Values and morals! Who's values and who's morals?

This post was inspired by another fellow “LinkeInner’s” question which read as follows:

Do you think that the core of the current economic crisis is a crisis of ethics and values?

Two-thirds of people believe the current economic crisis is also a crisis of ethics and values. But only 50% think universal values exist. These are among the findings of the World Economic Forum’s Faith and the Global Agenda: Values for the Post-Crisis Economy, an annual report on issues related to the role of faith in global affairs.

Global religious leaders identify the key values for a more just and sustainable post-crisis economy.

http://www.imf.org/external/np/pp/eng/2009/021909.pdf
http://www.universityworldnews.com/article.php?story=20091011105058536
http://www.weforum.org/en/media/Latest%20Press%20Releases/PR_Faithvalues

My answer is:

What do the other third think who DO NOT believe the economic crisis is a crisis of ethics and values? 

If we were to ‘layer’ the global economic landscape, we would discover that the playing field is never and never will be level.  As an example, in your part of the world, one man’s commission is potentially viewed as another man’s bribe...?  (See the Serious Fraud Office’s investigation into the BAE System’s contractual relations in Saudi Arabia).  I am not pointing any fingers or inferring wrongdoing on anyone’s part, but I am trying to highlight the problem of ‘relativity’.  Points of view on morality, ethics and values different depending on your position, relative to the other people involved in that exact same ‘transaction’.

But, to answer your question directly I would say NO, it isn’t a crisis of ethics and values.

My justification is this:

1.       There is a general misunderstanding of the Laws and forces of economics that are at play here:

The fundamental Laws and forces at play in economics have nothing to do with morality or values.  These are emotional characteristics and only ‘enter the field play’ and manage to distort the rules of the game.  Yes, don’t get me wrong there is hopefully a morally correct framework set up in the first place, in order to allow everyone access to an opportunity to participate in the market, however, as we know in practice, this is not necessarily the case.

Markets, on the whole, tend towards and actively seek states of ‘equilibrium’.  However, on the odd occasion there are factors at play (political, regulatory, information, access to resources, etc.) that distort and cause markets to deviate from this natural tendency to seek the ‘clearing price and volume’ in the market.  Equilibrium is defined as that point at which the demand and supply curve interacts in such a way that all parties are satisfied (achieved utility) and all products in the market is ‘cleared’ at a given price.  There is therefore no shortage or surplus available. 

Scarcity of resources leads to a continuous search and flow of innovation, capital, land, labour and resources into the economic landscape (the market) thereby combining to meet some economic need or want by the production, distribution and consumption process.

If we are lucky, we participate with like-minded ethical and value-based actors in this market-place, however, if we are not so fortunate, we have a choice as to whether we participate or not.  Regulation is supposed to assist us in defining the rules of engagement, however, sometimes these rules become so onerous that participants actively seek ways and means to avoid or circumvent them.  That is way libertarians in general favour principle based, rather that rule based systems of compliance and participation in free markets. 

Because of Information Asymmetry we do not necessarily know the intentions, wealth, capabilities, etc. of our fellow market participants.  This is why one of the fundamental principles of market participation is ‘Caveat Emptor’ or ‘buyer beware’.

2.       Compliance and regulation are well intentioned in order to help define the rules of engagement, but as I stated above, they can become onerous, leading to dysfunctional behaviours in the market place and can contribute to the Law of Unintended Consequences.

Competition and the way in which ‘free markets’ operate invariably lead to ‘cutting of corners’ and finding ways and means of gaining some form of an advantage, be it lower costs, more features, better built quality, etc.  The problem is when sub-standard materials, labour and skills get involved and is then presented and ‘superior’ products and the purchaser does not derive the ‘intended utility’ he expected from that product.

The question really is whether this is a moral, ethical and values based issue?  No-one wants to be cheated o feel cheated and taken advantage of and therefore be disappointed in the market place; but as realists we all know that utopia is a very distant aspiration...

This is but the beginning of the debate and I would like to continue this theme in future posting

All the best.

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