Free Markets: Creation or Destruction of Virtues?

          The impact of the free market on human virtues is a concept that is widely disputed. Many have argued that the free market effectively destroys morals. A few characteristics of the market economy, however, inevitably generate virtues among its participants.

          Many would argue that consumer satisfaction is (in general) high in the free market relative to a command system. One key difference between the market and command economic systems is the process of deciding what will be produced. In a command system, government makes the decision and bases it on their evaluation of optimal resource distribution. A market economy, on the other hand, has its resources allocated according to consumer demand – since firms respond with production in the pursuit of profit. Consumers get higher utility, or satisfaction, from consuming products that they want most. It is not uncommon for a command system’s government to allocate resources in such a way that inadequately satisfies consumers’ desires.  In a market economy, goods are produced according to desirability, at least partially eliminating the problem of inefficient resource allocation. With increased consumer satisfaction, some increased (at least temporary) happiness is a likely result. One psychology theory, called the feel-good do-good phenomenon, might help explain more virtuous behavior in the marketplace. Psychologist David Myers describes this theory by saying, “a mood-boosting experience (finding money, succeeding on a challenging task, recalling a happy event) has made people more likely to give money, pick up someone’s dropped papers, volunteer time, and do other good deeds. Psychologists call it the feel-good, do-good phenomenon,” (Myers, 479).  In other words, small pleasures from consumer satisfaction and mutually beneficial free market transactions could very well promote virtuous behavior in the marketplace.

          Free market incentives are another characteristic that may indirectly serve as a virtue creator. A bad reputation can easily result in enough lost business for a firm to shut down.  Many firms, especially in smaller communities, depend on repeat customers. Together, these factors incentivize quality products and service. One could even argue that free market incentives result in a cycle of operant conditioning that leads to growth of marketplace virtues. Assuming a producer depends on repeat customers to some degree, it is likely he will attempt to satisfy his customers in hopes they will return. Consumers who initially buy the product seek satisfaction in terms of quality and service. If the producer’s attempt was successful and the customer is happy, the consumer’s visit to the store was positively reinforced – increasing his likelihood of returning. Likewise, if the consumer returns, then the producer’s extra effort was positively reinforced – increasing the likelihood of further virtuous behavior by the producer.