The marketplace of sin

A few years ago, a group of us at work were discussing politics when someone asked a question that stumped me for years. I forget what the topic was, but the group, being more politically progressive than I am, was proposing more regulation, laws that would inhibit whatever behavior we were disapproving. I said something to the effect that regulation wasn’t always the answer. The man who hired me snapped back, “How can you believe in total depravity but want less regulation?” I’ve been thinking about that question ever since.

The term total depravity essentially means that every human being is born sinful. This is a historic, orthodox tenet of Christianity, one clarified by John Calvin during the Reformation. Total depravity means that a two-year-old doesn’t need to be taught how to lie, for example. We’re simply born that way.

Total is a term of breadth, not of degree. It means that every part of us is sinful—our logic and reasoning, our emotions, our language, and of course our behavior. It means we can’t do what’s right without God’s grace. This brings up all kinds of implications about free will and morality over which seminary students like to argue for hours. I’ll skip them for now.

The natural response is that laws should be put in place to restrain this totally depraved nature into which every human being is born. Of course, laws do help limit bad behavior, but only to a point. Murder is illegal in this country and in many others, yet over 24,000 murders were committed in America alone in 2020.

It’s also true that certain laws can encourage bad behavior rather than limit it. Economist Thomas Sowell wrote in Basic Economics, “Attempts to keep food prices down by imposing price controls have led to hunger and even starvation, whether in seventeenth-century Italy, eighteenth-century India, France after the French Revolution, Russia after the Bolshevik revolution, or in a number of African countries after they obtained independence during the 1960s.”

There are any number of ways to construct a system in which behavior is modified toward some desired end. Some believe in utopia, others in Communism, anarchy, libertarianism, socialism, and so on. Each system has its strengths and weaknesses.

As a capitalist, I have learned that an open marketplace based on prices is the best system our species has created for doing the most good for the most people. Capitalism, to be sure, has its weaknesses. However, as a system, it works better than others we’ve invented to constrain bad behavior.

When there are excesses in the marketplace, for example, whether driven by greed or anything else, prices and market participants can remove those excesses not from some law but by pursuing their own self-interest, leaving everyone better off. This was the point of Adam Smith’s The Wealth of Nations. Traders can sell short—they can take bets opposite the prevailing narrative. Entrepreneurs can create ways of doing things better, more efficiently, providing more jobs, investing in new initiatives. Alternatively, critics of capitalism can create systems that modify behavior toward whatever end they desire.

I’ve come to believe that both sides of the aisle want the same outcomes—healthy, wealthy, and wise people. It’s merely that their means of attaining those ends are in opposition. What can’t be attained by a process such as markets must be attained by force. Sowell put it this way in A Conflict of Visions: “attempts to equalize economic results lead to greater—and more dangerous—inequality in political power.” That political power opens up the door to all kinds of bad behavior.

In other words, market-based principles like prices emphasize the process while political-based principles like new laws emphasize outcomes. The two sides talk past each other. “Although the two visions reach very different moral conclusions,” Sowell continued, “they do so not on the basis of fundamentally different moral principles but rather because of their differences in analysis of causes and effects.”

Social justice, however defined, is an example of these competing systems seeking to influence a certain set of behaviors. One side submits to a process, with little regard for its outcomes, while the other imposes its vision on others to bring forth desired outcomes. That’s not to categorize the political left or right—they both impose their visions on each other. It’s more of categorization for the classical liberal or libertarian and everyone else. Sowell, in A Conflict of Visions, might label the former as the constrained vision and the latter as the unconstrained vision.

The unconstrained vision believes they can attain their ends based on a certain will or set of values, regardless of the physical or moral reality that led to whatever negative outcome that currently exists. The constrained vision, on the other hand, believes that will or values alone aren’t enough. Just look at Sam Bankman-Fried, who had all the moral vision in the world via effective altruism. He recently pleaded not guilty to eight felony counts this week, including conspiracy, fraud, and money laundering.

Sowell quoted Nobel prize–winning economist Friedrich Hayek as saying that social justice is “absurd,” a “mirage,” “a hallow incantation,” “a quasi-religious superstition,” and a concept that “does not belong to the category of error but to that of nonsense.” He concluded, “The concept of social justice thus represents the extremes of the conflict of visions—an idea of the highest importance in one vision and beneath contempt in the other.”

The difference reminds me of what I just read in James Clear’s Atomic Habits. He wrote that, when pursuing some goal, it’s not enough to think about the goal. That can actually inhibit you reaching it. Your will or motivation or—in this case, political “solution”—is not enough. Instead, you should think about the system that will help you reach that goal. We all respond to incentives. So, to get where you want to go, create a system that will set up the right incentive mix that will form a conducive environment to the right behavior.

This is because human nature is totally depraved. There will always be wars and rumors of wars, either internally or externally, within ourselves or our society or the society of others. What we can do, then, is create systems and institutions that distribute decision-making power through something like prices, ensuring that we don’t need unconstrained political solutions. With open markets, the theory goes, everyone can see the truth for themselves.