Adam Smith had a strong presumption that poor and middle class had higher moral standards than the rich and powerful. The reason for this is that the poor have more to lose from moral lapses.
Smith's thesis seems to be borne out in the housing crisis, in which rich people are walking away from mortgages at a faster rate than the poor. See NYTimes today,
"Biggest
Defaulters on Mortgages Are the Rich."
Does this finding contradict the presumption of Benjamin Friedman and others that prosperity leads to a more moral society overall? Or, does morality have nothing to do anymore with honoring your word--your contracts? Is an economic contract simply a financial deal that can be broken when it suits your situation?
Great questions, Jonathan - the point about morality and contracts is at the heart of the debate about the nature of contracts; see Charles Fried's classic book Contract as Promise for a roughly Kantian view, and any law-and-economics book for the utilitarian view that contract law merely spells out the consequences of breach and minimizes the losses from it. (As Oliver Wendell Holmes wrote in The Path of Law, "Nowhere is the confusion between legal and moral ideas more manifest than in the law of contract. ... The duty to keep a contract at common law means a prediction that you must pay damages if you do not keep it — and nothing else.")
By the way, Steve Horwitz had a related post on this topic (http://www.coordinationproblem.org/2010/07/cheating-vs-rational-rule-breaking.html), looking at cheating verses rational rule-breaking.
Posted by: Mark D. White | July 9, 2010 at 09:23 AM