1 MORTALITY AND CAPITALISM : Learning from the Past By Deepak Lal

This paper argues that morality is required to allow the gains from trade to be reaped by reducing the ‘policing’ type of transactions costs involved in opportunistic behaviour. But, as Hume emphasised neither God nor Reason can justify any particular morality, the only source of morality must be local traditions which socialize children through the moral emotions of shame and guilt. Capitalism does require morality, but this cannot be enforced by States, NGO’s or supra-national insitutions. JEL classification: O19, P10, Z00, Z1. Address: 8369 Bunche Hall, UCLA, 405 Hilgard Avenue, Los Angeles CA 90024 Tel: 310-825 4521 Fax: 310-825 9528 Revised email: [email protected] March 2002