Samuel Bowles: The moral economy: why good incentives are no substitute for good citizens

Some daycare centers, for example, that were concerned about parents arriving late to collect children decided to impose a fine for late arrivals. However, when this fine system began, the number of late arrivals doubled. The centers eventually canceled the fine system, but the number of late arrivals remained high. We see here a trade-off between material incentive and moral behavior: a “crowding out” relationship between “economy” and “moral.” Unfortunately, says Bowles, almost all the economists from A. Smith to contemporaries have built their theories on the premise of selfish individuals who act in response to incentives. They believed that incentives do not affect morality and that the “invisible hand” of the market will coordinate well with the relationship among self-regarding persons. In reality, however, incentives and morals are impossible to separate as daycare centers’ experiences show; the “invisible hand” does not work well without a “helping hand.” No matter what a clever mechanism you may design, suggests Bowles conclusively, the market economy does not work well, so civic trust and moral sentiments should support the market economy. We find in Japan that there also have been some similar arguments called “civil society theory.”