The Moral Foundation of Economic Behavior

Events ranging from the Enron scandal to our current global financial meltdown remind us that immoral behavior can undermine even the mightiest economies. This book explains why moral beliefs can and likely do play an important role in the development and operation of market economies.

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This book explains why moral beliefs can and likely do play an important role in the development and operation of market economies. It shows why the maximization of general prosperity requires that people genuinely trust others - even those whom they know don't particularly care about them. It then identifies characteristics that moral beliefs must have for people to trust others even when there is no chance of detection and no possibility of harming anyone. It shows that when moral beliefs with these characteristics are held by a sufficiently high proportion of the population, a high trust society emerges that supports maximum cooperation and creativity while permitting honest competition at the same time. The required characteristics are not tied to any specific religious narrative and have nothing to do with the moral earnestness of individuals or the set of moral values. What really matters is how moral beliefs affect the way people think about morality. The required characteristics are based on abstract ideas that must be learned so they are matters of culture, not genes, and are therefore potentially capable of explaining differences in material success across human societies. This work has many theoretical and empirical implications including but not limited to social capital theory and trust-based economic experiments.