as economics was generally subsumed in moral philosophy. There was not economics without moral reflection.

Chapter 3 moves on to the Scholastics, principally Thomas Aquinas, who brought the philosophy of Aristotle into dialogue with Christian doctrine. Here again we find a rich vein of moral reasoning coupled with ?positive economics.? The Scholastics used three categories in their analysis of economic transactions: (1) high virtue where an act serves its natural purpose (telos) and where net benefits are equal, (2) adiaphora, matters of indifference where transactions are neither virtuous nor sinful, and (3) unnatural and sinful transactions born of greed and without reciprocal benefits. The Scholastics? philosophical/theological approach to economics was oriented toward practical concerns, like the economics of today. But this likeness is with a vast difference. The Scholastics? practical concern was not, for example, to find the revenue maximizing tax rate or the welfare maximizing number of firms in an industry, but to get souls fit for heaven. A confessor would need to know under what circumstances a confessing merchant might be culpable before God for increasing his prices. Halteman and Noell aptly bring out the danger that moderns reading the Scholastics might miss much of what their economic analysis was actually about. “When viewed through a modern lens with the concept of natural purpose (or telos) filtered out and where sinful economic transactions seem irrelevant in voluntary markets, it is easy to collapse all three categories into one value-free notion of supply and demand. It is then a short step to the argument that the Scholastic writers were really talking about a ?neutral? market price all along, which discounts or overlooks the context of their work and the moral content of their analysis” (p. 51).

In chapter 4 we come to ?Adam Smith and the Prospects for Moral Reflection in Enlightenment Thinking.? This is the turning point in the story. Although the chapter title is without a question mark, I take it to be something of a question, for the authors understand Smith as conflicted. This conflict is not the ?Adam Smith problem,? i.e., reconciling the moral philosopher of The Theory of Moral Sentiments with the economist of The Wealth of Nations, but rather the conflict between the natural law of Smith?s teacher Francis Hutcheson and the skepticism of his friend David Hume. The chapter gives more attention to Theory of Moral Sentiments than to Wealth of Nations. Halteman and Noell see Smith as a transitional figure between the ancient and medieval vision of the natural world and human life fraught with meaning and purpose and the mechanistic vision of modern science. Smith sought to maintain a concern with the virtues and moral life, but to do so largely outside the framework of Christian doctrine, relying instead on Stoic philosophy. In this manner Smith was typical of the Enlightenment desire to strip Christian doctrine away from classical Greek and Roman philosophy, discarding the doctrine and retaining the philosophy, thus undoing much of what the Scholastics had done.

In chapter 5, ?The Secularization of Political Economy,? we encounter other classical and early neo-classical economists. Some, unlike Smith, had no moral philosophy counterpart for their economics. They tended to perceive the economy as naturalistic and deterministic. In Marx?s scientific materialism, as with Bentham, Mill, and Jevons?s utilitarianism, we encounter new types of moral reflection but on the whole less of it than with the Scholastics and Smith.

Chapter 6 concerns moral reflection in the work of three heterodox economists, Marx, Veblen, and Hayek. The three are presented as bucking the trend toward value-free mechanistic economics, albeit in their own distinct ways. The case of Marx is the least clear of the three, for as Halteman and Noell point out, Marx?s philosophy of history with its historical laws of motion was both materialistic and deterministic. The highlighted discussion in this chapter is ?Can a materialist produce a moral critique of capitalism?? Halteman and Noell?s answer is no. They argue that Marx reached outside his system for Christian language to make his moral critique. Veblen, influenced by the German historicists, was opposed to deductive rational choice methods. For Halteman and Noell he qualifies as an economist who instilled a moral element in his economics primarily by his rejection of the narrow homo economicus view of human nature. The authors find Hayek interesting for shying away from explicit moral reflection despite having written on the origins of moral norms.

Chapter 7, ?On Methods and Morals,? is the authors? critique of the dominance of egoistic rational choice as the predominant approach in contemporary economics. This makes economics less social and less human than it should be. Chapter 8 surveys ways in which economics is being broadened beyond rational choice by New Institutionalists, Austrians, and others doing research on happiness, cooperative behavior, economic psychology, and neuroeconomics.

In chapter 9 Halteman and Noell provide an outline for reform of economics as ?sociopolitical economy.? Their vision cuts directly against the imperialism of rational choice methodology, where the motivation of self-interest that predominates in the impersonal marketplace is used for analysis of behavior in the social settings of neighborhood, church, and family. In these settings not every action is an exchange. Real people make actual sacrifices out of mutual respect and love. Halteman and Noell do not want to abandon the rational choice maximization assumption where its use is appropriate, but they do think economists should move away from exclusive reliance on it for analysis of behavior in all settings. They recognize that their approach would make analysis less tidy (we might say that the queen of the social sciences would look less like herself and more like sociology) but they expect rewards in enhancement of the explanatory power of actual human behavior and greater opportunity for moral reflection. Basically what Halteman and Noell call for is an economics that is grounded in The Wealth of Nations and The Theory of Moral Sentiments.

As I suggested, there are two concerns evident in the book. The historical survey of moral reflection in economics clearly shows a decline in moral reflection, and is intended to stimulate dialogue about morals and markets. But the history also shows that the decline in moral reflection has paralleled the development of modern ?scientific? methods in economics. These methods of rational choice with mathematics as the language of analysis require high levels of abstraction, both from institutions and the complexities of human beliefs and behavior. The thinning of the human anthropology in economic analysis is of concern to the authors for its effects on positive economics as well as for its effects on normative economics. That is to say, Halteman and Noell are interested in both scientific reform and moral reform.

The authors are moderately optimistic about the prospects for moral reflection in some of the newer research programs discussed in chapter 8 such as the New Institutionalism and economic psychology. And on the whole their reading of Adam Smith is positive with respect to the potential for moderns to use Smith as a source for reflection on morals and markets. I am afraid that I do not fully share their optimism. My reading of their historical survey is that there has been a longer and steeper decline in moral reflection in economics than they detect. The decline may have begun with Adam Smith. It appears to me that a substantial portion of what they present as moral reflection in economics from Smith on is not in any deep sense moral reflection. Moreover, the new research programs in which they find potential for moral reflection may depart from rational choice methods, but they do not escape the bonds of value-free science. For example work on the economics of cooperation and economic psychology may account for the fact that people make decisions that are morally constrained. But this is not the same as reflection and evaluation of the moral standards themselves. Neuroeconomics and evolutionary psychology are materialistically reductionist, hardly rich soil for moral reflection.

The seeds of materialistic reductionism can be seen in Adam Smith. Halteman and Noell interpret Smith as ?downplaying anything that looks like religious moral restraint? on behavior (p. 58). Regarding what Smith considered the springs of human behavior they quote Joseph Cropsey.[1] “[N]ature provides man with imperfect perceptions of the tangible world, with the inevitable result that he can reason only imperfectly concerning the nature of things or what they really are. The faculty of reason leans upon an aid which was prepared by nature to assist not reason but appetite, specifically the appetite for life as such; and as a result, useful knowledge but not real knowledge is the most that man can aspire to” (p. 59).

The view here is that behavior is motivated by the appetites and passions. Moral restraint is provided by three behavior screens: sympathy, the impartial spectator, and the all-seeing judge. Smith sees sympathy as not being rational, but built-in and involuntary. The back-stop for sympathy is the impartial spectator. This ability to step outside of oneself into an impartial and well-informed spectator is something humans have as part of their nature, but Smith is agnostic about whether the spectator is real or imagined. The third screen, the all-seeing judge, is the highest. There is mention by Smith of the common belief in an afterlife, and therefore in eternal happiness or damnation. But the important matter is not the veracity of this belief, but its effects on behavior. That is, Christian theism contributes to the common good, whether the Christian God exists or not. Moreover, in place of Christian doctrine Smith drew on Stoic pantheism. Halteman and Noell summarize the grounds of Smith?s moral philosophy thusly: “Smith?s ability to connect the developmental organic qualities of the Stoic view of the world with the mechanistic ordered approach of the eighteenth-century Enlightenment era provided a broad base on which he built his views. The notion of moral progress in Stoicism, when blended with the Enlightenment ideas of moral precepts, led Smith to his three-level approach to the moral socializing of behavior. The ability to exercise sympathy and appropriate the impartial spectator and, if need be, the final judge of our conduct can be seen as a marriage of Stoic moral development and the secular virtue concepts of David Hume” (pp. 74-75).

What is missing from here on through the utilitarians, behaviorists, to the economic psychologists and neuroeconomists, and the other human studies in the modern academy? In two words: Imago Dei. If not created in the image of God, man is left as nothing more than a clever animal. Clever animals do not engage in moral reflection.

1. Joseph Cropsey (2001), Polity and Economy: An Interpretation of the Principles of Adam Smith. South Bend, IN: St. Augustine?s Press.

J. Daniel Hammond is Hultquist Family Professor, Department of Economics, Wake Forest University ( He is coeditor with Steven G. Medema and John D. Singleton of Chicago Price Theory, Edward Elgar Publishing, forthcoming.

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