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Econ 411
Moral Foundations of Capitalism
Spring 2023
WVU Class and Time
Reynolds Hall 5225 T-Th  4:00-5:15

Instructor: Professor Roger D. Congleton  
Office: 4131 Reynolds Hall  .
.Office Phone  3-7866  (during office hours)

(e-mail is the most reliable way to reach me).
Office Hours: 2:30-3:30 Tuesday and Thursdays, and most other afternoon times by appointment
Required Texts: Congleton, R. D., Solving Social Dilemmas: Ethics, Politics, and Prosperity. Oxford University Press.  (Plus class webnotes, links provided below)
Optional Texts
Source Material for the Course*

.    Aristotle (350 bc) Nicomachean Ethics (Available as an E-book from Google, Liberty Fund, Amazon, etc.)
    Buchanan, J. M. (1997) Ethics and Economic Progress. Norman OK: University of Oklahoma Press.
    Mill, J. S. (1863) On Liberty. Boston: Ticnor and Fields. (Available as an E-book from Google and Liberty Fund).
    Rand, A.(2005) Atlas Shrugged. New York: Penguin. (Available as an E-book from Google and Amazon).
    Smith, A. (1776) An Inquiry Into the Nature and Causes of the Wealth of Nations. (Available as an e-book from Google and Liberty Fund).
    Spencer, H. (1896) Principles of Ethics. Appleton and Company, New York. (Available as an e-book at Liberty Fund and at the Von Mises Institute)
Weber, Max (1930) The Protestant Ethic and the Spirit of Capitalism. (Available as an e-book from Google and Amazon.)

Course Description: Tentative Syllabus (as a PDF)
. Moral Foundations of Capitalism is a lecture-based course that explores how some types of ethical dispositions--internalized rules--allow markets to become larger and more effective sources of food, material comfort, and entertainment. They do so  by reducing unproductive conflict, avoiding over use of common resources, simplifying contract enforcement, internalizing externalities,  reducing team production problems, encouraging capital accumulation and innovation, and avoiding counter productive public policies. The great acceleration of commerce that "took off" during the nineteenth century that produced the effective markets that we largely take for granted today was associated with a shift in norms that generally supported market activities.
Whether then we suppose that the End impresses each man's mind with certain notions not merely by nature, but that there is somewhat also dependent on himself; or that the End is given by nature, and yet Virtue is voluntary because the good man does all the rest voluntarily, Vice must be equally so;
Aristotle (2012-05-17). Ethics (p. 82).  . Kindle Edition.
For not only is a developed sense of responsibility absolutely indispensable, but in general also an attitude which, at least during working hours, is freed from continual calculations of how the customary wage may be earned with a maximum of comfort and a minimum of exertion. Labor must, on the contrary, be performed as if it were an absolute end in itself, a calling. But such an attitude is by no means a product of nature.

Weber, Max (2012-10-21). The Protestant Ethic and the Spirit of Capitalism (Kindle Locations 311-314). Vook, Inc.. Kindle Edition.
The course is divided in to three parts. (1) The first part reviews theories of ethics from Aristotle through A. Pigou. This intellectual history introduces students to several theories of ethics.The theories demonstrate that ethics is not simply a gut feeling, but may have rational foundations. The overview also provides evidence that ethical theories in the West gradually became more supportive of commerce in the period before the great acceleration in the West during the nineteenth century. (2) The second part of the course uses game theory and economic theory to show how a subset of ethical dispositions can increase the efficiency and extent of exchange and production. When such ethical dispositions become commonplace, trading networks become more extensive, specialization increases, larger economic organizations become feasible, and rates of innovation tend to increase. In this manner, a commercial society can emerge. (3) The third part of the course explores  how normative theories affect governance and market relevant public policies. It demonstrates that the ethical dispositions of  voters and rule enforcers can make a government more likely to be "productive"  than "extractive."  Together the second and third parts show that without supportive norms, markets would be far smaller and less efficient, and average material welfare much lower.

The main goals of the course are to induce students (1) to the idea of social dilemmas and the manner in which some ethical dispositions solve or moderate them and  (2) to increase their understanding of the many ways in which normative theories affect the extent of commerce. (3) The course also will mmake students more familiar with several of the core ethical arguments concerning the proper role of markets in a good life that emerged in the period from 1600-1920,.

Overall the course suggests that some societies are richer than others because their normative culture--their most commonplace ethical dispositions--accord a broader role for commerce in a good life and good society than others, and also encourage the behavior that make markets and governments work more efficiently. In other words, it implies that commercial societies have moral foundations.

Grades are determined by two examinations (60%), 6 quizzes (15%), and a final paper (25%).

This exchange society and the guidance of the coordination of a far-ranging division of labor by variable market prices was made possible by the spreading of certain gradually evolved moral beliefs which, after they had spread, most men in the Western world learned to accept. These rules were inevitably learned by all the members of a population consisting chiefly of independent farmers, artisans and merchants and their servants and apprentices who shared the daily experiences of their masters…. They held an ethos that esteemed the prudent man, the good husbandman and provider who looked after the future of his family and his business by building up capital, guided less by the desire to be able to consume much than by the wish to be regarded as successful by his fellows who pursued similar aims.

F. A. Hayek [1979/2011]. Law, Legislation and Liberty, Volume 3: The Political Order of a Free People [pp. 164–165]. University of Chicago Press; Kindle Edition.

Tentative Course Outline .
Dates Topic
. I. Commerce and the Good Life

0. Introduction to Moral Foundations of Capitalism

January 10 Norms as personal motivations and self restraint. Two approaches to norms: positive--the study of the effects of norms, and normative--the application of normative theories to assess private behavior, societies, and market outcomes. Norms that help and hurt economic growth. Capitalism as a name for contemporary market-based networks and lifestyles. (Homo Constitutionalus)
SSD- Preface, Ch 1

Why MBA's Read Plato (WSJ)
Vonnegut: Harrion Bergeron
January 12, 17
1. Aristotle's Ethics with Applications to Political and Economic Theory Ethics as the pursuit of lifetime happiness, rather than short term pleasure. Aristotle's principle of moderation in all things.Wealth as a means to an end. Aristotlian virtues. Aristotle as the foundation of contemporary secular ethics.
SSD - Ch. 9

January 19, 24
2. The Early Enlightenment and Market Supporting Ethics.  Three major disruptions of the medieval order. Nature law and the moral sense. Markets as a dissipating or supporting system for ethical development. Rising importance of life on earth. Baxter and Barklay on duties on earth. Locke and the division between theological and civil ethics. (E-Campus Homework 1 Due Jan 25) SSD - Ch 10

Links to Homeworks
on Ecampus

January 26, 31
3. Classical Liberalism, Ethics, and the Market. Montesquieu and the importance of political virtue. Franklin and the "spirit" of capitalism. Smith: moral sentiments and the impartial spectator as the source of ethics and virtue. Kantian duties and the moral imperative. Bastiat on market support for ethics. 
SSD - Ch 11
February 2, 7
4. Utilitarianism: Trade Increases Social Welfare. Another secular core principle for the development of ethics. Bentham and the utilitarian revolution, Mill's extensions. Spencer's evolutionary approach. Do ethics improve survival prospects? Emergence of social ethics along with democratic politics. Ideology as social ethics.(E-Campus Homework 2, Due February 9)

SSD - Ch 12

II. Ethics and the Extent of Commerce
February 9, 14, 16

5. Civil Ethics and Civil Society: A Game Theoretic Analysis
(1) Introduction to Game Theory: Strategy Choice and Nash Equilibrium with Applications to Ethics and Civil Society, (2) Escaping the Hobbesian Dilemma, ethics and law as substitutes. (3) Solving  coordination games, (4) Internalizing Externalities
(E-Campus Homework 3, Due February 20)

SSD - Ch 2
February 21
Review for Midterm Exam
Study Guide I
February 23
Midterm Exam

February 28
Exams Returned and Reviewed

 March 2, 7, 9
6. Market Dilemmas and Ethical Solutions: The Ethical Foundations of Commerce
(1) Economics of gains to trade and trading networks, (2) Problems of Team Production, how the work ethic improves team production and promotes specialization. How selecting ethical persons can improve profits and encourage some types of ethical behavior. (3) Transaction and Enforcement costs as a limit on the extent of trading networks and specialization. How ethics reduces contract complexity and enforcement costs and expand markets. Evidence of the importance of Trustworthiness. (E-campus Homework, 4 Due March 22)
SSD - Ch 3
March 14, 16
No Class Spring Break  / (also public choice society meetings)

March 21 23 are travel days for Prof Congleton, pre recorded lecture for 23rd, two others added because he contracted Covid during his travels.

March 23, 28, 30
7. Neoclassical Economics with Ethics. Bringing ethics into the Marginal Benefit Marginal Cost Framework, Marginal Revenue Product as a consequence of team production and private ethics.  Equilibrium investments and  distributions of Virtue. Ethics and Commerce are co-determined. 
SSD - Ch 4
Recorded Intro Lecture(1)
Recorded Lecture (2)
Recorded Lecture (3)

April 4, 6
8. Ethics and Economic Progress. Ethical aspects of progress. Economic growth requires solving social dilemmas associated with specialization, capital accumulation, and innovation. Ethical and/or support for economic development. (E-Campus Homework 5 Due April 9) SSD - Ch 5

III. Politics, Ethics, and the Good Society
April 6
9. Ethics and Governance. The simplest form of government: customary law enforcement.  Corruption and the moral mitigation of corruption. The role of ethics in simple productive governments. Customary and Common Law. Extractive versus productive governance. SSD - Ch 6
April 6, 11 10. Ethics and Democratic Public Policy.  Norms and Institutions for Good Governance. The median voter theorem(s). The democratic indecisivenss problem. The democratic poverty trap. The problem of holding the next election. Normative solution to democratic dilemmas..(E-Campus Homework 6 Due April 17)
SSD - Ch 7
Links to Homeworks
on Ecampus

April 13
11. Ethics and Political-Economy System Choice. Ethics and the relative performance of political and economic systems. On the logic of a bounded domain for governance under different mixes of ethical disposition in government and markets. 
SSD - Ch 8
April 18
Review for Second Midterm
Study Guide II
April 20
 Second Midterm Exam

April 25
Exams Returned and Reviewed / Paper Workshop
Paper Topics
April 27
Last Day of Class, 12. Overview of Course and Paper Workshop
SSD - Ch 13

May 3
Papers Due by Midnight (to be e-mailed to

“Look around you,” he said. “A city is the frozen shape of human courage—the courage of those men who thought for the first time of every bolt, rivet and power generator that went to make it. The courage to say, not ‘It seems to me,’ but ‘It is’—and to stake one’s life on one’s judgment. You’re not alone. Those men exist. They have always existed.

Rand, Ayn (2005-04-21). Atlas Shrugged (pp. 473-474). Penguin Group. Kindle Edition.
Midterm Exam
and Endterm Exams
6 Ecampus Quizzes
Term Paper

Marginal extra credit for extraordinary class participation (up to 5% bonus)

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E Link to WVU Policies and Syllabus Addenda