David R. Henderson  

Free Market Virtues

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After finishing the game, the players had to fill in a form that asked their age and the part of Germany where they had lived in different decades. The authors found that, on average, those who had East German roots cheated twice as much as those who had grown up in West Germany under capitalism. They also looked at how much time people had spent in East Germany before the fall of the Berlin Wall. The longer the participants had been exposed to socialism, the greater the likelihood that they would claim improbable numbers of high rolls.
This is from "Lying Commies," The Economist, July 19.

In my book, The Joy of Freedom: An Economist's Odyssey, I have a chapter titled "Market Virtues and Community," in which I make the case that free markets encourage basic virtues. Now comes this study that suggests that socialism/communism does the opposite.

It reminds of what I experienced while playing volleyball regularly for a number of years with a number of people who had left a Communist country in the early 1980s. I don't want to be too specific about the country or where we played volleyball because I live in a relatively small community and some of these people, despite what I'm about to say, I considered friends. We would often have disputes about whether a ball landed on this or that side of the line and my friends from this particular Communist country would ALWAYS call it their way. In over 100 days of playing over a few years, I can't remember an exception to this rule. The other players, not from Communist countries, would at least occasionally call it against their own interest.


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COMMENTS (6 to date)
Scott Sumner writes:

Love this post, and I'm not surprised.

Groty writes:

I was thinking the other day about how much the world has changed since I was in college.

Back then, George Gilder's book, "Wealth and Poverty" - probably the best book I've ever read for making the ethical and moral case for free enterprise - was on the best seller list for a couple of years. Reagan was president, and he never missed an opportunity to talk about the importance of freedom and liberty to individual well being. And Milton Friedman was turning the whole world onto freedom and free enterprise.

Now Thomas Picketty's neo-Marxist book is all the rage. Obama is president and he likes talking about how increasing the size of government will improve people's lives. And Paul Krugman is the rock star economist extolling the virtues of massive government intervention in markets and Keynesian fiscal policies.

JKB writes:

Well, what can you expect from people who lived under a socio-political system that is a philosophy of failure. More over, to combat this failure they seek to change the rules so that they can gain all or a portion of the wealth created by the productive.


"On the other hand, the socialist proposes to overturn industrial competition and the institution of private property in the hope - vaguely outlined and not economically analyzed - of transferring the use of wealth from those who have to those who have not. "
--"Socialism a Philosophy of Failure", Laughlin, J.L., Scribner's magazine, 1909

David Friedman writes:

There is a chapter in the new third edition of my Machinery of Freedom on the economics of vice and virtue. One conclusion is that people will be better if they live in a society where most associations are voluntary—because in such a society virtue, on average, pays.

Pajser writes:

It is impossible to dismiss effects of transition to capitalism, which gradually caused tenfold crime increase in ex-Eastern Germany. Eastern Germany youth arrest rate is currently twice the rate of early 1990's, and also twice the Western Germany rate. Similar effects are well known in Russia. It is reasonable to assume that same cause is responsible for increase in small cheating behavior. It is not addressed in original article. (Entorf & Spengler, Crime in Europe, 2002; official police statistics)

Wojtek writes:

Yes. It is indeed generally been the case that transitioning away from socialism increases the amount of perceived crime. Two thoughts on this:

1. Crime was never really reported under communism, so it's really hard to tell, but assuming its true,
2. It only proves the point. If people grow up either evading or extracting favors from party members then its natural to expect that both the extraction and evasion will continue in a different form for some time thereafter.

I would therefore restate the observation as the transfer of crime from the party to individuals with compromised morals. These are often the same people, but not always. Acting in what one perceives to be the 'common good' leads many decent people completely astray. Those same people usually later complain about the crime of racketeering, in which they were quite happy to participate in the name of the state.

But I wanted to make another observation, and that is that I've often heard it said of Poles (mostly by Poles) that we lack respect for others property.

Lately, there has been a shift in this self perception. While the older generation treats it as an inevitability, the younger is frustrated by it and attributes it (rightly) to those who were raised under communism. The kids of the 80s and 90s have grown to be an eminently better behaved bunch. So you can really see this transformation take place in Poland. It seems that it has a generational impact, which is both sad and encouraging.

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