Adam Smith was first to show that selfishness and pursuit of self-interest by all parties in a free market economy results in the common good. It might appear that he expelled morality from economics. Many economists since then doubted "that moral norms play an independent role in explaining people's behavior ... that people follow norms only when doing so serves their interests" . Still despite these doubts the question remained: does following moral norms by some or all parties affect economy?
The weak point of the theory that morality or immorality of people does not affect economy, or that following moral norms is detrimental to economy, is that there is not one but many self-interests and they are often contradictory. For example, immediate gains is definitely everybody's self-interest. But a log-term survival is a self-interest too, which is frequently put in jeopardy by chasing immediate gains. This is where moral norms come in. They emerged as a means of reconciling contradictory self-interests by re-prioritizing them or even depricating some of them. For example, do not be too greedy otherwise ... (and a story follows about the too greedy Roman consul Crass who ended up with his throat filled up with melted gold for his extraordinary greed). There is a natural prioritization amongst self-interests. Immediate gains naturally have a higher priority over being better off in the long run. But moral norms try to re-prioritize them.
Whether a particular person will heed to a moral norm or not depends on circumstances and other factors. Paraphrasing Thomas Dunning, promise one 100% profit and he will be ready to trample on all human laws; promise him 300% profit, and there is not a crime at which he will scruple, nor a risk it will not run, even to the chance of him being hanged . This is definitely an exaggeration and definitely not applicable to everyone. The percentage of people that would commit any crime for 300% profit depends on the overall morality of a nation. And overall morality of a nation plays a huge role in success of its economy. As morality declines so goes economy.
R E F E R E N C E S:
1. Daniel M. Hausman and Michael S. McPherson, "Economic Analysis, Moral Philosophy, and Public Policy",
Cambridge University Press, 2008
2. "The Reminiscences of Thomas Dunning", in David Vincent (ed.), Testaments of Radicalism. Memoirs of Working Class Politicians. 1790-1885 (London: Europa Publications, 1977), p. 35-36.