Injustice Destroys Capitalism
Metaeconomics is most fundamentally concerned with bringing the moral and ethical dimension back into the formal analytical system of a science based, empirical reality based, economics: It is about eliminating injustice. The moral and ethical dimension and reducing if not eliminating injustice, is an old idea: Adam Smith's Theory of Moral Sentiments was all about how to ensure a moral---actually even more so, an ethics--- based (sentiments based, as the sentiments, empathy-sympathy, led to the ethical system) capitalism. A key part of that system was the need to avoid injustice.
Adam Smith saw justice---more accurately, eliminating injustice--- as the most important pillar in the foundation of good capitalism and of the community, society, and Spaceship Earth System (Nature) within which it was embedded. Injustice of any kind---racial; gender; sexual preferences; extreme inequality in income and wealth; criminal; environmental (as in destroying Spaceship Earth System Resources), ..., the list is long--- will cause capitalism to be a bad capitalism, and, will cause it to collapse. Also, the way to achieve justice (like in "justice for all") is not in some direct sense, but rather indirectly, through reducing injustice, working toward eliminating injustice. Smith and Wilson (2019, p. 201 ) help here, with the quote from Smith (1759/1790, Second.II.III, pp. 124-124):
Nature (read the Spaceship Earth System) has fitted the human species to live, to subsist, in society only. All of us require one another’s assistance. Society flourishes where that mutual support is provided in the reciprocity of gratitude and friendship bound together in good offices of affection and esteem.
So, people potentially can benefit from trade in the markets of a capitalism-based system, if all traders are trying to stay from doing bad things. It was a way to deal with the reality that a good capitalism cannot exist jointly with injustice.
Smith and Wilson (2019, p. 201) continue, quoting Smith (1759/1790, Second.II.III, pp. 124-125) some more, noting that no society can:
…subsist among those who are at all times ready to hurt and injure one another. The moment that injury begins, the moment that mutual resentment and animosity take place, all the bands of it are broke asunder, and … dissipated and scattered abroad by the violence and opposition of their discordant affections.
The hurt, the injury, the injustice must be tempered, bounded, and reduced as much as possible, before a market can trade with mutual gain to everyone both within and not in the market, and not bad, hopefully good, capitalism can emerge.
Smith and Wilson (2019, p. 202) further quote Smith (1759/1790, Second.II.III, pp. 1245-125), referring to the fact that while nature (read the Spaceship Earth System):
… exhorts mankind to acts of beneficence … she has not thought it necessary to guard and enforce the practice of it by the terrors of merited punishment in case it should be neglected. It is the ornament which embellishes, not the foundation which supports the building, and … was … sufficient to recommend, but by no means necessary to impose. Justice, on the contrary, is the main pillar that upholds the whole structure.
So, there it is: Humans want to barter and trade within markets, in their self-interest, with beneficence (in effect, mutual benefit to all). It cannot arise except for it also being done in the frame of avoiding injustice (to include all the other virtues, too, in a shared other-interest). Avoiding injustice is the pillar in the foundation of truly viable market, one that everyone can go along with.
Injustice will destroy capitalism. Adam Smith understood it, and probably already had experienced it in the older economic systems about which he was aware in the time he wrote the Sentiments book. It was actually published first (before the excessive greed only book!) in 1759, and the latest edition published in 1790 shortly after his death. It is unfortunate how we still have not learned the lesson in the modern era, even though empirical tests abound that support the need to avoid injustice.
Yet, 250-years later, we still see substantive racial (witness the US, actually, the Spaceship Earth wide, protests to racial injustice in 2020); gender and sexual, and wide range within it; criminal; extreme inequality in income and wealth manifested in social and public health problems; environmental injustice in not acknowledging the limited capacity of the atmosphere and ecosystem to handle carbon releases, and pollutants; and many other kinds of injustice. The protests by millions of people in the US and throughout other areas on the Spaceship speaks to it. Rising concerns over climate change speak to it, empirical reality starting to show it, in severe storms, pandemics, other ecosystem reactions.
And, both the Adam Smith moral philosophy and the empirical science show the reality that capitalism cannot survive it, which also explains why nationalism/fascism is now back on the table: It always steps into fill the gap when capitalism flounders. So, the capitalism Smith (1776/1789) described in the other book, the one titled On the Nature and the Causes of the Wealth of Nations, that has been used to justify self-interest based excessive greed, cannot survive. Only by tempering that self-interest with the shared other-interest, an empathy based ethical system, as Smith (1759/1790) The Theory of Moral Sentiments made clear, can it survive. And, the key aspect of the Sentiments was the continual move toward eliminating injustice.
Adam Smith made it clear that we had to move to a context for the market that everyone could go along with, which was not one of injustice. So, why are we not focused on eliminating injustice? Perhaps it is not being eliminated because of excessive greed (see Lynne, in press)?
Lynne, G. D. Metaeconomics: Tempering Excessive Greed. New York: Palgrave Macmillan, 2020.
Smith, A. An Inquiry into the Nature and Causes of the Wealth of Nations. Edited by E. Cannan. New York: Random House, 1776/1789.
———. The Theory of Moral Sentiments. Edited by D.D. and A.L. Macfie Raphael. Indianapolis, Indiana: Liberty Fund, Inc., 1759/1790.
Smith, Vernon L. "Adam Smith on Humanomic Behavior." Journal of Behavioral Finance and Economics 2, 1 (2012): 1-20.
Smith, Vernon L. and Wilson, Bart J. Humanomics: Moral Sentiments and the Wealth of Nations for the Twenty-First Century. New York: Cambridge University Press, 2019.