Is It Really Commercial Activity that Civilizes?

Don’t let references to “the dismal science” fool you. Classical liberal economics is actually a pretty optimistic way to look at life.

Liberals maintain that markets create wealth, promote mutual gain, and unlock talents and resources in individuals and nations. And, they say, markets have political benefits. Since the Enlightenment, liberals have argued that markets promote civic pluralism by making people more reasonable and prudent; less given to political and, especially, religious enthusiasm; and eager to avoid divisive debates about deep commitments.

That markets have these advantages is known as the doux commerce thesis. (That’s doux as in soft, or having a softening effect.) The thesis is most closely associated with the Baron de Montesquieu and Voltaire, though David Hume and Adam Smith endorsed it, too. In a very fine new book, The Dignity of Commerce: Markets and the Moral Foundations of Contract Law, contracts scholar Nathan B. Oman advances a version of the theory, updated to take account of current contract doctrine. Oman, a law professor at William and Mary Law School, combines immense learning and sophistication with a lightness of touch that makes his book a pleasure to read.

All of that said, I remain unpersuaded about doux commerce. Edmund Burke had it right, I think. Markets don’t inevitably lead to liberalism. Rather, the liberal tradition itself creates the sort of markets liberals admire.

The Dignity of Commerce masterfully covers all the big issues in contemporary contract law, including the tension between efficiency and distributive fairness; unconscionability; and contract remedies. At heart, though, the book is an attempt to answer the fundamental question of contract law, the one that precedes all the others: Why should the law enforce contracts in the first place?

Oman maintains the law should enforce contracts because contracts undergird markets, and markets “generate a set of moral habits—virtues—that support a liberal political order.” Markets require people to consider what others desire and to offer persuasive appeals. This training in give-and-take is essential to the reasoned deliberation on which liberalism relies. Markets “weaken loyalty to tribe and family” and promote “the ability to relate to strangers according to impersonal criteria,” and they promote equality rather than inherited status—all goals of classical liberalism from the start.

Markets also provide “a mechanism by which those with sharply differing religious, moral, and political beliefs can peacefully cooperate.” Repeated exchanges in the marketplace can reassure us that others value fidelity and fair dealing, whatever their racial, religious, or sexual identities. The market thus trains people to put intractable differences aside—to look the other way—in the interests of closing the deal. In the long run, looking the other way allows people to build relationships of trust they otherwise would not have built. Even if such relationships don’t form, looking the other way allows us all to get on with our private projects with a minimum of disturbance.

Oman recognizes that not all markets have good moral consequences, and not all markets deserve legal protection. The Atlantic slave trade was a market, but it was a moral horror. And he recognizes the market may colonize non-commercial areas of life, like marriage and family, ruining many human relationships by reducing them to arm’s length bargains. The law should resist attempts to apply the market metaphor indiscriminately to all human interactions, he says.

The doux commerce thesis seems right about many things. Markets do promote interactions among strangers and do encourage the kind of benign indifference Oman describes. But the thesis has some holes in it as well. Smith himself noted that commerce could lead to corruption and weaken republican virtues. This was an insight he shared with Jean-Jacques Rousseau—though, unlike Rousseau, he thought markets’ benefits outweighed their costs. Many societies have followed the path from wealth to decadence to despotism.

The conservative critique of the doux commerce thesis, associated most closely with Burke, carries considerable power. Burke favored markets, toleration, and pluralism, but he didn’t see any of them as inevitable, and he didn’t think markets alone could produce the other two. For Burke, the doux commerce thesis had cause and effect backwards. The market doesn’t create virtues and habits; rather, it depends on pre-existing virtues and habits, like law-abidingness, probity, toleration, and trust, all of which people bring to it from the wider culture, especially from religion. Without those pre-existing virtues and habits, the market could not exist.

Current events offer evidence of this. Since the fall of the Iron Curtain in 1989, the West has made the expansion of liberal markets the centerpiece of its diplomacy. The doux commerce thesis inspired both the World Trade Organization and NAFTA. It provided the intellectual foundation for the European Union, a common political enterprise that joined together countries as diverse as the United Kingdom and Bulgaria. And the thesis inspired the movement to install liberal markets in places, like Russia, that lacked a liberal tradition. All these endeavors were based in the idea that market would cause ethnic and national identities to recede in favor of pluralism, tolerance, and other liberal values.

Things can change, of course, but at the moment this project does not seem a great success. Liberal markets and pluralism are not triumphing across the world; in fact, the situation is rather the opposite. As one of his first acts, President Trump withdrew the United States from the Trans-Pacific Partnership, and his supporters’ irritation with NAFTA helped elect him last November. In Europe, the old national divisions have resurfaced. In fact, they have strengthened as the EU has broadened to include countries outside the Western core. In Russia, the attempt to create liberalism through markets has failed. As Jesse Norman writes, Russia lacked the liberal traditions that make free markets work—for example, levels of social trust that encourage people to deal fairly with strangers. As a result, market liberalization merely “assisted the loss of public assets at fire-sale prices to the new oligarchs.”

The Dignity of Commerce makes a major contribution to contracts scholarship. And I’ll concede it’s very hard to prove one way or the other whether doux commerce works in practice. Many people will find the author’s  argument quite persuasive; as I say, liberal economics is an optimistic worldview. In this regard, I’ll leave the last word to Oman himself.

“To the extent one is an optimist about the moral possibilities of markets,” he writes, “one should be enthusiastic about the extension of contract law to govern large swathes of human interaction. To the extent one is more subdued in one’s assessment of markets’ moral value,” by contrast, “one’s view of contract law’s domain should be similarly limited.”