The Socratic Society’s Philosophy Discussion Group meets again on Tuesday, June 3rd in Morven Brown 372 from midday until 2pm. Anyone with an interest in the topic is welcome, and you can come and go at any time; you don’t need to be there for the whole two hours.
The topic is “The Ethics of Economics”.
Does economics have an underlying ethical nature or should it be detached from ethical considerations altogether?
Ethics is the study of essentially what is right and wrong in respect to our character and actions. ‘Ethics’ is taken from the Greek word ethos which means the “tone of the community or its habits and customs”. Economics is the study of the management of concerns and resources of a community and the theory of the production and distribution of wealth. The original translation of ‘economics’ referred to managing one’s house.
Adam Smith, a Scottish moral philosopher and political economist, wrote one of the most influential pieces for market based economics. In ‘The Wealth of Nations’ (1776), he held that the ‘invisible hand’ of the market, along with free trade in a laissez-faire system, was the most desired method of organising and structuring an economy and is still taught in economics. However, Smith included certain moral restraints within this piece which have largely been forgotten today.
Economics has also taken some of its most important theoretical material from Utilitarianism, created by Jeremy Bentham and John Stuart Mill, which is the idea that the moral value of an action is determined solely by its contribution to the overall utility in maximizing happiness or pleasure of the greatest number. There is clearly a link between the two disciplines both in their origins and in their intended purposes. But in today’s consumerist society is this link still visible or has the increasing desire for economics to be seen as a scientific subject created a gap that is now too wide to recover from and is there a need for ethical considerations in the area or economics or should we leave the market alone?
See you on Tuesday…..
Socratic Society 
As I grow older, the more uncomfortable I am with judgments that are “moral” & “ethical” because they assume a starting point of ascendancy that those with whom they engage must rise to meet them. I prefer a more situational & contextual analysis.
As an economist, I say the same thing. Economics may speak about a mathematical optimum — such as maximization of utility & revenues & the minimization of costs & wastage — given assumptions. Others take the path of arriving at “satisficing” solutions wherein stakeholders interests are not satisfied optimally but adequately meeting their needs. More to my liking is the positive-sum thinking of John Nash’s game theory: seek a solution where everyone gains.
In studying law & economics, I believe that the crucial issue (applicable to trial courts & economic markets) is on information asymmetry — where information essential to the pursuit of one’s interests & defence of rights are purposely withheld to the willful advantage of one & detriment of another’s ignorance & naivete. In such case, I’m more comfortable with governance principles.
What do you mean by a ‘situational and contextual analysis’ contrasted with ethical judgements?
What are ‘governance principles’?
Ethics is about right and wrong, and economics does talk about improving things in some way – in particular communal wealth in physical items, through production, distribution and exchange.
The idea of the “invisible hand” is that by seeking your own best interests, you also benefit others. Yes, Smith did talk about this happening in the context of moral codes. So, we see that by pursing your own self interest in a moderating context, you do good for others too.
However, ethics involves the explicit notion that you think about how your actions affect others, rather than “relying” on the fact that your selfish motives will naturally benefit others. So, I do see some overlap.
However, economics is mostly about physical goods, and when not that, things that can be traded in an economy. This is an important part of our lives, and it is worth examining. However, our lives are about more than this, and we do need to look at other elements too.
I’ve given a talk an alternative economic theories. It does touch on some ethical issues – if you’re interested, it’s at :
http://www.archive.org/details/AlternativeEconomicTheories
… continuing ….
Joffre, its great to see someone trying to be concise when so many people mouth off without thinking about what they say. But you need to think about that trade off more carefully – it is possible to be too concise, so concise that you’re not terribly clear.
In any case I see ethics as understanding how your actions impact on others. It does not matter whether those others are less significant than you are – ethics is about _everyone_ else.
“Waste” is a bad thing – but a “waste” of the human spirit is a bad thing too.
Your analysis seems to focus on assymetries – information and power. But, a truly ethical approach tries to devalue your own greater power, so you treat others as equals regardless.
Certainly, power assymetries left to themselves, together with people making self-interested deals without reflection as to the ethical consequences – well, that will result in unequal deals. But it is a consequence of _both_ the unequal situation and the fact that the person with more power is not willing to incorporate the fact they have more power into their ethical analysis.
Some economic perspectives would say that people left to themselves, making deals in their own best interests regardless of assymetries, will result in the best outcome. But that’s a way of thinking which is built into that perspective, not a proper engagement with the situation.
BTW, one economic perspective, captured in “Freakononomics” sees everything as a function of “incentives” – with one incentive being “the moral incentive”. This is an interesting perspective, and a useful tool as far as it goes, but it does lose the detail that an ethical analysis gives you.
Sorry for being so highfalluting but I was hoping that the post was a prelude to the discussion later in the week, which John so graciously attended & aoparently still didn’t understand me. However, I shall be patient & understanding as well.
Situational & contextual analysis … we have to analyze the situation & context … like in Levitt’s “Freakonomics” that appears to justify the legalization of abortion in order to strategically reduce crime rates based on corss country experience & empirical data. I would not want to go into judging Levitt’s morality or lack thereof of, according to some because it would be missing the point of economics, which is to arrive at the optimal solution for all stakeholders.
Legalizing abortion is among the most convenient policy solutions. However, it does ignore the aspects that leads to crime that low-income families are prone to. These families are the groups who are apt to take the abortion of the unplanned, unwanted foetus; so to have less crime, let’s have less of them.
Economics is in the service of people & to say that to have less people is the solution is inconsistent with the principle for which economics stands. Note that I’m not saying Levitt is an immoral economist, he just has to take a step further to address the systems that breeds crime & give people more choices.
This is where good governance comes in. This site is a good reference, http://www.ausaid.gov.au/publications/pdf/good_governance.pdf. However, to keep it short, it’s owning up to one’s informed decisions in a manner that is fair, transparent & makes decisionmakers accountable to the stakeholders of that decision. I know good governance is hard but it is essential in a democracy, which wasn’t designed to make life easy but to help people become more vigilant of their rights.
Brynsimon, because you weren’t present & John probably forgot to mention the consensus we arrived at with Andy, let me share. The ethos in economics is summed in this analogy of the elephant, the blind men & the golden rule. The elephant is the market/economic situation, the blind men are the different economists holding various parts of the elephant & the golden rule is speaking out & listening to the description of the part that each blind man holds so that together they can construct the total picture.
Problem is some people insist that their part is the only right one, that the others are idiots & must be shut up. Others will keep quiet & use their part for their selfish gains. This analogy simplifies the highfalluting term of information asymmetry that John so eloquently spoke of & whom I help in making the concept clear.
There is in the pross of development a new emerging paradigm. It is called TRANSFINANCIAL ECONOMICS