Timur Kuran

Islam and Mammon

In an isolated group numbering at most in the low hundreds and whose members perform similar tasks, the range of experiences may be sufficiently narrow and the volume of relevant information sufficiently small to enable a veritable agreement on objectives. Moreover, the members of such a group may possess adequate knowledge of one another's needs. But it is sheer romanticism to expect such traits to characterize a population running into the millions. In a large society sustained cooperation toward jointly held and commonly understood ends is possible only in small subgroups like the family, the work team, and tightly knit partnerships.

If economics has taught us anything over the past two centuries, it is that the institution of the market allows traders pursuing different, rather than similar, ends to achieve mutually satisfying outcomes. As an unrivaled economizer of information, the market permits traders to serve the needs of others while pursuing nothing but their own selfish objectives. True, the viability of the market mechanism depends on the existence of certain constraints on people's actions, such as property rights, sanctions against dishonesty, regulations to curb harmful externalities, and contracting rules. And cooperative production in firms is a source of immense or even mainly, by altruism or jointness of purpose. A crucial role is played by institutions that induce traders to serve society as a by-product of personal pursuits based on personal knowledge. Put differently, prosperity does not require the commonality of all knowledge, in the sense of each person knowing the needs of every other. Nor does it require general conformity to joint objectives. Given people's very limited informational abilities, it always requires some division of knowledge and labor.

Friedrich Hayek, the most forceful modern exponent of these insights, traces the common misperception that the economic viability of a large society depends on jointness of both knowledge and purpose to Aristotle's teachings on household management and individual enterprise. These teachings showed no comprehension of the market order in which Aristotle lived, yet they set the pattern over the following two millennia for religious and philosophical thinking on the social order. Generalizing erroneously from the household to the wider economy, later thinkers such as Thomas Aquinas held that only actions aiming at known benefits to others are morally justified and, hence, economically desirable. Not until the eighteenth century would it be recognized that the market makes it possible 'to do a service to another without bearing him a real kindness,' or even knowing him.