Over on CapX, Tim Worstall elaborates on Matt Ridley’s recent Times column regarding free markets and fairness.
Ridley observes that free trade, contrary to common socialist rhetoric, actually makes people behave more fairly and generously:
The more integrated into the commercial world people are, the more generous they are. As one of the authors, the economist Herb Gintis, summarises the results: “Societies that use markets extensively develop a culture of co-operation, fairness and respect for the individual.”
Worstall elaborates that, as a result, a free market of repeated interactions is self-regulating:
Buying bread is, for example, a fairly common activity. Anyone trying to cheat us will quickly find their market disappearing. We might tell on them. We might just reject their offering. But bad bread does quickly disappear.
Buying pensions on the other hand is different – we only really do it once in a lifetime. And it takes perhaps 50 years to find out we made the wrong decision. We can rely a great deal less upon that trained-to-operate-in-markets set of reflexes that multiple iterations allow.
Which is rather a long-winded way of explaining what must be regulated and why.
Worstall’s assertion that fairness is a learned response reminds me of this recently reported experiment which found that wolves and domestic dogs have a similar sense of fairness (i.e. that it pre-dates the domestication of dogs). As reported on the BBC:
Two animals of each species were placed in adjacent cages, equipped with a buzzer apparatus. When the dog or wolf pressed it with their paw, both animals got a reward on some occasions. Other times, the dog or wolf doing the task got nothing while the partner did.
The key finding was that when the partner got a high value treat, the animal doing the task refused to continue with it.
“When the inequity was greatest they stopped working,” said Jennifer Essler, from the University of Veterinary Medicine in Vienna.
“For some of them it was a really really quick and strong response. One of the wolves stopped working after the third trial of not receiving anything while his partner received something. I think he was so frustrated he even broke the apparatus.”