Aquatic ape hypothesis

From Wikipedia, the free encyclopedia

 

The aquatic ape hypothesis (AAH), also referred to as aquatic ape theory (AAT) or the waterside hypothesis of human evolution, postulates that the ancestors of modern humans took a divergent evolutionary pathway from the other great apes by becoming adapted to a more aquatic habitat.

The hypothesis was initially proposed by the marine biologist Alister Hardy in 1960, who argued that a branch of apes was forced by competition over terrestrial habitats to hunt for food such as shellfish on the sea shore and sea bed, leading to adaptations that explained distinctive characteristics of modern humans such as functional hairlessness and bipedalism. Elaine Morgan's 1990 book on the hypothesis, Scars of Evolution, received some favorable reviews but was subject to criticism from the anthropologist John Langdon in 1997, who characterized it as an "umbrella hypothesis" with inconsistencies that were unresolved and a claim to parsimony that was false.

The hypothesis is highly controversial, and has been criticized by many as a pseudoscience. The hypothesis is thought to be more popular with the lay public than with scientists; in the scientific literature, it is generally ignored by anthropologists.

History

Hominin timeline
−10 — – −9.5 — – −9 — – −8.5 — – −8 — – −7.5 — – −7 — – −6.5 — – −6 — – −5.5 — – −5 — – −4.5 — – −4 — – −3.5 — – −3 — – −2.5 — – −2 — – −1.5 — – −1 — – −0.5 — – 0 —	Miocene Pliocene Pleistocene Hominini Nakalipithecus Ouranopithecus Oreopithecus Sahelanthropus Orrorin Ardipithecus Australopithecus Homo habilis Homo erectus Homo bodoensis Homo sapiens Neanderthals,Denisovans	← Earlier apes ← Gorilla split ← Chimpanzee split ← Earliest bipedal ← Stone tools ← Dispersal beyond Africa ← Earliest fire / cooking ← Earliest clothes ← Modern humans H o m i n i d s
(million years ago)

had become a respected academic and knighted for contributions to marine biology, Hardy finally voiced his thoughts in a speech to the British Sub-Aqua Club in Brighton on 5 March 1960. Several national newspapers reported sensational presentations of Hardy's ideas, which he countered by explaining them more fully in an article in New Scientist on 17 March 1960: "My thesis is that a branch of this primitive ape-stock was forced by competition from life in the trees to feed on the sea-shores and to hunt for food, shellfish, sea-urchins etc., in the shallow waters off the coast."^[11]

The idea was generally ignored by the scientific community after the article was published. Some interest was received, notably from the geographer Carl Sauer whose views on the role of the seashore in human evolution^[12] "stimulated tremendous progress in the study of coastal and aquatic adaptations" inside marine archaeology.^[13] In 1967, the hypothesis was mentioned in The Naked Ape, a popular book by the zoologist Desmond Morris, who reduced Hardy's phrase "more aquatic ape-like ancestors" to the bare "aquatic ape", commenting that "despite its most appealing indirect evidence, the aquatic theory lacks solid support".

While traditional descriptions of 'savage' existence identified three common sources of sustenance: gathering of fruit and nuts, fishing, and hunting, in the 1950s, the anthropologist Raymond Dart focused on hunting and gathering as the likely organizing concept of human society in prehistory, and hunting was the focus of the screenwriter Robert Ardrey's 1961 best-seller African Genesis. Another screenwriter, Elaine Morgan, responded to this focus in her 1972 Descent of Woman, which parodied the conventional picture of "the Tarzanlike figure of the prehominid who came down from the trees, saw a grassland teeming with game, picked up a weapon and became a Mighty Hunter," and pictured a more peaceful scene of humans by the seashore. She took her lead from a section in Morris's 1967 book which referred to the possibility of an Aquatic Ape period in evolution, his name for the speculation by the biologist Alister Hardy in 1960. When it aroused no reaction in the academic community, she dropped the feminist criticism and wrote a series of books–The Aquatic Ape (1982), The Scars of Evolution (1990), The Descent of the Child (1994), The Aquatic Ape Hypothesis (1997) and The Naked Darwinist (2008)–which explored the issues in more detail. Books published on the topic since then have avoided the contentious term aquatic and used waterside instead.

The Hardy/Morgan hypothesis

Hardy's hypothesis as outlined in the New Scientist was:

My thesis is that a branch of this primitive ape-stock was forced by competition from life in the trees to feed on the sea-shores and to hunt for food, shell fish, sea-urchins etc., in the shallow waters off the coast. I suppose that they were forced into the water just as we have seen happen in so many other groups of terrestrial animals. I am imagining this happening in the warmer parts of the world, in the tropical seas where Man could stand being in the water for relatively long periods, that is, several hours at a stretch.

Hardy argued a number of features of modern humans are characteristic of aquatic adaptations. He pointed to humans' lack of body hair as being analogous to the same lack seen in whales and hippopotamuses. and noted the layer of subcutaneous fat humans have that Hardy believed other apes lacked, although it has been shown that captive apes with ample access to food have levels of subcutaneous fat similar to humans. Additional features cited by Hardy include the location of the trachea in the throat rather than the nasal cavity, the human propensity for front-facing copulation, tears and eccrine sweating, though these claimed pieces of evidence have alternative evolutionary adaptationist explanations that do not invoke an aquatic context. Hardy additionally posited that bipedalism evolved first as an aid to wading before becoming the usual means of human locomotion, and tool use evolved out of the use of rocks to crack open shellfish. These last arguments were cited by later proponents of AAH as an inspiration for their research programs.

Morgan summed up her take on the hypothesis in 2011:

Waterside hypotheses of human evolution assert that selection from wading, swimming and diving and procurement of food from aquatic habitats have significantly affected the evolution of the lineage leading to Homo sapiens as distinct from that leading to Pan.

Reactions

Aquatic Ape Conference delegates in Valkenburg, 1987

The AAH is generally ignored by anthropologists, although it has a following outside academia and has received celebrity endorsement, for example from David Attenborough.

Academics who have commented on the aquatic ape hypothesis include categorical opponents (generally members of the community of academic anthropology) who reject almost all of the claims related to the hypothesis. Other academics have argued that the rejection of Hardy and Morgan is partially unfair given that other explanations which suffer from similar problems are not so strongly opposed. A conference devoted to the subject was held at Valkenburg, Netherlands, in 1987. Its 22 participants included academic proponents and opponents of the hypothesis and several neutral observers headed by the anthropologist Vernon Reynolds of the University of Oxford. His summary at the end was:

Overall, it will be clear that I do not think it would be correct to designate our early hominid ancestors as 'aquatic'. But at the same time there does seem to be evidence that not only did they take to water from time to time but that the water (and by this I mean inland lakes and rivers) was a habitat that provided enough extra food to count as an agency for selection.

Critiques

The AAH is not accepted as empirically supported by the scholarly community, and has been met with significant skepticism. The Nature editor and paleontologist Henry Gee has argued that the hypothesis has equivalent merit to creationism, and should be similarly dismissed.

In a 1997 critique, anthropologist John Langdon considered the AAH under the heading of an "umbrella hypothesis" and argued that the difficulty of ever disproving such a thing meant that although the idea has the appearance of being a parsimonious explanation, it actually was no more powerful an explanation than the null hypothesis that human evolution is not particularly guided by interaction with bodies of water. Langdon argued that however popular the idea was with the public, the "umbrella" nature of the idea means that it cannot serve as a proper scientific hypothesis. Langdon also objected to Morgan's blanket opposition to the "savannah hypothesis" which he took to be the "collective discipline of paleoanthropology". He observed that some anthropologists had regarded the idea as not worth the trouble of a rebuttal. In addition, the evidence cited by AAH proponents mostly concerned developments in soft tissue anatomy and physiology, whilst paleoanthropologists rarely speculated on evolutionary development of anatomy beyond the musculoskeletal system and brain size as revealed in fossils. After a brief description of the issues under 26 different headings, he produced a summary critique of these with mainly negative judgments. His main conclusion was that the AAH was unlikely ever to be disproved on the basis of comparative anatomy, and that the one body of data that could potentially disprove it was the fossil record.

Anthropologist John D. Hawks wrote that it is fair to categorize the AAH as pseudoscience because of the social factors that inform it, particularly the personality-led nature of the hypothesis and the unscientific approach of its adherents. Physical anthropologist Eugenie Scott has described the aquatic ape hypothesis as an instance of "crank anthropology" akin to other pseudoscientific ideas in anthropology such as alien-human interbreeding and Bigfoot.

In The Accidental Species: Misunderstandings of Human Evolution (2013), Henry Gee remarked on how a seafood diet can aid in the development of the human brain. He nevertheless criticized the AAH because "it's always a problem identifying features [such as body fat and hairlessness] that humans have now and inferring that they must have had some adaptive value in the past." Also "it's notoriously hard to infer habits [such as swimming] from anatomical structures".

Popular support for the AAH has become an embarrassment to some anthropologists, who want to explore the effects of water on human evolution without engaging with the AAH, which they consider "emphasizes adaptations to deep water (or at least underwater) conditions". Foley and Lahr suggest that "to flirt with anything watery in paleoanthropology can be misinterpreted", but argue "there is little doubt that throughout our evolution we have made extensive use of terrestrial habitats adjacent to fresh water, since we are, like many other terrestrial mammals, a heavily water-dependent species." But they allege that "under pressure from the mainstream, AAH supporters tended to flee from the core arguments of Hardy and Morgan towards a more generalized emphasis on fishy things."

In "The Waterside Ape", a pair of 2016 BBC Radio documentaries, David Attenborough discussed what he thought was a "move towards mainstream acceptance" for the AAH in the light of new research findings. He interviewed scientists supportive of the idea, including Kathlyn Stewart and Michael Crawford who had published papers in a special issue of the Journal of Human Evolution on "The Role of Freshwater and Marine Resources in the Evolution of the Human Diet, Brain and Behavior". Responding to the documentaries in a newspaper article, paleoanthropologist Alice Roberts criticized Attenborough's promotion of AAH and dismissed the idea as a distraction "from the emerging story of human evolution that is more interesting and complex". She argued that AAH had become "a theory of everything" that is simultaneously "too extravagant and too simple".

Philosopher Daniel Dennett, in his discussion of evolutionary philosophy, commented "During the last few years, when I have found myself in the company of distinguished biologists, evolutionary theorists, paleoanthropologists and other experts, I have often asked them to tell me, please, exactly why Elaine Morgan must be wrong about the aquatic theory. I haven’t yet had a reply worth mentioning, aside from those who admit, with a twinkle in their eyes, that they have also wondered the same thing." He challenged both Elaine Morgan and the scientific establishment in that "Both sides are indulging in adapt[at]ionist Just So stories". Along the same lines, historian Erika Lorraine Milam noted that independent of Morgan's work, certain standard explanations of human development in paleoanthropology have been roundly criticized for lacking evidence, while being based on sexist assumptions. Anatomy lecturer Bruce Charlton gave Morgan's book Scars of Evolution an enthusiastic review in the British Medical Journal in 1991, calling it "exceptionally well written" and "a good piece of science".

In 1995, paleoanthropologist Phillip Tobias declared that the savannah hypothesis was dead, because the open conditions did not exist when humanity's precursors stood upright and that therefore the conclusions of the Valkenberg conference were no longer valid. Tobias praised Morgan's book Scars of Evolution as a "remarkable book", though he said that he did not agree with all of it. Tobias and his student further criticised the orthodox hypothesis by arguing that the coming out of the forest of man's precursors had been an unexamined assumption of evolution since the days of Lamarck, and followed by Darwin, Wallace and Haeckel, well before Raymond Dart used it.

Reactions of Hardy and Morgan

Alister Hardy was astonished and mortified in 1960 when the national Sunday papers carried banner headlines "Oxford professor says man a sea ape", causing problems with his Oxford colleagues. As he later said to his ex-pupil Desmond Morris, "Of course I then had to write an article to refute this saying no this is just a guess, a rough hypothesis, this isn't a proven fact. And of course we're not related to dolphins."

Elaine Morgan's 1972 book Descent of Woman became an international best-seller, a Book of the Month selection in the United States and was translated into ten languages. The book was praised for its feminism but paleoanthropologists were disappointed with its promotions of the AAH. Morgan removed the feminist critique and left her AAH ideas intact, publishing the book as The Aquatic Ape 10 years later, but it did not garner any more positive reaction from scientists.

Related academic and independent research

Although the general reaction to Hardy and Morgan's proposals was silence by the relevant academic community, there have been over the last decades some academics who were inspired by AAH proposals, even to the point of pursuing particular lines of research on its basis. Some of the academics and professional scientists who have supported the AAH include Michael Crawford, Professor and Director of the Institute of Brain Chemistry and Human Nutrition at Imperial College London, his former postdoctoral researcher, Stephen Cunnane, now professor of medicine at Université de Sherbrooke, Erika Schagatay, professor of Environmental Physiology at Mid Sweden University, Kathlyn M. Stewart, Section Head of Palaeobiology at the Canadian Museum of Nature, and Tom Brenna, Professor of Paediatrics and Chemistry at University of Texas.

Wading and bipedalism

AAH proponent Algis Kuliukas, performed experiments to measure the comparative energy used when lacking orthograde posture with using fully upright posture. Although it is harder to walk upright with bent knees on land, this difference gradually diminishes as the depth of water increases and is still practical in thigh-high water.

In the BBC 4 documentary "H2O:the Molecule that Made Us, Series 1 Episode 2, Civilisations".(2021) Harvard anthropology professor Richard Wrangham, commenting on features of bonobo life filmed around rivers and streams in the Congo, suggests a similar habitat led to the evolution of our hominin ancestors as “a water walking wading ape ... It’s how we became bipedal”. That such a habitat "promoted adaptations for habitual bipedality in early hominins" and "that access to aquatic habitats was a necessary condition for adaptation to savanna habitats" were conclusions Wrangham and his colleagues had previously reached following their research into food provisioning in early hominins.

In a critique of the AAH, Henry Gee questioned any link between bipedalism and diet. Gee writes that early humans have been bipedal for 5 million years, but our ancestors' "fondness for seafood" emerged a mere 200,000 years ago.

Diet

Neanderthal skull (right) compared with modern human

Evidence supports aquatic food consumption in Homo as early as the Pliocene, but its linkage to brain evolution remains controversial. Further, there is no evidence that humans ate fish in significant amounts earlier than tens to hundreds of thousands of years ago. Supporters argue that the avoidance of taphonomic bias is the problem, as most hominin fossils occur in lake-side environments, and the presence of fish remains is therefore not proof of fish consumption. They also claim that the archaeological record of human fishing and coastal settlement is fundamentally deficient due to postglacial sea level rise.

In their 1989 book The Driving Force: Food, Evolution and The Future, Michael Crawford and David Marsh claimed that omega-3 fatty acids were vital for the development of the brain:

A branch of the line of primitive ancestral apes was forced by competition to leave the trees and feed on the seashore. Searching for oysters, mussels, crabs, crayfish and so on they would have spent much of their time in the water and an upright position would have come naturally.

Crawford and Marsh opined that the brain size in aquatic mammals is similar to humans, and that other primates and carnivores lost relative brain capacity. Cunnane, Stewart, Crawford, and colleagues published works arguing a correlation between aquatic diet and human brain evolution in their "shore-based diet scenario", acknowledging the Hardy/Morgan's thesis as a foundation work of their model. As evidence, they describe health problems in landlocked communities, such as cretinism in the Alps and goitre in parts of Africa due to salt-derived iodine deficiency, and state that inland habitats cannot naturally meet human iodide requirements.

Biologists Caroline Pond and Dick Colby were highly critical, saying that the work provided "no significant new information that would be of interest to biologists" and that its style was "speculative, theoretical and in many places so imprecise as to be misleading." British palaeontologist Henry Gee, who remarked on how a seafood diet can aid in the development of the human brain, nevertheless criticized AAH because inferring aquatic behavior from body fat and hairlessness patterns is an unjustifiable leap.

Diving behavior and performance

Aside from working as a professor, Erika Schagatay is also an experienced scuba and freediver whose research centers around human diving abilities. She suggests that such abilities are consistent with selective pressure for underwater foraging during human evolution, and discussed other anatomical traits speculated as diving adaptations by Hardy/Morgan. John Langdon suggested that such traits could be enabled by a human developmental plasticity.

Vernix caseosa

Tom Brenna, professor of pediatrics whose primary research focuses on fats, oils, and fatty acids, listened to the 2005 radio documentary Scars of Evolution where David Attenborough reported an observation that harbor seals were born with something that resembled human vernix caseosa. Intrigued, Brenna led a team that collaborated with Judy St Leger at San Diego Seaworld to compare the chemistry of human vernix and samples from California sea lion pups. They established that the molecular composition of both is similar, being rich in branched chain fatty acids and squalene.

Scientific socialism

From Wikipedia, the free encylopedia

is a term coined in 1840 by Pierre-Joseph Proudhon in his book What is Property? to mean a society ruled by a scientific government, i.e. one whose sovereignty rests upon reason, rather than sheer will:

Thus, in a given society, the authority of man over man is inversely proportional to the stage of intellectual development which that society has reached; and the probable duration of that authority can be calculated from the more or less general desire for a true government, — that is, for a scientific government. And just as the right of force and the right of artifice retreat before the steady advance of justice, and must finally be extinguished in equality, so the sovereignty of the will yields to the sovereignty of the reason, and must at last be lost in scientific socialism.

In the 1844 book The Holy Family, Karl Marx and Friedrich Engels described the writings of the socialist, communist writers Théodore Dézamy and Jules Gay as truly "scientific". Later in 1880, Engels used the term "scientific socialism" to describe Marx's social-political-economic theory.

Although the term socialism has come to mean specifically a combination of political and economic science, it is also applicable to a broader area of science encompassing what is now considered sociology and the humanities. The distinction between Utopian and scientific socialism originated with Marx, who criticized the Utopian characteristics of French socialism and English and Scottish political economy. Engels later argued that Utopian socialists failed to recognize why it was that socialism arose in the historical context that it did, that it arose as a response to new social contradictions of a new mode of production, i.e. capitalism. In recognizing the nature of socialism as the resolution of this contradiction and applying a thorough scientific understanding of capitalism, Engels asserted that socialism had broken free from a primitive state and become a science.his shift in socialism was seen as complementary to shifts in contemporary biology sparked by Charles Darwin and the understanding of evolution by natural selection—Marx and Engels saw this new understanding of biology as essential to the new understanding of socialism and vice versa.

Methodology

Scientific socialism refers to a method for understanding and predicting social, economic and material phenomena by examining their historical trends through the use of the scientific method in order to derive probable outcomes and probable future developments. It is in contrast to what later socialists referred to as Utopian socialism—a method based on establishing seemingly rational propositions for organizing society and convincing others of their rationality and/or desirability. It also contrasts with classical liberal notions of natural law, which are grounded in metaphysical notions of morality rather than a dynamic materialist or physicalist conception of the world.

Scientific socialists view social and political developments as being largely determined by economic conditions as opposed to ideas in contrast to Utopian socialists and classical liberals and thus believe that social relations and notions of morality are context-based relative to their specific stage of economic development. Therefore, as economic systems both socialism and capitalism are not social constructs that can be established at any time based on the subjective will and desires of the population, but instead are products of social evolution. An example of this was the advent of agriculture which enabled human communities to produce a surplus—this change in material and economic development led to a change in social relations and rendered the old form of social organization based on subsistence-living obsolete and a hindrance to further material progress. Changing economic conditions necessitated a change in social organization.

moral hazard

From Wikipedia, the free encyclopedia

In economics, moral hazard occurs when an entity has an incentive to increase its exposure to risk because it does not bear the full costs of that risk. For example, when a corporation is insured, it may take on higher risk knowing that its insurance will pay the associated costs. A moral hazard may occur where the actions of the risk-taking party change to the detriment of the cost-bearing party after a financial transaction has taken place.

Moral hazard can occur under a type of information asymmetry where the risk-taking party to a transaction knows more about its intentions than the party paying the consequences of the risk and has a tendency or incentive to take on too much risk from the perspective of the party with less information. One example is a principal–agent problem, where one party, called an agent, acts on behalf of another party, called the principal. If the agent has more information about his or her actions or intentions than the principal then the agent may have an incentive to act too riskily (from the viewpoint of the principal) if the interests of the agent and the principal are not aligned.

History

According to research by Dembe and Boden, the term dates back to the 17th century and was widely used by English insurance companies by the late 19th century. Early usage of the term carried negative connotations, implying fraud or immoral behavior (usually on the part of an insured party). Dembe and Boden point out, however, that prominent mathematicians who studied decision-making in the 18th century used "moral" to mean "subjective", which may cloud the true ethical significance in the term. The concept of moral hazard was the subject of renewed study by economists in the 1960s, beginning with economist Ken Arrow, and did not imply immoral behavior or fraud. Economists use this term to describe inefficiencies that can occur when risks are displaced or cannot be fully evaluated, rather than a description of the ethics or morals of the involved parties.

Rowell and Connelly offer a detailed description of the genesis of the term moral hazard, by identifying salient changes in economic thought, which are identified within the medieval theological and probability literature. Their paper compares and contrasts the predominantly normative conception of moral hazard found within the insurance-industry literature with the largely positive interpretations found within the economic literature. Often what is described as "moral hazard[s]" in the insurance literature is upon closer reading, a description of the closely related concept, adverse selection.

Finance

In 1998, William J. McDonough, head of the New York Federal Reserve, helped the counter-parties of Long Term Capital Management avoid losses by taking over the firm. This move was criticized by former Fed Chair, Paul Volcker and others as increasing moral hazard. Tyler Cowen concludes that "creditors came to believe that their loans to unsound financial institutions would be made good by the Fed – as long as the collapse of those institutions would threaten the global credit system." Fed Chair, Alan Greenspan, while conceding the risk of moral hazard, defended the policy to orderly unwind Long Term Capital by saying the world economy is at stake.

Economist Paul Krugman described moral hazard as "any situation in which one person makes the decision about how much risk to take, while someone else bears the cost if things go badly." Financial bailouts of lending institutions by governments, central banks or other institutions can encourage risky lending in the future if those that take the risks come to believe that they will not have to carry the full burden of potential losses. Lending institutions need to take risks by making loans, and the riskiest loans usually have the potential for making the highest return.

Taxpayers, depositors, and other creditors often have to shoulder at least part of the burden of risky financial decisions made by lending institutions. Many have argued that certain types of mortgage securitization contribute to moral hazard. Mortgage securitization enables mortgage originators to pass on the risk that the mortgages they originate might default and not hold the mortgages on their balance sheets and assume the risk. In one kind of mortgage securitization, known as "agency securitizations," default risk is retained by the securitizing agency that buys the mortgages from originators. These agencies thus have an incentive to monitor originators and check loan quality. "Agency securitizations" refer to securitizations by either Ginnie Mae, a government agency, or by Fannie Mae and Freddie Mac, both for-profit government-sponsored enterprises. They are similar to the "covered bonds" that are commonly used in Western Europe in that the securitizing agency retains default risk. Under both models, investors take on only interest-rate risk, not default risk.

In another type of securitization, known as "private label" securitization, default risk is generally not retained by the securitizing entity. Instead, the securitizing entity passes on default risk to investors. The securitizing entity, therefore, has relatively little incentive to monitor originators and maintain loan quality. "Private label" securitization refers to securitizations structured by financial institutions such as investment banks, commercial banks, and non-bank mortgage lenders.

During the years leading up to the subprime mortgage crisis, private label securitizations grew as a share of overall mortgage securitization by purchasing and securitizing low-quality, high-risk mortgages. Agency Securitizations appear to have somewhat lowered their standards, but Agency mortgages remained considerably safer than mortgages in private-label securitizations and performed far better in terms of default rates.

Economist Mark Zandi of Moody's Analytics described moral hazard as a root cause of the subprime mortgage crisis. He wrote that "the risks inherent in mortgage lending became so widely dispersed that no one was forced to worry about the quality of any single loan. As shaky mortgages were combined, diluting any problems into a larger pool, the incentive for responsibility was undermined." He also wrote, "Finance companies weren't subject to the same regulatory oversight as banks. Taxpayers weren't on the hook if they went belly up [pre-crisis], only their shareholders and other creditors were. Finance companies thus had little to discourage them from growing as aggressively as possible, even if that meant lowering or winking at traditional lending standards."

Moral hazard can also occur with borrowers. Borrowers may not act prudently (in the view of the lender) when they invest or spend funds recklessly. For example, credit card companies often limit the amount borrowers can spend with their cards because without such limits, borrowers may spend borrowed funds recklessly, leading to default.

Securitization of mortgages in America started in 1983 at Salomon Brothers and where the risk of each mortgage passed to the next purchaser instead of remaining with the original mortgaging institution. These mortgages and other debt instruments were put into a large pool of debt, and then shares in the pool were sold to many creditors.

Thus, there is no one person responsible for verifying that any one particular loan is sound, that the assets securing that one particular loan are worth what they are supposed to be worth, that the borrower responsible for making payments on the loan can read and write the language in which the papers that he/she signed were written, or even that the paperwork exists and is in good order. It has been suggested that this may have caused the subprime mortgage crisis.

Brokers, who were not lending their own money, pushed risk onto the lenders. Lenders, who sold mortgages soon after underwriting them, pushed risk onto investors. Investment banks bought mortgages and chopped up mortgage-backed securities into slices, some riskier than others. Investors bought securities and hedged against the risk of default and prepayment, pushing those risks further along. In a purely capitalist scenario, the last one holding the risk (like a game of musical chairs) is the one who faces the potential losses. In the sub-prime crisis, however, national credit authorities (the Federal Reserve in the US) assumed the ultimate risk on behalf of the citizenry at large.

Others believe that financial bailouts of lending institutions do not encourage risky lending behavior since there is no guarantee to lending institutions that a bailout will occur. Decreased valuation of a corporation before any bailout would prevent risky, speculative business decisions by executives who fail to conduct proper due diligence in their business transactions. The risk and the burdens of loss became apparent to Lehman Brothers, which who did not benefit from a bailout, and other financial institutions and mortgage companies such as Citibank and Countrywide Financial Corporation, whose valuation plunged during the subprime mortgage crisis.

Incentives to moral hazard in accounting rules

A 2017 report by the Basel Committee on Banking Supervision, an international regulator for the banking sector, noted that the accounting rules (IFRS # 9 and 13 in particular) leave entities significant discretion in determining financial instrument fair value and identified this discretion as a potential source of moral hazard: “The evidence consistent with accounting discretion as contributing to moral hazard behavior indicates that (additional) prudential valuation requirements may be justified.”

Banking regulators have taken actions to limit discretion and reduce valuation risk, i.e. the risk to banks' balance sheets arising from financial instrument valuation uncertainties. A row of regulatory documents has been issued, providing detailed prudential requirements that have many points of contact with the accounting rules and have the indirect effect of curbing the incentives for moral hazard by limiting the discretion left to banks in valuating financial instruments.

Connection to financial crisis of 2007−08

Main article: Financial crisis of 2007–08

Many scholars and journalists have argued that moral hazard played a role in the 2008 financial crisis, since numerous actors in the financial market may have had an incentive to increase their exposure to risk. In general, there are three ways in which moral hazard may have manifested itself in the lead up to the financial crisis.

• Asset managers may have had an incentive to take on more risk when managing other people's money, particularly if they were paid as a percentage of the fund's profits. If they took on more risk, they could expect higher payoff for themselves and were somewhat shielded from losses because they were spending other people's money. Therefore, asset managers may have been in a situation of moral hazard, where they would take on more risk than appropriate for a given client because they didn't bear the cost of failure.
• Mortgage loan originators, such as Washington Mutual, may have had an incentive to understate the risk of loans they originated because the loans were often sold to mortgage pools (see mortgage-backed securities). Because loan originators were paid on a per-mortgage basis, they had an incentive to produce as many mortgages as possible, even if they were risky. Because these institutions didn't expect to hold on to the loans until maturity, they could pass on the risk to the buyer of the loans. Therefore, mortgage loan originators may have been in a situation of moral hazard, because they didn't bear the costs of the risky mortgages they were underwriting.
• Third, large banks may have believed they were "too big to fail." That is, because these banks were so ingrained in the US economy, the federal government would not have allowed them to fail in order to prevent a full-scale economic crash. This belief may have been shaped by the 1998 bailout of Long Term Capital Management. "Too big to fail" banks may have believed they were essentially invincible to failure, thus putting them in a position of moral hazard: they could take on big risks – thus increasing their expected payoff – thinking that the federal government would bail them out in the event of a major failure. Therefore, large banks may have been in a situation of moral hazard, because they didn't bear the costs of a catastrophic collapse.

Notably, the Financial Crisis Inquiry Commission (FCIC), tasked by Congress with investigating the causes of the financial crisis, cited moral hazard as a component of the crisis, arguing that many factors, including deregulation in the derivatives market in 2000, reduced federal oversight, and the potential for government bailout of "too big to fail" institutions all played a role in increasing moral hazard in the years leading up to the collapse.

Others have argued that moral hazard could not have played a role in the financial crisis for three main reasons. First, in the event of a catastrophic failure, a government bailout would only come after major losses for the company. So even if a bailout was expected it wouldn't prevent the firm from taking losses. Second, there is some evidence that big banks were not expecting the crisis and thus were not expecting government bailouts, though the FCIC tried hard to contest this idea. Third, some have argued that negative externalities from corporate governance were a more important cause, since some risky investments may have had positive expected payoff for the firm but negative expected payoff to society.

Insurance industry

Moral hazard has been studied by insurers and academics; such as in the work of Kenneth Arrow, Tom Baker, and John Nyman.

The name comes originally from the insurance industry. Insurance companies worried that protecting their clients from risks (like fire, or car accidents) might encourage those clients to behave in riskier ways (like smoking in bed or not wearing seatbelts). This problem may inefficiently discourage those companies from protecting their clients as much as the clients would like to be protected.

Economists argue that the inefficiency results from information asymmetry. If insurance companies could perfectly observe the actions of their clients, they could deny coverage to clients choosing risky actions (like smoking in bed or not wearing seat belts), allowing them to provide thorough protection against risk (fire or accidents) without encouraging risky behavior. However, since insurance companies cannot perfectly observe their clients' actions, they are discouraged from providing the amount of protection that would be provided in a world with perfect information.

Economists distinguish moral hazard from adverse selection, another problem that arises in the insurance industry, which is caused by hidden information, rather than hidden actions.

The same underlying problem of non-observable actions also affects other contexts besides the insurance industry. It also arises in banking and finance: if a financial institution knows it is protected by a lender of last resort, it may make riskier investments than it would in the absence of the protection.

In insurance markets, moral hazard occurs when the behavior of the insured party changes in a way that raises costs for the insurer since the insured party no longer bears the full costs of that behavior. Because individuals no longer bear the cost of medical services, they have an added incentive to ask for pricier and more elaborate medical service, which would otherwise not be necessary. In those instances, individuals have an incentive to over consume, simply because they no longer bear the full cost of medical services.

Two types of behavior can change. One type is the risky behavior itself, resulting in a before the event moral hazard. Insured parties then behave in a more risky manner, resulting in more negative consequences that the insurer must pay for. For example, after purchasing automobile insurance, some may tend to be less careful about locking the automobile or choose to drive more, thereby increasing the risk of theft or an accident for the insurer. After purchasing fire insurance, some may tend to be less careful about preventing fires (say, by smoking in bed or neglecting to replace the batteries in fire alarms). A further example has been identified in flood risk management in which it is proposed that the possession of insurance undermines efforts to encourage people to integrate flood protection and resilience measures in properties exposed to flooding.

A second type of behavior that may change is the reaction to the negative consequences of risk once they have occurred and insurance is provided to cover their costs. That may be called ex post (after the event) moral hazard. Insured parties then do not behave in a more risky manner that results in more negative consequences, but they ask an insurer to pay for more of the negative consequences from risk as insurance coverage increases. For example, without medical insurance, some may forgo medical treatment due to its costs and simply deal with substandard health. However, after medical insurance becomes available, some may ask an insurance provider to pay for the cost of medical treatment that would not have occurred otherwise.

Sometimes moral hazard is so severe that it makes insurance policies impossible. Coinsurance, co-payments, and deductibles reduce the risk of moral hazard by increasing the out-of-pocket spending of consumers, which decreases their incentive to consume. Thus, the insured have a financial incentive to avoid making a claim.

Numerical example

The blue line represents the downward sloping marginal benefit curve. The orange line represents the constant $10 marginal cost curve without insurance. The green star is the market equilibrium. When the individual is insured, the marginal cost curve shifts down to 0, leading to a new equilibrium at the yellow star.

Consider a potential case of moral hazard in the health care market caused by the purchase of health insurance. Assume health care has constant marginal cost of $10 per unit and the individual's demand is given by Q = 20 − P. Assuming a perfectly competitive market, at equilibrium, the price will be $10 per unit and the individual will consume 10 units of health care. Now, consider the same individual with health insurance. Assume this health insurance makes health care free for the individual. In this case, the individual will have a price of $0 for the health care and thus will consume 20 units. The price will still be $10, but the insurance company would be the one bearing the costs.

This example shows numerically how moral hazard could occur with health insurance. The individual consumes more health care than the equilibrium quantity because they don't bear the cost of the additional care.

Economic theory

In economic theory, moral hazard is a situation in which the behavior of one party may change to the detriment of another after the transaction has taken place. For example, a person with insurance against automobile theft may be less cautious about locking their car because the negative consequences of vehicle theft are now (partially) the responsibility of the insurance company. A party makes a decision about how much risk to take, while another party bears the costs if things go badly, and the party insulated from risk behaves differently from how it would if it were fully exposed to the risk.

According to contract theory, moral hazard results from a situation in which a hidden action occurs. Bengt Holmström said this:

It has long been recognized that a problem of moral hazard may arise when individuals engage in risk sharing under conditions such that their privately taken actions affect the probability distribution of the outcome.

Moral hazard can be divided into two types when it involves asymmetric information (or lack of verifiability) of the outcome of a random event. An ex ante moral hazard is a change in behavior prior to the outcome of the random event, whereas ex post involves behavior after the outcome. For example, in the case of a health insurance company insuring an individual during a specific time period, the final health of the individual can be thought of as the outcome. The individual taking greater risks during the period would be ex-ante moral hazard whereas lying about a fictitious health problem to defraud the insurance company would be ex post moral hazard. A second example is the case of a bank making a loan to an entrepreneur for a risky business venture. The entrepreneur becoming overly risky would be ex ante moral hazard, but willful default (wrongly claiming the venture failed when it was profitable) is ex post moral hazard.

According to Hart and Holmström (1987), moral hazard models can be subdivided in models with hidden action and models with hidden information. In the former case, after the contract has been signed the agent chooses an action (such as an effort level) that cannot be observed by the principal. In the latter case, after the contract has been signed there is a random draw by nature that determines the agent's type (such as his valuation for a good or his costs of effort). In the literature, two reasons have been discussed why moral hazard may imply that the first-best solution (the solution that would be attained under complete information) is not achieved.

Firstly, the agent may be risk-averse, so there is a trade-off between providing the agent with incentives and insuring the agent. Secondly, the agent may be risk-neutral but wealth-constrained and so the agent cannot make a payment to the principal and there is a trade-off between providing incentives and minimizing the agent's limited-liability rent. Among the early contributors to the contract-theoretic literature on moral hazard were Oliver Hart and Sanford J. Grossman. In the meantime, the moral hazard model has been extended to the cases of multiple periods and multiple tasks, both with risk-averse and risk-neutral agents.

There are also models that combine hidden action and hidden information. Since there is no data on unobservable variables, the contract-theoretic moral hazard model is difficult to test directly, but there have been some successful indirect tests with field data. Direct tests of moral hazard theory are feasible in laboratory settings, using the tools of experimental economics. In such a setup, Hoppe and Schmitz (2018) have corroborated central insights of moral hazard theory.

Moral economy

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Moral_economy

The concept of moral economy refers to economic activities viewed through a moral, not just a material, lens. The definition of moral economy is constantly revisited depending on its usage in differing social, economic, ecological, and geographic situations and temporalities. The concept was developed in 1971 by the British Marxist social historian and political activist, E.P. Thompson (1924 – 1993), in his essay, "The Moral Economy of the English Crowd in the Eighteenth Century", to describe and analyze a specific class struggle in a specific era, from the perspective of the poorest citizens—the "crowd". While Thompson had used the term moral economy in his seminal 1963 book, The Making of the English Working Class, it was in the 1971 essay that he provided a thick description of the centuries-old paternalistic feudal moral economy of production and exchange, that was rapidly being replaced by the classical political economy. Thompson saw the "crowd" as subjects—not objects of history. He used the analytical tools of the emerging discipline of social history, writing a "history from below" to provide evidence of how the "crowd" of "tinners, colliers, weavers, hosiery workers, and labouring people" made the decision to riot. They grieved the loss of their livelihood, faced hunger and—in some cases starvation. Thompson traced the root causes to the combined effects of the enclosure system, profiteering during deprivation, soaring prices, and other practices that Thompson associated with free trade, the free market, and the laissez-faire system he identified with Adam Smith's 1774 book The Wealth of Nations. Thompson revealed how peasants' grievances were underpinned by a popular consensus on which moral values constitute a moral economy. This included social norms, and mutual obligations and responsibilities of the various members of a community. As older protective laws disappeared, and previously illegal activities became legal or normalized, peasants experienced actual deprivation, and in extreme cases, starvation. Thompson said that the riots were not just a response to the physical hunger—but the outrage against what they perceived to be the immorality of the new economic system that caused the deprivation.

Usage of the term moral economy, extends historically to the 18th century. In the 1830s, it was used as a criticism of capitalism, and the classical political economy. It is Thompson who is associated with re-inventing, and rigidly defining and analyzing the concept. In his 1991 review of his 1971 article and its numerous critics, Thompson said that his use of the concept was set within a specific historical context. In order for the concept to be useful, it requires a constantly renewed language.

While Thompson is assigned its paternity, it is through the work of the political scientist, James C. Scott in the 1970s and 1980s that the concept became more widely used. Scott re-appropriated the concept of moral economics in reference to the experience of 20th century peasants engaged in subsistence agriculture in southeast Asia. The term is unusual in that it was developed by an historian, made popular by a political scientist and used in disciplines and area studies, such as political science, economics, sociology, anthropology, cultural studies, and ecology.

In the 21st century, the term moral economy suffered from a confusing array of definitions, including those that refer to economic activities through a "moral and simplistic" lens.

Use of the term in the 19th century

According to E.D. Thompson, James Bronterre O'Brien used the term in his 1837 criticism of 19th century political economists. Bronterre wrote this anti-capitalist polemic: "True political economy is like a true domestic economy; it does not consist solely in slaving and saving; there is a moral economy as well as political...These quacks would make wreck of the affections, in exchange for incessant production and accumulation... It is indeed the moral economy that they always keep out of sight. When they talk about the tendency of large masses of capital, and the division of labour, to increase production and cheapen commodities, they do not tell us of the inferior human being which a single and fixed occupation must produce

Thompson's concept

The British Marxist historian E. P. Thompson, who self-described as an empiricist, spent almost a decade gathering evidence for his 1971 Past & Present journal article "The Moral Economy of the Crowd in Eighteenth Century". The article was based on a collaborative project he had undertaken in 1963 with Richard Charles Cobb, who was working on 18th and 19th century protests in France. There is a strong relation between Thompson's "historical writing and his political engagement". In the 1960s, he sided with the students in the student protests at his university, and in the 1980s, he was the most well-known antinuclear intellectual activist in Europe.

In his 2017 book, The Moral Economists, Tim Rogan included Thompson in his trio of the 20th century's "most influential critics of capitalism"—along with R. H. Tawney's (1880 – 1962) and Karl Polanyi—who were read by a broad base of readers, informed research, and had a major influence on public opinion. They were historians—not economists—who challenged utilitarianism in economics as outsiders to the field. They were "theorists of everything economists left out." Tawney, like Thompson, compared the way in which early societies had maintained social cohesion through their norms and mores, in contrast to the "rugged individualism promoted by utilitarianism".

Thompson had first used the term moral economy in his seminal 1963 publication, The Making of the English Working Class in reference to the 1795 food riots in Englan. Thompson's social history, which is associated with history from below,^: 113Like that of other British social historians—Raphael Samuel and Christopher Hill—had its antecedents in Georges Lefebvre and the French Annales school. Thompson saw the peasant, the crowds, the working class as subjects not objects of history. Previously, historians presented the peasants and working class "as one of the problems Government has had to handle".

In his 1964 book, The Crowd in History, George Rudé, "explored the pattern of food riots and market disturbances in terms of their geographical distribution, frequency, level of violence". In his 1971 essay, Thompson expanded on the theme of the 18th century riots in England by shifting focus to the mentalité of the 18th crowd—longing for the older disintegrating economic system—described by Thompson as a 'moral economy'—that both paternalistically protected them through crises and dirth, but also held authority over them, and an emerging system, that they sensed, threatened their livelihood and existence. Thompson investigated the mentalité of the crowd, to reveal the thinking underpinning the riots. Thompson investigated how in a particular situation rural England in the 18th century, a crowd of peasants made the decision to riot. Thompson acknowledged that "riots were triggered off by soaring prices, by malpractices among dealers, or by hunger. But these grievances operated within a popular consensus as to what were legitimate and what were illegitimate practices" in marketing, milling, and baking, for example. "This in its turn was grounded upon a consistent traditional view of social norms and obligations, of the proper economic functions of several parties within the community, which, taken together, can be said to constitute the moral economy of the poor. An outrage to these moral assumptions, quite as much as actual deprivation, was the usual occasion for direct action." According to Thompson these riots were generally peaceable acts that demonstrated a common political culture rooted in feudal rights to "set the price" of essential goods in the market. These peasants held that a traditional "fair price" was more important to the community than a "free" market price and they punished large farmers who sold their surpluses at higher prices outside the village while there were still those in need within the village.

He said that the riots had been "legitimized by the assumptions of an older moral economy, which taught the immorality of ...profiteering upon the necessities of the people". The riots were a "last desperate effort" on the part of the protestors to re-impose the disintegrating Tudor policies of provision, the "old paternalistic moral economy" that was faced with the emergence of the "economy of the free market," the classical political economy. Thompson pointed out the "contradictory components of paternalistic control and crowd rebellion."

In the essay, Thompson developed and re-invented the term 'moral economy' and the "practices with which it has been associated" by "rigidly" and definitively defining" it—based it on the years of empirical evidence that he had begun gathering in 1963—situating his research within an "interpretive framework", thereby setting a "scholarly standard".

Norbert Götz, whose area of research focus is conceptual history, examined E. P. Thompson's moral economy in relation to classical political economy. He described how Thompson "treated the concept as a neologism that had no prior history". In 1991, Thompson acknowledged that he had been assigned paternity of the term, but clarified that he did not coin it. He wrote that he thought that the usage of the term could be dated to at least the mid-18th century.Thompson cited Bronterre O'Brien's 1837 "directly anti-capitalist usage" of the term, which was similar to the way in which Thompson used it. Götz wrote that in pre-capitalist England, the customary order had roots in both the Edwardian and Tudor era and was based on ‘open’ marketplace exchange.

Thompson's "sufficiently attractive" concept of 'moral economy' became "famous" with scholars from other disciplines outside history, such as political science, sociology, and anthropology, adopting it.

Thompson presented a version of the article at an April 1966 conference at the State University of New York. He described moral economy as a "traditional consensus of crowd rights that were swept away by market forces." In this article, Thompson described the bread nexus that emerged in the 18th century, as comparable to the cash-nexus of the industrial revolution.

Thompson pit the pre-capitalist moral economy with its traditional and paternalistic values against the "values and ideas of an unfettered market"—the "modern "political economy" associated with liberalism and the ideology of the free market". According to Thompson, the "breakthrough of the new political economy of the free market was also the breakdown of the old moral economy of provision." Thompson emphasized the continuing force of pre-capitalist traditional "moral economy" even as capitalism was rapidly expanding. In the pre-capitalist society, the authorities followed a paternalist tradition of what Thompson called, a moral economy, by which the authorities provided support to the poor in times of dearth and supported fair prices as part of a moral obligation. By the late 18th century, exponents of laissez-faire who criticized the older, traditional system, were encouraged by Adam Smith's highly influential notion of a self-regulating market. The crowd, which included "tinners, colliers, weavers, hosiery workers, and labouring people", regularly rioted against grain merchants and traders who raised their prices in years of dearth in an attempt to reassert the concept of the just price.

Prior to the rise of classical economics in the eighteenth century, the economies in Europe and its North American colonies were governed by a variety of (formal and informal) regulations designed to prevent "greed" from overcoming "morality". In the older system prior to the end of the 18th century, economic transactions were based on mutual obligation. Horwitz said that when national commodities markets began to develop in England in the second half of the 18th century, "the price of grain was no longer local, but regional; this [presupposed for the first time] the general use of money and a wide marketability of goods." Horwitz wrote that there was a radical difference between 18th century laws in Britain and modern contract law the old theory of title of contract "outlived its usefulness". This happened around the same time as organized markets were emerging and the economic system was being transformed. Horwitz criticized late 18th century writers of contract law, such as John Joseph Powell, author of the 1790 "Essay upon the law of contracts and agreements", for denouncing the older systems for undermining the "rule of law". Horwitz said the older systems in the 18th century courts were better ways of writing contract laws, as they were more "equitable conceptions of substantive justice".

To Thompson, the emerging classical political economy was epitomized by Adam Smith's chapter, "Digression concerning the corn trade" in his 1776 The Wealth of Nations . He wrote that this chapter was the "most lucid expression" of the standpoint of the political economy upon market relations in subsistence foodstuffs. In this chapter Smith rejects the bounty imposed by the government on corn exports. "The unlimited, unrestrained freedom of the corn trade, as it is the only effectual preventative of the miseries of a famine, so it is the best palliative of the inconveniences of a dearth; for the inconveniences of a real scarcity cannot be remedied, they can only be palliated." The "profound" influence of his essay was felt in "British government circles" including William Pitt the Younger, Lord Grenville, and Edmund Burke. He cites examples of British administrators sent to India who resolutely resisted any and all government interventions in the free operation of the market in spite of the "vast exigencies of Indian famine" during the Great Bengal famine of 1770 Amartya Sen estimated that approximately 10 million people died in the famine, which he described as manmade. In England, in general poor laws and charity protected many from starvation in the 18th century. For example, in 1795, the government enacted the Speenhamland system to alleviate extreme poverty.

According to Thompson, there was a wide consensus of the community that those who engaged in riots were "informed by the belief that they were defending traditional rights or customs." Patrick Collinson said in his 2001 chapter in Puritanism and the Poor, that clergymen in the sixteenth and seventeenth century often preached against various economic practices that were not strictly illegal, but were deemed to be "uncharitable". He said that, when the clergy condemned selling food at high prices or raising rents, it is possible that this influenced the behavior of many people who regarded themselves as Christian and might have been concerned about their reputations.

The 1991 compilation of his essays, Customs in Common, included both the original 1971 essay "The Moral Economy" and a chapter devoted to his reflections on the original article. In his 2012 chapter "E. P. Thompson and Moral Economies", in A Companion to Moral Anthropology Marc Edelman said that Thompson's use of 'moral' conflates 'moral' as in 'mores' or customs with 'moral' as the principled stance—especially in terms of the "common good" as defined by "customary rights and utopian aspirations". In his 1991 reflection on his 1971 "Moral Economics", in which Thompson responded to his many critics, he wrote that "Maybe the trouble lies in the word 'moral'. "Moral is a signal which brings on a rush of polemical blood to the academic head. Nothing had made my critics angrier than the notion that a food rioter might have been more 'moral' than a disciple of Dr. Adam Smith." In his 1991 reflection, Thompson responded to the widespread use of the term to which he was associated, to clarify how he had intended it to be understood. His concept of moral economy was focused on a specific geographic, political, social, and temporal context. It included the combination of "beliefs, usages, and forms associated with the marketing of food in the time of dearth" in the 18th century in England. It included, what he called, a "particular moral charge to protest", the "outrage provoked by profiteering in life-threatening emergencies", the "deep emotions" when faced with dearth, and the claims made by the crowds to the authorities at the time.

Thompson responded to his critics such as Istvan Hont and Michael Ignatieff, who rejected Thompson's position on Adam Smith regarding government intervention in the time of a famine.

James C. Scott's moral economy

Cambodian rice farming

French anthropologist and sociologist, Didier Fassin, described how in the 1970s and 1980s the political scientist, James C. Scott, re-appropriated Thompson's concept of moral economics in anthropology in the United States, A considerable number of researchers investigating social mobilization in developing countries, within the framework of rural political economy, were informed and inspired by Scott's research and his 1976 publication The Moral Economy of the Peasant: Rebellion and Subsistence in Southeast Asia. He wrote as an historian, developing his ideas on "production and forms of resistance" in an "academic environment of Marxist anthropology". He undertook his research in the colonial archives in Paris and London. He focused on colonization and decolonization in the peasant world of Burma and Vietnam, which included two unsuccessful uprisings in the 1930s. Scott described how during the colonial era, the economic and political transformations systematically violated what the lower classes perceived as social equity, causing such "indignation and rage that prompted them to risk everything" and making of them the "shock troops of rebellion and revolution". Scott related what he calls the moral economy of the peasant to their ideas of what was meant by economic justice and exploitation, and what constituted the tolerable and the intolerable in the name of economic justice. The peasant's moral economy was based on the value system that underlies the "expression of emotions" which in "their extreme form" results in the "emergence of revolts." Scott's moral economy, which was written at a time when American imperialism was being questioned, is an "important scientific" contribution to American social science.

Scott acknowledges the key role played by Karl Polanyi's The Great Transformation in informing his own work. Polanyi's has been criticized for reifying society and romanticizing the premarket society.

Scott citing Polanyi, described how farmers, tenants, and laborers invoked "moral economies or market logic" when it would serve their interests against market forces that threatened them. Scott said that the struggles in specific localities and temporal spaces were unique. The kind of market regulation they struggled with was not based on a logical or abstract notion of market relations, but was informed by "historical origins and institutional structure of any particular economy."

In the introduction Scott described the moral economy of the "safety first" "subsistence ethic" as a consequence of "precapitalist peasant societies" existing "too close to the margin" and faced with the "fear of food shortages" in 19th century France, Russia, and Italy and Southeast Asia in the 20th centuryr Scott cites and respects the work of both Barrington Moore Jr., the author of his 1966 Social Origins of Dictatorship and Democracy: Lord and Peasant in the Making of the Modern World, and Eric R. Wolf author of his 1969 Peasant Wars of the Twentieth Century, but differentiates his own focus and approach from theirs.

Scott wrote, "To begin instead with the need for a reliable subsistence as the primordial goal of the peasant cultivator and then to examine his relationships to his neighbor, to elites, and to the state in terms of whether they aid or hinder him in meeting that need, is to recast many issues." Scott cited Richard Charles Cobb, the author of 1970 book, The Police and the People: French Popular Protest 1789-1820.

Since Thompson and Scott, the term moral economy used in social history, has been widely adopted in fields such as economics, sociology and anthropology related to the interplay between cultural mores and economic activity. It describes the various ways in which custom and social pressure coerce economic actors in a society to conform to traditional norms even at the expense of profit.

In a 2002 journal article on customary tenure by Bill Grigsby, an assistant professor of rural sociology, based on his 1994 field research in two villages in eastern Senegal, Grigsby cites both Karl Polanyi and Scott.

Moral economy: beyond Thompson and Scott

In the chapter, "The 'Moral Economy' of the English Crowd: Myth and Reality" John Stevenson, criticized Thompson and the other British scholars who, he said, had following the lead of the French Annales school-historians, shifting away from traditional historiography. Stevenson said that their historiography attempted to investigate how social and economic systems really worked by considering all levels of society and by attempting to reveal underpinning collective mentalité. In his 1975 book, Stevenson was critical of Thompson for his attempt to "decode" the actions and "reconstruct the underlying assumptions and attitudes" of 'plebeian culture' in the larger the context of "social and economic change". He rejected Thompson's concept of moral economy underpinned by what Thompson called "extraordinary deep-rooted pattern of behaviour and belief" which legitimised their protests against the "propertied and those in authority".

In his 1998 book Moral Economy, by the University of Colorado's professor emeritus of economics, John P. Powelson wrote, "In a moral economy, with today’s technology no one should be poor….The moral economy captures the benefits of technological invention through classic liberalism while using sidewise checks and balances to prevent environmental damage, ethnic and gender bias, and distorted distributions of wealth. . . . In the moral economy, governments facilitate but rarely mandate." Powelson relates the concept of a "moral economy" to the balance of economic power. His moral economy is one in which there is a balance between interventionism and libertarianism; between economic factors and ethical norms in the name of social justice. Powelson sees a moral economy and economic prosperity as mutually reinforcing.

The term moral economy continued to used in disciplines such as history, anthropology, sociology and political science in 2015.

Steven Shapin's 2009 The Scientific Life: A Moral History of a Late Modern Vocation is indebted to Thompson's re-invention of the term in 1971. Götz, along with political scientist Johanna Siméant-Germanos, who focuses on social movement studies, and Joakim Sandberg—whose specialty is normative ethics, undertook extensive literature reviews on the theme of "Moral Economy: New Perspectives", in which they traced the "varied history" of the term moral economy from its "formative influence" in Thompson's original 1971 article to its use and meaning in 2015.

In his 2020 book Humanitarianism in the Modern World Götz and his co-authors from a perspective of the moral economy, drew on philosophical, humanitarian, and medical ethics, to examine how donors and relief agencies endow aid choices, appeal for, allocate, and account for aid.

In his Journal of Global Ethics 2015 article Sandberg sought to enhance understanding of the concept of moral economy through the use of more "precise and stringent" descriptions of "moral attitudes and traditions" than those currently used by empirical researchers by using the lens of normative ethics.

In his publications, Geoffrey Hodgson called for economists to balance utilitarian tendencies with moral considerations. A 2000 Studies in Political Economy journal article, built on this to call for economists to revive and develop the concept of moral economy in "contemporary advanced economies." The author described moral economy as one that "embodies norms and sentiments regarding the responsibilities and rights of individuals and institutions with respect to others."

In The Efficient Society, Canadian philosopher Joseph Heath wrote that Canada in 2001, had achieved the proper balance between social needs and economic freedom, and as such comes close to being a moral economy.

A University College of Cork paper describes how "concept of the moral economy when employed as an analytical tool to comprehend the essentially conservative inclination of discommoded social interests that embarked on collective action in order to sustain traditional entitlements, to maintain extant economic arrangements, or to permit access to foodstuffs at moments of acute price inflation, has considerable value" in regards to uprisings in the 18th and 19th century in Ireland.

The Quaker Institute for the Future (QIF), established in 2003 in Pennsylvania, and the related Moral Economy Project, emerged from the legacy of the economist Kenneth Boulding, the author of 1966 article, "The economics of the coming spaceship earth". Boulding was among the first social scientists to call attention to the need for an integrated, holistic, ecological worldview as the key focus of progressive policy and action. The 2009 publication, Right Relationship: Building a Whole Earth Economy, which is part of that project and supported by the QIF, says that the well-being of the planet, upon which human life is entirely dependent, requires a whole earth economy, that they also call a moral economy. The authors described the development of a moral economy as one which includes a new ecologically and morally coherent "bottom line" for "resource use and for the governance of the common good. The authors address key questions regarding the purpose, function, appropriate size, fairness, and governance of a world economic system and propose new ideas to place our economy in correct relationship with the earth's ecosystem. They argue that such a moral economy is essential if we are to avoid systemic collapse as our "growth economy" outstrips the earth's limited ability to recycle our waste, and as the Earth's inventory of critical raw materials and minerals is used up, in the face of growing population and growing affluence within those populations.

Since at least 2008, while the use of the term moral economy has increased in the social sciences, the clarity of the terminology has not improved. There are many different different and "confusing" definitions assigned to the term, including those that refer to economic activities through a "moral and simplistic" lens, according to an article in the Anthropological Theory journal. Moral economic activity is rooted in mutual obligations between people engaged in transactions over time. The author builds on the work of both Thompson and Scot, and identifies a distinction between moral values simply set within the "context of economic activity" and moral values that arise from the economic activity itself. The author calls for clearer definition of moral economy that would have "substantive benefits of a better approach to economic activity and circulation and a more explicit and thoughtful attention to moral value."

In the 2011 book, The Moralization of the Markets, the authors write that the "moral economy is more resonant now than ever."

In the 21st century, Thompson's work on the "role of popular protest and the "moral economy of the crowd" continued to be relevant. He was described in 2020 list as one of the "most important social thinkers of our age", whose work informed critical theory, alongside Karl Marx, Walter Benjamin, Fernand Braudel—who was highly influential in the Annales school, Mikhail Bakhtin, Carlo Ginzburg, and Immanuel Wallerstein.