Reason Online has posted a fascinating dialogue between a few noted free-market types. John Mackey, the CEO of Whole Foods, argues that corporate responsibility must include more than simple monetary profit. Milton Friedman, the god of free markets, responds as does another CEO.

I’m a businessman and a free market libertarian, but I believe that the enlightened corporation should try to create value for all of its constituencies. From an investor’s perspective, the purpose of the business is to maximize profits. But that’s not the purpose for other stakeholders—for customers, employees, suppliers, and the community. Each of those groups will define the purpose of the business in terms of its own needs and desires, and each perspective is valid and legitimate.

Mackey's point is an interesting one, and I have to admit that I'd never considered that someone from a libertarian perspective would articulate it in such a way. The idea of focusing not just on shareholders but on stakeholders in the company is a fascinating one. Another angle of discussion the nature of the investor relationship.

I believe {corporate charity programs} would be completely justifiable even if they produced no profits and no P.R. This is because I believe the entrepreneurs, not the current investors in a company’s stock, have the right and responsibility to define the purpose of the company.... It is the entrepreneurs who set the company strategy and who negotiate the terms of trade with all of the voluntarily cooperating stakeholders—including the investors.

Friedman responds, getting in jabs at the nature of charity, but essentially spends his column-inches trying to explain Mackey's views as enlightened self-intrest disguised as altruism. In that sense, says Friedman, their differences are largely rhetorical.

It's TJ Rogers, CEO of Cypress Semiconductor, whose response borders on charicature.

I balk at the proposition that a company’s “stakeholders” (a term often used by collectivists to justify unreasonable demands) should be allowed to control the property of the shareholders. It seems Mackey’s philosophy is more accurately described by Karl Marx.

Shouting 'Marx!' feels like the economic equivalent of Godwinizing a discussion like this. I'm reminded of how barren our collective vocabulary is when we talk about issues like this. We've taken Adam Smith and turned his observations about markets into a moral force -- but who says that all of society must operate like a market at all times? As reasoning creatures, we're perfectly capable of shaping new norms. Self-interest is a powerful motivator, but it has never been and never will be the only motivator.

Rogers also asks, rhetorically, why Mackey feels giving to charity is better than giving to investors. Investors, after all, are individuals too -- they'll donate profits to charity, use them to put children through college, use them to fund a retirement... And Mackey is stealing from them to fund his philanthropy! Scandalous! Rogers sets the trap, then walks into it. Having spent his five paragraphs saying that profit is a corporation's sole purpose and responsibility, he sugar-coats his statement by implying that investors are themselves a sort of charity. As Machey notes in his rebuttal, investors can choose to put their money in a corporation whose goal is pure profit, or to put their money in one whose goals are broader.

Mackey's writing comes across as mature and thoughtful, framing the debate in terms of human issues. Friedman, for all his influence, seems genuinely blind to the idea that there is a world beyond the spreadsheet. And Rogers just looks like a Wall Street cartoon -- the "Greed Is Good" rationalizer. He's not a bad person from the sound of it, but I've always been baffled by the genuine anger and venom that many free-market types seem to reserve for people who act on moral principles inside the market system.

Hurricane Katrina has been and continues to be a punch to the gut. It's horrifying and tragic -- if you have anything to spare, donate to help.

My good friend Doctor Chuck has posted a couple of pieces on the hurricane and the country's reaction to it. I think I'll probably be livid soon, but for now it's a little numbing.

For now, I'll pause to reflect on this gem from TechCentralStation, the net's own little cross between The Cato Institute and Engadget. It springboards off of Katrina coverage, and bears the happy little title, "Three Cheers For Price Gougers." I'm not sure what free-market libertarians love so much about hurricanes, but every time one hits, they seem to crawl out of the woodwork to squawk Randian tripe about the inherent wisdom of the market.

If a gas station owner has gas, someone has to decide who gets it. If the price remains at pre-hurricane levels, many will fill their tanks, because they can afford to do so... Many will do so even if they have no immediate need for it. But after the first few people do this, the gas will be gone, and none will be available for those who come after, because it's now tied up in the gas tanks of those who didn't really need it.

This is certainly true, but he takes a bold step by stating that price gouging - boosting prices dramatically in areas where critical resources are scarce -- is a great solution. That works fine, as long as you live in a happy fantasy world of classroom abstractions. "Bob has $100, and Jane has $100. How will they choose to spend their money?" The reasoning goes. "Their decisions are what makes the free market run!" That's a fine way to determine the price of plasma TVs and ice cream -- it ensures that the people who REALLY want them will get them, rather than just the early-birds. The writer of the article isn't talking about plasma screens and ice cream, though. He's talking about how to best distribute critical resources like fuel, water, and food in the wake of a natural disaster. Just in case we misunderstand, he clarifies:

If ice prices rise to the market, the man who needs to keep his insulin cold for his diabetes treatment will place a higher value on it than the man who wants to keep his beer cold, and will have a better chance of getting it.

The writer, in his wisdom, seems to have overlooked the system's critical flaw. What if the man with diabetes has $50, and the man with a warm beer has $200? No amount of price-gouging will help the man with diabetes as long as our hypothetical beer drinker really wants some ice. The 'value' that the diabetic man places on the insulin is infinite, but the resources he has can't match the value. Tough luck for him -- that's the way the market works!

This is not to say that a free-market economy is somehow inherently bad. It's simply how things work when people can buy and sell goods freely. To pretend, though, that The Invisible Hand of capitalism is some sort of inherent moral force is a disgusting and crass insult to the victims of Katrina. According to stories coming out of New Orleans, Katrina's worst-hit victims are people who were simply too poor to leave when the storm approached.

"Let them know we're not bums. We have houses. Our houses were destroyed. We have jobs. It's not our fault that we didn't have cars to leave," Shatonia Thomas, 27, said as she walked near New Orleans' convention center five days after the storm, still trapped in the destruction with her children, ages 6 and 9.

Money and transportation -- two keys to surviving a natural disaster -- were inaccessible for many who got left behind in the Gulf region's worst squalor.

"It's a different equation for poor people," explained Dan Carter, a University of South Carolina historian. "There's a certain ease of transportation and funds that the middle class in this country takes for granted."

They had no cars, no money to hire transportation, and obviously state and federal evacuation plans offered them no help. The Market, in its infinite wisdom, left them high and dry. Or, more accurately, low and drowned. By the reasoning of TechCentralStation's article, though, they didn't "value" escape highly enough.

Thanks to Substitute for finding this story before I did. It reduced both of us to baffled, boggling silence.

For centuries, the argument in favor of laissez-faire capitalism has been simple. If you step back and let businesses pursue profit without restraint, legitimate needs and desires will be taken care of in an efficient manner. Moral concerns, the argument went, were better handled by consumers voting with dollars than governments coercing with legislation.

While I have my issues with that presupposition (see earlier posts about The Miracle Of The Market and the language of economics), it has given rise to some innovative approaches to social activism. The Social Investment Forum, SocialFunds.com, and other similar projects play by the rules of the free market, investing money in corporations that don't abuse the environment or exploit their workers. In that way, they're putting a dollar value -- their own money -- on those positive business practices.

Sounds cool, right? Putting moral value into The Market as something with economic weight? Bzzzzzt. According to Steven Milloy, a FoxNews and New York Sun columnist, they're bad people trying to weaken businesses. In order to combat those nasty, nasty investors who let moral responsibility get in the way of stock returns, he's founding a new mutual fund to counter Socially Responsible Investing.

Conrad posted a choice quote from the Wall Street Journal's article:

Founded by Steven Milloy, a columnist for FoxNews.com and The New York Sun, the fund aims to get good returns for investors while - in his words - evening the score with leftist forces that are chipping away at business. Culprits include corporate management, mutual funds and other groups that promote so-called corporate social responsibility.

"Businesses are being pressured by radical politicized left-wing activists to do things not in the best interest of the whole free-enterprise system," said Milloy, also an adjunct scholar at the Cato Institute and publisher of junkscience.com, a commentary site that bears the motto: "All the junk that's fit to debunk." "We want to be a counterforce to the activists," Milloy added.

So, let's revisit. When people decide what to invest in based on moral principle, they're bad. Because if a corporation is doing something legal to make a profit, that's good. But if people try to change laws to keep corporations from doing things they think are wrong, that's bad. Because if people really thought the things were bad, they would vote with their dollars. But if they vote with their dollars, that's bad. So, to stop them, Milloy and his friends will invest in companies that do bad things. And that's good.

Got it.

Catherine and I have been talking over the last week or two about the difficulty of discussing moral and ethical choices in our society when the discussion takes place in the language of economics. Free market capitalism is a well-oiled machine at this point, churning along and refining itself with little concern for troublesome bits like ethics or humanity or long-term viability.

Economics is a strange, magickal science to begin with. At certain levels, it's about describing the interactions between different parties and how they exchange valued things, like work and gold and time and DVD players. On a large scale, trying to predict how a nation's economy will go depends on very abstract philosophical models. Figuring out what to do to change and shape that direction is even trickier. In many cases, even deciding what we're measuring to determine success or failure is debatable. The only true anchor point of economics is this: Having More Is Good, Having Less Is Bad.

There are lots of ways to extrapolate this into what appears to be an equitable ethical and moral framework. In a large group of people, for example, one might decide that the median valuation of personal net worth is the measure of societal success. Or, perhaps the frequency with which people on the bottom of the net-worth pile advance to higher net-worth tiers. Or perhaps the percentage of people whose net worth is below a certain 'acceptable' level. If that number shrinks, we can declare victory.

These valuations, though, still collapse the human experience to a purely economic one. This isn't shocking -- economics is a language, a set of tools, and it doesn't include the meta-tools to describe the world outside of itself. You can't describe a work of art in economic terms -- only what people are willing to pay for it. You can't describe a child in economic terms -- only the cost of raising it, its potential productivity, and so on. There's nothing wrong with that; theology, for example, doesn't include very useful tools for analyzing the repercussions of international trade agreements. But increasingly, because economics seems very objective and rational, our society turns to its language, its constructs, to resolve inherently moral and ethical problems.

The concept of "The Market" is an example. Libertarians especially are fond of talking about The Market as if it is Providence, a force that works all events to good, even if we can't yet see it.

The International Herald Tribune has an interesting (if depressing) article today that highlights the problem. While the main focus of the piece is on Administration restrictions on African AIDS programs, there's a nugget that highlights the moral neutrality of The Market.

Here in Livingstone, Zambia, I visited Corridors of Hope, a U.S.-financed center for young people that has proved cheap and effective in reducing HIV among prostitutes and long-distance truck drivers. One prostitute in the program is Mavis Sitwala, an orphan (probably because of AIDS) who is supporting her five siblings and one child. She says that truck drivers pay $1 for sex with a condom or $4 for sex without.

"At times, you need food or money to pay the rent," she said, "and so even if he won't use a condom, you agree."

In the language of The Market, Mavis Sitwala is simply a free actor willing to do certain things in exchange for monetary compensation. Those who risk more receive more -- The Market has put a certain value on sex, both protected and unprotected, and that's just the way it is. The question of whether what she's doing is right (or what the truckers who hire her are doing right) can't really be considered. The only reason to intervene is if, say, Mavis' actions cause a ripple effect of economically detrimental health care problems.

Terri Schiavo's case recently highlighted the issue. A Christian acquaintance of mine said that we should work to build a Culture Of Life, to prevent anyone from being taken off life support. I pointed out that this would take metric tons of money -- Terri Schiavo is alive as I write this entry only because her husband won a malpractice lawsuit against her doctors and secured more than half a million dollars for her medical care. In low-profile cases, where low income families have no money to pay for the care of an infant or elderly loved one, are we as a society willing to foot the bill? The Market won't take care of that one -- it's brutal in its efficiency, as any study of insurance industry practices will show.

Are we as a culture willing to make decisions that are 'economically bad' but 'morally right?'