05/16/2014 11:31 am ET Updated Jul 16, 2014

The Dalai Lama and Adam Smith

ARNE DEDERT via Getty Images

We are taking a hard look at the financial sector today, through government regulation, legislation, relevant experts, the sector itself, and most important, hopefully the public. Two great minds are relevant, the Dalai Lama and Adam Smith. Both emphasized that in our daily lives (the Dalai Lama) and in our economy (Adam Smith) there was "more" to it than simply individual self-maximization; the "more" was a "moral awareness" (Dalai Lama), and a "spectator" or conscience on every individual shoulder guiding actions (Smith).

The "more" seems to have been ignored. A brief review will demonstrate this mistake.

I was an industrial engineer, specializing in studies in industrial organization, and I am an antitrust lawyer by education, government training, practice, and disposition. I believe in the market when it works like this:

Competition is the key to consumer welfare. Companies succeed when their customers pick them for superior service, product or price, vis-à-vis their competitors. Successful companies live by this priority -- their customers' welfare, and consideration of the suppliers and employees who make their competitive success possible.

Impediments to the operation of the competitive market place are removed by antitrust enforcement or regulation where necessary. Competitors tampering with prices or access to the then "market" were outlawed as early as the 1200s in England.

But the competitive market place is also governed by "more." From the beginning, the market was conceived to be comprised of men and women who were aware of some ethic, some morality, and some sense of right and wrong. It was not conceived as "win at any cost." It was not conceived that self-gain or self-profit maximization were the sole rule for people populating the market. Defining what that "more" is presents issues, but not issues which make "more" irrelevant.

The father of the competitive market, Adam Smith, was first the Chair of Moral Philosophy at the University of Glasgow. His lectures were published in his "Theory of Moral Sentiments" in 1759, long before his Wealth of Nations in 1776.

Smith believed it was only human to want to better ourselves. But this passion had to be restrained by what he termed one's individual "spectator," which I understand as "conscience." In more popular terms, consider Jiminy Cricket, Pinocchio's spectator or conscience.

Smith elaborated "Concern for our own happiness recommends to us the virtue of prudence, concern for that of other people, the virtues of justice and beneficence; of which one restrains us from hurting, the other prompts us to promote that happiness."

These "sentiments" are integral to Smith's market place as developed in the Wealth of Nations. Smith was not thinking of economics and the market place in a vacuum.

Have these thoughts been proven out in the history of the market? I say yes!

Looking back at surviving companies, they won in the competitive market place by outcompeting, generally fairly, obviously with concern for customer welfare, and awareness of the need for the "more." When even successful companies ultimately lost out, it was generally through complacent entrenchment and self-satisfaction.

Recognizing this is a sweeping generality; nevertheless, I found it hard to identify the reckless rascals, self-serving, devil-take-the-hindmost companies who succeeded in the long run?

Short term -- maybe. Long term -- no.

Competition and the "more" apply broadly throughout all business sectors, but let's concentrate on the financial sector which occupies us at the moment, for obvious reasons, including the yet unresolved financial crisis starting in 2007.

Financial markets in the last decades were not necessarily made up of reckless rascals or devils-take-the-hindmost, but I think too many became self-serving, forgetting their first duties were to their investors and beneficiaries. The financial markets became obscure to many and seemingly a money game, where money was used to seek gain for those in the game, rather than for those for whom they served. Competition was warped, and prudence, beneficence and justice (Smith) not apparent. Moral empathy (the Dalai Lama), and the priorities that go with it, was not apparent either.

Books have been written from which one can derive such a conclusion, but a recent op-ed piece in the New York Times, summed up a frank and marvelous conversation between the assertedly right wing president of the American Enterprise Institute, Arthur C. Brooks and the Dalai Lama! It should be read in full, but for these purposes, easily focused. The Dalai Lama, a believer in free enterprise, pointed out that "wielding capitalism for good requires deep moral awareness." Brooks agreed, concluding: "Washington needs to be more like the Dalai Lama. Without abandoning principles we need practical policies based on moral empathy. Tackling these issues may offend entrenched interests, but this is immaterial. It must be done."

Reconsider the last decades of the financial sector. Are we not required to take another look at competition and, particularly, the "more," regardless of who may be offended? Was there a level competitive playing field without government favor implied or real? Were the most respected leaders putting their customers and beneficiaries first? Was there moral concern or a "spectator" on every player, or even interest in those harmed by the practices adopted? Was there empathy for the still growing disparity between those having the power to profit from the financial system, and those nowhere near that pinnacle? Was the sector so opaque that it masked anticompetitive size and practices? Were the regulators "there?"

I do believe that to restore "trust" in the financial sector, a new hard look is required. It is important to change priorities and develop moral empathy and conscience. We need a financial sector that is not favored and too complex to be truly competitive, one that is responsible to its customers and beneficiaries as a priority. And one that operates with the important imperative of the Dalai Lama and Adam Smith -- an individual spectator and conscience on the shoulder of every player and facilitator.

I have hope that all the new regulations, commentators and critics are possibly laying the groundwork. Recent articles show that leaders such as Goldman and Morgan Stanley see change as a business, let alone moral, necessity. Customers are coming first and their trust must be restored. It's a beginning.