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Contents
Mark D. White
The Oxford Handbook of Ethics and Economics
Edited by Mark D. White
Print Publication Date: Jun 2019 Subject: Economics and Finance
Online Publication Date: Jun 2019
Contents
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Acknowledgments
Mark D. White
The Oxford Handbook of Ethics and Economics
Edited by Mark D. White
Print Publication Date: Jun 2019 Subject: Economics and Finance
Online Publication Date: Jun 2019
(p. v)
Acknowledgments
I would like to thank Adam Swallow at Oxford University Press for his indefatigable support and help with getting this project off the ground and completed; his associate Katie “Hawkeye” Bishop for her invaluable editorial assistance; and all of the contributors to this volume for their fantastic chapters and cooperation throughout the process.
For their unending inspiration, I extend special gratitude to Amartya Sen, Amitai Etzioni, and Deirdre McCloskey.
List of Figures
Mark D. White
The Oxford Handbook of Ethics and Economics
Edited by Mark D. White
Print Publication Date: Jun 2019 Subject: Economics and Finance
Online Publication Date: Jun 2019
(p. x) (p. xi)
List of Figures
4.1 Multiple approaches to understanding right from wrong79
9.1 Results of the baseline treatment in the die-cup experiment185
12.1 Shifting processes of work in the four sector-model261
13.1 The model of five spheres272
16.1 Supply and demand344
16.2 Exercising market power345
16.3 Competition among suppliers347
16.4 Direct normative prescription vs. adversarialism353
27.1 Contours of equal goodness601
List of Tables
Mark D. White
The Oxford Handbook of Ethics and Economics
Edited by Mark D. White
Print Publication Date: Jun 2019 Subject: Economics and Finance
Online Publication Date: Jun 2019
(p. xii) (p. xiii)
List of Tables
9.1 Payoffs of the players in each treatment in Gneezy (2005) 184
10.1 The mainstream and social economic visions of ethics and economics213
10.2 The mainstream economic vision: Society embedded in the economy218
10.3 Four different types of individual advantage and associated moral values222
10.4 Positions regarding the pervasiveness of moral values in economic life224
19.1 Types of well-being comparisons406
19.2 Invariance to rescalings of the well-being measure408
20.1 Utilitarianism vs. fairness424
20.2 Do ex post inequalities matter?424
20.3 Enriched description of consequences428
20.4 Pareto vs. inequality aversion429
20.5 Ex post egalitarianism vs. separability434
20.6 Implications of separability435
20.7 Pareto for equal risk, separability and statewise dominance vs. inequality aversion435
20.8 Prevention vs. vaccination436
21.1 Risky451
21.2 Certain451
21.3 Distributional Sensitivities, Prospect Values, and Parameters454
21.4 Restrictive Intervention and Intervention for All 455
21.5 Single-Cause and Multiple-Cause 456
21.6 No Screening and Screening 457
21.7 Vaginal Birth and C-section 458
21.8 Overview460
21.9 Prevention and Treatment 461
21.10 Protecting 99 Sheep and Saving One Sheep 462
21.11 Safe Detonation and Lethal Bomb 463
(p. xiv) 21.12 One Lives One Dies and Coin Flip 465
21.13 Adler’s Objection466
21.14 Utilities in Otsuka and Voorhoeve’s Example467
21.15 Otsuka and Voorhoeve’s Objection to Prioritarianism468
21.16 Sen’s Libertarian Paradox469
21.17 Gibbard’s version of the Libertarian Paradox469
22.1 Compensable vs. noncompensable harm482
22.2 A taxonomy of harmed or harmful conditions484
26.1 Results of an employment audit570
Notes on Contributors
Mark D. White
The Oxford Handbook of Ethics and Economics
Edited by Mark D. White
Print Publication Date: Jun 2019 Subject: Economics and Finance
Online Publication Date: Jun 2019
(p. xv)
Notes on Contributors
Matthew D. Adler
is the Richard A. Horvitz Professor of Law and Professor of Economics, Philosophy and Public Policy at Duke University. He was previously the Leon Meltzer Professor of Law at the University of Pennsylvania School of Law. His scholarship is interdisciplinary, drawing from both welfare economics and normative ethics. Adler’s current research focuses on the theoretical foundations and practical implementation of prioritarianism. With Ole Norheim, he is the founder of the “Prioritarianism in Practice” research network. Adler is the author of New Foundations of Cost-Benefit Analysis (Harvard, 2006, with Eric Posner); Well-Being and Fair Distribution: Beyond Cost-Benefit Analysis (Oxford, 2012), and Measuring Social Welfare (Oxford, 2019), and is the editor (with Marc Fleurbaey) of the Oxford Handbook of Well-Being and Public Policy (2016). Adler was until 2017 an editor of the journal Legal Theory, and is currently an editor of Economics and Philosophy.
Ali al-Nowaihi
is Emeritus Professor of Economics in the School of Business at Leicester University. Since 2000, his main area of research has been in behavioral economics. His main coauthor in this enterprise has been Sanjit Dhami; he has also published with Livio Stracca, Andrew Colman, Briony Pulford, David Omtzigt, Maxine Wei, and Cass Sunstein. Other areas he has published in include algebra, oligopoly theory (with Paul Levine), monetary policy (with Paul Levine and with Sanjit Dhami), and public economics (with Clive Fraser and with Sanjit Dhami). Ali graduated in mathematics from Cairo University in 1971, obtained his MSc also in mathematics from London University in 1973, and obtained his PhD in oligopoly theory in 1976 from the South Bank Polytechnic (now University). Ali has taught in two secondary schools, the South Bank Polytechnic (now University), Thames Polytechnic (now Greenwich University), and at Leicester University. He has also supervised six successful PhD students.
Jennifer A. Baker
is Professor of Philosophy at the College of Charleston. Her focus is on updating ancient virtue ethics for use today. Her published articles include “Who is Afraid of a Final End? The Omission of Traditional Practical Rationality from Contemporary Virtue Ethics,” “Virtue Ethics and Practical Guidance,” and “Virtue and Behavior.” Her co-edited collection of work on virtue and economics (with Mark D. White) was published by Oxford University Press in 2016. She is at work applying Stoic virtue ethics to business ethics as well as current-day policing.
Constanze Binder
is Assistant Professor in Philosophy at the Faculty of Philosophy, Co-Director of the Erasmus Institute for Philosophy and Economics, and Programme Director of the Research Master programme in Philosophy and Economics at Erasmus (p. xvi) University Rotterdam. Constanze studied economics and environmental system science at Graz University and obtained a PhD in philosophy at the University of Groningen. She previously taught in the Philosophy Departments of Groningen and Leiden University, worked at the Economics Department of the University of Osnabrück, and contributed to projects for the Austrian Federal Ministry of the Environment and the Austrian Human Dimensions Program. Constanze’s research is on the interface of philosophy and economics, with a particular focus on the analysis of freedom, responsibility, and distributive justice in political philosophy and welfare economics, as well as on the ethics of individual and collective decisionmaking in politics and economics.
Peter J. Boettke
is University Professor of Economics and Philosophy at George Mason University and Director of the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center. He received his PhD in economics from George Mason University in 1989. Before joining the faculty at George Mason University in 1998, Boettke taught at New York University. He currently serves as the President of the Mont Pelerin Society and was the President of the Southern Economics Association from 2015–17. His publications include Why Perestroika Failed: The Politics and Economics of Socialist Transformation, Calculation and Coordination: Essays on Socialism and Transitional Political Economy, Challenging Institutional Analysis and Development: The Bloomington School, Robust Political Economy for the 21st Century, and Living Economics: Yesterday, Today and Tomorrow.
Luc Bovens
(PhD University of Minnesota) is a Professor of Philosophy at the University of North Carolina at Chapel Hill and is core faculty in its PPE program. He was a Professor of Philosophy in the University of Colorado at Boulder (1990–2003) and in the London School of Economics and Political Science (2004–2017). He is joint author of Bayesian Epistemology
(Oxford, 2003). His areas of research are philosophy of economics, philosophy and public policy, formal epistemology, rationality, and moral psychology.
John Broome
is Emeritus White’s Professor of Moral Philosophy at the University of Oxford, and a fellow of Corpus Christi College, Oxford. He is also an Honorary Professor at the Australian National University. Before moving to Oxford, he was Professor of Philosophy at the University of St Andrews, and before that Professor of Economics at the University of Bristol. He works on rationality and normativity, and also on value theory. As an application of his work on value theory, he is involved in the philosophy of climate change. He was a Lead Author of the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. His books include, on value theory, Weighing Goods, Weighing Lives, and Ethics Out of Economics; on climate change, Climate Matters; and on rationality and normativity, Rationality Through Reasoning.
John B. Davis
is Professor Emeritus of Economics, Marquette University, USA, and Professor Emeritus of Economics, University of Amsterdam, Netherlands. He is the author of Keynes’s Philosophical Development (Cambridge, 1994), The Theory of the Individual in Economics (Routledge, 2003), Individuals and Identity in Economics (Cambridge, 2011), co-author with Marcel Boumans of Economic Methodology: Understanding Economics (p. xvii) as a Science (Palgrave Macmillan, 2010), and co-author with Robert McMaster of Health Care Economics (Routledge, 2017). He is a former editor of the Review of Social Economy, is co-editor with Wade Hands of the Journal of Economic Methodology, and is the editor of the Routledge Advances in Social Economics book series.
George F. DeMartino
is Professor of Economics in the Josef Korbel School of International Studies, University of Denver, where he co-directs the MA in Global Finance, Trade and Economic Integration. He has published Global Economy, Global Justice: Theoretical Objections and Policy Alternatives to Neoliberalism (Routledge) and The Economist’s Oath: On the Need for and Content of Professional Economic Ethics (Oxford University Press). He is co-editor with Deirdre N. McCloskey of The Oxford Handbook of Professional Economic Ethics. He is now working on The Tragedy of Economics: Harm, Economic Harm, and the Harm Economists Do as They Try to Do Good.
Sanjit Dhami
is Professor of Economics at the University of Leicester. He studied at the Delhi School of Economics for his MPhil and the University of Toronto for his Masters and PhD degrees in economics. He has previously taught at the Universities of Toronto, Essex, and Newcastle. His research has mainly focused on behavioral economic theory and its applications. He is the author of Foundations of Behavioral Economic Analysis published by Oxford University Press in 2016, possibly the most comprehensive graduate treatment of the sub
ject. His research spans several areas in behavioral economics, which include but are not restricted to behavioral decision theory, other-regarding preferences, time preferences, behavioral game theory, and judgment heuristics.
Marc Fleurbaey
is an economist, a professor in the Woodrow Wilson School and Center for Human Values at Princeton University, and a member of the Collège d’Etudes Mondiales (Paris FMSH). He is the co-author of Beyond GDP (with Didier Blanchet, Cambridge, 2013), A Theory of Fairness and Social Welfare (with François Maniquet, Cambridge, 2011), and the author of Fairness, Responsibility and Welfare (Oxford, 2008). He was a coordinating lead author for the IPCC 5th Report, and one of the initiators of the International Panel on Social Progress.
Gerald Gaus
is the James E. Rogers Professor of Philosophy at the University of Arizona, where he directs the program in Philosophy, Politics, Economics, and Law. His books include Value and Justification (Cambridge, 1990), Justificatory Liberalism (Oxford, 1996), and The Order of Public Reason (Cambridge, 2011). His most recent book is The Tyranny of the Ideal: Justice in a Diverse Society (Princeton University Press, 2016). He is currently writing a book on morality, complexity, and evolution to be published by Oxford University Press. His papers can be found atwww.gaus.biz.
Stefanie Haeffele
is a Senior Research Fellow, the Deputy Director of Academic and Student Programs, and a Senior Fellow with the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center at George Mason University. She is the co-author of Community Revival in the Wake of Disaster: Lessons in Local Entrepreneurship (Palgrave), and the editor of Knowledge and Incentives in (p. xviii) Policy: Using Public Choice and Market Process Theory to Analyze Public Policy Issues (Rowman and Littlefield International).
Daniel M. Hausman
earned his philosophy PhD in 1978 at Columbia University, and has taught at the University of Maryland at College Park, Carnegie Mellon University, and since 1988 at the University of Wisconsin-Madison; he has visited at the Institute for Advanced Studies, the London School of Economics, and the Université de Cergy-Pontoise. His research focuses on issues at the boundaries between economics and philosophy. With Michael McPherson, he founded the journal Economics and Philosophy. He is the editor of The Philosophy of Economics: An Anthology (3rd edn, 2007). His books include Capital, Profits, and Prices, The Inexact and Separate Science of Economics, Causal Asymmetries, Preference, Value, Choice and Welfare, Valuing Health: Well-being, Freedom, and Suffering, and Economic Analysis, Moral Philosophy, and Public Policy (3rd edn, 2017, co-authored with Michael
McPherson and Debra Satz). In 2009, Daniel Hausman was elected to the American Academy of Arts and Sciences.
Joseph Heath
is Professor in the Department of Philosophy and the School of Public Policy and Governance at the University of Toronto. A fellow of the Royal Society of Canada and the Trudeau Foundation, Heath is the author of several books, both popular and academic. His most recent, Morality, Competition and the Firm (Oxford, 2014), is a collection of papers on business ethics and the normative foundations of market economies. He is also the author of Enlightenment 2.0, which won the Shaughnessy Cohen Prize for Political Writing in 2015.
Geoffrey M. Hodgson
is Professor in Management at Loughborough University London. He is the author of several books, including Conceptualizing Capitalism (2015, winner of the Schumpeter Prize), From Pleasure Machines to Moral Communities (2013), Darwin’s Conjecture (with Thorbjørn Knudsen, 2010), and How Economics Forgot History (2001). He is the author of 150 articles in academic journals, Editor-in-Chief of the Journal of Institutional Economics, and Secretary of the World Interdisciplinary Network for Institutional Research.
Arjo Klamer
is a professor of cultural economics at Erasmus University in the Netherlands. He is the past president of the Association of Cultural Economists. He has developed a value-based approach and introduced the notion of shared goods. Among his publications are Doing the Right Thing: A Value Based Economy (2017) and Speaking of Economics: How to Be in the Conversation (2007).
Ulrike Knobloch
is Assistant Professor of Economics and Gender at the University of Vechta, Germany, and lecturer at the University of Fribourg, Switzerland, and the University of Gießen, Germany. She holds a PhD in economics from the University of St. Gallen, Switzerland, as well as a diploma in economics and an intermediate diploma in philosophy from the University of Freiburg, Germany. She is a long-time active member of the following networks: efas – economics, feminism and science; European Platform of Women Scientists (EPWS); International Association for Feminist Economics (p. xix) (IAFFE); and Network Caring Economy (which she co-founded in 1992). Her academic research focuses on the normative foundations of pluralist feminist economics, feminist economic ethics, regulatory ethics from a gender perspective, economics of provisioning and systems of provisioning in comparison, feminist critical thinking in social economy, and household economics. Her most recent publications include the edited volume Economics of Provisioning: Contributions to the Plurality of Feminist Economic Theory (2019 in German; English translation planned).
Michael S. McPherson
served as President of the Spencer Foundation for fourteen years before retiring in 2017. Earlier he was President of Macalester College in St. Paul, Minnesota, for seven years. He is a nationally known economist whose expertise focuses on the interplay between education and economics. McPherson is co-author or editor of several books, including Lesson Plan: An Agenda for Change in American Higher Education, Crossing the Finish Line: Completing College at America’s Public Universities, The Student Aid Game, and Economic Analysis, Moral Philosophy, and Public Policy (with Daniel Hausman and Debra Satz). McPherson was founding co-editor of the journal Economics and Philosophy (with Hausman). He is currently a Senior Research Fellow at the Mellon Foundation and a non-resident Fellow at the Urban Institute.
Barak Medina
is the Justice Haim H. Cohn Professor of Human Rights at the Faculty of Law, The Hebrew University of Jerusalem. He currently serves as Rector of the Hebrew University, after serving as Dean of the Faculty of Law from 2009 to 2012. His scholarly work focuses on human rights law and economic analysis of law. He has served as a visiting professor at the law schools of Columbia University and University of California, Berkeley.
Brendan O’Flaherty
is Professor of Economics at Columbia University. Most of his work is about homelessness, crime, race, and Newark, New Jersey. His books include Shadows of Doubt: Stereotypes, Crime, and the Pursuit of Justice (with Rajiv Sethi), The Economics of Race in the United States, How to House the Homeless (with Ingrid Gould Ellen), City Economics, and Making Room: The Economics of Homelessness.
James R. Otteson
is Thomas W. Smith Presidential Chair in Business Ethics and Professor of Economics at Wake Forest University. He received his BA from the University of Notre Dame and his PhD from the University of Chicago. He specializes in political economy, moral philosophy, and the history of economic thought, and his publications include Adam Smith’s Marketplace of Life (2002), Actual Ethics (2006), Adam Smith (2013), and The End of Socialism (2014). His most recent book, Honorable Business: A New Framework for Business in a Just and Humane Society, was published by Oxford University Press in 2019.
Julian Reiss
is Professor of Philosophy at Durham University and co-director of the Centre for Humanities Engaging Science and Society (CHESS). He has a degree in economics and finance from the University of St. Gallen and a PhD in philosophy from the London School of Economics. His main research interests are methodologies of the (p. xx) sciences (especially causality and causal inference, models, simulations and thought experiments, and counterfactuals), philosophy of economics, and science and values. He is the author of Error in
Economics: Towards a More Evidence-Based Methodology (2008), Philosophy of Economics: A Contemporary Introduction (2013), Causation, Evidence, and Inference (2015), and over fifty papers in leading philosophy and social science journals and edited collections.
Ingrid Robeyns
is an economist and philosopher and holds the Chair in Ethics of Institutions at the Ethics Institute at Utrecht University. She currently also serves as the president of the Human Development and Capability Association. She works primarily in normative political philosophy and applied ethics, in particular theories of justice, the evaluation of institutions, and the capability approach. In her recent book Well-Being, Freedom and Social Justice: The Capability Approach Re-examined (Open Book Publishers), she analyses how all the different strands in the capability approach relate to each other and can be thought to fit together under one generalized overarching structure. In applied ethics and applied philosophy, she has worked on questions of gender, parenthood, disability, basic income, welfare state arrangements, and ecological sustainability, among many more. More information and links to her publications can be found atwww.ingridrobeyns.info.
David C. Rose
is Professor of Economics at the University of Missouri-St. Louis. His research focuses on behavioral economics, political economy, the theory of the firm, and ethics. He has published scholarly articles on a wide range of topics. His book The Moral Foundation of Economic Behavior (Oxford, 2011) explored the role that moral beliefs play in the development and operation of free market societies. His more recent book Why Culture Matters Most (Oxford, 2019) explores how culture uniquely solves the most daunting obstacle to individual and collective human flourishing: individual rationality undermining the common good. His work has been supported by the Weldon Spring Foundation, the National Institute of Mental Health, the HFL Foundation, the Earhart Foundation, and the Templeton Foundation. He earned a bachelor’s degree in economics from Missouri State University and a PhD in economics from the University of Virginia.
Joakim Sandberg
is Director of the Financial Ethics Research Group at University of Gothenburg in Sweden. He is Professor of Economics and Finance from a Humanist Perspective at University of Groningen in the Netherlands, and Associate Professor of Practical Philosophy at University of Gothenburg. He is also affiliated with the Mistra Center for Sustainable Markets (Misum) at the Stockholm School of Economics. Joakim has a background in both economics (MBA in 2003) and philosophy (PhD in 2008). He was selected as Wallenberg Academy Fellow by the Royal Swedish Academy of Sciences in 2014.
Debra Satz
is the Vernon R. and Lysbeth Warren Anderson Dean of the School of Humanities and Sciences, the Marta Sutton Weeks Professor of Ethics in Society, and Professor of Philosophy and (by courtesy) Political Science at Stanford University. (p. xxi) Her publications in
clude Why Some Things Should Not be for Sale: The Moral Limits of Markets (2010) and Economic Analysis, Moral Philosophy and Public Policy (2017, with Michael McPherson and Daniel Hausman). She has coedited several books and is the author of numerous articles and the editor of the journal Philosophy and Public Affairs. She was elected a Fellow of the American Academy of Arts and Sciences in 2018.
David Schmidtz
is Kendrick Professor of Philosophy and Eller Chair of Service-Dominant Logic in the McGuire Center for Entrepreneurship at the University of Arizona. He is editor in chief of the journal Social Philosophy & Policy, author of Elements of Justice, and co-editor (with Dan Shahar) of Environmental Ethics: What Really Matters, What Really Works, published by Oxford University Press.
Virgil Henry Storr
is a Senior Research Fellow, Vice President of Academic and Student Programs, and the Don C. Lavoie Senior Fellow in the F.A. Hayek Program in Philosophy, Politics, and Economics at the Mercatus Center at George Mason University, and an Associate Professor of Economics in the Department of Economics at George Mason University. He is the author of Understanding the Culture of Markets (Routledge).
Mark D. White
is Professor and Chair of the Department of Philosophy at the College of Staten Island/ CUNY, and a member of the doctoral faculty in economics at the Graduate Center of CUNY. He is the author of seven books, including Kantian Ethics and Economics: Autonomy, Dignity, and Character; editor or co-editor of many volumes, including Economics and the Virtues: Building a New Moral Foundation (with Jennifer A. Baker); and author of over sixty journal articles and book chapters in economics, philosophy, and law. He is series editor of On Ethics and Economics (Rowman and Littlefield International) and Perspectives from Social Economics (Palgrave Macmillan), and a co-founder of the blog Economics and Ethics
Jonathan B. Wight
is Professor of Economics and International Studies in the Robins School of Business at the University of Richmond. He is past president of the Association for Social Economics and author of Ethics in Economics: An Introduction to Moral Frameworks and the academic novel Saving Adam Smith: A Tale of Wealth, Transformation, and Virtue. He is co-author of Teaching the Ethical Foundations and Economics, and co-founded and edits the blog Economics and Ethics
Kaitlyn Woltz
is a third year PhD student at George Mason University in the Economics department. She is a PhD fellow with the Mercatus Center and a Graduate Fellow with the F.A. Hayek
Program for Advanced Study in Philosophy, Politics, and Economics. Kaitlyn’s research interests are in the fields of Austrian economics, institutional analysis, and the political economy of criminal justice. Her current project looks at the role that prison periodicals played in prisons and the criminal justice system during the mid-twentieth century.
Eyal Zamir
is the Augusto Levi Professor of Commercial Law at the Faculty of Law, The Hebrew University of Jerusalem, where he served as Dean of the Faculty of Law from 2002 to 2005. His spheres of interest include economic and behavioral analyses of law, (p. xxii) law and normative ethics, and contract law and theory. He has been a visiting researcher or visiting professor at the law schools of Harvard, Yale, NYU, Georgetown, UCLA, and Zurich. Eyal has authored or edited sixteen books and published more than sixty articles and book chapters, including ones in Columbia Law Review, Journal of Legal Studies, University of Chicago Law Review, California Law Review, and Virginia Law Review.
Introduction
Mark D. White
The Oxford Handbook of Ethics and Economics
Edited by Mark D. White
Print Publication Date: Jun 2019
Online Publication Date: Jun 2019
Subject: Economics and Finance
THEbirth of modern economics is credited to a moral philosopher who wrote of both sympathy and self-interest, but nearly 250 years later the connection between ethics and economics has worn thin. In the last century especially, economics has adopted a scientific, positivistic, and empirical sheen, and its ethical foundations have been more difficult to discern, although they are still there. As long as it studies the choices, interactions, and welfare of human beings, economics cannot deny its roots in moral philosophy. At the most basic level, choice and well-being matter for a reason—and more to the point, human beings matter for a reason. Economists may take these things for granted when they go about their work, much as chemists take the existence of matter for granted. Unlike chemists, though, economists’ attitudes toward the persons they study help determine the methods, results, and interpretations of their research, as well as the recommendations they make to business and governments based on it.
This handbook, and the chapters that comprise it, do not attempt to restore ethics to economics, for it was never truly gone. When buyers and sellers meet in markets to trade money for good and services, they are seeking their own self-interest—but they are also often behaving honestly and honorably, although standard economic models make it difficult to explain why. Policies, regulations, and laws are typically designed to maximize aggregate welfare, and this is certainly an ethical goal—but not the only one, and economics needs to make room for other possibilities. The contributors to this volume highlight the ethical concepts inherent in economic analysis, extend the ethical foundations of economics into new areas of moral philosophy, and apply these techniques to a wide range of economic topics.
If “ethics and economics” or “economics and ethics” can be considered a field unto itself, it is a bifurcated one at best. The most visible part is methodological and critical, with economists, philosophers, and other scholars challenging mainstream economics for its narrow focus on the maximization of utility or welfare to the neglect of concepts such as virtue, rights, dignity, or justice. For example, Amartya Sen introduced the concept of commitment into economics to challenge the singular pursuit of preference-satisfaction (1977) and questioned the priority of values with respect to the Pareto criterion (1970). (p. 2) Amitai Etzioni (1987,1988) asked if simple preference-satisfaction was sufficient to explain altruistic behavior and introduced concepts inspired by Kantian ethics to give the
standard economic model more depth. Deirdre McCloskey emphasized the importance of virtue, not only in the history of economic thought (2008) but also the history of commerce and trade (2006, 2010, 2016). Given the critical stance of this kind of work, it is natural that heterodox economists have taken the lead in questioning the ethical presuppositions of mainstream economics, chief among them being social economists (Davis and Dolfsma2015), feminist economists (Ferber and Nelson2003), and Austrian economists (Boettke and Coyne2015). Many of the participants in this volume have made substantial contributions of their own in this area, and their chapters herein advance their integral work.
The other part of the field is not as revolutionary and has therefore been less recognized, but is no less valuable. It consists of the wealth of research into ethical behavior on the part of mainstream economists using more modest revisions or reinterpretations of economic theory. A prime example is the voluminous research, both theoretical and empirical, on the economics of altruism, in which economists study and explain the incidence of charitable behavior by either expanding models to include other-regarding preferences or utilities without violating any of the axioms of choice theory (Bergstrom1999; Fehr and Schmidt1999) or positing different types or sources of utility to motivate self-regarding and altruistic behavior, a modest modification to the standard model (Margolis1984; Etzioni1988). Copious experimental evidence confirms that people often do not behave as the simplistic models of self-interest predict (Fehr and Schmidt 2006), and behavioral economists, who recommend more significant changes to the constrained preference-satisfaction model (while leaving its core intact), also work to explain this behavior with more elaborate and psychologically realistic models of choice (Dhami2016: PartII). Evolutionary economists work to explain how the psychological foundations of economic behavior allowed early human beings to adapt to their environment, which reinforces the foundations of both mainstream and behavioral conceptions of choice (Bowles and Gintis 2011). Again, many of the chapters in this volume are written by pioneers in this area of economics and ethics, providing background, extensions, and applications of their seminal work.
These two parts of economics and ethics overlap, of course; commentary on technique need not be separate from application of it. Even the relatively mainstream work on altruism requires some changes to the standard economic model of choice, however modest. The more significant methodological critiques of economic technique and theory can— and should—be applied to topics of economic interest such as consumption and production theory and policymaking. Gary Becker (1976) famously expanded the domain of economics to topics previously thought to be sociological or legal—such as marriage, discrimination, and crime—but he did so strictly within the neoclassical framework, which neglects their inherent ethical dimensions. An expansion of the ethical foundation of economic theory is necessary to explain all the relevant facets of these phenomena and to predict behavior accurately. This goes for more “normal” economic activity as well, such as consumption and production, which have important (p. 3) ethical aspects that are taken for granted at best (and ignored at worst). Also, heterodox and political economists who urge more attention given to inequality and injustice are often reformers at heart—
like Jeremy Bentham, the implicit inspiration behind mainstream political economy—urging changes to economics to produce positive change in the real world.
Ethics is essential not only to economic theory, policy, and practice, but perhaps even more so to education. Very few economics students are exposed to ethics in any explicit manner, and the implicit ethical foundations of the economics they are taught are rarely brought into the light. Excellent resources exist, including books useful as texts for beginning students (Wight2015) and advanced ones (Hausman, McPherson, and Satz2016; Dutt and Wilber2010), as well as handbooks for practicing scholars (Peil and van Staveren2009, and the present volume), but the importance of ethics to economics must be recognized by the institutions responsible for education. To this end, movements on part of students and scholars, such as Rethinking Economics (Fischer et al.2017), are prompting reconsideration of economics education around the globe (particularly since the Great Recession), and ethics needs to part of this in order for economics to reach its full potential. (The ethical behavior of economists themselves has also attracted increased attention in recent years; see DeMartino2011and DeMartino and McCloskey 2016.)
Neglect of ethics means ruling out possible explanations of behavior, unexamined topics of study, and crucial perspectives on policy issues. Economics cannot claim to speak to all aspects of life while maintaining an insufficiently broad perspective that obscures important aspects of the world. It can be a worthy heuristic experiment to see how much an assumption can explain—and the mainstream paradigm certainly explains a lot—but when it is clear the assumption fails, there is no virtue in defending it as if it had intrinsic rather than instrumental value. The methods and approaches of economics are tools to explain and predict human behavior, design institutions, and recommend policy, and economists should be willing to modify, extend, or reject them when sufficient evidence indicates. For example, in recent years mainstream economists have increasingly acknowledged the innovations of behavioral economics, which are now being absorbed into the mainstream, leading some to proclaim that behavioral economics simply is economics. Let’s hope that sometime in the near future, we can say that ethics-and-economics simply is economics— which would certainly be a better economics, both practically and morally speaking.
Although the phrase “ethics and economics” would suggest a two-way exchange of ideas —which would be ideal—this has not been the pattern in the field, which, as described above, has dealt primarily with economists attempting to incorporate more elaborate conceptions of ethics into their work to better explain behavior or influence policy. For the most part, this handbook follows suit, with the chapters herein presenting various ways that ethics can contribute to economics. The volume is divided into two broad areas, foundations and applications, with a concluding chapter explaining what economics can contribute to ethics in turn, pointing the way to a true bilateral cooperation between the two fields in the future.
(p. 4) The first half of the book looks at foundational issues of ethics in economics. The first section surveys five significant ethical thinkers or schools of thought and explores
their actual or potential influence on economics. Appropriately, the first chapter, by Stefanie Haeffele and Virgil Henry Storr, deals with Adam Smith, the moral philosopher cited at the beginning of this introduction, explaining how he established a more complete social science that emphasized sociality and sympathy, especially in markets (which are looked at in more depth in the second part of the volume). The second chapter, by Jennifer A. Baker, explores the contributions that a rich conception of virtue, based on ancient philosophers such as Aristotle and the Stoics (as well as Smith), can make to economics, presented in the context of business ethics—and a notorious character from the work of Charles Dickens. In the third chapter, Mark D. White surveys his work integrating the deontological ethics of Immanuel Kant into economic theory and practice, and argues that economists need to acknowledge concepts such as principles, rights, and duties in order to capture the richness of human choice, as well as the true impact of utilitarian policy that wrongfully harms some for the benefit of others. In the fourth chapter, Jonathan B. Wight argues for a pluralist approach to ethics in economics, writing that no single school of ethics can capture every relevant moral aspect of economic phenomena. He recommends combining and balancing the perspectives of virtue, duty, and welfare, and responds to criticisms of a pluralistic approach to ethics in economics. In the final chapter of this section, Constanze Binder and Ingrid Robeyns present the capabilities approach of modern philosophers Amartya Sen and Martha Nussbaum in relation to economics. As Binder and Robeyns argue, the capabilities approach balances the two concerns of freedom and well-being in a way that makes it particularly useful for the evaluation of institutions and economic systems, but not without limits, which they are also careful to identify.
The second section of the foundations half of the book looks at the evolutionary roots of morality in the context of economic theory and thought. The first chapter, by Geoffrey M. Hodgson, addresses the issue of sympathy versus self-interest highlighted by Adam Smith and others, but in the context of the work of Charles Darwin, who emphasized the same themes in his work, and also explored how language and deliberation were essential to the development of morality. On this basis, Hodgson explains how moral sentiments important to economic behavior may have evolved, and questions whether the assumption of other-regarding preferences is sufficient for economic models to explain altruistic behavior. In the second chapter, Gerald Gaus presents the work of Friedrich von Hayek, who used the concept of spontaneous order to offer an explanation of the evolution of morality that aligns with current science while avoiding the utopianism of many current political philosophers. Gaus challenges, however, Hayek’s focus on group selection, arguing instead that a Smithean “invisible hand” can maintain social cooperation. In the final chapter of this section, David C. Rose surveys classical economic ideas about decision-making and introduces the visual metaphor of a bookshelf with books of different colors to represent choices of different degrees of social conformity. He then uses this to explain how the style of economic thinking that Deirdre McCloskey terms “Max-U” could have evolved in tandem with the development of the market economy.
(p. 5) The contributors to the third section of this half of the book explore various schools of thought within economics and how each incorporates ethics to better explain economic behavior. The first chapter, by Sanjit Dhami and Ali al-Nowaihi, surveys the work done by behavioral and experimental economists in studying ethical and unethical behavior— particularly lying—and argues that behavioral economics provides a more inclusive framework that results in more accurate and useful predictions of economic behavior, especially when ethical factors are present. The second chapter, by John B. Davis, examines the interrelationship between ethics and economics on a more methodological level, exploring the nature of the relationship between the disciplines using a complex systems approach. Davis argues that social economics, which assumes that market processes are embedded in social processes, offers a better context for dealing with ethics and economics than mainstream economics does. In the third chapter, Peter J. Boettke and Kaitlyn Woltz look at the connection between economics and ethics in the Austrian school of economics, with particular attention to the separation between ethical assumptions and economic analysis in the context of twentieth-century Austrian economists’ support of free markets and capitalism (which are addressed further in the second half of the book). In the next chapter, Ulrike Knobloch explores the ethics of feminist economics, or what she calls feminist economic ethics (which also takes queer and postcolonial ethics into account). In this framework, she critically examines various topics such as the androcentric point of view of economics, the ethics and economics of gender norms, and the nature of ethics, justice, and provisioning, all from the point of view of care. Finally, the chapter by Arlo Klamer introduces a value-based approach to economics based on cultural economics, using a novel five-spheres model of the economy to explore the many ways that culture is essential to economics and emphasize that sense-making is an integral aspect of the economic process.
The second half of the book focuses on applications of ethics to important topics within economics, whether from a mainstream or expanded perspective. The first section is devoted to the ethics of commerce and markets, a topic mentioned in several of the chapters in the first half of the book. In his opening chapter, James R. Otteson discusses the ethical approaches of contributors to classical political economy, especially David Hume and Adam Smith, as well as their critics, including Jean-Jacques Rousseau and Karl Marx. He describes how Hume and Smith saw markets as not only moral but truly humane, helping to ensure for a broad prosperity, give special assistance to the poor, and enhance sociality in general. Julian Reiss takes a similar approach in his chapter, looking at the relationship between capitalism and democracy through the work of Alexis de Tocqueville, Joseph Schumpeter, and Karl Polanyi, as well as Marx and Hayek. Reiss then extends their perspectives into the current literature, in the end questioning which type of capitalism that exists today, if any, can co-exist with democracy. In the third chapter, Joseph Heath focuses on profit, pointing out its counterintuitive role as the motivation for competition, which ideally drives profit to zero. Because morality is normally understood to make people more cooperative, Heath asks if profit can truly be moral if it encourages competition, even as a means to overall beneficial end. Next, Joakim Sandberg examines the ethics of money and finance, starting with their existence (p. 6) per se and
then questioning the ethics of financial practices, suggesting ways to make them more honest or fair. He also considers arguments that agents within financial systems have social responsibilities beyond their own self-interest, a common question in discussions of commerce in general. Finally, Michael S. McPherson and Debra Satz look at labor markets, perhaps the most human aspect of commerce if not always the most humane. Recognizing that markets for labor have unique properties that distinguish them from other markets for inputs or output, they survey a number of perennial issues, including unemployment, the minimum wage, and the organization of work in a just society, as well as ethical implications of the rise of the gig economy.
The second section of this half of the book deals with the difficult problem of policymaking in an ethical fashion, both within welfare economics itself—especially in the context of risk—as well as in conjunction with fairness and equality. In the first chapter, Matthew D. Adler provides a comprehensive review of cost-benefit analysis and social welfare functions, the two most widely used approaches to welfare economics and policymaking, and makes a case that the social welfare function approach is preferable in the context of a number of important ethical principles that complement basic welfarism (including prioritarianism, which gives additional weight to the well-being of the worse-off). Next, Marc Fleurbaey focuses on risk and uncertainty, and examines several ethical questions with making social decisions involving risk to various parties, such as whether social decisions should be more or less risk-averse than those individuals make for themselves; how policymakers should respond to large but unlikely catastrophes compared to smaller but more frequent harms; and how these questions relate to egalitarianism, both ex ante and ex post. The third chapter, by Luc Bovens, looks at similar ethical issues of risk using examples such as drug allocations, charitable giving, breast-cancer screening, and Caesarian sections. He explains how each example has its own unique characteristics that make a utilitarian approach unpalatable, and questions the sufficiency of formal modeling alone to solve these difficult issues. Finally, George F. DeMartino looks at what he calls econogenic harm, harm done by economists in the process of trying to do good, which arises because of the uneven impact of economic interventions (especially those justified by cost-benefit analysis) and the epistemic problems that plague much work in economics. Because econogenic harm is inevitable to some degree, DeMartino proposes an “economy harm profile analysis” to help economists analyze it, reduce it, and identify opportunities to rectify it when possible.
The final section of this half of the book looks at four major applied fields of economics with significant ethical aspects. In the first chapter, Daniel M. Hausman tackles the fraught issues of health care and health insurance, explaining the difficulty of designing health policy and law to deal with asymmetric information, adverse selection, and moral hazard. He then complements the typical economic concern of efficiency with the equally important values of compassion, choice, efficiency, fairness, and solidarity, arguing that, in the end, health care markets must be both economically sound and morally defensible. Next, Eyal Zamir and Barak Medina consider deontological morality within the context of the economic approach to law (or law and economics) as a way to counterbalance and improve upon the standard utilitarian approach to the discipline. (p. 7) Specifically, they
propose using threshold deontology, which limits the enforcement of deontological rules when their cost reaches a particularly high level, as a way to integrate rules and standards within a legal decision-making framework without abandoning concern with outcomes altogether. In the third chapter, David Schmditz investigates the concept of justice within discussions of ecology and the environment, arguing that an economic approach is integral to arriving at realistic solutions. After asking what it means for justice to be realistically ecological, he discusses the evolution of justice among early humans and how it makes compromise possible in a world of political conflict, especially with regard to environmental issues. In the last chapter of the section, Brendan O’Flaherty looks at the justification for civil rights in terms of both ethics and economics, explaining why they rightfully apply only to those subject to discrimination, and critically examines their effectiveness in light of their rationale, finishing with some suggestions for reform.
The volume concludes with a chapter by John Broome that turns the focus away from what ethics can contribute to economics, and points instead to lessons that economics can teach ethics, such as the right and (especially) wrong way to use the word “utility,” as well as the usefulness of mathematical methods, which he illustrates with an overview of the discussions of prioritarianism in both economics and philosophy (moral and political). More generally, Broome’s chapter suggests an avenue for the field of economics and ethics to be a truly interdisciplinary venture in which each part contributes to the other, possibly even leading to a new collaborative entity in which both ethics and economics work together toward their common goals of human prosperity and flourishing, however those might be defined or expressed.
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