Wednesday, June 3, 2009

Economics: Sin as an Irrelevant Concept?

TORONTO, ONTARIO - In an hour of the On Point radio program on Monday discussing the bankruptcy of General Motors, guest Allan Meltzer of Carnegie Mellon and the American Enterprise institute made the statement: "Capitalism without failed companies is like religion without sin--it doesn't work." While I ironically agreed with much of his assessment of the government intervention in the auto industry, this kind of statement is exactly why I often lose respect for the right wing in the United States--they often don't see how their cultural perspective gets in the way of their own ideology, even when their logic is actually sound.

On its face, Meltzer's statement could be easily seen as culturally arrogant. Many non-western religions do not contain a concept of sin, at least in explicit terms, and thus practitioners could hear their religion being called non-functional. Buddhists, for example, who fundamentally believe in enlightenment by being freed from desire and hence suffering, would find it pretty hard to believe that an explicit system of divine moral codes is necessary as the foundation of religious faith. What a number of non-Abrahamic faiths tend to share is not a set of moral rules, but a sense of achieving balance with world, which is often situational rather than absolute.

Yet, that's not what really bothered me about the statement, as an educated person from a faith without an explicit concept of sin should still be able to understand the meaning of the statement. The concept of feeling "bad" (out-of-balance if not guilty) for doing the "wrong thing" (whether categorized as a sin or not) is a nearly universal concept, so the use of what sounded to me like Catholic vocabulary should be not be taken as an insult by people from other cultures when Meltzer likely would be just as happy with a more general concept in his analogy.

What bothered me was that the mind-set of sin seems in conflict with the free market economics Meltzer was trying to espouse. Human beings are expected to feel guilty (or "bad") when they realize that they have done the wrong thing and then make some effort to repent or otherwise be forgiven (or come back in balance). Corporations and businesses have no capacity to feel guilty, or really to feel anything at all. If they do the wrong thing, there is no incentive to repent--in fact, unless laws require them to do something, the boards of public corporations have a legal responsibility to their shareholders to NOT do anything that would reduce profits. Only in the most direct of consumer markets--where customers can become upset with a company and boycott its products--can the free market actually lead to changed behavior, and in some sense that kind of emotional behavior is even against the view of a rational free market, in which consumers base their decisions on the qualities (cost and utility) of the products in the markets alone.

The right wing often seems to think that a free market without government regulation actually will be self-correcting, that corporations will somehow "repent" for any "sins" that they commit. Yet, without laws and regulations holding the companies accountable for actions against the interest of society, that correction won't occur. This fundamental conflict between free-market and Christian thought is not necessarily unresolvable, but is rarely acknowledged and I suspect leads to problems making laws that adequately reflect either perspective or a balance thereof.

Again, I don't think any of this has much, if anything, to do with the government rescues of Chrysler and General Motors, which are about direct government intervention and not regulation. Yet, by invoking Christian rhetoric that points to what I consider a fundamental disconnect, I am led to wonder about quality of the rest of his logic, even if I started out inclined to find it sound (and, ultimately, do find it so). Such is the real danger of invoking the concept of sin in an free market economic context.

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