Given what we know about the ultimate goal of free markets (project A), this second part of our project (B) investigates what virtues are required from key market actors to make the positive relationship between markets and human flourishing come through.
The following questions are central to this research project:
B1. What are the views regarding virtues, free market institutions and their potential for human flourishing in different cultural zones in Northern Europe (Germany, the Netherlands and Denmark), Anglo-Saxon countries (UK and US) and Latin Europe (France, Spain, Italy)? How are these views related to influential discourses in economics as a science within these cultural zones?
B2. What can we learn from game theory, behavioral economics and experimental economics about the influence of virtues and vices on market efficiency and human flourishing in a market context?
B3. How do different indicators of economic freedom (e.g. size of government, quality of legal system and property rights, sound money, trade openness and government regulation) affect human flourishing and what is the role of virtues in this relationship?
Methodologies and approaches used in this project are:
- game theory
- behavioral economics
- critical assessment of state of he art insights in various fields of economics
- panel estimation using data of economic freedom and various indicators of human flourishing and virtues
- multilevel regression analysis of data from Eurobarometer, European Values Study
- archival research
- oral history
- prosopography
Resulting Publications
2021
Graafland, Johan
Ethics and Economics: An Introduction to Free Markets, Equality and Happiness Book
Routledge, Abingdon, Oxfordshire, 2021.
@book{Graafland2021bb,
title = {Ethics and Economics: An Introduction to Free Markets, Equality and Happiness},
author = {Johan Graafland },
url = {https://www.routledge.com/Ethics-and-Economics-An-Introduction-to-Free-Markets-Inequality-and-Happiness/Graafland/p/book/9781032020624, Routledge website
https://www.moralmarkets.org/book/ethics-and-economics-an-introduction/, Moral Markets book shelf},
year = {2021},
date = {2021-09-01},
urldate = {2021-09-01},
publisher = {Routledge},
address = {Abingdon, Oxfordshire},
abstract = {This textbook applies economic ethics to evaluate the free market system and enables students to examine the impact of free markets using the three main ethical approaches: utilitarianism, principle-based ethics, and virtue ethics. Ethics and Economics systematically links empirical research to these ethical questions, with a focus on the core topics of happiness, inequality, and virtues. Each chapter offers a recommended further reading list, and digital supplements include a list of key terms. The final chapter provides a practical method for applying the different ethical approaches to morally evaluate an economic policy proposal and an example of the methodology being applied to a real-life policy. This book will give students a clear theoretical and methodological toolkit for analyzing the ethics of market policies, making it a valuable resource for courses on economic ethics and economic philosophy.},
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tppubtype = {book}
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This textbook applies economic ethics to evaluate the free market system and enables students to examine the impact of free markets using the three main ethical approaches: utilitarianism, principle-based ethics, and virtue ethics. Ethics and Economics systematically links empirical research to these ethical questions, with a focus on the core topics of happiness, inequality, and virtues. Each chapter offers a recommended further reading list, and digital supplements include a list of key terms. The final chapter provides a practical method for applying the different ethical approaches to morally evaluate an economic policy proposal and an example of the methodology being applied to a real-life policy. This book will give students a clear theoretical and methodological toolkit for analyzing the ethics of market policies, making it a valuable resource for courses on economic ethics and economic philosophy.
Graafland, Johan; Verbruggen, Harmen
Free-Market, Perfect Market and Welfare State Perspectives on “Good” Markets: an Empirical Test Journal Article
In: Applied Research in Quality of Life, 2021.
@article{Graafland2021,
title = {Free-Market, Perfect Market and Welfare State Perspectives on “Good” Markets: an Empirical Test},
author = {Johan Graafland and Harmen Verbruggen},
url = {https://www.moralmarkets.org/wp-content/uploads/Graafland-Verbruggen2021_Article_Free-MarketPerfectMarketAndWel.pdf},
doi = {10.1007/s11482-021-09946-2},
year = {2021},
date = {2021-05-20},
journal = {Applied Research in Quality of Life},
abstract = {This study explores the relationship between human development and market institutions and tests the performance of three alternative economic perspectives that each assign a different role to governments. In the free-market perspective, the principal task of the government is to protect property rights. In the perfect-market perspective, the government has the additional responsibility of correcting market failures. The welfare-state perspective posits that the state must actively adopt welfare-state policies across a broad range of fields. Based on a sample of 34 OECD countries plus Russia across a time frame spanning 1990 to 2018, the results demonstrate that economic freedom and small size of government do not significantly affect human development as measured by the Human Development Index. Hence, we find no support for the free-market ideal. Conversely, it is found that human development is positively related to governmental interventions that aim to reduce externalities (public expenditure on education and environmental regulation). These results support the perfect-market perspective. With respect to the welfare-state perspective, the findings are mixed. On the one hand, we found that (some) labor market regulations (particularly hiring and firing regulations, hours regulations and mandated cost of worker dismissal) have a negative impact upon human development. On the other hand, human development is shown to be positively affected by governmental intervention seeking to reduce gender stratification in the labor market.},
keywords = {},
pubstate = {published},
tppubtype = {article}
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This study explores the relationship between human development and market institutions and tests the performance of three alternative economic perspectives that each assign a different role to governments. In the free-market perspective, the principal task of the government is to protect property rights. In the perfect-market perspective, the government has the additional responsibility of correcting market failures. The welfare-state perspective posits that the state must actively adopt welfare-state policies across a broad range of fields. Based on a sample of 34 OECD countries plus Russia across a time frame spanning 1990 to 2018, the results demonstrate that economic freedom and small size of government do not significantly affect human development as measured by the Human Development Index. Hence, we find no support for the free-market ideal. Conversely, it is found that human development is positively related to governmental interventions that aim to reduce externalities (public expenditure on education and environmental regulation). These results support the perfect-market perspective. With respect to the welfare-state perspective, the findings are mixed. On the one hand, we found that (some) labor market regulations (particularly hiring and firing regulations, hours regulations and mandated cost of worker dismissal) have a negative impact upon human development. On the other hand, human development is shown to be positively affected by governmental intervention seeking to reduce gender stratification in the labor market.
Lous, Bjorn; Graafland, Johan
Who Becomes Unhappy when Income Inequality Increases? Journal Article
In: Applied Research in Quality of Life, 2021.
@article{Lous2021,
title = {Who Becomes Unhappy when Income Inequality Increases?},
author = {Bjorn Lous and Johan Graafland},
url = {https://www.moralmarkets.org/wp-content/uploads/Who-becomes-unhappy-when-income-inequality-increases.pdf},
doi = {10.1007/s11482-020-09906-2},
year = {2021},
date = {2021-02-03},
journal = {Applied Research in Quality of Life},
abstract = {Literature has established that, on a macroeconomic level, income inequality has a negative effect on average life satisfaction. An unresolved question is, however, which income groups are harmed by income inequality. In this paper we investigate this relationship at the microeconomic level combining national indicators of income inequality with individual data of life satisfaction from the World Values Survey for 39 countries over a period of 25 years. Tests on moderation by income category show that the Gini coefficient is most negatively related to life satisfaction of the lowest income groups, but the negative effects also extends to other income groups. For the income share of the top 1% we find a similar result. These findings show that income inequality is especially a concern for the lower income groups, but that the harmful effect of income inequality also spillovers to the life satisfaction of other income groups.},
keywords = {},
pubstate = {published},
tppubtype = {article}
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Literature has established that, on a macroeconomic level, income inequality has a negative effect on average life satisfaction. An unresolved question is, however, which income groups are harmed by income inequality. In this paper we investigate this relationship at the microeconomic level combining national indicators of income inequality with individual data of life satisfaction from the World Values Survey for 39 countries over a period of 25 years. Tests on moderation by income category show that the Gini coefficient is most negatively related to life satisfaction of the lowest income groups, but the negative effects also extends to other income groups. For the income share of the top 1% we find a similar result. These findings show that income inequality is especially a concern for the lower income groups, but that the harmful effect of income inequality also spillovers to the life satisfaction of other income groups.
2020
Graafland, Johan
Vrijemarktinstituties, deugden en maatschappelijk verantwoord ondernemen Journal Article
In: Management & Organisatie, vol. 2020, no. 2/3, pp. 36-47, 2020.
@article{Graafland2020c,
title = {Vrijemarktinstituties, deugden en maatschappelijk verantwoord ondernemen},
author = {Johan Graafland },
year = {2020},
date = {2020-06-01},
journal = {Management & Organisatie},
volume = {2020},
number = {2/3},
pages = {36-47},
abstract = {In dit artikel onderzoekt de auteur of het effect van economische vrijheid op maatschappelijk verantwoord ondernemen afhankelijk is van de deugdzaamheid van bedrijven, zoals afgemeten aan hun intrinsieke motivatie voor MVO en hun langetermijngerichtheid. Dit onderzoek past daarmee in een groeiende literatuur waarin rekening wordt gehouden met meer gedragsmatige factoren van MVO-prestaties.},
keywords = {},
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In dit artikel onderzoekt de auteur of het effect van economische vrijheid op maatschappelijk verantwoord ondernemen afhankelijk is van de deugdzaamheid van bedrijven, zoals afgemeten aan hun intrinsieke motivatie voor MVO en hun langetermijngerichtheid. Dit onderzoek past daarmee in een groeiende literatuur waarin rekening wordt gehouden met meer gedragsmatige factoren van MVO-prestaties.
Lous, Bjorn
On free markets, income inequality, happiness and trust PhD Thesis
Tilburg University, Center for Economic Research (CentER), 2020, ISBN: 978 90 5668 620 8.
@phdthesis{Lous2020,
title = {On free markets, income inequality, happiness and trust},
author = {Bjorn Lous},
url = {https://pure.uvt.nl/ws/portalfiles/portal/32241440/Lous_PhD_Thesis_final.pdf},
isbn = {978 90 5668 620 8},
year = {2020},
date = {2020-01-31},
school = {Tilburg University, Center for Economic Research (CentER)},
abstract = {Even though on average Western countries are richer than ever before, an undercurrent of widespread discomfort and uncertainty has been revealed in recent years. This has led to renewed critical interest in the foundations and assumptions of the capitalist economic model. This thesis focuses on the role of inequality in the functioning of the economy. Specifically, three relationships are investigated. The first empirical chapter sets the general context, looking at the effect of economic freedom on (country-level) life satisfaction through income inequality. The second research chapter analyzes the effect of income inequality on trust and inequality in life satisfaction. The third and fourth chapters zoom in on the microeconomic level, discussing how national income inequality relates to individual life satisfaction, and to individual inclination to trust other people. In addition, the differences between different income groups are investigated, as well as between other socio-demographically defined groups.},
keywords = {},
pubstate = {published},
tppubtype = {phdthesis}
}
Even though on average Western countries are richer than ever before, an undercurrent of widespread discomfort and uncertainty has been revealed in recent years. This has led to renewed critical interest in the foundations and assumptions of the capitalist economic model. This thesis focuses on the role of inequality in the functioning of the economy. Specifically, three relationships are investigated. The first empirical chapter sets the general context, looking at the effect of economic freedom on (country-level) life satisfaction through income inequality. The second research chapter analyzes the effect of income inequality on trust and inequality in life satisfaction. The third and fourth chapters zoom in on the microeconomic level, discussing how national income inequality relates to individual life satisfaction, and to individual inclination to trust other people. In addition, the differences between different income groups are investigated, as well as between other socio-demographically defined groups.
2019
Graafland, Johan
When Does Economic Freedom Promote Well Being? On the Moderating Role of Long-Term Orientation Journal Article
In: Social Indicators Research, 2019, ISSN: 1573-0921.
@article{Graafland2019d,
title = {When Does Economic Freedom Promote Well Being? On the Moderating Role of Long-Term Orientation},
author = {Johan Graafland},
url = {https://doi.org/10.1007/s11205-019-02230-9},
doi = {10.1007/s11205-019-02230-9},
issn = {1573-0921},
year = {2019},
date = {2019-11-30},
journal = {Social Indicators Research},
abstract = {An increasing volume of literature has shown that economic freedom is related to life satisfaction. However, life satisfaction may not fully describe well-being because of its subjective nature. This study contributes to previous literature by extending analysis of the relationship between economic freedom and life satisfaction to other dimensions of well-being as measured by the better life index of the OECD that includes both objective and subjective measures. A second innovation of this paper is that, in explaining the differences in well-being between countries, we conjecture that the relationship between free market institutions as measured by economic freedom and well-being is moderated by the cultural dimension of long-term orientation. This hypothesis is supported for six out of 11 dimensions of well-being: income, community, health, life satisfaction, safety, and work---life balance. Our study shows that looking at interdependencies between culture and formal institutions can increase the explanatory power of internationally comparative research into well-being.},
keywords = {},
pubstate = {published},
tppubtype = {article}
}
An increasing volume of literature has shown that economic freedom is related to life satisfaction. However, life satisfaction may not fully describe well-being because of its subjective nature. This study contributes to previous literature by extending analysis of the relationship between economic freedom and life satisfaction to other dimensions of well-being as measured by the better life index of the OECD that includes both objective and subjective measures. A second innovation of this paper is that, in explaining the differences in well-being between countries, we conjecture that the relationship between free market institutions as measured by economic freedom and well-being is moderated by the cultural dimension of long-term orientation. This hypothesis is supported for six out of 11 dimensions of well-being: income, community, health, life satisfaction, safety, and work---life balance. Our study shows that looking at interdependencies between culture and formal institutions can increase the explanatory power of internationally comparative research into well-being.
Graafland, Johan
Contingencies in the relationship between economic freedom and human development: the role of generalized trust Journal Article
In: Journal of Institutional Economics, pp. 1–16, 2019.
@article{graaflandm,
title = {Contingencies in the relationship between economic freedom and human development: the role of generalized trust},
author = {Johan Graafland},
url = {https://www.cambridge.org/core/journals/journal-of-institutional-economics/article/contingencies-in-the-relationship-between-economic-freedom-and-human-development-the-role-of-generalized-trust/455C6214E32F50EF20C3F7BFA83E675A},
doi = {10.1017/S1744137419000705},
year = {2019},
date = {2019-11-07},
journal = {Journal of Institutional Economics},
pages = {1–16},
publisher = {Cambridge University Press},
abstract = {An increasing volume of literature has shown that human development is related to economic institutions. But previous literature has not considered that the effects of economic institutions on human development are contingent on culture. In this study, we contend that the effects of economic freedom (as an indicator of economic institutions) on human development are dependent on generalized trust (as an indicator of culture). Using panel analysis on a sample of 29 OECD countries during 1990–2015, we find that generalized trust positively moderates the relationship between economic freedom and human development. The policy implication is that free market institutions foster human development only in high trust societies, not in low trust countries.},
keywords = {},
pubstate = {published},
tppubtype = {article}
}
An increasing volume of literature has shown that human development is related to economic institutions. But previous literature has not considered that the effects of economic institutions on human development are contingent on culture. In this study, we contend that the effects of economic freedom (as an indicator of economic institutions) on human development are dependent on generalized trust (as an indicator of culture). Using panel analysis on a sample of 29 OECD countries during 1990–2015, we find that generalized trust positively moderates the relationship between economic freedom and human development. The policy implication is that free market institutions foster human development only in high trust societies, not in low trust countries.
Graafland, Johan; Lous, Bjorn
Income Inequality, Life Satisfaction Inequality and Trust: A Cross Country Panel Analysis Journal Article
In: Journal of Happiness Studies, vol. 20, no. 6, pp. 1717–1737, 2019, ISSN: 1573-7780.
@article{Graafland2019c,
title = {Income Inequality, Life Satisfaction Inequality and Trust: A Cross Country Panel Analysis},
author = {Johan Graafland and Bjorn Lous},
url = {https://doi.org/10.1007/s10902-018-0021-0},
doi = {10.1007/s10902-018-0021-0},
issn = {1573-7780},
year = {2019},
date = {2019-08-01},
journal = {Journal of Happiness Studies},
volume = {20},
number = {6},
pages = {1717--1737},
abstract = {Literature has argued that income inequality crowds out trust. However, whether income inequality makes people less trusting depends on how they perceive income inequality within their personal social context and social cognition. In this paper we therefore conjecture that the relationship of income inequality to trust depends on how income inequality affects inequality of life satisfaction. If life satisfaction inequality is high, distrust is generated among the least happy. This will increase polarization and the risk of rebellion, thereby also affecting trust among the happier people. Thus, life satisfaction inequality may be an essential factor in the relationship between income inequality and trust. In previous literature, the potential mediating role of life satisfaction inequality in the relationship between income inequality and social trust has not yet received attention. We test our model by panel analysis on 25 OECD countries in the period 1990--2014. The panel analysis shows that income inequality increases life satisfaction inequality and that both income inequality and life satisfaction inequality have a significant negative impact on social trust. Mediation tests show complementary mediation: besides the direct negative effect of income inequality on trust, we find an indirect effect mediated by life satisfaction inequality. This indirect effect counts for 20% of the total effect of income inequality on trust. Our results imply that policy options for increasing trust are not limited to countering income inequality, but can also include policy measures that directly reduce inequality of life satisfaction.},
keywords = {},
pubstate = {published},
tppubtype = {article}
}
Literature has argued that income inequality crowds out trust. However, whether income inequality makes people less trusting depends on how they perceive income inequality within their personal social context and social cognition. In this paper we therefore conjecture that the relationship of income inequality to trust depends on how income inequality affects inequality of life satisfaction. If life satisfaction inequality is high, distrust is generated among the least happy. This will increase polarization and the risk of rebellion, thereby also affecting trust among the happier people. Thus, life satisfaction inequality may be an essential factor in the relationship between income inequality and trust. In previous literature, the potential mediating role of life satisfaction inequality in the relationship between income inequality and social trust has not yet received attention. We test our model by panel analysis on 25 OECD countries in the period 1990--2014. The panel analysis shows that income inequality increases life satisfaction inequality and that both income inequality and life satisfaction inequality have a significant negative impact on social trust. Mediation tests show complementary mediation: besides the direct negative effect of income inequality on trust, we find an indirect effect mediated by life satisfaction inequality. This indirect effect counts for 20% of the total effect of income inequality on trust. Our results imply that policy options for increasing trust are not limited to countering income inequality, but can also include policy measures that directly reduce inequality of life satisfaction.
2017
Graafland, Johan; Lous, Bjorn
Economic Freedom, Income Inequality and Life Satisfaction in OECD Countries Journal Article
In: Journal of Happiness Studies, vol. online first, pp. 1-23, 2017.
@article{Graafland2017,
title = { Economic Freedom, Income Inequality and Life Satisfaction in OECD Countries},
author = {Johan Graafland and Bjorn Lous},
doi = {10.1007/s10902-017-9905-7},
year = {2017},
date = {2017-08-12},
journal = {Journal of Happiness Studies},
volume = {online first},
pages = {1-23},
abstract = {Since \emph{Piketty’s Capital in the 21st Century} in 2014, scientific interest into the impact of income inequality on society has been on the rise. However, little is known about the mediating role of income inequality in the relationship between market institutions and subjective well-being. Using panel analysis on a sample of 21 OECD countries to test the effects of five different types of economic freedom on income inequality, we find that fiscal freedom, free trade and freedom from government regulation increase income inequality, whereas sound money decreases income inequality. Income inequality is found to have a negative effect on life satisfaction. Mediation tests show that income inequality mediates the influence of fiscal freedom, free trade and freedom from government regulation on life satisfaction. },
keywords = {},
pubstate = {published},
tppubtype = {article}
}
Since Piketty’s Capital in the 21st Century in 2014, scientific interest into the impact of income inequality on society has been on the rise. However, little is known about the mediating role of income inequality in the relationship between market institutions and subjective well-being. Using panel analysis on a sample of 21 OECD countries to test the effects of five different types of economic freedom on income inequality, we find that fiscal freedom, free trade and freedom from government regulation increase income inequality, whereas sound money decreases income inequality. Income inequality is found to have a negative effect on life satisfaction. Mediation tests show that income inequality mediates the influence of fiscal freedom, free trade and freedom from government regulation on life satisfaction.
