Acton Commentary

The Mystery and Morality of Markets--Explained!


A mother asks her son to run to the market for some bread. An investment banker asks a colleague how the bond market is doing. A manufacturer asks a consultant if there is a market for a certain new product. Given these different uses of the word, market, is there any wonder that people often misunderstand what is meant by “the market”?

Ronald Nash (professor of philosophy and theology at Reformed Theological Seminary in Orlando, Florida), in his book Poverty and Wealth, defines the market as a “set of procedures or arrangements that prevail throughout a society that allows voluntary exchanges.” Put another way, according to Nash, “the market is the framework of customs and rules within which specific voluntary exchanges in specific markets take place.” The market is not “a specific place or thing,” nor is it “simply the collection of particular markets in which goods and services are exchanged.” Rather, according to Nash, the thing we call “the market” is a “spontaneous and impersonal order within which individual human beings make economic choices.”

Nash explains that the market is like an urban traffic pattern. Over time, a city develops, a traffic pattern emerges as drivers respond to the street grid, traffic lights, road signs, and the like. It is impersonal in that it applies to everyone equally, yet it is spontaneous in that it evolves out of a process of trial and error. Further, “while the traffic pattern lays down rules, people still have a considerable degree of freedom as to how and where they will drive.” In this way, it produces order, prevents harm, and allows for freedom. The market functions in much the same way. Certain rules–forbidding coercion, force, fraud, theft, and the like–establish the context for economic transactions, and the market develops as people buy and sell within it.

A clear understanding of what is meant by a market economy is rarely grasped. The market, while possessing practical virtues, remains essentially morally neutral, and thus needs a broader moral framework in order to operate ethically. The term the market is really a metaphor; the network of exchange we call the market is, in reality, a process rooted in human action and choice, reflecting varied and subjective values possessed by market actors. In this way, the market becomes a very potent tool for the diffusion of knowledge by communicating the real costs of goods and services; however, it would be a mistake to think of it as possessing an ethic in itself.

John Paul II expresses just such an understanding of the relationship between morals and markets in his encyclical letter Centesimus Annus . As he explains, “Economic activity, especially the activity of a market economy, cannot be conducted in an institutional, juridical, or political vacuum” (no. 48). In this manner, the pope affirms an “economic system that recognizes the fundamental and positive role of business, the market, private property, and the resulting responsibility for the means of production, as well as free human creativity in the economic sector,” but he flatly rejects a “system in which freedom in the economic sector is not circumscribed within a strong juridical framework which places it at the service of human freedom … the core of which is ethical and religious.” In other words, the free market, to remain fit for the human person, must be tempered by a just political order and a healthy culture.

It is essential for defenders of the free market to understand this link between culture and the market. The market does not function in a vacuum; it requires a legal, cultural, and social context. For example, many critics have warned against the danger of libertinism in a free-market society. In general, these critics are pointing out that we live in an age when everything is for sale, including many things–such as the human body–that should not be. This libertinism, however, does not arise out of the nature of the market but out of our particular cultural and historical situation. Thus, the apparent alliance between free markets and libertinism can be replaced with an alliance between free markets and an adequate philosophy of the human person-one that considers the moral dimension and spiritual worth of human persons.

By definition, we cannot choose to live in a world without markets. But we can choose what kind of markets will develop. Will they be free or planned? Will they provide a context for virtue or opportunity for violence and corruption? Answering such questions and striving to establish markets that are both free and virtuous are worthy tasks for all Christians concerned about the justice and righteousness of markets, politics, and culture.