ResPublica's call for more virtue in banking looks like it is out of step with our times. This is an indictment not of ResPublica, but of our times. In fact, virtue is necessary for a healthy free market economy because virtuous men do the right thing without law, and so virtue is an alternative to an arms race between ever-increasing regulation and ever more cunning attempts to game such regulation. Free markets, in this sense, need a moral framework.

This poses the question: what is the economic basis of virtue? If you think this is a Marxian question, you'd be only half right. When Deirdre McCloskey says that markets promote virtue and Dan Ariely says that exposure to centrally planned economies promote cheating, they are agreeing (rightly) with Marx that "the mode of production of material life conditions the general process of social, political and intellectual life."

Now, we know that bankers have been serial criminals. This tells us that there is something anti-McCloskeyan about the industry - that it breeds vice not virtue. But what? Here are six possibilities:

1. Short-term incentives. Annual or quarterly targets for sales or profits encourage people to meet targets now even if this means breaking rules: why bother helping your employer avoid a fine in a few years' time if you fail to make your targets and are sacked before then? Such targets thus create institutionalized criminality - in the sense that future punishments are discounted so heavily as not to be a disincentive. The Bank of England's proposals to claw back bonuses are an attempt to address this problem.

2. Whereas McCloskey might be right that competition for customers encourages virtues of trustworthiness, competition between traders doesn't. It instead breeds a dog-eat-dog mentality.

3. Neoliberalism can be performative; it doesn't just describe the world, but creates it. If you claim that people are amoral and self-interested and that government regulation is inefficient and undesirable, people might act in an amoral way and seek to evade regulation. And if you believe a (misreading?) of Friedman, that "The Social Responsibility of Business is to Increase its Profits" you will aim to maximize profits, come what may.

4. Mere proximity to money can encourage unethical behaviour, and self-interestedness (pdf).

5. Selection effects. Hierarchies can select in favour of some vices such as narcissism, overconfidence, and psychopathy.

6. Diffused pivotality. Big organizations can encourage vice by removing individual responsibility; we can justify behaving badly by believing that we're doing what the boss wants or that if we didn't do it, someone else would.

Now, I'm not claiming that these mechanisms are found exclusively in banks and nowhere else; I suspect that 5 and 6 help explain Ariely's finding that centrally planned economies encouraged cheating. Instead, what I'm suggesting is that there are some mechanisms - which are stronger and more prevalent in some places than others - which undermine virtue. To this extent, Alasdair MacIntyre is right and McCloskey wrong: we lack the institutional and cultural basis for an ethics of virtue.

In this context, ResPublica might have a point in advocating more diverse ownership and governance systems - because some of these might do a better job of promoting virtue than existing structures.

I don't know if they will. But I do know ResPublica is asking the right question, of how to promote the virtues in which a free market does serve the public good. The fact that so few people are taking up this point - preferring instead cheap sneers at the (albeit silly) call for bankers' oaths - makes me suspect that some on the right are more interested in shilling for the rich than in promoting a free market economy.