Moral economy
Encyclopedia
Moral economy is a phrase used in a number of contexts to describe the interplay between moral or cultural beliefs and economic activities.

A just economy

A moral economy, in one interpretation, is an economy that is based on goodness, fairness, and justice. Such an economy is generally only stable in small, closely knit communities, where the principles of mutuality — i.e. "I'll scratch your back if you'll scratch mine" — operate to avoid the free rider problem
Free rider problem
In economics, collective bargaining, psychology, and political science, a free rider is someone who consumes a resource without paying for it, or pays less than the full cost. The free rider problem is the question of how to limit free riding...

. Where economic transactions arise between strangers who cannot be informally sanctioned by a social network, the free rider problem lacks a solution and a moral economy becomes harder to maintain.

In traditional societies, each person and each household is a consumer
Consumer
Consumer is a broad label for any individuals or households that use goods generated within the economy. The concept of a consumer occurs in different contexts, so that the usage and significance of the term may vary.-Economics and marketing:...

 as well as a producer
Production, costs, and pricing
The following outline is provided as an overview of and topical guide to industrial organization:Industrial organization – describes the behavior of firms in the marketplace with regard to production, pricing, employment and other decisions...

. Social network
Social network
A social network is a social structure made up of individuals called "nodes", which are tied by one or more specific types of interdependency, such as friendship, kinship, common interest, financial exchange, dislike, sexual relationships, or relationships of beliefs, knowledge or prestige.Social...

s create mutual understandings to promote the survival of these social unit
Social unit
Social unit is a term used in sociology, anthropology, ethnology, and also in animal behaviour studies, zoology and biology to describe a social entity which is part of and participates in a larger social group or society....

s in the face of scarcity
Scarcity
Scarcity is the fundamental economic problem of having humans who have unlimited wants and needs in a world of limited resources. It states that society has insufficient productive resources to fulfill all human wants and needs. Alternatively, scarcity implies that not all of society's goals can be...

; these social ties operate to prevent the economic actors in traditional societies from behaving to maximize personal profit
Profit (economics)
In economics, the term profit has two related but distinct meanings. Normal profit represents the total opportunity costs of a venture to an entrepreneur or investor, whilst economic profit In economics, the term profit has two related but distinct meanings. Normal profit represents the total...

. Traditional understandings arise as to the relative value of various goods and services; they are not independently renegotiated for each transaction in an impersonal, anonymous market
Market
A market is one of many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services in exchange for money from buyers...

. These traditional understandings acquire the force of custom
Convention (norm)
A convention is a set of agreed, stipulated or generally accepted standards, norms, social norms or criteria, often taking the form of a custom....

, and with increased social complexity may eventually acquire the force of law
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...

.

The Efficient Society
The Efficient Society
The Efficient Society: Why Canada is as Close to Utopia as it Gets is a popular book by Canadian philosopher and author Joseph Heath. First released in 2001, the book is Heath's attempt to explain why Canada 'works'. He argues that Canada's successes as a nation are largely attributable to its...

by Joseph Heath
Joseph Heath
Joseph Heath is a philosophy professor at the University of Toronto. He also teaches at the School of Public Policy and Governance. He received his BA from McGill University, where his teachers included Charles Taylor, and his MA and PhD degrees are from Northwestern University, where he studied...

 discusses the nature of a moral economy in these terms, and argues that Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...

 has achieved the proper balance between social needs and economic freedom
Economic freedom
Economic freedom is a term used in economic and policy debates. As with freedom generally, there are various definitions, but no universally accepted concept of economic freedom...

, and as such comes close to being a moral economy. Other economists such as John P. Powelson relate the concept of a "moral economy" to the balance of economic power
Economic power
There is no agreed-upon definition of power in economics. At least five definitions of power have been used:*Purchasing power, i.e., the ability of any amount of money to buy goods and services. Those with more assets, or, more correctly, net worth, have more power of this sort...

; in their view, a moral economy is an economy in which economic factors are balanced against ethical norms in the name of social justice
Social justice
Social justice generally refers to the idea of creating a society or institution that is based on the principles of equality and solidarity, that understands and values human rights, and that recognizes the dignity of every human being. The term and modern concept of "social justice" was coined by...

.

Right Relationship by Brown and Garver, discusses the urgent need for achieving an economy that is recognized to be a subsidiary of the overall ecosystem of the planet. They address key questions regarding the purpose, function, appropriate size, fairness, and governance of a world economic system and propose new ideas to place our economy in correct relationship with the Earth's ecosystem. They argue that such a moral economy is essential if we are to avoid systemic collapse as our growth economy outstrips the Earth's limited ability to recycle our waste, and as the Earth's inventory of critical raw materials and minerals is used up, in the face of growing population and growing affluence within those populations.

Economics and social norms

In a related sense, "moral economy" is also a name given in economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

, sociology
Sociology
Sociology is the study of society. It is a social science—a term with which it is sometimes synonymous—which uses various methods of empirical investigation and critical analysis to develop a body of knowledge about human social activity...

 and anthropology
Anthropology
Anthropology is the study of humanity. It has origins in the humanities, the natural sciences, and the social sciences. The term "anthropology" is from the Greek anthrōpos , "man", understood to mean mankind or humanity, and -logia , "discourse" or "study", and was first used in 1501 by German...

 to the interplay between cultural
Culture
Culture is a term that has many different inter-related meanings. For example, in 1952, Alfred Kroeber and Clyde Kluckhohn compiled a list of 164 definitions of "culture" in Culture: A Critical Review of Concepts and Definitions...

 mores
Mores
Mores, in sociology, are any given society's particular norms, virtues, or values. The word mores is a plurale tantum term borrowed from Latin, which has been used in the English language since the 1890s....

 and economic activity. It describes the various ways in which custom and social pressure coerce economic actors in a society to conform to tradition
Tradition
A tradition is a ritual, belief or object passed down within a society, still maintained in the present, with origins in the past. Common examples include holidays or impractical but socially meaningful clothes , but the idea has also been applied to social norms such as greetings...

al norm
Norm (sociology)
Social norms are the accepted behaviors within a society or group. This sociological and social psychological term has been defined as "the rules that a group uses for appropriate and inappropriate values, beliefs, attitudes and behaviors. These rules may be explicit or implicit...

s even at the expense of profit
Profit (economics)
In economics, the term profit has two related but distinct meanings. Normal profit represents the total opportunity costs of a venture to an entrepreneur or investor, whilst economic profit In economics, the term profit has two related but distinct meanings. Normal profit represents the total...

.

Prior to the rise of classical economics
Classical economics
Classical economics is widely regarded as the first modern school of economic thought. Its major developers include Adam Smith, Jean-Baptiste Say, David Ricardo, Thomas Malthus and John Stuart Mill....

 in the eighteenth century, the economies in Europe and its North American colonies were governed by a variety of (formal and informal) regulations designed to prevent "greed" from overcoming "morality". In its most formal manifestations, examples such as the traditional Christian
Christianity
Christianity is a monotheistic religion based on the life and teachings of Jesus as presented in canonical gospels and other New Testament writings...

 and Muslim
Islam
Islam . The most common are and .   : Arabic pronunciation varies regionally. The first vowel ranges from ~~. The second vowel ranges from ~~~...

 prohibitions on usury
Usury
Usury Originally, when the charging of interest was still banned by Christian churches, usury simply meant the charging of interest at any rate . In countries where the charging of interest became acceptable, the term came to be used for interest above the rate allowed by law...

 represent the limits imposed by religious values on economic activity, and as such are part of the moral economy. Law
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...

s that determine what sort of contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...

s will be given effect by the judiciary
Judiciary
The judiciary is the system of courts that interprets and applies the law in the name of the state. The judiciary also provides a mechanism for the resolution of disputes...

, and what sort of contracts are void
Void (law)
In law, void means of no legal effect. An action, document or transaction which is void is of no legal effect whatsoever: an absolute nullity - the law treats it as if it had never existed or happened....

 or voidable
Voidable
In law, a transaction or action which is voidable is valid, but may be annulled by one of the parties to the transaction. Voidable is usually used in distinction to void ab initio and unenforceable....

, often incorporate concepts of a moral economy; in many jurisdictions, traditionally a contract involving gambling
Gambling
Gambling is the wagering of money or something of material value on an event with an uncertain outcome with the primary intent of winning additional money and/or material goods...

 was considered void in law
Void (law)
In law, void means of no legal effect. An action, document or transaction which is void is of no legal effect whatsoever: an absolute nullity - the law treats it as if it had never existed or happened....

 because it was against public policy
Public policy
Public policy as government action is generally the principled guide to action taken by the administrative or executive branches of the state with regard to a class of issues in a manner consistent with law and institutional customs. In general, the foundation is the pertinent national and...

. These restrictions on freedom of contract
Freedom of contract
Freedom of contract is the freedom of individuals and corporations to form contracts without government restrictions. This is opposed to government restrictions such as minimum wage, competition law, or price fixing...

 are the results of moral economy. According to the beliefs which inspired these laws, economic transactions were supposed to be based on mutual obligation, not individual gain. In colonial Massachusetts, for example, prices and markets were highly regulated, even the fees physicians could charge..

Other forms of moral economy are more informal. In the sixteenth and seventeenth century, for instance, clergymen often preached against various economic practices that were not strictly illegal, but were deemed to be "uncharitable". Their condemnations of selling food at high prices or raising rents probably influenced the behavior of many people who regarded themselves as Christian and worried about their reputations.

Likewise, during the rapid expansion of capitalism over the past several centuries, the tradition of a pre-capitalist "moral economy" was used to justify popular action against unscrupulous merchants and traders. For example, the poor regularly rioted against grain merchants who raised their prices in years of dearth in an attempt to reassert the concept of the just price
Just price
The just price is a theory of ethics in economics that attempts to set standards of fairness in transactions. With intellectual roots in ancient Greek philosophy, it was advanced by Thomas Aquinas based on an argument against usury, which in his time referred to the making of any rate of interest...

. The Marxist historian E. P. Thompson
E. P. Thompson
Edward Palmer Thompson was a British historian, writer, socialist and peace campaigner. He is probably best known today for his historical work on the British radical movements in the late 18th and early 19th centuries, in particular The Making of the English Working Class...

 emphasized the continuing force of this tradition in his pioneering article on "The Moral Economy of the English Crowd in the Eighteenth Century" (1971). Later historians and sociologists have uncovered the same phenomenon in a variety of other situations, including peasants' riots in continental Europe during the nineteenth century and in many developing countries in the twentieth. The political scientist James C. Scott
James C. Scott
James C. Scott is Sterling Professor of Political Science, formerly Eugene Meyer Professor of Political Science and Anthropology at Yale University. He is also the director of the Program in Agrarian Studies. By training, he is a southeast Asianist.- Research topics :James Scott's work focuses...

, for example, showed how this ideology could be used as a method of resisting authority in The Moral Economy of the Peasant: Subsistence and Rebellion in Southeast Asia (1976).

It must be remembered, however, that sometimes a moral economy may not act in conformity to morality
Morality
Morality is the differentiation among intentions, decisions, and actions between those that are good and bad . A moral code is a system of morality and a moral is any one practice or teaching within a moral code...

 as it is now generally understood. Social pressures to enforce racial segregation
Racial segregation
Racial segregation is the separation of humans into racial groups in daily life. It may apply to activities such as eating in a restaurant, drinking from a water fountain, using a public toilet, attending school, going to the movies, or in the rental or purchase of a home...

 even when willing buyers and sellers would erode the racial barriers, are clearly an example of cultural pressures imposing economic inefficiency, and therefore fall within the purview of moral economy.

Utopian moral economies

In modern times, "utopian moral economies" have arisen to systematically reorganize their economic system to reflect a particular moral or ethical code that rejects the free-market ethos of capitalist economies. Societies that pursue some derivative of Socialism
Socialism
Socialism is an economic system characterized by social ownership of the means of production and cooperative management of the economy; or a political philosophy advocating such a system. "Social ownership" may refer to any one of, or a combination of, the following: cooperative enterprises,...

 or Communism
Communism
Communism is a social, political and economic ideology that aims at the establishment of a classless, moneyless, revolutionary and stateless socialist society structured upon common ownership of the means of production...

 are obvious examples of this impulse, along with small-scale attempts in the form of the Israeli kibbutz
Kibbutz
A kibbutz is a collective community in Israel that was traditionally based on agriculture. Today, farming has been partly supplanted by other economic branches, including industrial plants and high-tech enterprises. Kibbutzim began as utopian communities, a combination of socialism and Zionism...

 and the intentional communities of the 1960s and 70s.

Very few of these experiments - with the possible exception of the kibbutz - turned out the way their founders had imagined. Unsurprisingly, a revolutionary reorganization of some of the most fundamental parts of society often resulted in the severe dislocation of many people's everyday lives and the loss of whole generations to schemes like Stalin's failed policy of collective farming
Collective farming
Collective farming and communal farming are types of agricultural production in which the holdings of several farmers are run as a joint enterprise...

. However, many of the small and pragmatic attempts to make the capitalist economy more moral (e.g. fair trade, moral investment funds, the development of renewable energy sources, recycling, cooperatives, etc.) have grown from the same impulse that drove the utopian revolutionaries.

See also

  • Economic anthropology
    Economic anthropology
    Economic anthropology is a scholarly field that attempts to explain human economic behavior using the tools of both economics and anthropology. It is practiced by anthropologists and has a complex relationship with economics...

  • Free rider problem
    Free rider problem
    In economics, collective bargaining, psychology, and political science, a free rider is someone who consumes a resource without paying for it, or pays less than the full cost. The free rider problem is the question of how to limit free riding...

  • Intentional Community
    Intentional community
    An intentional community is a planned residential community designed to have a much higher degree of teamwork than other communities. The members of an intentional community typically hold a common social, political, religious, or spiritual vision and often follow an alternative lifestyle. They...

  • Just price
    Just price
    The just price is a theory of ethics in economics that attempts to set standards of fairness in transactions. With intellectual roots in ancient Greek philosophy, it was advanced by Thomas Aquinas based on an argument against usury, which in his time referred to the making of any rate of interest...

  • Moral hazard
    Moral hazard
    In economic theory, moral hazard refers to a situation in which a party makes a decision about how much risk to take, while another party bears the costs if things go badly, and the party insulated from risk behaves differently from how it would if it were fully exposed to the risk.Moral hazard...

  • Non-market economics
  • Perverse incentive
    Perverse incentive
    A perverse incentive is an incentive that has an unintended and undesirable result which is contrary to the interests of the incentive makers. Perverse incentives are a type of unintended consequences.- Examples :...

  • Social dilemma
    Social dilemma
    Social dilemmas are situations in which collective interests are at odds with private interests. Such situations arise when faced with prioritizing either short-term selfish interests or the long-term interests of a group, organization, or society. Many of the most challenging issues, from the...


External links

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