I am interested in this question of ‘moral base’ and its role in self-interest…
and since we’ve done a lot of comments here, I’m going to do another post that will allow us to continue digging into that and other points about ‘pre-requisites’ of markets.

I’m going to postpone an answer on the Netherlands question (interesting topics, but in general I’ll just say that change is the nature of things, and that many things as we know them today will not be the same in 100 years – for better or worse).

I feel my life has been in the “right-direction”: educated, family, business, etc. etc. etc. But I am often on the “wrong-track”: I’ll offfer no detail but take my word for it! If a person judged me by looking microscopically at my life at any point in time, they might conclude I am a lousy person. I hope you don’t think I am!

Likewise, in understanding the United States, I feel the left are looking too much at the “wrong-track” situations, of which there are many, and this is blinding you and most post 1970 university graduates to the “right-direction” of this most successful country!

Both are “judgements”, but one is an overview judgement and the other is a specific judgement. I see a major difference. Perhaps you do not.

“Moral Base” is another difficult term. I am not ready to define what I mean precisely yet, but will.

On your Europe comments, if you are as good a demographer as a historian, you will recognize that the Netherlands (as we know it today) will not exist in 100 years. Agreed? Is this where you want the U.S. to go? I don’t! I want it to exist with the dynamic growth, freedom and wealth that it has enjoyed for 200+ years.

By the way, remember the Dutch were very much like us in many ways 3 or 400 years ago. Compared to their situation today, is that what you wish on the U.S.?

1. Fortunately I’m very hard to offend! The way I look at things, the first step is to look at a question from a few directions, discuss and see if we can come to some agreement on the facts, and then make decisions and judgements. If you ask me about the US 1776-1960, I think the first step is to look at what happened in those years – and it’s a lot! The Revolution, Slavery, Civil War, Native Americans, Suffrage, rise of corporations, immigration, WWI & II, etc. etc. etc.
You seem to indicate above that you believe this is a simple factual question (‘“Right track” implies judgement. “Right direction” is a factual statement.’), but in this case I don’t get the distinction – both seem to imply judgement to me. And before I make sweeping judgements, I prefer to consider (at least some of) the facts, and to acknowledge that I may have a mix of opinions and judgements about various deeds and activities of the U.S. in that time period.

2. About ‘moral base’ – again, there are semantic issues about what this means. You seem to be equating it (or at least describing it in this instance) as a sort of ‘Puritan work ethic’ – certainly that’s one kind of moral base. The interesting question in this context is what is the ‘required moral base’ for a self-interest that creates effective free markets?

Given that you feel that the U.S. is losing its moral base, thus more people have a ‘false’ self-interest – why are you so sure that the free market will operate as you expect? (One could seemingly make this argument about some of the recent bank woes – even Alan Greenspan said “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity are in a state of shocked disbelief.”)

Historically it is indeed interesting that the most free-market oriented countries derive from England – I’d say they are England, the U.S., Australia and New Zealand. Other areas certainly have different ideas & traditions, leading to different approaches to government and economics. Some of those approaches work better than others in terms of standard of living, etc. but it seems to me that they are valid, and may be the optimal choice in those societies given their traditions, etc.

3. About Europe – I’ll limit my comments to what I saw in the Netherlands, but indeed there is a generally different attitude about work there. Some people (not all by any means) do indeed seem to take advantage of the fact that it’s hard to fire people there. This cannot help but reduce efficiency and productivity of the workforce.

And yet – there’s low crime there, people feel safe walking around in the cities. So there is a kind of ‘moral base’ that is stronger there, in my opinion, than in the U.S.

To operate effectively a republican style government must be of a society which has a moral base. Our society is losing its moral base – Europe, I am sure you will agree, has lost theirs – and as it is lost we will face bigger and bigger problems – as Europe is today. An example I heard today is that the average worker in Belgium takes 35 days of “sick leave” per year – they are not questioned on their reasons – and this is on top of their very liberal vacation policies. They must only work 9 months of 12! An example of “self-centered” versus “self-interest” of a Belgian and we are headed the same way!

This moral base is what allows the population to be “self-interested” – work ethic to raise all of the society – not “self-centered” – “I don’t feel good today” – and make decisions which quite often are counter to our own short term good, but appropriate for the society.

I do not think this is what Foley is talking about. He is recommending a more selfish level of moral relevance. In the above example he would say the liberal sick day rules make for a more efficient work force by allowing 10% of those people who are really sick have the day off – while the unintended consequence is that 90% of the days are simply a self-centered decision by the worker to relax for the day! And he would be willing to take that cost – to the detriment and eventual destruction of his country.

Does all that make sense?

But can we strictly say that a self-centered person is not acting in their own self-interest?

If the person is so self-centered that they make choices that so neglect the ‘common good’ that it backfires and in fact brings them to ruin, then they clearly did not have a very good sense of what is in their own self-interest.

But it does raise interesting questions about what is the ‘proper mix’ of concerns of a self-interested person… is there some ideal? does this relate to the ‘moral relevance’ issue that Foley raises?

To be honest, I find it hard to answer a question like this with a simple yes/no. I think the U.S. was the boldest experiment in democracy in its time, I think the government structure with its checks and balances was a brilliant design. I think that the hard-fought struggles to (for example) end slavery, gain womens’ suffrage, gain union rights, were all steps that helped to fulfill the promise of the country. I’m proud of the way the country has (generally) been able to absorb new people from around the world, and keep providing opportunities for those who have a dream and want to work hard.

I don’t see 1960 as a particular turning point (of course that entire period was before my time). The experiment continues. The current situation is so close-up that it’s hard to have much perspective on it. The fact that we’ve elected an African-American as President will probably be seen as another significant milestone. If the economy continues to falter, this may also be a significant milestone in our history, but not in a good way!

Do you think the US was moving in the right direction from 1776 to 1960?

“Could the internet have arisen through the private markets? Perhaps, but it’s hypothetical – we’ll never know.”

That is the problem with government intervention – we will never know! We know the downside of government intervention over private development – why chance that when you do not know? Government intervention should be extremely limited and used only in the case of imminent disaster! Else, it will be abused.

“Self-centered” is perhaps another semantic problem. Market inputs do not need self-centered inputs, but “self-interest” inputs, which may not be self-centered at all. That is, a “self-centered” person would accept a claim of bankruptcy with our eased laws; a “self-interested” person would not accept bankruptcy because they see what it is doing to the society.

My brother once said to me: “Doesn’t everybody vote for what is good for them?” This statement knocked me on my heels as a terribly “self’-centered” position. I have always voted for what I think is good for the city, state, country, etc. You?

Hope that explains my take on Foley’s position.

I’d say up to the 1920s at least, and perhaps as far as the 1940s or beyond, the country was to a large extent made up of farmers, with an industrial base that started growing in the late 1800s. The country until around 1900 was pretty much involved with matters on this continent, and not very interventionist globally. There were obviously some big internal tensions, leading to the Civil War.

World War II was a major turning point – at the end of the war the U.S. was in an unassailable economic position, and much of the world was grateful for the countries intervention. This led to a great rise in the middle class, very favorable union contracts, etc. I suspect this was essentially an unsustainable position to be in, but while it lasted, very favorable to the U.S. (I’d say the best years economically ran about 1946-1966).

In the sixties, I think the Vietnam War and the ‘Great Society’ social programs started sapping some of the country’s economic strength. When U.S. oil production peaked around 1970, this was another turning point, where we no longer had control over oil pricing, and I suspect this led to coming off the gold standard soon after. Nixon’s price controls and whatnot probably did more harm than good.

One idea I’ve had just lately is that coming off the gold standard was one trigger for the gradual explosion of credit and debt that we’ve been experiencing ever since. I’m afraid that much of what was considered as ‘economic growth’ over the last 15 years or so may simply be due to borrowing as opposed to true growth of economic capability. It seems now that we’re starting to pay the price for that. Whether the bailouts can create some sort of ‘smooth landing’ seems to me to be doubtful, though some very smart people argue otherwise.

Also after WWII the country was increasingly active militarily around the world, for better or worse. This led to an increasingly large ‘military-industrial complex’ – and directly or indirectly to the development of nuclear weapons and power, and to the internet. In recent years fortunes have been made by private efforts building on top of the internet platform. Could the internet have arisen through the private markets? Perhaps, but it’s hypothetical – we’ll never know. The argument against it is that the required investment would be so big and so long that no private firm or firms would find it in their interest to try to create it.

So now we are a country that is no longer on the farm, and people have a much lower degree of self-sufficiency than they used to. This is largely because of market forces and expansion of global trade. Therefore people are more dependent than ever on the smooth operation of markets (as you say, think of Manhattan – then think what happens if Manhattan didn’t get any shipments of food for three days!). I think that’s part of why there’s more political involvement when markets are (or appear to be) failing – we don’t have as much tolerance for it as in the old days. We’re much more tightly interconnected, and we all rely on many parts of the system continuing to operate in all circumstances.

Sorry for the long comment, but one last note – I think it’s interesting that you (1) have great confidence in the long-term ability of markets to solve many problems yet (2) feel that people are now too “self-centered”. This goes right back to the original issue that Foley raises – isn’t the market about each person pursuing their own goals? What can be more self-centered than that? Why do you think it’s a problem that people are ‘self-centered’? (Or do you see it more as a problem of lack of patience?)

“…but I do think that in some cases it’s really the only viable solution.”

Give me two examples – national defense and border control excluded.

My comments on Paulson were after the fact. I feel the bailouts are a major mistake. We are rewarding failure, and that never works. Also, they are not using the money as they indicated they would – a typical result when government is not held accountable – and they almost never are (in the short term). In the long term, hopefully the society will see the problem and resolve it through elections, holding them accountable for the failed policies. Would be easier if these failed policies were never implemented!