Consider any personal characteristic, such as honesty, which benefits those around me at some cost to myself. Such a characteristic makes me more valuable as an associate. If others can observe it, if, as I argued earlier, it is easier to appear honest if you are honest, then honest people will be more attractive as employees, employers, spouses--in any association with someone else who benefits by their honesty. Dishonest people will find that they can get jobs only if they are willing to accept a lower salary than honest employees and can hire workers only if they are willing to offer higher salaries than honest employers. In such a situation, an individual initially motivated entirely by narrow self-interest will find it in his interest to try to train himself into honesty--to synthesize a conscience.
The size of this incentive to virtue depends on how large a fraction of our interactions are voluntary. Consider two societies. In one, most associations are voluntary--we choose our jobs, our employees, our spouses. In the other most associations are chosen for us. The former might be a competitive, free-market society, the latter a centrally planned socialist society, where workers are allocated to jobs, or a traditional society, where most people are born into a particular role and have very limited alternatives.
In the market society, since most people who associate with me do so voluntarily and only if they think they benefit by the association, there are sizable costs to being dishonest and sizable benefits to being honest. In the other sort of society, these costs and benefits are much lower. If you are a worker in a centrally planned society, your job is determined and your salary set by someone far away, someone who does not know you and will not have to associate with you. The dishonest employee has the same opportunities as the honest one--and the additional opportunity to steal things when nobody is looking.
The same argument applies to vices. In my previous article, I gave the example of someone with an "aggressive personality"--a strategy of beating up people who do not do what he wants. Committing himself to that strategy may be profitable, even though beating up people is costly, because people will back down, giving the bully his way without the cost of a fight.
One disadvantage to being a bully is that in a voluntary society people stay very far out of your way--they avoid the problem by refusing to associate with you. Bullies are not very attractive as employees--or employers. So this strategy is likely to have a low payoff in a market society. It still has some advantages, since not all associations are voluntarily chosen--most of us, for example, have limited control over who our neighbors are. But the payoff will be much lower than in a society where we are assigned or born into most of our relationships.
The implication of this argument is that a market society will have nicer people than either a traditional or a centrally planned society. Virtues will have a higher payoff, so more people will choose to become virtuous. Vices will have a lower payoff, so fewer will choose to become vicious. The result is precisely the opposite of the claim--that such a society promotes a blind, narrow selfishness--often made by opponents of capitalism.
One important change in American society over the past fifty years has been the increasing frequency of laws--mostly designed to reduce racial discrimination--that require individuals, if challenged, to justify decisions such as hiring one job applicant instead of another, or renting an apartment to one of several potential tenants. Such laws may make racial discrimination more difficult, but they also make it harder to discriminate among individuals on reasonable but highly subjective grounds. An answer such as "I hired Smith because he seemed like a much nicer man than Joe," although it may be true, is not likely to convince a court or a Fair Employment Practices Commission. So one cost of such laws is to lower the payoff to the strategy called virtue, and thus reduce the number of people who choose to follow that strategy.
Published in Liberty Magazine, reprinted by permission