Note: This is the second of several blog posts in which we review The Dignity of Commerce: Markets and the Moral Foundation of Contract Law, by Nathan B. Oman.
In our previous post, we introduced Nate Oman’s book on “The Dignity of Commerce.” Professor Oman’s beautiful book is divided into two parts. Part I explores the relationship between markets and morality. Part II then delves into specific areas of contract law, such as the doctrine of consideration, remedies for breach, and boilerplate contracts. We shall review each chapter in Part II in future posts, so here we shall focus on the main idea in Part I: the moral nature of markets.
In particular, Part I of Professor Oman’s book ends up making a highly original contribution to the domains of ethics and moral philosophy. According to Prof. Oman, markets do more to promote other-regarding behavior in a pluralistic moral world (our world!) than other moral systems do, or in colloquial terms, markets don’t just talk the talk of morality but actually walk the moral walk. Why are markets such powerful drivers of morality? Among other things, Oman restates two important features about the process of voluntary exchange that, combined, work to incentivize other-regarding behavior: First, “Each party to a market exchange has at least the nominal power to veto the transaction. *** Second, exchange requires that each party pursue the other party’s interests to achieve his or her own interest” (p. 44). Although these oft-overlooked axioms about markets can be traced back to Adam Smith, Oman weaves them together in an insightful way to make the following original observation about the meta-morality of markets: the idea that markets create a transcendental space or robust framework in which people with radically different moral, religious, political views can cooperate with each other in mutually beneficial ways, or in Oman’s eloquent words: “Markets facilitate peaceful cooperation and coexistence in a pluralistic society” (p. 67).
So, to sum up our review of Oman’s tome thus far, although it is true that there are many competing sources of ethics and morality—including such sacred and profane institutions as the family, religion, and politics—Oman persuasively argues that markets do more to promote peaceful cooperation and other-regarding behavior than these other systems do. In business terms, one could argue that there are many different types of “morality distribution channels”—i.e. many different ways of promoting morality, including politics, religion, and tribe. What Oman’s work teaches us is that markets also constitute a separate morality distribution channel and that markets can do a far more effective job of promoting morality than these other institutions do …