You could say that this is simply another case of satisfaction of individual preferences — but you could also describe this as people in business adjusting their behaviour so as not to violate moral norms which are held by others in their society, which is basically the social contract theory of ethics laid out by Thomas Hobbes. In this way, economics does hew to an ethical framework, even if that framework is understood primarily in terms of preference satisfaction. Within economics, approaches to the subject can be divided into two fields: positive economics and normative economics.
Positive economics seeks to examine the economy in a given country, area, or international region, and to see that economy as it is. The aim is to collect data and form an accurate picture of the world. Eventually, with enough data, economists can make predictions about what effects an action such as raising interest rates could have on an economy. Positive economics seeks to understand the economy as it exists and to accurately predict what outcomes will arise from various forms of intervention.
Hence it describes how the economy is, with no stance taken on how the economy should be. Normative economics, by contrast, looks at how the economy should be and what actions should be taken. This is where values come into play: should the economy be manipulated in such a way as to promote fairness, growth, equality, standard of living, life expectancy, or something else?
A positive theory of economics can tell you how to achieve these aims, but in order to decide what aims to pursue, you need normative economics. Many economists consider themselves data collectors and analysts rather than politicians or philosophers, so they would identify more with the framework of descriptive positive economics than that of prescriptive normative economics. However, this emphasis on data and objectivity has a tendency to lead people to believe that they are being objective when in fact their values are coming in to play.
As any scientist or journalist can tell you, what questions you ask when searching for facts has as much bearing on the conclusion you eventually reach as the facts themselves. In studying positive economics, economists necessarily make judgements about what topics to examine, which forms a kind of normative approach about which issues are most important. In this way, the distinction between positive and normative economics is not as clear as you might think, and plenty of economists are working with prescriptive and therefore moral values even if they are not aware of it.
And when values come into play, then ethics must necessarily follow. Finally, it is important to consider the role of psychology in both economics and ethics. With economic theories based primarily on the assumption of individual rationality, assuming that people will make the choices which will maximise their utility.
However, evidence from psychology makes it abundantly clear that this assumption does not hold — from the innocent person who confesses to a crime under intense questioning, to the person who develops a destructive gambling habit, to the person who goes along with a social group even if they disagree as most of us do from time to time , there are no shortage of examples of human behaviour where people do not act rationally and maximize their utility.
So the assumption of rationality on behalf of economic subjects can in fact be seen as prescriptive. An economist does not, in fact, describe the world as it is, because they assume that individuals are making rational economic decisions, which is not always true. This provides another arena for discussing the role of ethics in economics: examining the choices that people ought to make based on their situation, finances, and psychological state as well as their individual preferences.
Although at first blush, then, it may appear that ethics has little to do with economics, once you dig down into the details of the practice of economics it becomes clear that ethical concerns impact the subject in a number of ways. Even when economists are unaware of the fact, they are already operating within an ethical framework. The holidays are coming up soon, with Christmas just around the corner.
If you want to avoid last-minute panicked present-buying, you had better get to planning the gifts you'll be giving. And what if you have an economist in your life?
What would be the perfect gift for them? We're here to help your Christmas gift woes with some fun suggestions for the 10 best gift ideas for an economist. Happy holidays! Jobs Professor. PhD Candidate. Mid-Level Industry Position. Recycling can increase the available stock of aluminum and save space in landfills, but it also has costs: the costs of making and installing recycling bins for empty cans, the monetary and pollution costs of having recycling trucks travel through neighborhoods and businesses to collect the recyclables, the time cost of putting the cans in the right bins, the cost of reprocessing the cans to extract the raw aluminum, and so on.
Whether the benefits of recycling outweigh the costs depends on the results of number crunching by economists. Another part of the recycling issue turns on general political commitments. Given that using resources well and putting trash in its place are valuable, what social institutions should we rely on to achieve those values? Should recycling be voluntary and a matter of market incentives?
Governing how we approach the above scientific, economic, and political issues is a set of presuppositions of ethical values. Those who think egoistically see the environment as a set of resources for humans to use for their benefit. Humans use the environment for a variety of economic and aesthetic purposes, and it is important to human health that certain standards of cleanliness are maintained.
On that assumption, it makes sense to ask scientists to investigate the stock of resources and to develop techniques for extracting them. It also makes sense to ask economists to do cost-benefit analyses comparing mining and recycling to determine the most cost-effective methods of producing aluminum.
The egoistic goal is to preserve, change, or use the environment in ways that increase human wealth, health, and experiences of beauty. By contrast, strong forms of altruism when applied to environmental issues dictate different scientific and economic priorities.
Altruism with respect to the environment requires that humans subordinate or sacrifice their interests to the needs of other species or to the environment as a whole. Given this perspective, the environment is something to be preserved rather than used by humans. Human self-interested values are a lower priority than the well-being of other species or the environment as a whole.
Scientifically, asking researchers to find out how much aluminum is available for our use then becomes a morally suspect activity. And economically, recycling then becomes not a matter of a practice worth doing if the cost-benefit numbers work out for us but rather a duty that humans should accept no matter what the economic consequences to themselves.
In — he was a visiting professor of business ethics at Georgetown University in Washington, D. Ethics and Economics By Stephen R.
By Stephen R. Further Reading Hume, David. A Treatise of Human Nature. Oxford: Oxford University Press, Mill, John Stuart. On Liberty. Rand, Ayn. Capitalism: The Unknown Ideal. New York: Signet, A defense of capitalism on egoist grounds. Rand argues that what justifies capitalism morally is that it provides individuals with the liberty and property rights they need to survive and flourish self-responsibly.
Sen, Amartya. On Ethics and Economics. London: Blackwell, Sen criticizes standard utilitarian defenses of free markets and discusses generally the kind of theoretical ethics needed to provide a basis for welfare economics.
An economic system that rewards amoral self-interest creates economic instability, fractures economic insecurity, fosters concentrations of economic power, exacerbates economic inequality and violates ecological sustainability. So much for the self-regulating market economy! In my opinion, this is doubtful, notwithstanding the worthy intent. Already some businesses practice a degree of philanthropy. However, this often seems to be part of a process of corporate image management.
In aggregate, its effects are minor, especially in Australia, which lacks the stronger philanthropic tradition of the USA. This is welcome. Indeed, businesses developing reputations for responsible behaviours may reap benefits in the form of worker and customer loyalty.
The necessary changes must ultimately be structural, such that it ceases to be profitable to act in ways that cause the anti-social and anti-ecological fallout described in this article. The standard economics curriculum is currently dominated by neoclassical theories that purport to show how self-interested behaviours produce economically optimal outcomes market equilibrium; efficient resource allocation; sustained growth.
Instead, students could more usefully study the competing currents of heterodox political economic thought, which more explicitly consider the tensions and contradictions in the capitalist economic system.
It could also help to show this systemic character of the behaviours exhibited by financial institutions such as Goldman Sachs. Economists might then stop being apologists for the current economic arrangements and become explicitly concerned with how ethical issues necessarily intervene between economic means and social ends.
Festival of Social Science — Aberdeen, Aberdeenshire. Edition: Available editions United Kingdom. Become an author Sign up as a reader Sign in.
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