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What I Believe (about Markets and Morals)

by Michael Shermer, Sep 07 2010

A reply to Jerry Coyne

In his endearingly titled blog, “Michael, we hardly knew ye,” the venerable evolutionary biologist and slayer of creationist dragons Jerry Coyne (author of Why Evolution is True) wonders if I’ve gone ‘round the bend over capitalism and sold my skeptical soul to the Templeton Foundation, the alleged evil subsidizers of religious and capitalist propaganda. Allow me to set the record straight (again) for all my critics out there (and in reading the comments to Jerry’s blog there’s more than I thought, and many of them are darned right caustic!).

First, on the Templeton Foundation, I was invited to write a monthly column for their new magazine, Big Questions Online, and as with my work for them in years past, I’m allowed to write just about anything I like. It is interesting that Jerry and his commentators would hone in on this, my second column, ignoring my first column, which was a stinging rebuke of religion in general and Deepak Chopra’s New Age spirituality in particular. No one could possibly read my list comparing God 1.0 to God 2.0 (omnipresent—nonlocal; fully man/fully God—wave/particle duality; miracle—wave function collapse, etc.) and conclude that I’m the pay of a religious propaganda machine. And if that doesn’t seal the deal for ya, the God critique was originally my second column, but the BQO editors liked it so much that they bumped it up to number 1, and it was, in fact, the most popular article on the site for the entire month. So there!

Second, I think I made a mistake in mentioning “capitalism” at the beginning of the column on markets and morality, because (1) the article is really about trade, not capitalism per se; and (2) that word seems to set some people off into MichaelMoorish-like paroxysms of rage, engaging the limbic system full throttle and governing back the prefrontal cortex, resulting in red-faced, spittle-spewing tirades about Gordon Gekko and Bernie Madoff. In fact, as I depict trade (especially in my book The Mind of the Market, which, curiously, few of my critics have actually read), it should be something embraced by all liberals because trade empowers individuals over corporate entities of all types (from governments and religions to actual corporations). By trade I just mean the exchange of ideas, products, or services between two or more people, and by free trade I just mean that people can engage in such exchanges without hindrance from third parties (thieves, thugs, highwaymen, bribe takers, tax collectors, and the like)—think eBay, or a flea market, or a farmer’s market. My main point in citing all those primate studies is to show the evolutionary continuity between nonhuman primates and ourselves in the evolved sense of fairness in all such exchanges (grooming, food sharing, etc.), and especially that trade helps attenuate the pervasive xenophobia between strangers, the result of our natural-born tribalism. I’m not claiming that trading hunter-gatherers were early capitalists; no, groups traded for assorted reasons having more to do with forming political coalitions against other dangerous groups (the enemy of my enemy is my friend) than in increasing primitive GDP.

Third, as for modern capitalism, I’m not a naïf—I think of it as akin to professional sports—competitors will cheat if they can get away with it, and so in order for the system to work there needs to be a clearly defined set of rules that are strictly enforced with severe consequences for violations. And I agree with Ralph Nader that there is far too much corporate welfare (what Adam Smith called rent seeking), in which companies will try to game the system by getting special privileges, handouts, tax breaks, and the like in order to gain an unfair advantage over competitors, especially over foreign competitors, which Adam Smith warned his readers about in The Wealth of Nations.

Fourth, Coyne raises an important objection when he asks rhetorically: “Is Apple moral? Is General Motors moral? The questions make no sense. These corporations may act morally by donating money to good causes and so on, but it’s ludicrous to claim that selling cars or computers promotes morality.” Therefore, he concludes: “I don’t see capitalism as innately conducive to morality. It is, at best, orthogonal to it. It may make us more prosperous, but it doesn’t make us better people.”

This gets to the point of my work in evolutionary economics (the subject of The Mind of the Market). The evolved psychology behind trade does, in fact, makes us better people. Nonzero exchanges between strangers (“you give me that which I want and I’ll give you this which you want”) has measurably positive effects on subjects in experiments, such as those conducted by neuroeconomist Paul Zak, who discovered a significant boost in oxytocin in subjects making fair exchanges in the Ultimatum Game and other experimental conditions, and even reversed the causal vector by giving some subjects hits of oxytocin through a nose spray (normally used to induce labor), which resulted in those subjects being more generous and fair in exchange games (that involve real money).

Trade makes us less likely to kill our potential trading partners. As Jared Diamond once told me about his research on Papua New Guinea hunter-gatherers: “Should you happen to meet an unfamiliar person in the forest, of course you try to kill him or else to run away. Our modern custom of just saying hello and starting a friendly chat would be suicidal.” And yet something happened in the 1960s to bring about more peaceful interactions. Initially, peace was imposed upon the native New Guineans by fiat from the Western colonial government that ruled over the territory, but officials then insured continued peace by providing goods that the people needed, as well as the technologies to enable them to continue producing more resources on their own. In less than one generation, New Guinean hunter-gatherers who were fighting each other with stone tools were suddenly New Guinean consumer-traders operating computers, flying planes, and running their own small businesses. Where goods crossed New Guinea frontiers, New Guinea armies did not.

This is an example from my book of what I call Bastiat’s Principle, from an observation by the 19th-century French economist Frédéric Bastiat: “Where goods do not cross frontiers, armies will.” Although trade is not a sure-fire prophylactic against between-group conflict (there are exceptions to Thomas Friedman’s observation that two countries with MacDonalds don’t fight, but as a first order approximation it is accurate), it is an integral component to establishing trust between strangers that lessens the potential volatility that naturally exists whenever groups come into contact with one another, especially over the allocation of scare resources that have alternative uses, the very definition of economics.

And that brings us back full circle to trade, markets, and morality.

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71 Responses to “What I Believe (about Markets and Morals)”

  1. By trade I just mean the exchange of ideas, products, or services between two or more people, and by free trade I just mean that people can engage in such exchanges without hindrance from third parties (thieves, thugs, highwaymen, bribe takers, tax collectors, and the like)—think eBay, or a flea market, or a farmer’s market

    So by “free trade” you mean “interaction”?

    It would seem to be an entirely trivial point to say that ‘when people interact, they tend to develop moral notions’. I suspect that that’s an article that wouldn’t sell all too well, but dressing it up in the vernacular of capitalism and whatnot is certainly a) contentious and b) misleading *if* your point was to talk about interactions and not mere economic exchange. (and I’m going to point at your statement of “exchange of ideas” to deny any claim that you are talking merely about economic exchange)

    It’s another point again to claim that these interactions will lead to a coherent ethical system, or a system of morals that is internally consistent: such a claim is not entailed by the evidence, at all, though certainly possible (in the mathematical sense).

    The promotion of economic exchange, however, doesn’t promote morality in any way. Your argument here bears that out: economic exchange promotes pragmatic choices regarding killing (or not killing) your market. That is pragmatism, not ethics.

    • itzac says:

      I think, from reading this post, that Michael’s definition of free trade would be like mine: goods and services allowed across borders without any impediment, but also without any subsidy. I would also add that people ought to be allowed to move as freely.

      Certainly this sort of thing doesn’t exists in the world, except maybe in a limited fashion in the EU. What the U.S. has passed off as free trade and globalization is really economic imperialism. I know some libertarians who can’t tell the difference, but it’s clear reading this post that Michael is not one of them.

      • MadScientist says:

        “Free Trade” has a far more stringent definition than what Shermer’s using; his definition is so vague as to be useless.

        I don’t know what you mean by “economic imperialism”. Numerous free trade agreements have dismantled protectionism to a large extent (though never eradicated it in any case I know of). I see no imperialist agenda though. In negotiations, unsurprisingly some sides will demand an unfair arrangement. If one side concedes to an unfair arrangement then that’s silly. In cases where we have a highly developed economy and a poorly developed economy I still see no evidence of any imperialism. If local businesses falter because they can’t compete with the foreigners that is simply a failure of the local businesses to adopt appropriate competitive practices.

        Looking at the example of the USA and China, China is a net exporter to the USA. I don’t see how we’ve pushed our economic imperialism onto China. In the case of Australia, many businesses which had been protected have closed shop as the economy was opened up in the 1980s – and I for one was glad to see them go. For example, even in the early 1990s Australia was still manufacturing engines of such old design that we hadn’t manufactured them in the USA since the late 1950s.

        Even in cases such as the USA and Nicaragua I don’t see any evidence for claims of economic imperialism.

      • Guerilla Surgeon says:

        There is no such thing as free trade, China has become prosperous while protecting its economy in various ways. India is becoming prosperous by doing the same thing. I think what people get annoyed about at least in this part of the world is that while the US wants to get rid of tariffs on its own goods, it consistently refuses to stop subsidising its agriculture, which we in New Zealand, and to some extent those in Australia rely on. That’s not free trade either. And of course then there’s the question of intellectual property protection etc etc, which the US ignored in the 19th century when it was developing its economy and is so hot about now, no wonder the Chinese ignore it :-).

      • I think, from reading this post, that Michael’s definition of free trade would be like mine

        Then you need to read his definition again. I quoted it, and stuck it in italics to highlight it.

        Michael’s definition includes *ideas*, not merely objects, thus my characterizing his definition of “free trade” as merely “interaction” as there is no form of ‘interaction’ that is not captured by his definition of ‘free trade’.

      • MadScientist says:

        I found the “trading ideas” thing to be unsettling. Historically ideas have been shared rather than traded, although specific information (such as a patent) has been traded. With “process patents” and “software patents” though, even ideas seem to be tradeable in some places.

        Even if we were to be very generous and pretend that the “ideas” part were not mentioned, Michael seems to be thinking about “unregulated trade” rather than “free trade”. I think that’s pretty funny because from history we know that “unregulated trade” is untenable – it invariably results in gaming which is not in the interest of the consumers; I hardly think of that as “promoting morality”. A few hundred years ago however, it did promote standardization of measures and other market regulations, but this was in response to the amoral market behaving in an immoral fashion rather than the self-interest of parties leading naturally to moral behavior. Even in today’s increasingly regulated markets we can still see a lot of players behaving badly.

      • MadScientist says:

        Oops – I should have said “did *prompt* standardization” rather than “promote”, but the needs of trade weren’t the only drivers for standardization.

      • Patrick says:

        Why is trading ideas unsettling? Books, movies, advertising, blogs, newspapers…

      • Patrick says:

        And no, I don’t get at all that Dr. Shermer is suggesting unregulated trade. He mentions that you need someone or something to make and enforce rules. Free trade exists when no one is erecting barriers to trade.

      • Nicholas says:

        Ideas _are_ traded. Why am I paying such a high tuition otherwise?
        The argument here (which I have seen before from other philosophers; never to my knowledge from an economist) is that all human interaction has an economic angle. Trade in this paradigm is defined as interaction in which I perceive you to be giving something I value to me and vice versa. If one of us believes the other didn’t give them anything, then we’re dealing with theft, attack, or just not an interaction at all. EX: When we sit near each other on the bus and strike up a conversation, I “pay” you with my conversation, interesting facts, and jokes, and you “pay” me with visible appreciation, laughter, and intelligent rebuttal.

      • JediBear says:

        Your tuition is not paid in exchange for ideas. Your tuition covers, rather, (a portion of the cost of) the use of the school’s facilities and the services of its faculty and staff.

        “Education” is not an idea, it is a service, provided by people who do not work for free, using tools that cost money and must be maintained (which requires money and the services of people who do not work for free.)

        Another service, called “Evaluation,” may ultimately result in the piece of paper you’re *really* paying for (or speculating on, as the case may be.)

        After all, you could have had free (excepting of course that there’s no such thing as a free lunch) access to all the ideas you will encounter in your education through public libraries and the Internet.

        And yes, public libraries often are that good. Many are better than university libraries, and contain more and better information than the textbooks you likely paid hundreds for this semester. Some will even contain those same textbooks.

    • MadScientist says:

      I suspected as much, “Free Trade” for Shermer isn’t what any economist thinks of when you mention “Free Trade”. I think it’s disingenuous to use well-established and widely understood phrases from one field and use it to mean something very different – it is a common trick used in poor arguments; we see that sort of thing all the time in the creationist literature.

  2. GoneWithTheWind says:

    What am I missing here? Re: the comment “evil subsidizers of religious and capitalist propaganda.” How does one put these two things in the same sentence? I totally understand the anti-religion bigotry but what is with the anti-capitalism bigotry? You are aware that even socialist/communist countries must use capitalism to survive? We are lucky enough to live in a free society where we are free to use capitalism. I think most people who in their foggy mind think they hate capitalism actually hate freedom and prefer socialism/communism where the government elite control the capitalism.

    • MadScientist says:

      That’s entirely Shermer’s own imagination and phrasing. I can see no evidence of any of his critics being “anti-capitalism”.

    • The Saint says:

      I think you don’t know the meanings of either capitalism or socialism.
      Capitalism is private control of the “means of production” ie, factories, restaurants, businesses, ect, anything that is a means of making profit.

      Socialism is worker control of the means of production. Look up worker-cooperatives. Then try and tell me that I hate freedom and want an elite to run everything. You think that’s not how things our in our system now?

      • Robert Janckila says:

        Re: Socialism

        How do workers gain control of the means of production? Do they start from scratch or do they seize the means of production from others using force (as in Soviet Russia)? If they start from scratch they are capitalists organized into a group (a. k. a. a cooperative).

    • Bad Boy Scientist says:

      “Hating freedom” is a loaded term. Who among us would admit to “hating freedom”? If we’re honest we see that it depends on the *type* of freedom.

      For example

      The freedom that allows physically strong people to take things away from their weaker neighbors is a freedom I’d hate.

      The freedom that allows smarter people to swindle the less intelligent is a freedom that I’d hate.

      But the freedom of the economically powerful to run roughshod over the economically weak is – for some reason – a freedom we, Americans, love.

      • Nicholas says:

        The reason in my opinion/experience that American’s “love” economic disparity is because western corporatism/capitalism is based off an understanding of nature in which resources just come from “somewhere else” and access to nature is only limited by the willingness of the person to work. So if you don’t have any natural resources, you should just start walking until you find something no person owns yet. Harvest it, and it’s automatically yours (This understanding of nature seems to be at least as old , and is probably much older than, capitalism.The narrative hasn’t really adjusted since Lysander Spooner’s time.)

  3. MadScientist says:

    I think you’re still missing the point of writing for the Templetons and confusing that with various other issues.

  4. Henk van der Gaast says:

    Whoa Michael, you’ve opened up a can of woo here. All thanx to a major dummy spit at Coyne.

    You may have missed the entire subplot here, but when odd things are attributed to an organisation, its contributers and supporters will wear some of the taint.

    Personally, note the non woo attribution, I would have nothing to do with the foundation. I cant see Coyne writing for the very secular Catholic science weekly either.

    Having a spit in this light doesnt help your image.

  5. Mike Anzis says:

    Saint: Sorry, you’re the one who doesn’t know the meaning of socialism. “Worker control” is a euphemism. It just means that an elite that gains political control exercises ownership, with varying degrees of coercion. The Soviet Union and Maoist China, or George Orwell’s “Animal Farm” demonstrate how bromides like “worker control” can play out in the real world.

    Bravo Michael! Keep up the good fight!

    • Tim says:

      I love the word bromide. This chat room is in good hands without any further comment from me.

    • The Saint says:

      You know Orwell was a democratic socialist right? Clearly he thought that it was possible for workers to control their workplace without Stalinism. You admit that in your post, when you say that Animal Farm “demonstrate[s] how bromides like “worker control” CAN play out in the real world.” Obviously it can. And it has a great deal. That doesn’t mean it necessarily MUST.

      “It just means that an elite that gains political control exercises ownership, with varying degrees of coercion.”
      Do you really, honestly think that we don’t live in such a system now?

      ‘Socialism’ is a big tent, encompassing everyone from anarchists (ie, libertarian-socialists), to European socialists, to authoritarian Stalinists/Leninists etc. Don’t lump them altogether, because these groups have fought either other as hard as anyone else.

      • Mike Anzis says:

        Yes, we live in such a system now because we have a (mixed) statist economy, where the political elite exercise varying degrees of ownership (control) via taxes, tariffs, regulations, etc. Michael argues for a much freer economny with much less political control.

        Webster defines socialism as “…collective or governmental ownership and administration of the means of production and distribution of goods”, … “no private property” … “the means of production are owned and controlled by the state”. That’s control by the political elite.

        In a free economy, you can have all the co-ops, non-profits, and democratic enterprises you want. Just don’t (have government) force everyone else to do the same with their own property or enterprise.

        “Libertarian-socialist” is a new one on me. I would just call those people civil libertarians.

      • The Saint says:

        I wasn’t referring to a government elite-I was referring to the NON-government, corporate elite that exercises a great deal of control over this country. People in the highest reaches of power move seamlessly between government and business, blurring the lines between the two. For example, look at the number of senior economic officials in DC who were previously (and will be in the future) on the boards of major financial institutions (particularly Goldman Sachs).

        That’s ‘a’ definition of socialism, not ‘the’ definition. I think you should listen to what a particular person proposes and evaluate that, rather than use the broad brush of socialism to smear it. For example, I would only like to see natural resources nationalized, and all businesses bigger than a pop-and-pop store owned and run by the worker-owners directly, with minimal government interference. I’d like to see political power decentralized and spread as thinly as possible.

        If you’ve never heard of libertarian-socialism before it will probably shock you to learn that the term Libertarian referred exclusively to left-wingers for about 150 years before it was appropriated by worshipers of the invisible hand.

      • Mike Anzis says:

        Your’re absolutely right about a corporate elite exercising control. As Michael points out, when competititors are allowed to cheat (i.e. get special favors, bailouts, “stimulus” money, subsidies, be “too big to fail”, etc.), they will, and they will get in bed with the state. The solution is a free market where cheating is prohibited, and there is no incentive to court the state.

        I don’t think the concept of the “left” even existed 150 years ago. And was Lysander Spooner ever referred to as a libertarian, or refer to himself as such?

      • The Saint says:

        This is where I think free-marketers are as naive as the most Utopian communist. The idea that it’s possible to have massive disparities of wealth and NOT have the elite use their massive wealth to unfairly influence the government is so absurd a notion that it boggles the mind. Massive economic inequality is incompatible with anything resembling democracy.

        And the communist manifesto was written 152 years ago, so it’s safe to say that the Left existed.

      • Patrick says:

        It is not naive, you’re building a straw man because you don’t understand the basic premise behind libertarianism. Elites will (try to) use their power and influence no matter how they acquire it and no matter what system they operate under.

        How is it more fair to allow elites to use their power to influence an all powerful government that controls trade, and directs resources around? Political decisions require the agreement of 50% +1 in order to make sweeping changes – and not the people, just the elites in power. It may be the case (as it often is) that most people would prefer something else entirely.

        The market on the other hand satisfies many needs and you DO NOT have to be in the majority. Just look at television today. Companies thrive serving just 1 percent of the market. That is capitalism. That wouldn’t occur in Democracy, let alone socialism (especially if it was programming that offended the governing elites)

        Effectively limiting the power of government so they elites can only operate their power on a competitive basis in a free market is THE FAIREST way. Sure they have more money, but they can only exercise control if the PEOPLE buy into what they are selling – not by voting, but by literally buying their goods and services.
        The invisible hand of the market is far more fair and forgiving than the very visible and painful backhand of government.

      • Bad Boy Scientist says:

        What if those elites buy a monopoly and use that for unfair influence?

        Say for example, if someone wanted to sell cars & tires so they bought a public transportation system for a metropolitan area and then dismantled it – so people would now have to buy cars to get around.

        Can those people simply choose not to be subject to that ploy -by not buying cars?
        [ed. not that this would ever happen in real life -
        not even in La-la-land]

      • The Saint says:

        Patrick: I had written a long response to you, but it was apparently deleted for what the FCC would call a “fleeting expletive”. What I had said was I f**k*** know libertarianism, because I spent several years as an apologist for it.

        To summarize what I said, your arguments stand up quite well against the centrally planned Soviet model where all power is vested in the central government. Fortunately, I am not nor have I ever advocated anything close to that. I want to DEcentralize and spread out power away from government elites AND economic elites.

        Also, you’re using the libertarian fallacy of saying everyone has “free choice” in capitalism. That’s BS. Free choice implies that there’s more than one real option. Look at employment. Currently, there’s something like 3.5 unemployed for every job available (many of which they don’t even qualify for). They have to take what they’re offered at the salary they’re offered, OR they can get evicted from their home and declare bankruptcy. Some ‘choice’. That also applies to the currently employed. Or what about utilities? Most place have only one company that offers electricity, water, or cable/internet. Many of the first two are public, but rightwingers would like to privatize them. What choice do I have there? Patronize the electric company or live in the dark? Some choice. This myth of “free choice” is right up there with “informed/rational actors”.

      • Patrick says:

        Bad Scientist,

        Economists have proven time and again that in a free market monopolies are an unsustainable money losing venture. Someone is always there to compete and cut you down in price.

        The only way monopolies survive is if they have the backing of government and even then its not always certain. Cornelius Vanderbuilt destroyed a few government back shipping monopolies with a little competition. Monopolies do their best when the very visible backhand of government outlaws the competition all together (public schools, post office)

      • Patrick says:

        Saint,

        You’ve built a strawman yet again. In America you can not sell your labor for cheaper than the minimum wage. Obama has even gone after internships (working for free in exchange for experience and references). People don’t have a choice because of government. PS, government’s unemployment insurance policies are lengthening the unemployment spells and increasing the number of unemployed.

        PS, your fallacy also rests on a presumed assumption that there is a right to have a job. There is not, because you do not have a right to force someone to give you money against their will.

      • Patrick says:

        Want to be a lawyer? You need approval from the bar.

        Want to be a plumber? You need a license

        Want to be a carpenter? You need a license

        Want to make and sell coffins? You need to be a government approved and licensed funeral home.

        Want to open your own road side food stand? You need a license

        Want to be a barber? You need a license

        What to sell flowers? You need a license

        Want to decorate people’s homes? You need a license

        Want to give drunk people free rides homes? You better have a license to drive a taxi

        If people are lacking freedom, look at the government first to figure out how to take it back…

  6. Beelzebud says:

    As always, when it comes to Shermer it’s all about him.

  7. Beelzebud says:

    And writing for Templeton does it for me. That organization’s main goal is to “blur the line between science and religion”. Thanks, but no thanks. The fact that you would write for a group like this is, quite frankly, astounding.

    Would you also write for the Discovery Institute, if they allowed you to write Libertarian propaganda in their magazine?

    I’m not sure how you maintain respect in the skeptical world. Especially after this.

    • Max says:

      Do you resepect Chris Mooney, the Templeton Fellow?

      • Beelzebud says:

        Not really. Like Shermer, he wrote a couple of interesting books earlier in his career, but lately he’s done nothing that would earn him much respect from me. He can build bridges with anti-vaxxers ,the cult of Rand, and religious zealots if he wishes, but I decline.

      • MadScientist says:

        I see Mooney as fundamentally dishonest and have lost all interest in anything he has to say long before he became a Templeton fellow. He makes fantastic claims with no evidence to back it, such that being patronizing to religious folks will encourage them to accept science and spurn religion. He also claims, counter to evidence, that being forthright is not helpful in convincing people of the merits of science.

  8. Qwerty says:

    Of course Capitalism is the only moral system. Everything is voluntary.

    READ ROTHBARD!

  9. Bad Boy Scientist says:

    I am not sure that free exchange of ideas and things between two cultures necessarily leads to peace, love and understanding. In the ancient world, didn’t many countries go to war with former trading partners?

    Wasn’t TRADE a major factor of the exploration & settling of the Americas the by Europeans? Ask any indigenous Americans how that worked out for them.

    • Patrick says:

      This was not free trade. Colonial imperialism – aka dominating your markets by military force – is not free trade. The nations of Europe also operated under a form of economics known as mercantilism and basically favored autarky over real international trade.

      • Bad Boy Scientist says:

        I see: every case of free trade has resulted in peace, love and happiness for all because all examples of trade in which peace, love and happiness for all did not result were ipso facto not free trade.

      • Patrick says:

        No words have meanings. Lets watch.

        Free trade – voluntary exchange of goods and services.

        British colonial expansion into India – use of state sponsored and protected monopoly under the protection of the British Navy to compel people, by force, to trade only with the British.

        How exactly does that fit with free trade?

  10. DSS says:

    Michael, at end of 1st paragraph, “downright” not “darned right”

  11. Bad Boy Scientist says:

    I like Jared Diamond, but I don’t like this comment: “Trade makes us less likely to kill our potential trading partners.” Correlation does not imply cause-and-effect and when there is cause-and-effect, it doesn’t tell us which way the arrow points.

    The fact that free trade only exists during times of peace doesn’t mean that it causes peace. After all, drug dealers & buyers would be *less* likely to kill each other if they weren’t in trade.

    Since people like sound bites, here’s mine. Which seems more likely to explain this (presumed) correlation between trading and peace:
    A) If you trade with someone you won’t kill them
    B) If you kill someone you won’t trade with them

    • Galt1138 says:

      They’d be even less likely to kill each other if what they are trading was legal. See how that works?

      And, for the record, fraud is still a crime. So, one could argue if contract laws are enforced and fraud is forcefully prosecuted, then the need for regulations decreases, particularly if businesses and government are separated (in much the same way we have a separation of church and state).

    • Patrick says:

      You’re right, correlation is not causation, but there is simply no better explanation for why trade is STRONGLY correlated with peace and even stable democracy, than free trade.

      Both WWI and WWII, for example, were preceded by SHARP declines in international trade. The shooting wars began with international trade wars, started by governments who raised tariffs and other trade barriers to harm importers and boost their own exports.

      It’s not that nations stop trading when they go to war, its that they weren’t trading BEFORE they went to war.

      • Bad Boy Scientist says:

        You say “It’s not that nations stop trading when they go to war, its that they weren’t trading BEFORE they went to war.”

        Can you support that assertion?

        I have read books on the Cold War which assert that the post WWII boom in international trade was largely due to the Pax Americana rather than the free trade *caused* the Pax Americana.

        We should also acknowledge the significant contributions of the US military (and nuclear deterrent) to maintaining ‘world peace.’

      • Patrick says:

        The cold war was not a fighting war. We’re talking about fighting wars, aka hot wars.

        Nevertheless, the U.S. was hardly trading with the Soviet block. World trade was largely restored among the western nations and some developing ones. Trade had not been fully restored with the Soviet side.

      • Bad Boy Scientist says:

        Oops. Accidentally edited out a key line:

        after “Can you support that assertion?” I had this line:

        Finding a few anecdotal examples does not demonstrate a rule,

      • JGB says:

        And another thing about pre WWII trading – The US stopped trading with Japan due to their militarism in Asia – so that is a data point on the side of peace->free trade (rather
        than the other way around).

  12. Joe Ferguson says:

    Didn’t read it when I saw he was talking about markets. Schermer has seriously undermined his credibility as a skeptic with all his Libertarian proselytizing, and I find it difficult to take anything he says seriously anymore. Faith and belief are faith and belief, be it religious, political, or economic. Preaching belief has no place in a skeptical publication.

    • Patrick says:

      And that is why there are plenty of facts in the world that A) show capitalism works and B) that free trade works. Even Paul Krugman is a free trading capitalist (sure he supports more regulations and a bigger welfare state than Shermer, but he’s still a capitalist)… People who think socialism and communism are functional forms of economic control are the ones lost in dogmatic faith.

      • Bad Boy Scientist says:

        Hmmm. Can you point out any true examples of pure ‘free trade’, capitalism, or communism? If not, how can you really say that any of them ‘work’ or ‘don’t work’?

      • Patrick says:

        Do you own a foriegn car? Know someone who does?

        Why on earth are you obssessed with pure trade? We know that in principle it works and that as it expands, wealth expands and poverty decreases.

  13. Patrick says:

    Anyone who thinks capitalism doesn’t make people better hasn’t woke up to the real world and noticed all the wonderful advances under capitalism like medicine, better homes, safer cars, more amenities in life, and oh yes, more free time to advance our minds or just relax if we’re inclined. Capitalism is helping us build wealth which in turn is driving up demand for rapid technological advancement. Capitalism, specifically free market capitalism, also promotes better and more peaceful relationships among humans than other forms of economic control.

    • The Saint says:

      We do have a better standard of living in the Western world than the rest of the world. This is not a result of the joys of capitalism, this is a result of nearly five centuries of exploiting the rest of the world. Since you mentioned Krugman, have you read Stiglitz’ “Globalization and its discontents”? He disuses how since the Reagan/Thatcher revolution the World Bank and (especially) the IMF have aggressively pushed a neoliberal agenda on the developing world. It’s been great for the West and especially large western corporations; it’s been an unmitigated disaster for Africa and Latin America.
      Also RE: ‘look at all that capitalism has brought us!’, we could be doing so much better than we are if we weren’t allowing the top 1% to run away with the nation’s wealth. Look at Scandinavia. They’re ‘capitalist’ (though Limbaugh and Dick Armey and co would never admit it), and they’re doing much better on just about every conceivable measure. How did they achieve this? By moving away from market fundamentalism.

      • Joe Ferguson says:

        Actually, most of the Western World combines capitalism and socialism for a better way of life than here in the U.S., where capitalism is the state religion.

        Anyone who still thinks of the Soviets or Red Chinese when they hear the word socialism is blind to the real world.

      • Bad Boy Scientist says:

        The US is plenty socialist: check out our public schools, libraries, fire departments, sundry social services (including foster care programs, elder care programs), National Institute of Health, national forest service, NASA, roads, highways (plus all those truck scales which regulate transportation), railways, airports, the FCC.

        I could go on, but you see my point – we’re all socialists

      • Patrick says:

        The U.S. government does direct a lot of economic activity. But most of it does not build wealth.

        The public school systems destroy more wealth than they create today (diminishing rate of return on the unsustainable investment that has grown faster than inflation and student population growth combined while results have stagnated).

        NASA is bassackwards. Transporation in the U.S. only got better when it was deregulated under Carter. The Forest Service doesn’t create wealth and the EPA certainly destroys its fair share.

        This isn’t suggesting we should get rid of them (though maybe we should) I’m just saying we’re wealth in spite of the government, not because of it.

      • Patrick says:

        Pure sophomoric garbage Saint. The U.S. does not have a better existence because of exploitation (as you would use it in the negative). The U.S. has been prosperous because of trade, capitalism (the private ownership of capital and direction of goods and services) and a sound legal system.

        The George Stiglitz book is garbage (straw men galore and fallacious reasoning all the more), but even he believes, fundamentally, in Capitalism.

        Latin America and Africa have suffered because they’ve embraced socialism (state direction of the economy) lack private property rights, heavily restrict trade (relying the debunked import substitution theories).

        Which scandinavian country are you talking about? Norway is a rentier state. Sweden? Not only has Sweden been charging toward the so called “market fundamentalism” but the bulk of the wealth was built by it before they converted to a welfare state.

    • Bad Boy Scientist says:

      I thought that that all of those wonderful things that we enjoy since the invention of Capitalism have been due to the decline in pirates!

    • Beelzebud says:

      You sound too much like a zealot. I think rational people see that the best economic structure is one where we take the good parts of capitalism, and the good parts of socialism, and continue on with a mixed economy like we have been…

      Pure capitalism is bad.
      Pure socialism is bad.

      Mix the two, and they’re both good.

      • The Saint says:

        I am a zealot. What’s wrong with that? This attitude irritates me more than rightwing libertarians. The ‘split the difference’ crowd thinks that staking the middle ground between to competing views automatically makes them “serious”, “sensible”, and above those petty ideologues. Which is BS. Sometimes the ‘zealots’ are right. Especially when debate has been skewed so far in one direction. For example, it’s now considered an extremist position to say that the US should prosecute those who commit war crimes, or that the president doesn’t have the authority to assassinate US citizens.

        Coincidently I agree that mixed economies (like those in Scandinavia) work much better than the extreme free market model.

      • Beelzebud says:

        Ok in broad terms on the word “zealot” I absolutely agree with you. I’m a zealot for scientific truth. I think everyone is a zealot about certain things. In terms of what we’re discussing here (the market), I think zealotry is the worst way to approach it. At any rate, we both seem to share the same opinion. I’m not a middle of the road “split the difference” kind of a guy, except when it’s the most sensible thing to do, and with something like economics, i think it’s very sensible.

      • Patrick says:

        I agree, moderation or the middle ground does not mean you are correct.

      • Max says:

        Some extreme positions are more sensible than their extreme opposites, as in extreme free speech versus extreme censorship, but the most sensible position is still in between, though not straight down the middle.

  14. John Draeger says:

    Geez, I had just made peace with Shermer over politics/economics after reading his Sci Amer article, then this continued crappola on economics combined with evolutionary biology resurfaced. Michael, give it up! There just are not very many people who are going to accept the central thesis of that book of yours. Promote the others you have written, but leave “The Mind of the Market” rest in peace.

    Most of you are quicker than I am reading reading Skepticblog posts and probably have already made some of these arguments, but I couldn’t resist challenging some of this tripe since I’m stuck indoors on a rainy day.

    “In fact, as I depict trade (especially in my book The Mind of the Market, which, curiously, few of my critics have actually read), it should be something embraced by all liberals because trade empowers individuals over corporate entities of all types (from governments and religions to actual corporations).”

    No, trade doesn’t necessarily empower individuals, especially when corporate entities are defined as individuals as they currently are in the U.S. When we have unfair trade policies it precisely disempowers the individuals getting the unfair deal…like when we can’t compete on a level playing field with China because they have pegged their currency to the US dollar, and don’t enforce health and safety laws protecting their workers, resulting in a competitive disadvantage for their corporations over ours.

    Shermer is still not admitting he made some mistakes in his book…cognitive dissonance is making him rationalize still. Problem with free trade as Shermer defines it is that the consumer isn’t protected from being ripped off by people who know more than they do (maybe he’s okay with that). For flea market items like a clay pot there’s not much harm in a buyer paying a little extra because he/she thinks it’s something it’s not. But for goods and services involving safety and health there needs to be gov’t oversight…regulation, which Shermer has a negative reaction to just like he describes some have a reaction to the word “capitalism.” Shermer makes some serious false assumptions and false premises in his arguments for free trade in his book, which I have in fact read.

    Shermer conflates modern financial markets with trading of favors between individuals (as if we are still under a barter system). The field of evolutionary economics is not supported by most economists. It over-stretches biological evolution to fit economists. Now you can combine psychology and economics in the sense that people use their brain to make financial decisions, but there’s nothing in the definition of biological evolution that applies directly to economics. Shermer is trying to mix two unlike substances. When trade involves money that’s not perceived as being directly connected to human lives, the brain does not consider the harmful consequences of unfair trades–hence the U.S. housing bubble and the last market crash. Unregulated nameless, faceless transactions result in real harm to real people, but those involved don’t perceive the harm directly so (even if they are not sociopaths like Bernie Madoff) they continue making harmful financial transactions.

    “This is an example from my book of what I call Bastiat’s Principle, from an observation by the 19th-century French economist Frédéric Bastiat: “Where goods do not cross frontiers, armies will.”

    That’s clearly not always the case. There are many nations that exist peacefully without attacking each other even when they trade nothing. Shermer is trying to apply colonialist practices to modern nations, which don’t as a rule attack and occupy foreign nations to take their resources like was done by some powerful nations of the past. He makes the assumption that the cultural norm of attacking the stranger seen in Papua New Guinea in the past applies to all cultures through time. Let’s see the evidence that’s the case. There are plenty of studies saying that humans are naturally cooperative. It’s religious cultural differences that tend to make people hate each other enough to attack them, or a perceived threat to their own welfare and resources.

    “especially over the allocation of scare resources that have alternative uses, the very definition of economics.”

    Where is he getting his definition of economics? A fine pile of BS. Enough said.

    • JGB says:

      +1, John
      To this I would like to add that most of these fancy economic theories are based in two demonstrably false assumptions: the rational actor (which has been tested and disproved) and the availability of reliable information (in practice, there are active disinformation campaigns which give the seller a huge advantage over the buyer – and the theories which attempt to deal with that make economic modeling intractable).

      The second fact is especially pertinent now that news (TV, radio and print) is controlled by a few and that there are active efforts to dismantle net-neutrality. Consumers cannot make decisions in an information vacuum. Whereas they cannot keep the truth from leaking out they can burying with lies (IOW: drop the signal to noise by raising the noise background). We see this happening so it is not a purely academic consideration.

      Lastly, I think that all discussions of human organizations and systems should not be using such subjective metrics as “works v doesn’t work” or “Better v worse” – I think that we should be measuring “stability of the system” – for one thing, it is easier to find outward signs of social instability than it is for social “better or worse.” For another, people *want* security and stability. (in this country people want it more than freedom, it seems).

      I ask this question: Is there any social-economic system (e.g. democratic-capitalism, fascism, socialism, communism, theocratic-socialism) that is so inherently stable that you can adhere blindly to its principles and not risk riots, revolution or class-warfare no matter what the future throws at you?

  15. Heliocles says:

    Most of this article is sound, but I feel that the following passage is somewhat dubious:

    “Should you happen to meet an unfamiliar person in the forest, of course you try to kill him or else to run away. Our modern custom of just saying hello and starting a friendly chat would be suicidal” etc..

    I think this is a misleading line-in on the aggressivity of primitive people. Firstly, the Papua New Guineans were generally among the fiercer primitive peoples. Even if all the stories about head-hunting and cannibalism certainly aren’t true, it seems as though many tribes were deadlocked in totem conceptions, such as the belief that killing or even eating somebody will transfer that person’s powers to you. Such cannibalism goes against basic animal instincts (the drawbacks of eating meat infested with your own species’ parasites are substantial) and has not been widely spread. There have been Indian and Eskimo tribes who have been far less prone to fighting one another to death.

    Secondly, the Guineans DIDN’T cross borders haphazardly. Tribes mostly stayed in their own territories, well aware of the consequences. Just as today, a peaceful tradesman (of goods or labour) does not walk across the American-Mexican border at leisure.

  16. Justin says:

    Michael, from one libertarian skeptic to another, THANK YOU! I consider you (along with Richard Dawkins) to be my hero. I hope the significance of such a statement is not lost on you. It is truly a tragedy how either misinformed or misguided so many well-meaning and well-educated people are about capitalism. The world owes you a debt for articulating so cogently the merits of free markets. Someday I will shake your hand and express my gratitude and admiration in person.

    Best,
    Justin