The Moral Economy: Why Good Incentives Are No Substitute For Good Citizens,
Yale University Press, 2016
This is a short masterpiece that seamlessly blends economic theory with ethical and political philosophy. The fundamental argument of the book is conveyed through the compelling tale of the Haifa day care centres, where a fine was imposed on parents who were late in picking up their children at the end of the day. But it backfired because parents doubled the fraction of time that they arrived late. Why did it backfire so badly? Bowles argues very convincingly that the “counterproductive result of imposing these fines suggests a kind of negative synergy between economic incentives and moral behaviour. Placing a price on lateness, as if putting it up for sale, seems to have undermined the parents’ sense of ethical obligation to avoid inconveniencing the teachers, leading them to think of lateness as just another commodity they could purchase” (p.5).
To reinforce the argument, Bowles cites the example of the small tax on plastic grocery bags that Ireland imposed in 2002, which superficially resembled the Haifa day care fine. But the difference between the two is very instructive. In Haifa the fine included no justification for the punishment, with the result that there was no moral message attached to it. The Irish plastic bag tax, by contrast, was preceded by extensive public deliberation and a substantial publicity campaign that dramatised the noxious role of the bags in blighting the environment. In Haifa the fine appeared to say “lateness is ok as long as you pay for it”, while in Ireland the fine was accompanied by a strong moral message that seemed to say “don’t trash the Emerald Isle”.
The political message to reform-minded politicians might be distilled as follows: if you genuinely want to effect transformative change, you’ll need to harness the power of civic action and, to that end, you must appeal to both material interests and moral sentiments, “framed so that the two work synergistically rather than at cross-purposes” (p.220).
Bowles trawls through the works of the great philosophers – taking in Aristotle, Machiavelli, Mandeville, Hume, Smith, Bentham etc – to explore the most robust institutional design for a state, or a “constitution for knaves” as he calls it. He makes great play of Hume’s maxim for good governance: “In contriving any system of government …every man ought to be supposed to be a knave and to have no other end, in all his actions, than private interest. By this we must govern him, and, by means of it, make him, notwithstanding his insatiable avarice and ambition, cooperate to public good”. In a similar spirit, Bowles quotes the “duty and interest” injunction of Bentham, who enjoined legislators to “make it each man’s interest to observe …that conduct which it is his duty to observe”.
Although Adam Smith is largely believed to have glorified self-interest, Bowles provides a much needed corrective by reminding us that Smith was first and foremost a moral philosopher, who opened his Theory of Moral Sentiments, with a very different perspective on the human condition, saying: “How selfish soever man may be supposed, there are evidently some principles in his nature that interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it”. In other words, says Bowles, the founding father of political economy did not overlook the appeal of ethical and other-regarding motives.
Drawing on classical philosophy and contemporary behavioural economics, Bowles suggests the following extension to Hume’s maxim about knaves: “good policies and constitutions are those that support socially valued ends not only by harnessing self-interest but also by evoking, cultivating, and empowering public-spirited motives” (p.222).
This book ought to be read by every politician in the land because its judicious insights into what really motivates citizens and consumers could help to effect and sustain progressive change and enable us to meet great societal challenges such as climate change and dignified eldercare.
Kevin Morgan, November 2018