The central proposition of Harold James’s stimulating essay is that modern capitalism and its corporate forms have wrought a shift in our attitudes toward trust. By the beginning of the 21st century, he writes, both Thomist elaborations of Aristotelian ethics and 18th century Enlightenment thinking about moral conduct had “become largely extinct.” The resulting dearth of “trustworthy individuals,” he suggests, underpins the current world economic crisis, presumably by releasing avarice from all restraint—hence the title of his essay, “Thinking About Greed.”

It would seem beyond question, as James argues, that a profound shift in our moral outlook has occurred with the rise of a market economy. But even if we could somehow inculcate the ethical norms the disappearance of which James laments, would that have a bearing on our current predicament? An excess of corporate greed is how both Barack Obama and John McCain are framing the cause of the economic implosion. But however attractive it is for politicians to rail against the greedy tycoons of Wall Street, it does not take us very far as an analysis. In a modern economy, acquisitiveness is a constant and therefore cannot be employed to explain an extraordinary set of events like the collapse of the global banking system.

This is not to say that greed and untrustworthy behavior played no part in the financial unraveling. Cases are already coming to light of corporate insiders worrying aloud about the near worthlessness of the complex instruments they were simultaneously marketing as low-risk. But the incentives that caused such conduct are far from the root of the matter. Rather than being the consequence of a shift in morality or a surfeit of greed, the crisis would appear to have its origins in the contradictions of a mixed economy. Quasi-public institutions like Fannie Mae and Freddie Mac, which seemingly had the credit of the U.S. government behind them, interacted with private firms in a highly unpredictable fashion, not so much because they were unregulated but because they were regulated in dysfunctional ways.

Why that occurred is largely the consequence of political decisions made by Congress, which pursued the popular course of making home mortgages affordable to those who could not, in the end, actually afford them. For a similar set of political reasons, the Treasury Department scrupulously avoided listening to warnings that the home-price bubble was going to burst, and with it Fannie Mae, Freddie Mac, and much else. The Federal Reserve Bank under Alan Greenspan also willingly went along, failing to rein in the sub-prime loan market, keeping interest rates low, and betting the nation’s economic health on the certainty of ever-rising home prices. It is a fitting irony that Greenspan, an acolyte of Ayn Rand, should bear heavy responsibility for the largest intrusion of government into the private sector since the New Deal. At the end of the day, though, all of these institutions were responding eagerly to pressure from a public that was pining to buy more and/or larger houses than it could pay for and sought government’s help to make up the gap.

What follows from all this? James concludes his essay by arguing that the older ethical tradition that has been lost “has a crucial part to play in a quickly changing and very modern world.” But this seems utopian. It was inevitable that an ethics derived, as he himself describes it, upon the economy of the household and on personal exchanges over short distances, would fail to survive in an era of mass production on a global scale. One does not have to be a Marxist to believe that it would be difficult to recover a tradition so lacking in correspondence to the prevailing means of production. And indeed, James does not offer a hint about how we might move our society—and the world economic engine to which it is inextricably linked—in the direction he favors.

There is indeed an older set of ethical habits in need of restoration, which are intrinsic to both Thomistic and Enlightenment thinking. The cardinal virtue of prudence (at least in its modern meaning of caution) goes unmentioned by James. So too does Adam Smith’s stress on thrift. Both are essential to the effective functioning of a market economy. Their cultivation, through education and through the proper ordering of economic incentives, remains a vital social goal. A contemporary non-philosopher, non-economist has of late been underscoring this point. “Let’s do what our parents told us before we probably even got that first credit card. Don’t live outside of our means. We need to make sure that as individuals we’re taking personal responsibility through all of this.” The words come from Sarah Palin.

Whether we can recover our thriftiness, both as individuals and as a society, is one of the big questions posed by the financial crisis. Out of necessity, we’ve turned first to government for a rescue. If we’re not ultimately to bankrupt government itself along with our banks by assigning it the position of risk-taker of last resort, we need, over the longer term, to curb the unrealistic expectations that brought us low.

Gabriel Schoenfeld is a visiting scholar at The Witherspoon Institute.

Copyright 2008 The Witherspoon Institute. All rights reserved.