Morality, Institutions, and Economic Growth

The figure is from this paper by Harvey S. James Jr. , and this is the abstract

Generalized morality reflects ethical norms in society about the inappropriateness of behaviors that can cause harm to others. Generalized morality may be an important factor affecting the economic performance of countries. A measure of generalized morality is constructed from data from the World Values Survey. One question examined is whether generalized morality is correlated with economic growth rates in per capita GDP across a sample of countries, controlling for institutions and other factors expected to affect economic performance. A second question examined is whether the path by which generalized morality affects growth is direct or indirect through generalized trust. The findings reveal that generalized morality is correlated with economic growth, but its effect is manifested primarily through generalized trust when economic institutions are weak.

I am glad to see papers like this one, and the topic remains under-researched. Great insights can be found in David Hume.

Markets and Morality

While seeing both costs and benefits of markets, Adam Smith promotes free markets not only on efficiency but also on moral grounds. Commerce is intertwined with morals, it supports moral development and at the same time it is supported by it. For Smith, commercial societies generate wealth which supports life for an increasing number of people, institutions which support liberty, and social conditions which facilitate moral impartiality. Recent findings from experimental economics seem to support Smith’s ideas that markets and some aspects of morality are dependent on each other, and in particular that the causal effects of the relationship seem to go from markets to morality.

That is from an article by Maria Pia Paganelli, it is titled "Commercial Relations: From Adam Smith to Field Experiments."

Morality and political economy in Hume

In his Treatise of Human Nature, Hume argues that reason does not motivate action but rather directs our judgement by informing us about their causes and effects. He distances, in his argument, passions from reason by claiming that passions are not ideas, do not represent anything, are self-contained and thus cannot be contradictory to truth or reason. Moral judgements, according to Hume, are passions and as such they cannot be contrary to reason. For Hume, morality does not consist of immutable principles to be discovered by reason; it is based on human passions, which, through repetition, human beings come to associate with certain moral characteristics. Following on this statement, I here explore the following point: to the extent economic behaviour is determined by passions such as greed, benevolence and pleasure, we cannot separate economic activity and morality. As an extension, morality and political economy are inextricably linked in Hume. This suggests that ethics, through the study of morality and political economy, and the study of economic behaviour and institutions are inseparable subjects. It is interesting to observe this in the work of Hume, a fundamental influence on Adam Smith, one of the most important precursors of modern economics. The paper underlines the importance of understanding the evolution of the history of economic thinking that led to modern-day economics and which, though claiming Hume via Smith as one of its progenitors, argues for a complete separation of ethics and economics. In particular, the separation of positive from normative economics becomes infeasible in light of Hume’s analysis, rendering problematic the claim of modern economics that Hume is the founding father.

From a new paper by Serap Ayşe Kayatekin (Cambridge Journal of Economics, January 2013). I did not find the full paper online.