Chapter 3. The Relationship Between the Economic System and the Social Order

Table of Contents

Current Theories Explaining the Existence of Social Order

Is society mainly a market place, in which self-serving individuals compete with one another—at work, in politics, and in courtship—enhancing the general welfare in the process? Or do we typically seek to do both what is right and what is pleasurable, and find ourselves frequently in conflict when moral values and happiness are incompatible? Are we, first of all, ‘normative-effective’ beings, whose deliberations and decisions are deeply affected by our values and emotions?

— Amitai Etzioni[1]

In brief, the principle of self-interest is incomplete as a social organising principle. It operates effectively only in tandem with some supporting social principle. This fundamental characteristic of economic liberalism, which was largely taken for granted by Adam Smith and John Stuart Mill in their different ways, has been lost sight of by its modern protagonists…The attempt has been made to erect an increasingly explicit social organisation without a supporting social morality…In this way, the foundations of the market system have been weakened.

— Fred Hirsch[2]


The previous chapter began an examination of two key, but buried assumptions, which have underpinned much recent public policy formulation: the ideas that the economic system is autonomous and that the economic system has priority over the social system. These two assumptions have allowed economics to become the dominant methodology and vocabulary for the evaluation of public policy choices in our society. As a consequence, ‘economic efficiency’—defined in neoclassical terms—has become the dominant value to be served by government policy.

The discussion so far has centred on the question of how social order originates. It has been shown that there is broad consensus that the social order is a moral order that developed with the social evolution of the human race. It was concluded that there was no pre-social human nature, and consequently the study of social life involved the study of regulated conduct, not simply the study of regularities. It is our shared values that act as the mortar that binds our communities together and these are backed by formal and informal means of coercion and our own sense of guilt. Importantly, it is the control of our greed that constitutes one of the prime victories of culture over our ‘animality’. That victory is, however, incomplete and the maintenance of a peaceful society involves constant struggle. I concluded that, in an effective civil society, the pursuit of individual and organisational choice and ‘self-interest’ were heavily constrained by internalised moral codes and by externally imposed social sanctions. The resulting order was constantly under threat from what used to be called human sinfulness, particularly human greed.

This chapter will give an account of the various contemporary theories that are used to account for that social order before focusing on the relationship of dependence between the economic and social systems, pointing to the neglect of this relationship by economic fundamentalists. In addition, the chapter will provide a brief historical overview of this debate as it arose after the breakdown of the medieval hierarchical world-view, particularly under the influence of the Reformation.