There is now widespread consensus that market economies outperform other political-economic systems in generating material wealth. With all their various, and well catalogued, faults, market economies nevertheless allocate resources more efficiently and lead to greater production than centrally managed economies. By some estimates (see, for example, Deirdre McCloskey's Bourgeois Equality [University of Chicago Press, 2016]), the average person alive today is some 100 times as wealthy, in real terms, than the average person alive in 1800. In 1900, the proportion of people worldwide living at the level of subsistence, or $1–3 per person per day, was approximately 90%; today it stands at about 5%—and it is falling rapidly. In 1980, 90% of all Chinese lived at the levels of absolute poverty; today, only 10% do. So in less than forty years, over 1 billion people in China alone have risen out of poverty. In all likelihood, in just the next decade or so we will see the number of people living at absolute poverty decrease to zero. This is indeed one of the most important and significant achievements in all of human history, though a story that somehow many of us do not know.
Yet, as impressive as these numbers are, wealth is obviously not the only thing that matters in life. What effect have markets, and their increasing prosperity, had on our social relations and on our virtue? Are there moral reasons, not just economic reasons, to support market economies? Nathan Orman and Robert Taylor argue that the answer is yes.
Their two books offer examinations of the moral assumptions and moral implications of the processes of markets, though they approach the topics from very different perspectives. Oman is a professor of law at William and Mary, whereas Taylor is a professor of political science at the University of California, Davis. Oman is an expert on legal contracts, whereas Taylor's expertise is in the republican tradition of thought in political theory. And their respective topics are quite different: Oman is concerned to explore the importance of contract law for both the development and the maintenance of markets; Taylor, for his part, is concerned about whether markets provide sufficient protection from domination by arbitrary power, which he takes to be a central concern of republican thought. Despite their different approaches, the two books combine to provide a surprisingly powerful moral argument in favor of a market economy.
Oman begins his case by acknowledging the “economic” argument in favor of markets that bases it on a claim about the market's ability to allocate resources efficiently, but he believes this argument, by itself, is insufficient. If “efficient allocation of resources” is understood merely as maximizing the satisfaction of preferences, then this would include the satisfaction of morally dubious, even evil, preferences. As he tells us, “Judging the market through the lens of economic efficiency reduces the moral significance of the market to a single issue: the allocation of resources. Although this is surely an extremely important part of what markets do, they do much more than this” (12). What else do, or can, they do? Oman's argument is that markets can and should be defended not on grounds of efficiency, but, rather, on the grounds that they give rise to “moral goods of liberal cooperation, wealth, and certain virtues without generating unacceptable pathologies” (23).
Oman conceives of exchanges in a “well-functioning market” as requiring two central features: they are mutually voluntary, and they are (therefore) mutually beneficial. If one or more parties to a transaction does not benefit from it, or does not believe she benefits from it, she will walk away; by contrast, if all parties agree, we can conclude that they believe they do benefit, at least by their own lights. What makes a market “well-functioning,” according to Oman, is precisely its guarantee that no exchanges take place that are not both mutually voluntary and thus mutually beneficial—or, at the very least, are believed, expected, or hoped to be mutually beneficial by the respective parties to it. But what institutions are required to create a “well-functioning market”? Here Oman directs our attention to an element that is little observed in the literature. One might have expected a defense of private property, and perhaps of a police and court system requisite to protect it and adjudicate disputes about it. But Oman's focus is on contracts. His claim is that contract law is a necessary support for markets because of the role it plays in generating trust among the market participants, particularly when the participants are strangers to one another.
So Oman's argument proceeds thus: Markets can generate positive moral virtues and hence are desirable apart from their relative efficiency. To generate those positive moral virtues people must enter into mutually voluntary and mutual beneficial transactions. But to enter into such transactions, people must be willing to trust one another not to cheat or renege on agreements. To support such trust, there must be robust legal and cultural norms regarding the creation, execution, and protection of contracts. Hence contract law, as well as the political and cultural institutions supporting it, is a necessary prerequisite for a well-functioning market economy—and thus for the moral goods Oman believes it portends.
The idea that contracts are an important part of a market economy is not new. Adam Smith, for example, claimed that protecting everyone's “personal rights, or what is due to him from the promises of others,” was one of the three “most sacred laws of justice,” the other two being those that “guard the life and person of our neighbor” and those that “guard his property and possessions” (Theory of Moral Sentiments [1759], II.ii.2.2). And of course there is a long tradition in British common law that developed around the necessity of respecting promises and contracts. But Oman's contribution is to argue, first, that market economies—and, in particular, the prosperity they have generated—could not have arisen without a robust respect for the sanctity of contracts; and, second, that there is an important connection between contracts, the markets they support, and the “liberal virtues” markets encourage.
What exactly are these virtues? Oman argues that “commerce inculcates valuable habits,” particularly in light of the fact that they “require that one consider the point of view of others and alter one's behavior to satisfy their desires” (43). If all exchanges must be mutually voluntary, then each party to any exchange has an opt-out option, or the right to say “no, thank you” and go elsewhere. That means that if I want to exchange with you, I must think about your desires, not only about my own, and I must consider what value I can provide to you, not only what value you can provide me. Thus I am encouraged, according to Oman, to engage in “deliberation, the ability to consider an opposing viewpoint” (43). But this process of considering others’ viewpoints further encourages me to cultivate an “ability to relate to strangers according to impersonal criteria” (43), instead of as members of a particular family or tribe, and to “break down aristocratic habits” and relate to others “peaceably as equals” (44). Oman's argument is that these three habits of deliberation, peaceful and impersonal exchange, and moral equality are cardinal virtues of a liberal order that are worthy of defense. Moreover, because the market exchanges that encourage these virtues depend on the protection of promises and contracts, contract law plays an integral role in exchange, in markets, and thus in a larger liberal order. For that reason, Oman argues, participation in contract making in market orders is not to be lamented, but, instead, “is a thing to be cherished and supported” (58).
A good deal of Oman's book is taken up with examining what kinds of contracts, and what kind of contract law, are required to support the liberal order and liberal virtues he extols. So, for example, he examines and defends specific conceptions of legal “consideration,” “remedies,” and “boilerplate” (chaps. 5, 6, and 7, respectively), arguing that far from pointless minutiae these are central and generally beneficial aspects of contract law that have arisen from a long and hard-fought process of trial and error. He also includes a chapter on what he calls “pernicious markets,” which are markets that, for example, can cause harm (like pollution) or that inject commercial values where they do not belong (like families). One might quibble with particular aspects of his treatment, but a great virtue of his overall argument is the rejection of a priori principles about contracts or property, instead relying on this claim: “Contracts ought to be enforced to support well-functioning markets—that is, markets that deliver liberal virtues, peaceful cooperation, and wealth. If markets fail to deliver these goods but instead become pernicious, then we lack a good justification for enforcing the contracts that sustain those markets” (180). Thus Oman's argument holds contracts and their enforcement to be a value that is dependent on their ability to generate the “liberal virtues” he believes they can. But Oman is not dogmatic: in good classical political-economy fashion, he views these as robust defaults. Because contracts (and property) in general encourage these “liberal virtues,” they should for that reason be supported—unless and until a case arises in which a particular contract does not conduce to those worthy ends, in which case we make an exception. But exceptions nevertheless prove the rule.
Turning now to Taylor's slim volume, his argument takes as its starting point what he takes as the undeniable good of limiting the arbitrary power that some may exercise, or try to exercise, over others in human societies. He argues that no “contemporary school of political theory has been more focused on the singular evil of arbitrary power than republicanism” (1), and for that reason he focuses on republican thought and claims that it can provide the tools for the construction of a conception of a virtuous polity that has as one of its hallmarks the minimizing of domination. Taylor's contribution to the republican tradition is to claim that the best way to limit such arbitrary power is, as he puts it, “empowering voice indirectly by resourcing exit” (6). Taylor builds on the important work of Hirschman (1970), who identified “voice” and “exit” as possible limiting factors of power. Taylor builds on Hirschman's claim that voice is often relatively ineffective at protecting us from others’ exertions of power unless it carries a credible threat, which the real possibility of exit constitutes. Taylor's example: the “domineering husband” is unlikely to listen to the complaints of his “abused wife,” unless her “exit [from the marriage] is feasible” (5). His recommendation: “policy reforms that reduce the cost of exit for the most vulnerable and improve the responsiveness of institutions via competition can make their threats of exit increasingly credible and thus persuasive” (17–18).
One worry a critic might raise is that if we grant the government sufficient power to curb arbitrary power, especially in interpersonal relationships, then perhaps the government might be susceptible to abusing that power itself, leading to an increase in overall domination in society. In light of this, Taylor recommends what he calls the “privatization option” (24), which is the “indirect empowerment of voice by promoting competition and resource exit,” rather than “direct empowerment” of government agencies to intervene in citizens’ choices, which indeed “runs the risk of increasing net domination” (25). Taylor directs his argument at “progressives,” who he fears “have made a fetish out of social democracy and have as a result given insufficient attention to other means of reducing domination and exploitation” (26). In particular, Taylor argues that “encouraging effective competition in marriage markets, labor markets, and even locational markets can counter the dominating effects of marital, market, and political power, respectively” (31). Taylor's recommendation, therefore, is to create the conditions necessary for market competition as extensively as possible, and, where necessary, to subsidize “exit” to enable especially the most vulnerable members of our society to make credible threats to those who would dominate them. If they can make credible threats of exit, Taylor argues, then this has the effect of leveling power relations and thus reducing the ability of some to dominate others.
What would the subsidies Taylor recommends look like? One of Taylor's main examples is families. He argues that “it is essential that the government protect women from physical coercion,” but that alone is not enough: it must also “ensure a fair division of property and future income by enforcing alimony and child-support payments,” as well as institute “‘common-property’ rules” (37). Moreover, to minimize the potentially vulnerable economic position of “dependent wives,” Taylor suggests that states might offer vouchers for job retraining or “could guarantee conditional or unconditional basic incomes”—each of which can “make marital exit a feasible option” for them (38).
Taylor's argument is not that domination is the only social evil deserving institutional attention and protection, but he does argue that domination is a “unique evil” (42). It is, he believes, the source of many, perhaps most, of the other evils we worry about in a liberal society, and hence it warrants special focus. When it comes to more standard areas of markets—such as buying and selling, choosing where to work (or not work), entering or exiting industries or fields, and so forth—Taylor's argument is that an open market is people's best protection against domination. If I can choose whether to buy from or sell to you, whether to work for you, whether to open a business in competition with you, and so on, then you do not dominate me in these respects. I may make mistakes, and my attempts might end up failing, but Taylor argues that in such cases the mistakes and failures are my own, and are thus an expression of my own freedom and not others’ domination of me. Because of the “unique evil” of domination, any worries about lack of success or failure to compete pale in comparison.
One sustained set of objections Taylor examines is the extent to which other republican theorists, like Pettit and Sandel, highlight the abuses not of public actors but of private, and thus call for state action in the service of ends like equality. Whereas classical liberal theorists like Smith or Hayek worried about the dangers of a state with powers to dominate, Pettit and Sandel (and others) worry about the power that corporations or other private entities can wield over workers, consumers, or citizens—and hence recommend remedies like protections of unions, regulatory “blocked exchanges,” and anticollusion legislation (102–4). Taylor argues that upon inspection these arguments arise not from dispassionate and objective review of the best ways to minimize domination, but instead from “atavistic hostility to markets and commercial society” (104). That seems ungenerous, however: even if it is true that these critics oppose markets and commercial society—which Pettit, Sandel, Walzer, and Gourevitch (all of whom Taylor cites) largely do—nevertheless it seems reasonable to suppose that large corporations might be able to move the market, not to mention lobby the government for favorable regulatory policy. If so, it is fair to raise worries about them and to look for remedies, including legislative and regulatory remedies.
Yet Taylor argues, “Such regulatory intervention, though, is vulnerable to criticism on the republican grounds of anti-paternalism and anti-moralism” (102). Thus he adverts to the republican tradition itself to counter the interventionist tendencies of these republican theorists. If the goal is to minimize domination, then, Taylor argues, we must recognize the extent to which legislation and regulation often result from preferential judgments that object to the substance of people's choices, rather than to whether those choices were made under coercion or duress. Taylor claims in fact that many of the particular choices to which others in the republican tradition object actually result from “a blatant form of moralism” (103) by which critics object simply to the substantive choices people make; if so, Taylor claims that their call for third-party intervention in these choices “violates republican neutrality” (104). He argues, then, not for what he calls the “socialist ‘labor republicanism’ advocated by Gourevitch and Sandel,” but rather for what he calls the “market model of republicanism,” which, Taylor contends, “remains the only strategy that answers republicanism's distinctive call to end arbitrary interference by private and public actors in the lives of citizens” (p. 107; emphasis in the original).
As with Oman's book, there are elements of Taylor's with which one might quibble. Perhaps one might argue, for example, that he underestimates the dangers of private domination; perhaps his defense of the “economic model” of republicanism leaves citizens too open to powerful market forces or corporations; or perhaps he is not sufficiently concerned with the problems to which great inequalities in wealth can lead. Despite these potential worries, however, Taylor's book offers a careful and sophisticated argument, and in the process offers a new and refreshing take on the venerable tradition of republicanism. Taken together, Taylor's and Oman's books offer a complementary justification for a liberal commercial society that relies not merely on efficient allocation of resources but instead on moral concerns that are, or ought to be, shared across a wide variety of perspectives. For those reasons, the books repay close attention and are welcome additions to the ongoing conversation about the moral place of markets in a humane and just society.
