The Parable of the Dishonest Aspiring Cashier: A Proof of Concept that the Economy Needs Virtue

Chapter 7 of The Information Class

This post is part of my book project The Information Class.

Turning to the moral side of class, we must first deal with an infamous blind spot of economics.

Economists have a long tradition of pretending that people are amoral. “Rational, self-interested agents” is the term of art. I think this has contributed much to the success of economics, for reasons best understood in light of MacIntyre’s important thesis, to which we’ll return, that modern morality is fatally confused because the tradition of the virtues was lost through the failed Enlightenment project to rationalize morality. When all ethics seems unscientific and controversial, a mere arena of shrill, interminable debates, it’s nice to have a social science that seemingly has a lot to teach about human affairs without requiring any prerequisites of moral understanding.

Of course, economists’ trademark selfishness assumption is wildly counterfactual! People are moral, some more so than others, but all except rare psychopaths more so than a rational, self-interested agent. They recognize some rules and usually obey them. They care about others.

Yet sometimes the economist’s approach is innocuous because there are no moral rules in play. In a typical market, buyers and sellers have no duties towards each other, other than basic non-violence and respect for property rights and contracts. To buy or not to buy is a question the shopper can ask without worrying about whether and how badly the seller wants the sale. And economics does good service by showing why there is no duty to buy. In certain competitive market conditions which approximately describe reality in a reasonably large range of situations, self-interested behavior on the part of buyers and sellers demonstrably yields a socially optimal outcome. So stop worrying and be selfish! It’s a load off your mind.

This conclusion, however, has been greatly over-applied.

There is, of course, a great deal of altruism within families, and that could be proved by evolutionary reasoning even to someone so perversely cynical as to interpret away all the overwhelming daily evidence of it. It has to be true that people are altruistic to spouses and children, because our selfish genes would clearly have to make us feel that way if we were to survive and reproduce in the Stone Age. Up to a point, intra-family altruism can actually justify the selfish rational agent assumption because agents can be interpreted not as individuals, but as families. The mutual love and duties within the family are so strong as to meld them into a unit for economic purposes, and the ever-acute needs of children justify families in being largely selfish vis-a-vis the external world. But that doesn't work for singles, and family ties are also messy and overlapping, so it won't really do to regard the economy as the sum of interactions among selfish agents who represent loving families. Singles have different needs and find different outlets for their altruism.

Families aside, daily economic life is full of situations, starting with just about every employee deciding what to do at every moment, where market equilibrium isn’t present and morality is needed to make things tick. Do you work or shirk? Do you steal from the cash drawer? Do you backstab a colleague or engage in a turf war? Do you work two extra hours to get the proposal done on time? Morality and selfishness will very often yield different answers, and morality is generally more beneficial for more people than selfishness.

But that’s all at a very high level and doesn’t do justice to the nuance of it. There's another concept that needs to be brought in if we're going to shed any real light on the role of virtue in economics.

It's the key claim of moral philosophers, going back at least to Aristotle, though less emphasized of late, that virtue is habit-forming. Doing virtuous actions makes you like virtue more. Doing right makes you want to do right. How can that fit into economic theory? It might come in under the head of “human capital,” a well-established concept. It’s well known that skills usually improve with use, and some jobs are valued as much as an investment in experience as for the paycheck. But skills alter what you can do. Virtues alter what you want. And that makes it tricky because it deprives economists of a permanent, unalterable utility function to serve as a standard. Economists like preferences to stay fixed, because it gives them a yardstick to judge by.

It won’t do. If virtue really is habit-forming, if people really can and do change what they want by forming good habits, then economics needs to be able to integrate that. So as a battering ram to open the door of economists’ minds to this subversive possibility, consider the Parable of the Dishonest Aspiring Cashier.

Suppose you want to get a job as a cashier. The hourly wage is better than other jobs that you can get. And you might also be able to steal from the cash register when no one is looking. You’re not an irrational kleptomaniac. You’re a rational, self-interested agent, with no moral principles, and you’ll only steal if the risk-weighted net rewards of stealing are positive. They might not be. But they might, so possible theft is another upside of the cashier job.

Unfortunately for you, potential employers are pretty good at reading your moral character. They can tell you’re dishonest. If they hire you, theft is a potential downside from their point of view. They could hire you while investing in increased surveillance to deter you from stealing. But the cost of that makes it not worth it to hire you.

Now suppose you have a way of altering your character so that you’re genuinely in love with honesty and would be horrified at stealing. If you could do that, you’d miss out on potential theft as an upside of the cashier job. But employers would recognize your new honesty and be willing to hire you, and the hourly wage is still good. So, even from your original, dishonest perspective, you’re better off becoming honest.

The Parable of the Dishonest Aspiring Cashier is a proof of concept that there are cases where individuals should want to change their utility function, or in natural language, that rational people will sometimes want to change what they want. Naive utilitarianism can’t cope with that, since it needs people’s wants to be fixed in order to serve as a standard of value. Some economists might be tempted to dismiss this as a clever paradoxical edge case. I don't want to waste time refuting that. I'll trust readers to recognize that cases like this happen all the time. More than that, virtue ethicists have long known that nothing typifies the human condition more than scenarios like this.

It really is better to love virtue, whatever anyone thinks about it. Value is not merely subjective. If you want value to be subjective, the Parable of the Dishonest Aspiring Cashier is a crisis for your worldview. If you believe in objective value anyway, the Parable of the Dishonest Aspiring Cashier fits nicely into the large moral framework of the world.

If we want a brief answer to the old question “what is the meaning of life?” then the answer, “to acquire virtue” is as good as any.

If you’re interested in economics and virtue, see my post Golden Rule Capitalism.