This document discusses the relationship between morality and capitalism. It argues that morality is necessary to allow gains from trade by reducing opportunistic behavior and transaction costs. However, morality cannot be enforced by states, institutions or organizations, but rather emerges from local traditions through moral emotions like shame and guilt. The document examines how different societies, like agrarian civilizations and Western Christianity, developed different material and cosmological beliefs that shaped their economic systems and transactions costs. It also discusses how concepts of human nature, individualism, and community have changed over time and influenced the rise of capitalism in the West.

1. PRIVATE MORALITY
&
CAPITALISM
LEARNING FROM THE PAST
DEEPAK LAL

2. ABSTRACT
 This paper argues that morality is required to
allow the gains from trade to be reaped by
reducing the ‘policing’ type of transactions costs
involved in opportunistic behaviour.
 But, as Hume emphasised neither God nor Reason
can justify any particular morality, the only
source of morality must be local traditions which
socialize children through the moral emotions of
shame and guilt.
 Capitalism does require morality, but this cannot
be enforced by States, NGO’s or supra-national
insitutions.
CONT………

3. ABSTRACT
 Concepts like Communalistics Ethics by
Agrarian Eurasian Civilisation &
Individualistic Ethics of Western
Christedom
 Role of market,govt and civil society in
fostering globalisation
 Role of morality in economic life

4. ANALYTICAL FRAMEWORK
 Morality is part of the institutional infrastructure
of a society.
 This institutional infrastructure consists of
Informal constraints /restraints like cultural
norms (which encompass morality)
Formal constraints which are embodied in
particular and more purposeful
organizational structures. Formal rules
embrace the Common Law which forms a
spontaneous order which constrain human
behavior. ( Hayek)

5. ANALYTICAL FRAMEWORK
 HOMO ECONOMICS – RATIONLITY &
MOTIVATION FOR SELF INTEREST
 Constraining means limiting self interest
 Transaction cost – Cost of Relationship and is
influenced by societal institutions.
 Culture is informal aspect of societal institution
Which control & influence human behavior.
 Humans cope with environment change by
adapting the social norms to survive but animals
mutate to survive.

6.  Social customs give to culture which is
transmitted to new members ( Children)
 Routinised behavior for equilibrium in economics
is equivalent to ecological concept of social
norm.
 When environment changes– old theories don’t
work & new adaptation process by hit & trial to
have equilibrium
 Material belief
 Cosmological belief

7. TYPES OF BELIEFS
 Material belief
Ways of Making a living & beliefs
about the material world read
economy.It is more malleable .
 Cosmological belief
Understanding the environment around
us and mankind’s place in it .It is less
malleable & hysteresis in nature.

8. TYPES OF BELIEFS
 Different transaction cost
 Efficiency of exchange & policing works of
economic dimensions varies.

9. EXAMPLES OF BELIEFS
 Cost of finding trading partner – Material
belief
 Enforcing an the agreement with him –
Cosmological belief
 Knowledge asymmetries b/n principal &
agents leads to policing aspects of the
transaction cost.

10. CHANGING MATERIAL &
COSMOLOGICAL BELIEFS
It can be studied with respect to
 HUMAN NATURE
 AGRARIAN CIVILISATION
 THE RISE OF THE WEST

11. ON HUMAN NATURE
 It is set during the period of evolution ending with the
stone age.
 Reciprocal Altruism part of basic human nature in the
stone age .
 Altruism is selfless concern for the welfare of others.
Reciprocal altruism is not unconditional. Firstly the act of
altruism must give rise to a surplus of cooperation, in the
sense that the gains to the beneficiary must be
perceived to be meaningfully larger than the costs to the
benefactor. Secondly the act of altruism should be
reciprocated by the original beneficiary if the situation is
later reversed. Failure to do so will usually cause the
original benefactor to withdraw future acts of altruism.

12. ON HUMAN NATURE
 A potential example of reciprocal altruism
is blood-sharing in the vampire bat, in
which bats feed regurgitated blood to
those who have not collected much blood
themselves knowing that they themselves
may someday benefit from this same
donation; Cheaters are remembered by
the colony and ousted from this
collaboration.

13.  Gain from co-operation may be less than
that of cheating & free riders. It will be
mitigated by “tit for tat” game
 Truck & Barter – Trading Instinct

14. AGRARIAN CIVILISATION
 Power of sword,pen & plough well understood.
 Restraint on anti-social action – A way of life
rather than religion
 Moral emotion of shame & guilt is the driving
force
 Cosmological belief is Communalist in nature
 Merchants are considered as necessary evil
 Material belief not conducive for economic
growth

15. Rise of the west
 Change in cosmological & material belief
mediated by catholic church (6AD to 11AD)
 Promoted cult individualism first in family affairs
and later in material relationship
 Extolling virginity & preventing second marriage
to create single woman who can bequest to the
church
 Preventing adoption of children,marriage
between close kins, widows to enrich the
churches monetarily
 40 % familiies don’t have heirs and chief
beneficiaries are churches

16. Rise of the west
 Extensive growth – per capita income
constant
 Intensive growth – Increase in per capita
income
 Smithian growth – Linkage of a new empire
 Promethean growth – Linkage of a additional
resource

17. Rise of the west
 Extensive legal & administrative procedures
 Power of KING to power of gODF
 From truck & barter to modern economic growth
and reduced suspicion on the merchants.
 PAPAL revolution – Church entering into realm of
the kings.
 From joint families and family values to guilt
based culture

18. Communalism vs individualism
 Eurasian civilisation i.e the ethics of sinic
& the HINDU has remained distinctly
“communalistic” rather than
“Individualistic”.The HINDU ethics talks of
 Out wardly individualism rather inwardly
individualism or modern individualism. EX-
Renouncing the world & becoming ascetic.

19.  Samuel Huntingdon came up with the "Clash of
Civilizations" theory .He drew up a chart to show which
civlization has problems with another. These are the
civlizations included in the chart:
-Western Christendom, centered on Europe and North
America but also including Australia and New Zealand.
Whether Latin America and the former member states of
the Soviet Union are included, or are instead their own
separate civilizations, will be an important future
consideration for those regions, according to Huntington.

20.  -The Orthodox world of Orthodox and/or Slavic Eastern
Europe and Russia.
-Latin America
-The Muslim world of the Middle East, North Africa,
Central Asia, the northwest of South Asia (Pakistan,
Bangladesh, and parts of India), Malaysia, Indonesia
-Hindu civilization, located chiefly in India, Nepal, and
culturally adhered to by the global diaspora
-The Sinic civilization of China, Korea, Vietnam,
Singapore, Taiwan, which includes the Chinese
diaspora, especially in relation to Southeast Asia.

21. -Latin America
-The Muslim world of the Middle East, North Africa, Central Asia, the
northwest of South Asia (Pakistan, Bangladesh, and parts of India),
Malaysia, Indonesia
-Hindu civilization, located chiefly in India, Nepal, and culturally
adhered to by the global diaspora
-The Sinic civilization of China, Korea, Vietnam, Singapore, Taiwan,
which includes the Chinese diaspora, especially in relation to
Southeast Asia.
-Sub-Saharan Africa

22. -The Buddhist areas of Northern India, Nepal, Bhutan,
Mongolia, Kalmykia, Siberia, Myanmar, Thailand,
Cambodia, Laos and Tibet.
-Japan, considered an independent civilization
-Instead of belonging to one of "major" civilizations,
Ethiopia and Haiti are labeled as "lone" countries. Former
British colonies in the Caribbean are supposed to
constitute an independent civilization.
-Israel is identified as a non-Western state having rather
its own civilization.
________________________________________

23. SINIC CIVILISATION
Its central cosmological beliefs are
 OPTIMISM
 FAMILIALISM
 BUREAUCRATIC AUTHORITARIANISM
 NO ROOM FOR OUITWARD INDIVIDUALISM
 ANCESTOR WORSHIP
 HIERARCHY
 RITUAL DEFERENCE
 OBEDIENCE
 RECIPROCITY

24. CHRISTIANITY
 SHARES SPACE WITH ISLAM AND JUDAISM
 Cosmological beliefs are
 UNIVERSALITY
“ONE CANNOT CHOOSE HINDUISM BUT
BORN WITH IT”
“BUT YOU CAN CHOOSE CHRISTIANISM
,YOU NEED NOT BORN WITH IT”
 CHRISTIANISM – Proselytize.( Conversion)
 EGALITARIAN

25. CHRISTIANITY
 Home aequalis – men are born equal
 Asian - HOME hierarchicus – men are not
born equal
 Liberty & equality based on individualism

26. Course of western individualism
 Man is an individual in relation to GOD
 St Augustines “City of GOD” vision of the
heavenly cities ( Garden of Eden,A fall leading to
the original sin & a day of judgement
 Darwin’s “God was blind”
 Nietzsche’s God is dead
 Moral sensibilities serve across purpose that to
one man a morality is proved by its utility and to
another the utility refuted by him.

27.  Moral abyss due to death of GOD which
further mutates in the form of marxism &
freudianism a more recently in the form of
eco-fundamentalism.

28. MARXISM
 Looks to the past & future
 Commodifiaction – class society and
conflicting material forces.
 Earthly salvation by historical materialism.

29. ECOFUNDAMENTALISM
CONTENIPTUS MUNDI
 Human kind is evil
 Only living in harmony with a deified
nature can it be saved

30. Alasdair Macintyre
 Contemporary western notion of self (
Cosmological Belief) has three contradicting
elements that are not compatible &
commensurable
 Enlightenment – Stand apart from social
influence and mould as per their own
preferences
 Evaluation by others –Standards are acquisitive
& competitive success.
 Remaining religious & moral norms and open to
“invocation of values and success of habits of
the heart on the other on the other hand.

31.  David Hume’s in “Treatise of Human
Nature” – Morality is essential to control
man’s self aggrandising instincts to garner
the gains from co-operation
 Morality is based on tradition rather than
GOD or reason. It cements social fabrics
 Japan adopting west’s material beliefs
without adopting cosmological beliefs.
 Modernising without westernising

32. Commercial society promotes
VIGOROUS VIRTUES LIKE
 Hard work
 Prudence
 Thrift
 Self reliance

33. IMPLICATIONS FOR GLOBAL
CAPITALISM
IMPACT OF MORALITY ON
MARKET
STATE
NGOS

34. MARKET
Markets : The creation of the national public debt and
the Bank of England in the late 17th century contributed
to the rise of the merchantS and financiers in economic
power and societal states.
The traditional prohibition of interest was lifted, posing a
serious problem for the traditional value system.Money –
A means of Exchange not to increase at interest -
Aristotle
Independence and real property (real estate) were taken
to be the moral foundation for civic virtue and moral
personality.
Share are illusions based on fantasy - POCOCK

35. STATE
 CIVIL ASSOCIATION :
 State custodian of laws which did not
impose any societal goal but faciliator to
pursue their own ends.OAKESHOTT
 ENTERPRISE ASSOCIATION
 State manager of an enterprise seeking to
use the law for legislation of morality.

36. The state has come to be viewed as enterprise
association rather than a civil association (Greek view:
Communal ties).
The dissolution of communal ties, apart from
encouraging individualism, caused the prevalence of a
set of ideas and values which Dakeshott calls ‘anti-
individual’. These ideas and values protected those who,
by circumstance or temperament, were unable to look
after themselves in the new world of broken commercial
ties(through a large number of govt. welfare activities).
Preferance of secuity over liberty,solidarity to enterprise ,
equality to self determination.

37.  The state seen as a civil association does not try
to legislate morality. The state seen as an
enterprise association displays both the domestic
concerns for social welfare and the desire to
export western values like ‘human rights’ and
democracy’ to the rest of the world. However,
the view of the state which seeks to combine
the market with various social demands is
antithetical to efficient globalization which
restricts itself to provision of public goods and
keeps away from the support of any system of
morality.

38. NGOS
Most are really pressure groups
International NGOs are altruistic-they may be said to promote an
international moral order and an international civil society.
The environmental NGOs, consumer NGOs, the Human rights NGOs,
the Health NGOs may be harming rather than helping, the worlds
most needy citizens by resisting growth prospects of
underdeveloped economies in the third world.
The ‘global Salvationists ’(NGOs) make the claim that globalization has
marginalised poor peoples and poor countries, are propagating ‘a
kind of ethical imperialism’. Instead of aiding globalization they are
promoting a global collectivism which includes the ‘ethical’
enterprise view of the state supported by Oakeshott.

39. Conclusions
At present, as in the past, morality is essential to constrain
opportunistic economic behavior of human beings in every society.
Capitalism does require moral behavior, But moral behavior cannot
be enforced by govts, NGOs or any supra-national institutions such
as WTO. In the non-western countries it is important to keep in tact
traditional mainsprings of morality, and never to undermine the
traditional institutions which ensure a morality system) in the name
of a universal western ethic which is trumpeted as a necessity for
effective globalization. It is possible for these countries to modernize
(i.e. adopt capitalism) without westernizing (i.e. accepting the
western brand of morality = its cosmological beliefs)