Since 2008, there has been much discussion about the contribution of unethical behavior to our present economic circumstances. Whether it was borrowers’ lying on mortgage applications or Fannie Mae and Freddie Mac’s politically driven lending policies, there seems to be some consciousness that non-economic factors played a role in facilitating what we already call the Great Recession.
Unfortunately evidence is emerging that some people have learned nothing. A recent report, for example, commissioned by the Wall Street Journal illustrates that “losses from mortgage fraud — ranging from falsified credit reports to identity theft — rose 17 percent last year after declining 57 percent in the two years after its 2006 peak.”
Of course, a wider adherence to ethical norms against lying and stealing won’t solve every economic problem. There are heavy technical dimensions to many economic dilemmas which require technical solutions. Nor does every policy error constitute a moral failure.
Nevertheless, those making economic decisions are human beings, and our virtues and vices do shape our purchasing, selling, and policy choices. Many such virtues could be highlighted, but one needing extra-attention today is humility.
The word “humility” derives from the Latin humilitas. This in turn comes from humus, which means earth or soil, but is also related to homō, meaning man. For the Greeks and Romans, the word underscored the idea that humans are not God or gods. Likewise for the Jews and early Christians, humility was about remembering that humans are fallible creatures who come from and return to the earth: ashes to ashes, dust to dust. Some first millennium Christian writers, such as St. John Chrysostom, even described humility as the mother of the virtues, as it prevented vanity from corrupting every other virtue.
So, how might a renewed embrace of humility help us to rethink our approach to contemporary economic life?
In the case of consumers, a good dose of humility might well encourage some acceptance that the meaning of life is not simple and is certainly not to be found in how many material things we possess, as important as wealth can be in helping us to live dignified lives. To this extent, greater humility might temper the “I-want-it-all-right-now” mentality that helped generate such high household-debt levels in America and Europe.
Likewise, businesses could benefit from a renewed appreciation of humility. The financial wizard the late Sir John Templeton once wrote that humility was crucial if business was to maintain the open-mindedness that is essential to successful entrepreneurship, rather than rest upon their past glories. To this we might add the insight of another prominent entrepreneur, François Michelin, that humility helps business leaders in a market economy remember that the customers are the real masters. More humble business leaders would also be less inclined to succumb to the “Masters-of-the-Universe” hubris that helped destroy any number of banks in 2008.
Speaking of hubris, humility also has a role to play in encouraging mainstream economists to accept economics’ limits as a science and acknowledge that not everything about markets can be explained by mathematical models that were supposed to fail only once in a million years. As George Mason University professor of economics Russ Roberts has wisely observed, while “facts and evidence still matter," economists “should face the evidence that we are no better today at predicting tomorrow than we were yesterday.”
But perhaps those who could do with the biggest bout of humility during recessions are politicians and governments. If the Great Recession has taught us anything, it is that governments should admit many economic problems are beyond their control, and that any claim by politicians to be able to “manage” trillion-dollar economies is arrogant nonsense.
Instead, politicians should be modest enough to concede that (1) the seemingly disorderly process of market exchange resolves many challenges that governments cannot; and (2) government overreach invariably causes new problems. Here they would do well to read Adam Smith’s famous warning concerning the “man of system,” who “is apt to be very wise in his own conceit, and is so often enamored with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it.”
The fear of the Lord, the Bible says, is the beginning of wisdom. Contrary to received opinion, this verse has nothing to do with frightening people into religious belief. Instead it reminds each of us that we are not the center of the universe and that the sooner we grasp this, the wiser our choices will be. All of us — consumers, business-leaders, and politicians — need to be sufficiently humble to reassess our actions in a time of recession, acknowledge our errors, and then live out the necessary correctives.
To this extent, the virtue of humility may well be a key to understanding our pre-recessionary past and a way of illuminating our path to a better and more economically prosperous future.