the ethics of competition (1923)

Frank Knight, Chicago School economist:

“Moreover, the freest individual, the unencumbered male in the prime of life, is in no real sense an ultimate unit or social datum. He is in large measure a product of the economic system, which is a fundamental part of the cultural environment that has formed his desires and needs, given him whatever marketable productive capacities he has, and which largely controls his opportunities. Social organization through free contract implies that the contracting units know what they want and are guided by their desires, that is, that they are “perfectly rational,” which would be equivalent to saying that they are accurate mechanisms of desire-satisfaction. In fact, human activity is largely impulsive, a relatively unthinking and undetermined response to stimulus and suggestion. Moreover, there is truth in the allegation that unregulated competition places a premium on deceit and corruption. In any case, where the family is the social unit, the inheritance of wealth, culture, educational advantages, and economic opportunities tend toward the progressive increase of inequality, with bad results for personality at both ends of the scale. It is plainly contrary to fact to treat the individual as a datum, and it must be conceded that the lines along which a competitive economic order tends to form character are often far from being ethically ideal.”

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