Two and a Half Cheers for the Midwestern Bourgeoisie: Role of the Virtues in Tempering Business Decisions

A recent book (The Bourgeois Virtues: Ethics for an Age of Commerce, D. N. McCloskey), raises the matter of the role of the virtues in business and economic choice, arguing that capitalism can indeed, be virtuous or at least better than the alternative(s). This argument is especially timely in light of the apparent excesses on Wall Street and in some banking/financial institutions. Excessive greed and often the lack of business ethics contributed in substantive ways to the financial crisis and near economic meltdown we have been experiencing. As McCloskey, (2006, pp. 1-2) argues (in setting the stage for the complex argument made in this 616-page book!): “The book … is directed toward you who are suspicious of the phrase ‘bourgeois virtues,’ pretty sure that it is a contradiction in terms. And the book is directed, with less optimism about changing their minds, toward you who think the phrase is worse: a lie. ‘Bourgeois virtues’ is neither. The claim here is that modern capitalism does not need to be offset to be good. Capitalism can on the contrary be virtuous. In a fallen world bourgeois life is not perfect. But it’s better than any available alternative. American capitalism needs to be inspirited, moralized, completed. Two and a half cheers for the Midwestern bourgeoisie (middle-class, small business owners…. yet)… Many a businessman is an ethical shell or worse. Even the virtues of the bourgeoisie, … do not lead straight to heaven.”

The Myth of the Rational Market: Nudging Each Other Away from Fool’s Gold

A flurry of media commentary and several new books are focused on the recent financial crisis and near economic collapse. A Newsweek article by Zakaria (2009), “Greed is Good (To a Point),” suggests reconsidering the role of greed in capitalism. This is also the theme in Fools Gold (Tett, 2009), a story about the way derivatives markets have evolved: showing greed at its worst. In many ways this is the core source of the current set of problems. In some sense, these perspectives are integrated in The Myth of the Rational Market by Fox (2009), who traces the thinking on the efficient market hypothesis, now understood for what it is: a myth. Both books are based in large part on interviews with major players in the crisis. There are also books drawing mainly on science, but still quite accessible to general readers, as represented in Nudge by Thaler and Sunstein (2008). Both have done extensive research on human foibles in economic choice. There is also Animal Spirits (Akerlof and Schiller, 2009), a book about what Keynesian economics is really about, a look at human forces at work. Akerlof is a Nobel prize winner in economics, who before this has pointed to the problems with presuming rationality in real markets. Schiller is one of the few economists who predicted these events.