Human capital is a central concept in the field of political economy. Human flourishing is an even more central possibility at the heart of studies of the human condition more generally. Human beings can be assets in a way. They can embody human capital with a prospect of generating a favorable return on investment. When might that be good for the people involved? When might being human capital contribute in a positive way to human flourishing? When might the relationship be vicious rather than virtuous, so that being human capital opens doors to exploitation rather than to flourishing?

The liberal system of free markets and limited government has resulted in an unprecedented explosion of prosperity, freeing most people from the daily grind of survival and enabling them to engage in enjoyable and meaningful activities. Empirical studies of happiness show that people in richer and freer countries are happier at all income levels, and that happiness rises with the natural log of real GDP per capita. Contrary to critics, empirical research shows that people in such countries are also more honest and trustworthy than people from pre-industrial societies or from former communist dictatorships. Thus, more people flourish in such societies. Likewise, more people have intellectual virtue and wisdom as well as what Aristotle regards as the most important component of flourishing: contemplation (theória).

Since Gary Becker received the Noble Prize in 1992, the theory of human capital has become deeply entrenched in mainstream economics. Building on the work of John Locke and David Hume, Adam Smith portrayed the investment in education as a critical factor for economic growth. He argued that the acquisition of knowledge and skills is a type of capital, much like a machine, and thus articulated the concept of human capital in all but in name. While the correlation between schooling and future earnings has been firmly established by empirical studies, the specific causes at work are still under debate. It is not yet established whether it is the quantity or quality of the education, or the preschool, primary, secondary, or tertiary stages, that matters the most, or even at all. Some scholars discredit schooling as either a type of signaling or behavioral modification that has little in common with job training. This essay will canvas some of the early modern literature on human capital theory and then critique contemporary efforts to locate the causal nexus between investments in education as the primary form of human capital and economic output. The theory of human capital, it is argued, is beset with ambiguities and vague appeals at the causal level.

Markets are widely recognized as sources of material wealth. There is, however, a widely expressed concern that the relationship between markets and human capital is an exploitative one, and the relationship between markets and human flourishing (beyond simply material well-being) is a negative one. We argue, however, that human capital and human flourishing depend on markets in ways that are underappreciated. This essay highlights the positive relationships between markets, human capital, and human flourishing. We first highlight the positive ways that markets foster human capital investments and development and then describe the various ways that markets promote human flourishing. Finally, we introduce Amartya Sen’s capability approach as a plausible and compelling evaluative framework for assessing the moral desirability of certain social arrangements and suggest that markets (on Sen’s terms) are morally desirable social arrangements because they promote human capital development and human flourishing.

Students of Adam Smith’s views on virtue typically look to The Theory of Moral Sentiments. But in fact, the Wealth of Nations contains a strikingly robust theory of the relationship between virtues and institutions, one centered on the question of how the incentive systems created by various institutional structures encourage or impede the moral development of both individuals and societies. This essay documents this underappreciated approach and aims to demonstrate its ubiquity in the Wealth of Nations across multiple institutional contexts.

Recent United States economic policy has renewed a long-standing debate between protectionism and free trade. This essay examines the lesser-studied views of Adam Smith on the debate concerning liberal trade policy, arguing that while Smith promotes free trade as the “system of natural justice and liberty,” he also acknowledges the need for political judgment in questions of trade. While Smith has many concerns about limiting free trade, he also has a wider understanding of human flourishing in Wealth of Nations beyond opulence that cannot be achieved by strict adherence to any system. This essay argues that Smith understands human flourishing to include the development and exercise of judgment that will allow individuals to satisfy their material needs and extend moral concern to others, especially those within their immediate sphere of influence—their nation. His exceptions to free trade redirect national sentiment away from zero-sum economic transactions between nations or between groups within a nation to support other goals for human flourishing beyond opulence, such as security, a regular administration of law, and special concern for one’s countrymen.

Considering the role of chance in life cuts to the question of how much control and responsibility we have, individually and collectively. Today, we have an ambivalent view of fortune, simultaneously overemphasizing and underemphasizing its influence in our lives; we are sensitive about its presence even as we seek to minimize it. Such ambivalence and sensitivity follow from our passion for equality, which is the underlying principle of both commerce and democracy. I draw on Smith and Tocqueville—exemplary analysts of the rise of commerce and democracy, respectively—to demonstrate the relationship between equality and chance. I argue that as we come to see one another as equals, both socially and psychologically, we are more attentive to differences in fortune, both good and bad, and thus to fortune’s effects at large. The egalitarian nature of commercial and democratic society therefore broadens imaginative identification with others, while likewise opening individuals to the fact of contingency and chance, which encourages reflection that one’s situation could be otherwise. Consequently, there is a risk that individuals come to feel overwhelmed by a sense that fortune governs their lives, which may lead them to withdraw their support for the regime of commerce and democracy.

Frederic Bastiat’s last work was Economic Harmonies, published in 1851. He died while completing it, and although it had some uptake in the nineteenth century, in recent times scholarly interest has focused on his other work. In the Harmonies, he makes a remarkable claim: when properly understood, in a free market society all people’s economic interests are in harmony. If we consider that Karl Marx was arguing at the same time that those same societies are afflicted by an endemic class struggle that can end only with a communist revolution, the contrast is sharp. In this essay, I explore Bastiat’s rationale for his claim as a rejoinder to an influential argument mounted by Marx against economic liberty.

The theory of this essay is (i) that Tocquevillian democracy functions as a work shed in which the citizen actively builds society and, in the process, develops virtues; (ii) that the citizen brings those virtues to the workplace to the benefit of that enterprise and commercial society; (iii) that those virtues are particularized in the workplace; and (iv), without democracy, capitalism’s inculcation of virtue in the person is incomplete. Tocquevillian democracy encourages the citizen to shun the inward focus of individualism in favor of a disposition critical to both capitalism and democracy: the disposition to create positive associations with others, external and internal to an enterprise or association. Tocquevillian democracy complements capitalism, ameliorating human vices of greed and selfishness. Imbued with an outward-looking disposition, the market agent is encouraged to suppress individualism and selfishness and instead embrace a mission of service to society. Government centralization, particularly the usurpation of local power, has negative consequences which affect commercial society, impairing the moral formation of the market agent and the worker.

This essay argues that young people must practice freedom, responsibility, and democratic self-government in order to be fit for freedom, responsibility, and democratic self-government. The essay first examines the nature, origins, and consequences of the dominant factory model of schooling in light of the constructivist view of learning. It then discusses Peter Gray’s, Maria Montessori’s, and Alexis de Tocqueville’s views on how the practice of freedom in a self-governing community generates intellectual and moral virtues. Finally, it describes the experience of the once famous, but now forgotten, Junior Republics started by William “Daddy” George, in which teenagers lived in a self-governing village as a model for consciously cultivating moral and civic education in the Tocquevillian mold. It concludes that we should enable children to engage in more free play with peers and that we should organize education to enable learners to practice the personal and civic virtues underpinning self-government in environments more like self-governing communities than factories for developing “human capital.”

The nineteenth-century British cooperative movement identified competition as the central feature of the mode of production dominating the British economy. Most often, cooperators took the competitive system to be the antithesis of their own system of mutual assistance. Yet John Stuart Mill, even while endorsing and predicting the replacement of the capitalists’ economy with a cooperative one, insists that this new mode must not desert competition. Mill holds that without competition a cooperative system will fail to achieve progress. Competition between cooperative associations is necessary to encourage investment and technological change. As an outstanding classical economist, Mill might reasonably have been expected to develop a theory of the dynamic equalization of returns across cooperative industries. But Mill fails to complete his theory of cooperative competition. He leaves numerous questions unaddressed. In particular, he does not explain what will happen to cooperatives that fall behind. Are these a source of unemployment? Will there be a business cycle? How will new products be developed? At root, Mill fails to develop a theory of entrepreneurship under cooperation.

Economists have provided multiple pictures of how human beings’ aims work. Some have claimed that preferences are identical between all human beings. Others propose desires are in some measure under the desirer’s own control. I propose that the contemporary moral theory of exemplarism provides a way to combine the advantages of these views while allowing economists to have empirical input into moral discourse. Furthermore, the previous views imply their own particular defenses of free societies, and I argue exemplarism does as well. I articulate an argument that out of tradition-based, planning-based, and market-based societies, market-based societies best permit the freedom necessary for moral exemplars to arise. In the process of exploring this argument, I flesh out some of the details of how human beings change themselves that are left out of earlier accounts.

Ordo-liberalism constitutes a distinct set of ideas within twentieth-century classical liberalism. Through examining key ordo-liberal ideas expressed in the works of two prominent and representative ordo-liberals—Walter Eucken and Wilhelm Röpke—this essay explores how ordo-liberals sought to integrate the case for a market economy into commitments to specific moral, political, philosophical, and legal goals. It also assesses the relative success and failure of ordo-liberals in advancing their ideas at the intellectual level and in the policy arena.