¹ An economist who is an exception to this rule is Donald McCloskey. His “Bourgeois virtue,” American Scholar, vol. 63 (1994), pp. 177-191 is on no account to be missed.

² This definition is loosely based on William A. Galston, “Introduction” in John W. Chapman & William A. Galston, Virtue, NOMOS XXXIV (New York: New York University Press, 1992), p. 1. See also Galston’s “Liberal virtues,” American Political Science Review, vol. 82 (1988), pp. 1277-1289.

³ See Hirschman’s classic essay “Rival interpretations of market society: Civilizing, destructive or feeble?,” J. of Econ. Lit., vol. XX (1982), pp. 1463-1484. It is reprinted in his book, Rival Views of Market Society (Cambridge: Harvard University Press, 1992), chap. 5.

⁴ For a contemporary example see Robert Bellah et al.: “[M]arket forces are rapidly invading every sphere of society—even the family, that traditional bastion of refuge from the ‘heartless world.’” Robert N. Bellah, Richard Madsen, William M. Sullivan, Ann Swidler, Steven M. Tipton, The Good Society (Alfred A. Knopf: New York, 1991), p. 92. Perhaps the most famous statement is the Communist Manifesto (p. 13): “The bourgeoisie . . . has put an end to all feudal, patriarchal, idyllic relations. It . . . has left no other bond between man and man than naked self-interest, than callous cash payment. It has drowned the most heavenly ecstasies of religious fervor, of chivalrous enthusiasm, of philistine sentimentalism, in the icy water of egotistical calculation. It has resolved personal worth into exchange value . . . . [It] has stripped of its halo every occupation hitherto honored and looked up to with reverent awe. It has converted the physician, the lawyer, the priest, the poet, the man of science, into its paid wage-laborers. [It] has . . . reduced the family relation to a mere money relation.” Karl Marx and Frederick Engels, The Communist Manifesto (New York: International Publishers, 1994) p. 11. Hirschman notes that this perception was by no means original with Marx. Over a century earlier it had been the essence of the conservative reaction to the advance of market society voiced during the 1730s. (“Rival interpretations,” p. 1467).

⁵ Daniel Bell, The Cultural Contradictions of Capitalism (New York: Basic, 1976). References are to the 1978 paperback edition. For this reference see p. xx of the 1978 foreword.

⁶ Alasdair MacIntyre, After Virtue (Notre Dame, Ind.: Notre Dame Press, 1981), pp. 250-1. If the process is incomplete—still only “surface appearance”—that is because of a vestigial premarket ethic. See pp. 110-11.

⁷ This is emphatically not MacIntyre’s view. For him virtues are defined by the fact that they are practiced “without regard to consequences.” (MacIntyre, p. 189). But it does seem to be capture Galston’s position. He sees the revival of interest in the virtues as driven by “growing qualms about the predominance of self-interest in both public and private life [in the U.S.], spreading fears about the fragmentation and privatization of American society, mounting concerns about the effects of institutions . . . on the character of young people, and a renewed disposition to believe that without certain traditional virtues neither public leaders nor public policies are likely to succeed.” “Introduction,” p. 2.

⁸ Gertrude Himmelfarb, “A de-moralized society,” Public Interest, no. 117 (1994), p. 73. See also Irving Kristol, Two Cheers for Capitalism (New York: Basic Books, 1978); and Bell, Cultural Contradictions.

⁹ The term is Hirschman’s. See “Rival interpretations.”

¹⁰ Fred Hirsch, Social Limits to Growth (Cambridge: Harvard University Press, 1978).

¹¹ Hirsch, pp. 122, 124.

¹² Hirsch, p. 141. James Q. Wilson makes a similar point: “For there to be a contract, . . . there must first be a willingness to obey contracts.” The Moral Sense (New York: Free Press, 1993), p. 14.

¹³ For another statement of the argument here see R.M. Hare, “One philosopher’s approach to business and professional ethics,” Business & Professional Ethics Journal, vol. 11 (1992), esp. pp. 11-14.

¹⁴ Kenneth J. Arrow, “Social responsibility and economic efficiency,” Public Policy, vol. 21 (1973), p. 314.

¹⁵ Ibid.

¹⁶ Hare, pp. 12-13.

¹⁷ Arrow, p. 315.

¹⁸ Compare Alexander Pope’s Essay on Man:

But sometimes Virtue starves, while Vice is fed.

What then? Is the reward of Virtue bread?

Cited by Jonathan Riley, “Liberal philanthropy,” in Chapman & Galston, Virtue.

¹⁹ James Q. Wilson, “The rediscovery of character, Private virtue and public policy,” Public Interest, no. 81 (1985), p. 15.

²⁰ MacIntyre, p. 196.

²¹ Hirschman, “Rival interpretations,” p. 1465.

²² Hirschman, p. 1467.

²³ For this debate see Friedrich von Hayek, The Constitution of Liberty (Chicago: University of Chicago Press, 1960), Milton Friedman, Capitalism & Freedom (Chicago: University of Chicago Press, 1962), Robert Nozick, Anarchy, State, and Utopia (New York: Basic Books, 1974), and Irving Kristol, “‘When virtue loses all her loveliness’—Some reflections on capitalism and the ‘free society,’” in Two Cheers for Capitalism.

²⁴ Hirsch, p. 141.

²⁵ Ibid. , 132.

²⁶ Robert Frank, Passions Within Reason (New York: W.W. Norton, 1988), pp. 69, 191.

²⁷ If trustworthiness is a business asset, then there may be circumstances where it is more profitable to feign it than to cultivate the genuine article. In Groucho Marx’s immortal line, “The secret of life is honesty and plain-dealing; if you can fake that, you’ve got it made.” The tendency of opportunistic actors in the marketplace to mimic virtues like trustworthiness is testimony to the economic advantages of the virtues. As La Rochefoucauld put it, hypocrisy is the homage that vice pays to virtue.

²⁸ John Shad, former chairman of the Securities and Exchange Committee, quoted by James W. Kuhn, “Ethics in business: What managers practice that economists ignore,” Business Ethics Quarterly, vol. 2 (1992), p. 307.

²⁹ Lectures on Jurisprudence, eds. R.L. Meek, D.D. Raphael & P.G. Stein (Oxford: Clarendon Press, 1978). Cited in Jerry Z. Muller, Adam Smith in His Time and Ours (New York: Free Press, 1993), p. 132.

³⁰ Nathan Rosenberg & L.E. Birdzell, Jr., How the West Grew Rich (New York: Basic, 1986), p. 128.

³¹ Smith, The Theory of Moral Sentiments (Indianapolis: Liberty Classics, 1976), Pt. VI, sect. III, p. 392. See Patricia H. Werhane, Adam Smith and His Legacy for Modern Capitalism (New York: Oxford University Press, 1991), p.45.

³² Frank, p. 257. Some contemporary neo-conservative critics of capitalism believe it has been corrupted by its success. The economic plenty that it has generated has corroded the traditional bourgeois virtue of self-control leaving behind “a purely acquisitive ethos.” (Kristol, Two Cheers, p. 88). Daniel Bell has said that “a corporation finds its employees being straight by day and swingers by night” (Cultural Contradictions, p. xxv). For a dissection of this view— which he facetiously labels the “dolce vita scenario”—see Hirschman, “Rival interpretations,” pp. 1468-9.

³³ Yale Brozen, in Brozen, Elmer W. Johnson, Charles W. Powers, Can the market sustain an ethic? (Chicago: University of Chicago, 1978), p. 15.

³⁴ Werhane, p. 96.

³⁵ Brozen, p. 14; Muller, p. 195. Of course, that courtesy may be not be free of hypocrisy. Enlightenment thinkers acknowledged that together with all the non-material improvements to society brought about by commerce, “a bit of hypocrisy may have to be accepted into the bargain.” (Hirschman, “Rival interpretations,” p. 1465).

³⁶ Stewart Macaulay, “Non-contractual relations in business,” American Sociological Review, vol. 28 (1963), p. 61.

³⁷ Robert C. Solomon, Ethics & Excellence (New York: Oxford University Press, 1992), p. 105.

³⁸ Robert Axelrod, The Evolution of Cooperation (New York: Basic Books, 1984), p. 174.

³⁹ For what follows see, especially, Oliver E. Williamson, “The economics of organization: The transaction cost approach,” American Journal of Sociology, vol. 87 (1981), pp. 548-577.

⁴⁰ Ian Macneil, “Exchange revisited: Individual utility and social solidarity,” Ethics, vol. 96 (1986), p. 578.

⁴¹ Macneil, p. 585.

⁴² The last four sentences are my elaboration of Macneil’s account, but are intended to be faithful to its spirit.

⁴³ Macaulay, p. 64.

⁴⁴ Mark Granovetter, “Economic action and social structure: The problem of embeddedness,” American Journal of Sociology, vol. 91 (1985), pp. 498-499.

⁴⁵ Richard Epstein, Forbidden Grounds, The Case against Employment Discrimination Laws (Cambridge: Harvard University Press, 1993), p. 155.

⁴⁶ George A. Akerlof, “The market for ‘lemons,’ Quality uncertainty and the market mechanism,” Quarterly Journal of Economics 84 (1970), p. 500.

⁴⁷ Paul Rubin, Managing Business Transactions (New York: Free Press, 1990), pp. 149-150.

⁴⁸ An additional advantage is the saving in administrative or agency costs, but I don’t explore that point here.

⁴⁹ MacIntyre, p. 196.

⁵⁰ Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (Indianapolis: Liberty Press, 1976 [1776]), Book 1, chap. 1, p. 22.

⁵¹ Ibid.

⁵² Smith, Bk. I, chap. 10, pt. 2, p. 145.

⁵³ Milton Friedman, Capitalism & Freedom, (Chicago: University of Chicago Press, 1962), pp. 131-2, argues that price cartels are inherently unstable (and so not a major public policy problem) precisely because the requisite level of trust is too great to sustain. OPEC’s failure suggests some of the difficulties of maintaining cross-cultural trust.

⁵⁴ Mark Granovetter, “Economic action and social structure: The problem of embeddedness,” American Journal of Sociology, vol. 91 (1985), p. 492.

⁵⁵ Michael Novak. In Harper’s Forum, “Is there virtue in profit?,” vol. 273 (1986), p. 38.

⁵⁶ Kenneth J. Arrow, “Gifts and Exchanges.” In Edmund S. Phelps, ed., Altruism, Morality, and Economic Theory (New York: Russell Sage, 1975), pp. 14-15.

⁵⁷ Adam Smith, Theory of Moral Sentiments (Indianapolis: Liberty Classics, 1976 [1759]), Pt. VII, sect. II, chap. 1, p. 463. Muller, p. 8.

⁵⁸ Alexis de Tocqueville, Democracy in America (New York: Modern Library, 1981 [1835, 1840], Bk. 2, chap. 8, p. 414.

⁵⁹ “While interest brings people closer together, this is a matter of a few moments only; it can only create an external tie among them . . . . The [consciousnesses] are only in superficial contact; they do not penetrate one another . . . every harmony of interest contains a latent or delayed conflict . . . for interest is what is least constant in the world.” Cited in Hirschman, “Rival interpretations,” p. 1471.

⁶⁰ This is what Frank calls the “commitment problem.” See Frank, Passions within Reason. Cf. Smith, Theory of Moral Sentiments, pt. VI, sec. III, p. 387: “But the most perfect knowledge of [the rules of virtue] will not alone enable him to act in this manner; his own passions are very apt to mislead him—sometimes to drive him, and sometimes to seduce him, to violate all the rules which he himself, in all his sober and cool hours approves of.”

⁶¹ Wilson, “Rediscovery,” p. 15; see also The Moral Sense, p. 249.

⁶² Tocqueville, pp. 416-7. MacIntyre would presumably reject this account because of his rigid separation between external goods and goods internal to a practice.

⁶³ MacIntyre, p. 198. Adam Smith uses virtually identical imagery to make the same point: “In the middling and inferior stations of life, the road to virtue and that to fortune . . . are, happily, in most cases very nearly the same,” The Theory of Moral Sentiments, Pt. I, sect. III, chap. 3, p. 128.