Good governance requires the understanding of how people react to laws, economic incentives, information, or moral dilemmas. In his book entitled “The Moral Economy”, Samuel Bowles explains the research-based experience that it is not only self-interest that people follow, and they are not as long-sighted, speculating, or consistent as several economists and decision-makers suggest.
Samuel Bowles’s book approaches this topic from the aspects of economic policy-related planning and economic modelling. His main message is that for a new paradigm in economic policy Homo economicus needs to be replaced by an empirically well-founded behavioural model. In order to support this idea, he refers not only to the scientific results of recent years but various experiments as well. Certain parts of the book are based on the lectures delivered by the author in 2010 at Yale University within the framework of the Castle Lectures series. It is a real merit of the book that it combines research conducted in various fields, such as behavioural psychology, the history of economic theory, and game theory, including the most important achievements in these areas.
For decision-makers, the dilemma is as follows: on the one hand, providing the conditions necessary for markets operating well with complete contracts (private property-related rights, competition, flexibility, mobility), might destroy the social norms that enable mutually beneficial exchanges even in the case of incomplete contracts. On the other hand, however, institutions supporting social norms might also destroy market operations, because economy could get more distant from the ideal (“invisible hand”) state.
As for incentives, five statements are made in the book, and these offer an answer to the question raised in the subheading:
- Incentives are essential to a well-governed society.
- Incentives cannot single-handedly implement a fully efficient use of economic resources if people are entirely self-interested and amoral.
- Ethical and other social preferences are therefore essential.
- Unless designed to at least “do no harm”, incentives may stand in the way of “creating better people”.
- Public policy must be concerned about the nature of individual preferences and the possibility that incentives may affect them adversely.
Good policies support socially important objectives, and they do so not only by utilising self-interest but also by building upon the motivations deriving from community spirit – this is how the final conclusion of the book can be summarised.
Samuel Bowles directs the Behavioural Sciences Program at the Santa Fe Institute in New Mexico and is a Professor Emeritus at the University of Massachusetts. In 2006, Bowles was awarded the Leontief Prize for his outstanding contribution to economic theory. He has also advised the governments of Cuba, South Africa, and Greece, the presidential candidates Robert F. Kennedy and Jesse Jackson, as well as Nelson Mandela.
“The Moral Economy” is available in the bookshop of PABooks opened in September in the House of Wisdom, together with other earlier publications. Recent information about the latest books of the publishing house are available at the www.pallasathenekiado.hu website, where the publications can also be purchased via the webshop.
The Pallas Athéné Publishing House pays great attention to community building as well. Its Facebook page (www.facebook.com/PallasAtheneKiado) incorporates useful and interesting information about newly published books and any related event.