III. Moral Choice in the Private Property Order

We now look at the literature that discusses differing moral consequences of these two models. Starting with the private property order, the need to make a living under conditions of volunteerism and free association requires that people conduct themselves in a manner acceptable to their trading partners. This phenomenon has come to be known as the "doux-commerce thesis." It is the idea that in a market setting, gentle manners, polish, and cordiality are the result of self-interest. Many political theorists have stressed the importance of the doux-commerce thesis including Montesquieu, Smith, Hume, Condorcet, and Thomas Paine.

Adam Smith notes that the Dutch, who are the most commercial nation in the world, "are also the most faithful to their word," and, he says, this relationship holds in regard to the English and the Scottish who are respectively less commercial and less faithful to their word. Smith says that honesty is not attributable to national character but is reducible to self-interest. As Smith puts it, "When a person makes perhaps 20 contracts in a day, he cannot gain so much by endeavouring to impose on his neighbours, as the very appearance of a cheat would make him lose." In other words, dealers are afraid of losing their reputation in the eyes of those with whom they have repeated dealings. Smith concludes that "whenever commerce is introduced into any country, probity and punctuality always accompany it" (1997, p. 17).

Tullock (1997) works out Smith's insight in light of modern game theory. In a five-sided, single-play game where players must choose between "cooperate" and "defect," all players chose the "defect" response, resulting in a prisoners' dilemma. However, when the game was played repeatedly and players were allowed to form groups and communicate freely, all players chose the "cooperate" response. Tullock argues that their change in response is due to the reputation effect. "Anyone who chose to defect in any given game would, in essence, put himself in a situation where it would be extremely difficult for him to get partners for any future game" (p. 23). He adds that the reason that the prisoners' dilemma disappears under repeated plays is "simply that people voluntarily choose their own partners" (pp. 23-24). The ability to choose one's playing partner, says Tullock, adds a "don't play" option to the above two-strategy game. The "don't play" option raises the expected cost of cheating. Thus, he concludes, "a reputation for being 'sound' is a valuable asset, and we should expect people to make every effort to get it" (p. 25).

Marc Ryser (1997) shows how the Japanese banking system uses Tullock's "don't play" strategy to reduce bad checks and default rates on promissory notes. Firms that issue bad paper are reported to the central clearinghouse by both the issuer's bank and the collection bank of the person who received the check. The central clearinghouse publishes the names of defaulters in newspapers and forbids its member banks from doing business with them, effectively shutting down these firms (pp. 227-228).

Avner Greif's (1997) study of eleventh-century Maghribi traders attests to the power of the "don't play" option to constrain moral choice when people have the opportunity and the desire for repeated dealings. Interregional trade by these Jewish traders required the hiring of agents to do business in distant markets. The Maghribi traders minimized the agency problem inherent in this relationship by organizing agency relations within an economic institution that Greif refers to as a "coalition" (p. 148). Coalition members agreed to hire only from within the coalition and to pay their agents higher wages than what could be received as nonmembers. Members also agreed to never employ agents who had previously cheated while in the employ of coalition members. Furthermore, agents caught cheating could be cheated by other coalition members with impunity. The coalition held relatives responsible for members' debts, thus preventing older agents from cheating near life's end. It was also the duty of members to provide each other with information about markets, prices, and the actions of fellow members. This "gossip" information, as Merry (1997) illustrates in a different context, was the condition that enabled members to form consensus and impose sanctions.

Benson (1997) details the existence of honest relations in commerce on an even larger scale with the evolution of the Law Merchant, the body of rules, customs, and practices that rose spontaneously between the eleventh through the fifteenth century and formed the basis of modern Western mercantile law.

Albert Hirschman's quote of Samuel Ricard sums up "doux-commerce thesis." very nicely:

Ricard argues, as Hirschman points out, that commerce is a "powerful moralizing agent which brings many nonmaterial improvements to society even though a bit of hypocrisy may have to be accepted into the bargain" (1982, p. 1465).

Commerce-engendered values are often referred to as "bourgeois" values, a term associated with the middle class and used by John Locke to refer to his "ideal" man. Locke's bourgeois man is of humble origin and has overcome the deficiencies of his birth by using his ability. He is self-directed, self-disciplined, and prudent in judgment. He is a creature of enlightened self-interest, and is the moral equal of other men with the natural rights of life, liberty, and property (Wood, 1983, pp. 124-135).

Maria Ossowska (1970) selects Benjamin Franklin as the incarnation of the bourgeois morality in America and Daniel Defoe in England. These are writers, she says, that "propagated as positive the slogans and values that were depreciated by their critics" (p. 160). Ossowska cites Max Weber's contention that Franklin was "the apostle of the ideal of a man worthy of credit" (p. 162). To gain such a reputation one must be punctual, avoid waste, be always at work, and avoid the tavern. Franklin's thirteen principles for living the perfect life are: temperance, silence, order, resolution, frugality, industry, sincerity, justice, moderation, cleanliness, tranquillity, chastity, and humility. Ossowska notes that Franklin admitted that in regard to the last two "he did not arrive at complete success" (p. 162).

McCloskey attributes the development of bourgeois virtue, in large part, to the overall necessity and pervasiveness of talking and persuasion in commercial relations:

Though not normally thought of as a commerce engendered value, "charity" may also be included on the list of bourgeois virtues. Smith explains in the first sentence of his Theory of Moral Sentiments, that where there is no coercion, some people will naturally be inclined to be benefactors to others:

Smith identifies "sympathy" as the source of people's "fellow-feeling" for the misery of others. Through their imagination, people feel, in varying degrees, the misery of others and are thereby excited to relieve it. Their charity reduces not only the misery of others but their own discomfort as well (p. 4). Charity inspires gratitude in the receivers and excites reciprocal feelings and gestures of repayment. As Smith explains,

Reciprocal gestures of gratitude, by reinforcing the "propriety" of helping others, increases the tendencies for generosity both in the benefactor and in those who observed the gratitude. Thus is formed a circle of mutually reinforcing generosity and gratitude, and as McCloskey agrees, charity becomes a predominant virtue of bourgeois morality.

McCloskey also hints at the thesis of this paper when she describes how moral choice is constrained in Small Town, America.

Urban anthropologist Jane Jacobs (1992) says that morality divides itself naturally into two moral "syndromes" because humans have only two distinct ways of making a living: taking and trading (51-53). She calls her two syndromes "commercial" and "guardian," after the segments of society engaged in these functions (23-24). The bourgeois virtues of the private property order are nearly identical with her commercial syndrome virtues, and as we shall see, her guardian syndrome virtues are similar to those of the bureau.