Economics and Ethics

Two book reviews in economics and ethics from the Erasmus Journal for Philosophy and Economics

Mark D. White

Thanks to the indispensable Heterodox Economics Newsletter (latest issue here), here are two recent book reviews that may interest our readers, both from the latest issue of the Erasmus Journal for Philosophy and Economics (6/1, Spring 2013). [In the interest of full disclosure I must note that I blurbed the first book and the second was published in my "Perspectives in Social Economics" series from Palgrave Macmillan.]

Economics as Applied Ethics: Value Judgements in Welfare Economics, by Wilfred Beckerman (Palgrave Macmillan, 2011), was reviewed by our own Jonathan B. Wight, who finds it "a well-written textbook geared to advanced undergraduate or graduate students of economics, many of whom are largely and regrettably innocent of the ethical problems inherent in conventional economic analysis." After a detailed critical breakdown by chapter, Wight concludes that:

Overall, this book is highly recommended. It covers the selected topics with depth and sensitivity. The writing is generally excellent, but there are occasions of repetition and unevenness, as if the chapters were compiled separately and merged later. A student reader who is not already familiar with basic ethical theories could benefit from a primer in some places. For example, the book discusses Amartya Sen’s theory of commitment, however it does not dig very deeply to explain or defend that notion, whether from a deontological or virtue ethics approach.

The book devotes a lot of attention to questions of equality and justice, particularly on the work of economist philosophers such as John Broome, Partha Dasgupta, Ian Little, and Amartya Sen. This is
appropriate, interesting, and relevant. However, the book does not appear to address research in experimental economics, biology, and psychology that might be relevant to some of these questions, such as the work in neuroeconomics by Paul Zak, experimental work by Vernon Smith, or recent philosophical work on virtue ethics by Deirdre McCloskey. This is the normal limitation of any text that strives to be concise, yet students should understand there is much more to ethics and economics than can be conveyed in this book.

Approximating Prudence: Aristotelian Practical Wisdom and Economic Models of Choice, by Andrew Yuengert (Palgrave Macmillan, 2012), was reviewed by Ricardo F. Crespo. According to Crespo, 

Yuengert shows in this book that economic modeling undertakes only a partial analysis of economic action, because it ‘puts away’ interesting features of its subject that deserve to be taken into account. He proposes adopting the Aristotelian account of human action—more specifically, of practical wisdom—as the benchmark against which to consider economic modeling. He maintains that “economics can learn much about its limits from Aristotle, who describes aspects of choice behavior that cannot be precisely modeled” (p. 3). Thus, the aim of the book is to determine what aspects of human behavior cannot be captured by the economists’ models.

After a careful analysis of the book's structure and arguments, Crespo concludes that it

provides the useful service of identifying the characteristics of human action that economic models cannot take into account. It is useful because it explains the challenge to positive economists of trying to incorporate these characteristics into their approach, and because it highlights the features that economists must consider in their normative work. The contribution of the book lies in its originality. Economics books are not usually about what economics cannot do.

Both the author and the reviewer are Aristotelian economists, and readers benefit greatly from Crespo's detailed analysis of Yuengert's use of concepts such as eudaimonia  and contingency (the latter is comparison to Knightian uncertainty). (See Crespo's Academia.edu page for his own work on Aristotle and economics.)

Posing with Adam

Jonathan B. Wight

The bard of social economics, Adam Smith, poses with one of his admirers, Patricia Dan (University of Richmond, Class of 2016).

Thanks Patricia for this inspiration.

Why We Need Wilderness

Jonathan B. Wight

Wilderness surprises us, draws us out of conventional thinking.

Wilderness enchants us in ways we could not have anticipated.

Wilderness presents novelty on a scale unimaginable to the human brain.

Wilderness delights while generating positive environmental and social externalities.

St. Mary's Wilderness, Blue Ridge Parkway, Virginia.

Some Good News – Pt II: Health Care

Jonathan B. Wight

Another good news story came out this week, this one about health care.

Obamacare apparently creates incentives for treating the whole person, not just giving tests or scheduling visits.

Hospital emergency rooms typically cover a lot of uninsured people. They provide treatment, but do not provide care in the holistic sense. Emergency rooms deal with acute symptoms, but may not deal well with chronic problems.

St. Francis Family Medicine, a practice in Richmond, Virginia, was highlighted on NPR for providing an example of how money can be saved by providing the indigent with access to regular medical check-ups and care outside of the emergency room setting. Doctors and nurses develop relationships with patients, who are then more likely to adhere to the treatment regimen and come to regular follow-up visits. Regular access to treatment saves a lot of health care money and improves health indicators, compared to the present situation.

Back in the 1980s Jack Fiedler and I investigated health care data on several hundred thousand Medicaid patients. The data showed that providing patients with a minimal number of mental health visits more than paid for itself in terms of lowering overall medical costs. The reason is that mental health visits do two things: they are cheaper substitutes for regular medical visits (and people may suffer from physical problems that arise from psychological origins); and second, they complement regular medical care because psychological problems some have physical health origins (for example, a mastectomy creates anxiety and depression). It makes sense to treat the whole person. For details, see Fiedler and Wight, The Medical Offset Effect and Public Health Policy: Mental Health Industry in Transition (1989).

The bottom line: Getting every American access to health insurance could potentially save money and improve health indicators.

Some Good News – Pt 1: Prisons

Jonathan B. Wight

Too rarely do we read good-news stories. My next two posts seek to change that.

First up is a cover story by Jim Bacon in this week's Style Weekly about the impact of a prison ministry program that saved Virginia's government millions of dollars through lowered recidivism and violence in the justice system. Jim writes:

"Jails aren't what they were 30 or 40 years ago," [a drug rehabilitator] says. "They're not full of criminals. They're full of addicts who do criminal things. ..."

"The criminal justice system is focused on the war on drugs. The war on drugs is not the solution. When you treat addicts and alcoholics like they have a disease, you'll get a better outcome than if you treat them like a bad guy."

Kingdom Life Ministries has been addressing the human person: "I don't want to know how bad you are," [the organizing director] says to a rapt audience. "I want to know if you want to change."

Kingdom Life Ministries short-circuits [the change] process by helping inmates develop re-entry plans — preparing for the job search, getting a driver's license, finding a place to live and reconnecting with family members. The program also provides basic life skills, emphasizing anger management, communicating emotions and accepting the obligations of fatherhood. "Drugs and alcohol are only 10 percent of the problem," [the rehab director] says. "It's the anger and character flaws that lead to destructive behavior."

"What sets the ministry apart is its peer-based model…. Rather than relying upon credentialed substance-abuse professionals, few of whom have had any personal experience with, say, heroin or cocaine addiction, the program recruits former inmates who know firsthand the pain and temptation that substance abusers experience. When someone suffers withdrawal symptoms… they would rather talk to someone who has walked in their shoes."

Does it all get back to empathy? Certainly Adam Smith would agree with the idea that one's peers with good stories are better teachers of ethics than philosophers with abstract theories. In any event, this approach has lowered recidivism, saving the state many millions. One small program does not make a dent in the war on drugs. But experiments like this may hold a clue to solutions that work.

Tyrone Fleming, currently a resident at the Kingdom Life Ministries transition house, spends a quiet moment prior to Sunday's service.

St. John Fisher College - Video

Jonathan B. Wight

St. John Fisher College in Rochester, NY has an interesting group of faculty who are tackling Adam Smith and the Enlightenment from three separate but coordinate course angles:

• Economics (Clair Smith)
• Business ethics (Linda MacCammon), and
• Political philosophy (Tim Madigan).

SJFC students read excerpts from The Theory of Moral Sentiments and other Enlightenment works and write assignments and hear lectures with students from the other classes. It's a great way to engage students in interdisciplinary learning, and specifically to integrate ethics and economics.

I recently visited SJFC and had a 30-minute interview with Linda MacCammon about Adam Smith's lessons for modern students.

Video link: http://www.livestream.com/cardinaltv/video?clipId=flv_cf0c6c52-a4d4-46a3-8efd-be57b920dc41&utm_source=lslibrary&utm_medium=ui-thumb

The Boston Saga and Islam

Jonathan B. Wight

I wish I could publish the whole thing, but don't want to get into copyright issues. So here's a short excerpt from Qasim Rashid's Huffington post on the Boston episode:

It took 9,000 officers, five days, and roughly $1 billion in lost revenue for Boston, but suspect one is dead and suspect two is in custody.

So let me start with the standard roll call: As an American Muslim, I condemn all violence in the name of religion. Terrorism has no religion and Islam is no exception. If the Tsarnaev brothers are guilty of the Boston bombings, then I hope they are brought to justice.

Is that condemnation clear enough? Because I'm pretty sure a whole lot of people instead read blah blah blah blah blah….

…Keep reading the post here.

Qasim's point is that mental illness is the cause of most young male acts of mass homicide in America. This case is likely no different, despite the addition of a religious overlay.

Qasim Rashid is a National Spokesperson for the Ahmadiyya Muslim Community and serves as a Muslim Chaplain for Virginia State Prisons. Qasim is currently completing his third book, a non-fiction, The Wrong Kind of Muslim: An Untold Story of Persecution, set to be released later this year. He received his undergraduate degree from the University of Illinois at Chicago, and his JD at the University of Richmond School of Law.

Calories and Miles-to-Burn

Jonathan B. Wight

For those who want to reduce America's burgeoning health crisis—induced in part by a self-inflicted sugar-water soda craze—here is a new approach (care of David Frum):

Doctor blogger Aaron Carroll highlights an interesting study that suggests there's a better way than a mere calorie count to get people to reduce the calorie count of their meals:

Using a web-based survey, participants were randomly assigned to one of four menus which differed only in their labeling schemes...

(1) a menu with no nutritional information, (2) a menu with calorie information, (3) a menu with calorie information and minutes to walk to burn those calories, or (4) a menu with calorie information and miles to walk to burn those calories.

There was a significant difference in the mean number of calories ordered based on menu type..., with an average of 1020 calories ordered from a menu with no nutritional information, 927 calories ordered from a menu with only calorie information, 916 calories ordered from a menu with both calorie information and minutes to walk to burn those calories, and 826 calories ordered from the menu with calorie information and the number of miles to walk to burn those calories.

The last option produces nearly a 20 percent drop in calories compared to the default case menu.* This shows that we don't need to ban sodas, as Bloomberg tried, but we do need to inform in ways that are effective. And that would necessitate that nutrition information be standardized to reflect behavioral insights.

Yes, this is a type of paternalism, but it is a mild assault on individual liberties, with possibly good impacts on health and health care costs.

*Of course, this is the short-run effect. The long-run effect may dissipate substantially.

Austerity and Unemployment

Jonathan B. Wight

Austerity causes economic contractions that increase unemployment, as shown in the European economies of late:

The contrary view—that cutting spending magically inspires private demand and positive supply shocks—doesn't seem to be working out so well. Why should business invest when capacity utilization is so low?

For the U.S., capacity utilization plummeted in the Great Recession and although recovering, is still below its pre-recession average of about 81.5 percent.

I remember struggling and deeply digesting the Keynesian IS/LM framework my junior and senior years in college. The four-quadrant diagrams were enough to make my future wife abandon economics for business, but for myself, I was deeply invested. Living through a liquidity trap in the present has been a fascinating experience from a purely intellectual standpoint.

From a human and ethical standpoint, living through a liquidity trap when half the macro-economics profession eschews the basic Keynesian IS/LM framework is deeply depressing because it suggests that much unemployment and the concomitant human suffering is unnecessary. Applying leeches to a patient or bleeding the patient may inspire confidence that one is taking the necessary hard medicine and behaving virtuously, but there is no guarantee that such half-baked ideas will magically work. They usually do not.

Economics does not progress in a linear fashion, but rather recursively. We plow forward with the new and throw out the old that we think is irrelevant. We later come back to revisit what we threw out that turned out to be important. That is why interest in Adam Smith has been flourishing after perhaps a century of neglect. The same story may one day be true of Keynes.

POSTSCRIPT: Let's not forget the half-baked Keynesianism as well—the erroneous idea that Keynes called for big government in general. Keynes was clear (see last chapter to The General Theory) that when the economy recovers to full employment the fiscal budget needs to move toward a surplus.

Duty and Virtue

Jonathan B. Wight

Amidst the gripping drama in Boston last week, the Texas chemical plant explosion has received relatively modest attention.

We learn that 11 of the estimated 14 dead were first responders—police, fire, and other rescue personnel. And in Boston 1 police officer was killed and another seriously wounded in the week of terrorism.

A standard economic view is that jobs offer pecuniary and non-pecuniary benefits and costs; individuals select their professions accordingly. If so, no one needs to be (or should be) congratulated for heroism. In the economic model bravery is simply behavior calculated to win rewards. This model has appeal in some cases but misses the big picture of deontological and virtue ethics motives. The firefighters who went in to confront the chemical blaze knew of the high likelihood of injury and death. They were not calculating their own costs and benefits, I think, but led by their duty and character. They should be revered for that service and bravery.

I have a friend whose fathers and brothers—and yes, grandfathers also—were firefighters. There was community and family solidarity, and in the vision of Paul Zak, a lot of oxytocin flowing. Behaviors become instinctive and socialized, not calculated. Paul Heyne wrote that:

[T]he market requires moral foundations which cannot be created by market transactions themselves. Moral foundations are nurtured in communities - in families, neighborhoods, religious fellowships, local political associations, and other voluntary groups. By fostering the steady disintegration of these communities, market transactions may tend over time to undermine the moral foundations upon which they rest….

Economists would do well not to assume that all behaviors are opportunistic, because in doing so they may inadvertently undermine the socialized moral foundations of duty and virtue.