Why Is Money Morally Suspect?
El Greco, "Christ Driving the Money Changers from the Temple" (1568)

Why Is Money Morally Suspect?

Karl Polanyi vs. Georg Simmel

The modern mind is very different from the premodern mind, in so many interlocking ways that it’s very difficult to get a grasp on what the difference even consists in, fundamentally, let alone how it came about. Here, I contrast two accounts of a narrower problem, the relationship between the rise of markets and the human moral sense: Michael Polanyi’s, which is held in vulgar form by quite a lot of people, and Georg Simmel’s rather less well-known account.

Both agree that economic and moral life were less differentiated in the premodern era than they are today. To evaluate our moral skepticism of monetary calculation, the question is: which escaped from which?

The Polanyi Thesis: Market Logic as a Crowding Out

In The Great Transformation, Karl Polanyi argues that the rise of markets was a historically contingent political push that freed markets from control by moral norms, especially reciprocity and generosity. In particular, he tells a story whereby policies were instituted to suppress these norms and the social institutions that cultivate and effectuate them, replacing them with the cold eye-for-an-eye logic of market exchange. Markets, in other words, became autonomous, “freed” from their prior moral restraints.

He argues that the suppression of institutions like agricultural commons, mutual aid, and so on – efficient though it may be in an economic sense – inevitably leads to pauperization of the working classes, and therefore eventually reaction. Pauperization, as distinct from mere immiseration, also involves a kind of moral impoverishment; an anomie on top of poverty, coming from the breakdown of social support networks that were cleared away in service of the liberal market order. Poverty has always existed, Polanyi may admit; but the pauper is a phenomenon of the laissez-faire moral order.

The Polanyi Thesis, or something like it, is widespread. People are suspicious of market logic, at least in moral domains. Polanyi sees this as society’s “self-protection” reasserting itself: if the market is not a self-regulating order, mankind’s moral sense, perhaps, is.

But this moral skepticism of market logic may itself be something new, and not the reassertion of something old. Its significance for Simmel, therefore, is rather different than for Polanyi.

The Simmel Hypothesis: Money as Differentiator

In The Philosophy of Money, Georg Simmel makes something like the reverse argument. Markets were not freed from moral constraints; morality, rather, was freed from economic constraints.

Simmel’s argument in brief is that the rise of markets – and specifically of money as the universal medium of value – led to norms and institutions becoming functionally differentiated in a way that they had not been before. One aspect of this I’ve written about before is that, money having taken over the role of coordinating resource use and social status that had previously been filled by institutions like religion, marriage, and so on, that the latter were “freed” to evolve and differentiate according to their own internal logic. Thus, the idea of religion as a matter of individual conscience rather than of public interest is only possible in a highly monetized society. To marry purely for love, without economic considerations, is only possible in a highly monetized society. Not that conscience or love played no role before, but the economic and political considerations loomed large alongside them.

In this instance, Simmel argues that the moral sense broadly speaking was also “freed” from a number of practical necessities. As I’ve argued elsewhere,

Many social institutions – most importantly, property rights and market exchange – have the function of transforming would-be N-person social dilemmas into soluble dyadic interactions.

Essentially this means that the moral burden for the average individual in his capacity as a producer or consumer – if not for everyone – became substantially lighter. Moral rules were less of a practical imperative in the economic realm, because market institutions made it in people’s interest to cooperate – the doux commerce hypothesis.

Simmel, however, did not stop with doux commerce. Instead, he asked: what happens to the moral sense when the practical burdens on it lighten? And just like religion, marriage, and fashion, the moral sense begins to evolve according to its own internal logic, without strong feedback from the real world. It is precisely this freeing that differentiates modern moral sensibilities from the premodern.

One concrete difference that Simmel notes is that the moderns are quite peculiar in regarding money as profaning. It offends us to imagine a monetary payment for murder, for example, whereas this was quite common to the ancients. For us, money carries the meaning of rational calculation. To imagine a monetary payment for murder is, for us, to imagine someone asking: “can I afford to murder this person?” – something we naturally feel should be morally off-limits to cost-benefit considerations.

Or take the use of money in religious ceremony. The only thing that strikes us as odd about the story of Jesus overturning the tables of the moneychangers in the temple is that they had the audacity to be there in the first place. Tithes, of course, are one thing – though even this sits uneasily with some – but the tithe is (supposed to be) a voluntary offering. To offer religious experience in direct exchange for money seems to us to reduce the former to a means, rather than an end in itself.

For the ancients however, in sparsely monetized societies, the economic realm was not so differentiated from the moral or religious realm. It did not reduce the exchanged object to a means; it did not implicate the user in cost-benefit calculations. The sight of moneychangers at the temple would have been quite ordinary, a welcome convenience, like an ATM at the bar, making it easier for you to buy an animal to offer as a sacrifice. This was not a corrupt and decadent society, at least not in that respect; money simply did not have the profaning connotations to them as it does to us.

Thus, the moral skepticism of markets that Polanyi points to as the reassertion of the moral immune system in response to a new disruption, Simmel would point to as something novel in its own right. Markets have not made us morally decadent; in fact, they have freed the moral sense from the burden of economic necessity, and have thus allowed us to be far more morally rigorous – at least with respect to money – than was ever possible before. It is not that markets have been freed from moral constraints, but rather that morality has been freed from economic constraints.

Which Fits the Facts?

The best evidence for the Simmel Hypothesis, interestingly enough, is the widespread belief in the Polanyi Thesis. The fact that we are keyed up to worry about the moral effects of markets is itself something worth explaining!

One sees this especially strongly where sacred values are used as a shield against rational calculation. How dare you think about tradeoffs – especially monetary value – when lives are on the line?

One hears it in “people above profits” as a cry for redistribution, or in the defense of riots and looting that “it’s just property” – hardly worth worrying about in comparison to the lives supposedly lost to systemic racism. Even a Nobel-winning economist can lament that “The relationship between patient and doctor used to be considered something special, almost sacred. Now politicians and supposed reformers talk about the act of receiving care as if it were no different from a commercial transaction, like buying a car.” A similar push has been made to regard education as sacred, and therefore to remove it from the realm of rational calculation. In both of these latter examples, to treat it commercially – just like treating a religious ceremony as a commercial transaction – profanes it and provokes offense.

It’s clear enough – to me, anyway – that these arguments are self-serving, even cynical; at best, right for the wrong reasons. Nevertheless, their intuitive plausibility and widespread appeal is something worth explaining. Anti-market bias isn’t an explanation; it’s simply a statement of the question. Why indeed does familiarity breed contempt? Why is the prejudice against commerce stronger in highly monetized economies?

In this respect, our rather more sensible revulsion against the monetization of criminal justice – something practiced without compunction by the ancients – suggests that Simmel’s explanation fits the facts better. Our prejudice against commerce is not general; rather, it activates only when confronted with a sacred value, and the sacred value is presumed to always win. Our moral sense is not pushing back against the encroachment of calculating logic; rather, our moral sense has been disconnected from influence by rational calculation of money-valued tradeoffs, and is pushing into new territory; it has asserted its own supremacy in a way that would never have been possible in a poorly monetized society.

It would appear – per Simmel, and contra Polanyi – that the rise and dominance of markets in the modern world, their disconnection from moral questions, has – ironically – demoted economic logic as a mode of decisionmaking, and made it a junior partner of a newly autonomous moral sense.

To point this out is not, of course, to advocate the reverse. The moral sense is still indispensable in social dilemmas and collective action problems, and there is no question of maintaining human social life without it. Markets – impressive as they are as mechanisms for incentive-compatible exchange and coordination – do not solve the problem of incentive-compatible governance. Quoting again from “Inside and Outside Perspectives on Institutions“,

At the same time, economists ought to appreciate the functional role of sacred values in human cooperation. Particular sacred values may – and often should – be criticized and analyzed, but sacredness itself cannot be dispensed with or rejected as irrational.

What the Simmel Hypothesis provides that the Polanyi Thesis does not, is a phylogeny of anti-market bias that gives us a vantage point from which to evaluate when the impulse is productive and when it is not. It is not that economic and moral life should be disconnected; it is simply that the types of problems solved by each are no longer so bound up as they once were. And if we use the tools of one to solve the problems of the other – if we activate our moral sense and punish inappropriately in coordination games like market exchanges, or if we apply economic logic to moral questions and defect in social dilemmas – dysfunction will reign in both.


Georg SimmelMichael Polanyi


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