Rational markets and reasonable unicorns

With respect to “reason”, St Augustine argued that reason and faith could not be separated, but that faith preceded reason, purifying the soul and preparing it to accept the light of reason. St Thomas Aquinas explained, with respect to reason, that man did not have sufficient wisdom to penetrate the nature of everything, and so needed to apply reason to approach truth one step at a time.

The essence of a “rational” market economy is the process of applying reason to buiness in a systematic and sustained fashion. The foundation for the development of various aspects of Western society is rooted in the cultural soil arising from its beliefs.

Max Weber pointed out that the reason that the capital economy only arose in Europe is that, of all the world’s major religions, only Protestantism gave people the moral ideas of refraining from material consumption and actively seeking wealth. The Protestant work ethic broke traditional ties, creating new doctrinal ethics and belief culture that made entrepreneurs willing to reinvest their profits so as to benefit the overall interests of society. This is precisely the key to the rise of “rational” market economies in the West. Rodney Stark argues that the rise of the West was based on the victory of reason: with the application of reason in business, and under the responsive protection of the state, the capital economy flourished, and this was the victory won by the West.

Liu Xiaoming is a senior partner and director of the Company Law and legal advisers professional committee at Longan Law Firm. He can be contacted on +86 10 6532 0366 or by e-mail at xiaoming@longanlaw.com