Economics and Ethics

George Washington’s Letter to the Jews of Newport

Jonathan B. Wight

Like many Americans, I find Christmas to be my favorite holiday—yes, despite the commercial hype and stress that often accompanies it. I love the carols and the camaraderie and the spiritual renewal.

But every year we must remember that the United States was not founded as a particular Christian nation—at least as envisioned by Thomas Jefferson and George Washington and others. Religious autonomy and competition in religion (not state monopoly) are every bit part of our freedoms, and these will be curtailed if we believe that "one right religion" is tied up in the manifest destiny of America.

Below are the views of George Washington, who responded to a letter from Jews in Newport:

August 1790

Gentlemen:

While I received with much satisfaction your address replete with expressions of esteem, I rejoice in the opportunity of assuring you that I shall always retain grateful remembrance of the cordial welcome I experienced on my visit to Newport from all classes of citizens.

The reflection on the days of difficulty and danger which are past is rendered the more sweet from a consciousness that they are succeeded by days of uncommon prosperity and security.

If we have wisdom to make the best use of the advantages with which we are now favored, we cannot fail, under the just administration of a good government, to become a great and happy people.

The citizens of the United States of America have a right to applaud themselves for having given to mankind examples of an enlarged and liberal policy—a policy worthy of imitation. All possess alike liberty of conscience and immunities of citizenship. (emphasis added)

It is now no more that toleration is spoken of as if it were the indulgence of one class of people that another enjoyed the exercise of their inherent natural rights, for, happily, the Government of the United States, which gives to bigotry no sanction, to persecution no assistance, requires only that they who live under its protection should demean themselves as good citizens in giving it on all occasions their effectual support.

    George Washington

In this letter Washington demonstrates his devotion to pluralism; we are not a nation of Protestants, or Catholics, or Jews or anything else. Good government is good government; good citizenship speaks for itself—and requires no oath.

 

The Necessity of Art

Jonathan B. Wight

A review of the new Crystal Bridges Museum of American Art appears in today's NY Times. The museum, built with funds from Alice Walton (an heir to Walmart fortune) demonstrates once again America's lucky(?) moral climate in which the rich often feel compelled to live out Andrew Carnegie's quip that "A man who dies rich dies disgraced."

The Crystal Bridges Museum of American Art in Bentonville, Arkansas

Instead, many wealthy Americans provide their local communities (and beyond) with amenities of art and culture to which previously only kings had access. Exposure to art can stimulate the moral imagination, and to Adam Smith was a vital part of moral teaching.

The review concludes:

[The museum's elements]… convey the belief that art, like music and literature, is not a recreational luxury or the purview of the rich. Rather, it is an essential tool for living to which everyone must have access, because it helps awaken and direct the individual talent whose development is essential to society, especially a democratic one. Art, after all, is one of the places where the pursuit of happiness gains focus and purpose and starts expanding outward, to aid and abet that thing called the greater good.

Art can aid the common good, one would think, as long as it is not intended to! This is a paradox, but an understandable one. The intention of art must be to seek a deeper truth, not to proselytize. When governments monopolize art to preach (think of Mao), the result can be brainwashing. Some of the Maoist posters from the 1950s and 1960s provide excellent examples.

Art, to serve its function, must be offered up in a freely accessible marketplace of competition—just as with religion.

Reflections on Grading and Inequality

Jonathan B. Wight

Why do students compete for grades? An obvious answer is that they want higher scores so that they can get into graduate school or look more attractive to recruiters from consulting companies. Higher grades lead to more bucks earned after graduation.

What's interesting is that it doesn't take very much inequality to get students to ramp up the hours studying:

A mere 12% increase in score induces some students to knock themselves out to get an A rather than a B!

Of course, the rewards for getting an A are more than just the numerical gain; being scarce, A's offer huge psychic rewards as well as potential pecuniary rewards greater than 12%.

In the raging debate over income inequality the argument is often presented that unequal incomes spur productive behaviors that otherwise would be withheld for lack of incentive. This is surely true, but the advocates of this viewpoint have little empirical evidence to argue that a "huge" difference is needed to spur that activity.

Rather, people fight heroically over quite small differences in rewards—primarily because the reward itself is a symbol of social standing or intrinsic excellence. Some students, for example, want to view themselves as masters of the material or essential lovers of the subject and will work for no "pay" (e.g., they audit or do extra work).

In the wider world Adam Smith argued that the most ambitious businessman really just wants recognition for the rivalry involved or the excellence of the work. Hence, the "necessity" of social recognition promotes profound exertions, without requiring huge financial rewards (e.g., "great objects"):

In every profession, the exertion of the greater part of those who exercise it, is always in proportion to the necessity they are under of making that exertion…. The greatness of the objects which are to be acquired by success in some particular professions may, no doubt, sometimes animate the exertion of a few men of extraordinary spirit and ambition. Great objects, however, are evidently not necessary in order to occasion the greatest exertions. Rivalship and emulation render excellency, even in mean professions, an object of ambition, and frequently occasion the very greatest exertions (Wealth of Nations, Liberty Fund Edition, 493-494).

What is the lesson? Those who advocate for equal distribution of rewards—there are not many in this day and age—are sadly misguided, and perhaps misunderstand human nature. Inequality is good—but here's the main point—huge inequality is not necessary to bring out the human passion for exceling and competing. This does not constitute an argument in favor of government distribution, but presents a counter-argument to those who proclaim as "fact" something that is apparently untrue.

Large inequality is not necessary for markets to function. At least, that's the lesson [from grading] in my classroom. But there would be a riot if points were not awarded "fairly" according to the contract in the syllabus! So justice first, and mild inequality second, are the prerequisite institutions needed. [Clarification added.]

Call for papers: Well-being in Contemporary Society

Mark D. White

International Conference on the Philosophy and Science of Well-being and their Practical Importance

Location: University of Twente, Enschede, Netherlands

Date: July 26-27, 2012

Program Chair:                 
Philip Brey (University of Twente)

Organising committee:                
Johnny Hartz Søraker (University of Twente)
Pak-Hang Wong (University of Twente)
Jan-Willem van der Rijt (University of Amsterdam)
Jelle de Boer (University of Amsterdam)

About the Conference

In recent years, well-being has enjoyed a renaissance in philosophical discussions, as well as in fields like psychology, economics, development studies and sociology. Although these approaches share a common goal – to better understand what well-being is and how it can be enhanced – these developments have led to a great diversity in philosophical and scientific approaches to the analysis of well-being. Despite the increasing amount of research, most of the work on well-being is also performed at a highly abstract level. This is especially true in philosophy, but relatively little work has been devoted to the application of theories of well-being also in other fields, in particular when it comes to an understanding of life in contemporary society. Developments such as globalization, consumerism, and the rapid innovation and use of new and emerging technologies, all exert significant impact on the well-being of people living today, and we need a better understanding of their consequences for well-being.

Contemporary society requires that well-being researchers examine these problems – and, if possible, propose solutions to address them. This international conference aims to bring together researchers from various disciplines, including, but not limited to, psychology, economics, sociology, philosophy and development studies, in order to examine the practical role of well-being in contemporary society.

Potential Topics

We are looking for contributions that examine the notion of well-being in the context of contemporary society. The conference particularly welcomes papers that employ a notion of well-being to address social, political and ethical issues in present-day society. Suggested topics for the workshop include, but are not limited to:

• Theoretical developments and approaches in the philosophy and science of well-being in relation to contemporary society, culture and life.
• Well-being in social and political philosophy and/or in policy studies
• Positive psychology (and related research fields) and its practical applicability
• New and emerging technologies and well-being
• Intercultural and interpersonal comparisons of well-being
• Reliability, validity and applicability of well-being measures
• Other specific practical issues pertaining to well-being in contemporary society

The workshop will include both invited papers and an open call for papers. For the open call, we invite extended abstracts (1500-2000 words).  Please anonymise the abstract, and include title, name and address in the accompanying email. The abstract, and any questions you may have about the conference, should be sent to wics2012@utwente.nl. Your abstract should be submitted before February 15^th 2012, and will be subject to blind peer review.

Publication

Following the conference we aim to publish the papers, subject to a blind review process, in either an edited volume or a special issue of a relevant journal. We did so successfully with our previous conference, Good Life In a Technological Age, from which select papers were published as book in the prestigious Routledge Studies in Science, Technology and Society series, and will be available in February 2012.

Important Dates

Abstract Submission Deadline: February 15. 2012
Notification of Acceptance: March 1, 2012
Conference Dates: July 26-27, 2012

The Walk-Out at Harvard

Jonathan B. Wight

As you may have heard, students at Harvard recently walked-out of Greg Mankiw's Ec 10 Principles class because of alleged ideological bias in his presentation. Guess what—we all have a bias! Dani Rodrik notes that:

…Carlos Diaz-Alejandro once put it, "by now any bright graduate student, by choosing his assumptions regarding distortions and policy instruments carefully, can produce a consistent model yielding just about any policy recommendation he favored at the start." ["Trade Policies and Economic Development," in Peter B. Kenan, ed. International Trade and Finance: Frontiers for Research, Cambridge, Cambridge University Press, 1975: 93-150, p. 97]….

Instead of communicating the full panoply of perspectives that their discipline offers, [economics teachers] display excessive confidence in particular remedies – often those that best accord with their own personal ideologies….

In our zeal to display the profession's crown jewels in untarnished form – market efficiency, the invisible hand, comparative advantage – we skip over the real-world complications and nuances, well recognized as they are in the discipline. It is as if introductory physics courses assumed a world without gravity, because everything becomes so much simpler that way.

While we all have a necessary ideological bias stemming from world view and random facts, Joseph Schumpeter argued that ideology can be overcome using a scientific method. But a first step seems to be to recognize the bias and admit it to students and offer opportunities for alternative viewpoints.

Instead, economists portray "efficiency" as a scientific principle—when it is a moral judgment swaddled in the language of impartiality.

Steven Margolis, also at Harvard, staged a "teach-in" about the Mankiw walk-out (link is to a video of it). First, Margolis noted that a walk-out usually isn't the right way to deal with intellectual differences. Second, he discussed his attempt to offer an alternative Ec principles course at Harvard, which was rejected by the economics faculty--then accepted only as an alternative studies course. Students at Harvard, like students at many other schools, are not allowed to learn about alternatives to the neoclassical model and get credits toward the major! This is reflected also in the demise of "History of Economic Thought" classes where one could learn about historical points of view and schools.

Mankiw justifies his position this way: "A main disagreement I have with Steve is pedagogical. I believe his critiques of mainstream economics should be presented after students have had a standard course like ec 10."

Mainstream economics has a lot to teach students, but I completely disagree with Mankiw in his assertion that students should learn about problems in a separate course. If we are training leaders, not technocrats, we cannot afford to allow the brainwashing of young minds. Teaching economics as if there is no debate is tantamount to brainwashing. Far better to integrate ethical debates from the start, to inculcate in students the notion that economists have a particular ethical framework (consequentialist) and a defensible yet debatable goal (maximizing the economic surplus).

Margolis notes that high school econ classes explicitly omit anything controversial. The new National Content Standards in Economics states that: "Including strongly held minority views of economic processes and concepts would have confused and frustrated teachers and students who would then be left with the responsibility of sorting the qualifications and alternatives without a sufficient foundation to do so."

And, if Mankiw has his way, controversy will be removed from college principles classes as well! Most students never go beyond one economics class. Even if they do go on to graduate school, they would surely not expect to find "balanced" treatment at that higher level. The bottom line is, if critical thinking about plural viewpoints isn't a part of Econ principles, students will largely never experience it.

Forgive the self-promotion, but teachers who want to easily integrate a bit of ethical discussion in Econ Principles can try this book of ten lessons by Wight and Morton, Teaching the Ethical Foundations of Economics, NCEE, 2007). Introducing different ideologies and ethical frameworks takes only a moment of time, and creates enthusiasm in students who are treated as adults not children who need rote learning.

Special issue of Socio-Economic Review on corporate social responsibility

Mark D. White

The latest issue of Socio-Economic Review (10/1, January 2012) is a special issue devoted to "Corporate Social Responsibility and institutional theory: new perspectives on private governance":

Stephen Brammer, Gregory Jackson, and Dirk Matten, "Corporate Social Responsibility and institutional theory: new perspectiveson private governance," http://ser.oxfordjournals.org/cgi/content/abstract/10/1/3?etoc

Daniel Kinderman, "'Free us up so we can be responsible!' The co-evolution of Corporate Social Responsibility and neo-liberalism in the UK, 1977-2010", http://ser.oxfordjournals.org/cgi/content/abstract/10/1/29?etoc

Richard Marens, "Generous in victory? American managerial autonomy, labour relations and the invention of Corporate Social Responsibility," http://ser.oxfordjournals.org/cgi/content/abstract/10/1/59?etoc

Nahee Kang and Jeremy Moon, "Institutional complementarity between corporate governance and Corporate Social Responsibility: a comparative institutional analysis of three capitalisms," http://ser.oxfordjournals.org/cgi/content/abstract/10/1/85?etoc

Michael A. Witt and Gordon Redding, "The spirits of Corporate Social Responsibility: senior executive perceptions of the role of the firm in society in Germany, Hong Kong, Japan, South Korea and the USA," http://ser.oxfordjournals.org/cgi/content/abstract/10/1/109?etoc

Sebastian Koos, "The institutional embeddedness of social responsibility: a multilevel analysis of smaller firms' civic engagement in Western Europe," http://ser.oxfordjournals.org/cgi/content/abstract/10/1/135?etoc

Luc Fransen, "Multi-stakeholder governance and voluntary programme interactions: legitimation politics in the institutional design of Corporate Social Responsibility," http://ser.oxfordjournals.org/cgi/content/abstract/10/1/163?etoc

Thomas Conzelmann, "A procedural approach to the design of voluntary clubs: negotiating the Responsible Care Global Charter," http://ser.oxfordjournals.org/cgi/content/abstract/10/1/193?etoc

New issue of Social Philosophy and Policy: New Essays in Political and Social Philosophy

Mark D. White

Always an essential read, the latest issue of Social Philosophy and Policy (29/1, January 2012) has the theme of "New Essays in Political and Social Philosophy," and features essays by some of biggest names in those fields (not to mention legal philosophy):

POLITICAL LIBERTY: WHO NEEDS IT?, Jason Brennan

STATE COERCION AND FORCE, Christopher W. Morris

DEMOCRATIC LEGITIMACY AND ECONOMIC LIBERTY, John Tomasi

WHO OWNS WHAT? SOME REFLECTIONS ON THE FOUNDATION OF POLITICAL PHILOSOPHY, Lloyd P. Gerson

HUMAN REPRODUCTIVE INTERESTS: PUZZLES AT THE PERIPHERY OF THE PROPERTY PARADIGM, Donald C. Hubin

WHY FREE TRADE IS REQUIRED BY JUSTICE, Fernando R. Tesón

STRUCTURAL EXPLOITATION, Matt Zwolinski

RESCUING JUSTICE FROM EQUALITY, Steven Wall

REINTERPRETING RAWLS'S THE LAW OF PEOPLES, Christopher Heath Wellman

RESPONSIBLE CHOICES, DESERT-BASED LEGAL INSTITUTIONS, AND THE CHALLENGES OF CONTEMPORARY NEUROSCIENCE, Michael S. Moore

GENOCIDE AND CRIMES AGAINST HUMANITY: DISPELLING THE CONCEPTUAL FOG, Andrew Altman

HARM AND THE VOLENTI PRINCIPLE, Gerald Dworkin

EDUCATION AND THE MODERN STATE, Anthony O'Hear

Several fascinating new bioethics articles in January 2012 journals

Mark D. White

The January 2012 issues of Bioethics (26/1) and Cambridge Quarterly of Healthcare Ethics (21/1) recently came out, with some particularly interesting articles (some of which I actually had a chance to read during my finals!). Here's a sampling:

Whoopie Pies, Supersize Fries: "Just" Snacking? "Just" Des(s)erts?, Leonard M. Fleck

Liberals generally deny that any one ordering of values should govern all individual lives. Some individuals might make maximizing their health their highest value, but that obligates no one else. Still, if some individuals daily indulge in rich desserts, this will have consequences for others in the form of high health costs for diabetes or heart disease. What should a just, liberal, egalitarian society do by way of tolerating, discouraging, regulating, forbidding, or punishing personal health choices that impose costs on others? This is our central question. A related question is whether a just, liberal, egalitarian society should use judgments of personal responsibility for ill health to impose those costs on individuals in order to control escalating healthcare costs for society.

"Please Don't Tell Me": The Right Not to Know, Jonathan Herring and Charles Foster

Knowledge is generally a good thing. People who know lots of bits of information are generally admired. Some of them win prizes in TV competitions. If you were offered the gift of having an entire encyclopedia wired into your brain, you would probably accept, without thinking. But we should be wary of assuming that all knowledge is good. Too much knowledge can inhibit rather than enable thought.

"To Thine Own Self Be True": On the Loss of Integrity as a Kind of Suffering, Henri Wijsbek

One of the requirements in the Dutch regulation for euthanasia and assisted suicide is that the doctor must be satisfied ‘that the patient's suffering is unbearable, and that there is no prospect of improvement.’ In the notorious Chabot case, a psychiatrist assisted a 50 year old woman in suicide, although she did not suffer from any somatic disease, nor strictly speaking from any psychiatric condition. In Seduced by Death, Herbert Hendin concluded that apparently the Dutch regulation now allows physicians to assist anyone in suicide simply because he or she is unhappy.

In this paper, I reject Hendin's conclusion and in particular his description of Mrs Boomsma as someone who was ‘simply unhappy.’ After a detailed narration of her lifestory, I turn to the American philosopher Harry Frankfurt's account of volitional incapacity and love for a more accurate characterization of her suffering. Having been through what she had, she could only go on living as another person than the one she had been when she was a happy mother. That would have violated her integrity, and that she could not bring herself to do.

Risk and Mid-Level Moral Principles, Nicolas Espinoza and Martin Peterson

We discuss ethical aspects of risk-taking with special focus on principlism and mid-level moral principles. A new distinction between the strength of an obligation and the degree to which it is valid is proposed. We then use this distinction for arguing that, in cases where mid-level moral principles come into conflict, the moral status of the act under consideration may be indeterminate, in a sense rendered precise in the paper. We apply this thought to issues related to pandemic influenza vaccines. The main conclusion of the paper is that on a principlist approach some acts may be neither right nor wrong (or neither permissible nor impermissible), and we claim that this has important implications for how we ought to make decisions under risk.

Call for papers: 14th World Congress in Social Economics, "Towards an Ethical Economy and Economics"

Mark D. White

From the Social Economics Blog:

ASSOCIATION for SOCIAL ECONOMICS
 
14th WORLD CONGRESS IN SOCIAL ECONOMICS
 
CALL FOR PAPERS
 
University of Glasgow, Glasgow, Scotland, UK, June 20-22, 2012
 
"Towards an Ethical Economy and Economics"

The on-going financial crisis continues to evolve from one centered on the Western financial system to sovereign debt crisis, particularly in the Euro-zone. This has brought into sharp relief the inadequacy of standard approaches that emphasise the economy as inherently stable and the incapacity of the current economic system to address its fundamental problems. The crisis has also raised a host of ethical issues revolving around the actions of governments, the financial sector, communities, individuals, and, indeed, the economics profession. The financial crisis has further revealed the reliance on conventional notions of growth to sustain mass consumption and as a vehicle for addressing recessionary pressures, largely ignoring concerns over environmental sustainability and increasing inequalities. Social economics, with its focus on the social values and relationships that drive the market-based system, is well-placed to offer insightful analyses of the present state of economies and of economics and to offer an outlet for discussion of alternatives founded on the notion of the economy as the process of social provisioning.

See here for more details...

Another pointed critique of mathematical modeling in finance and economics

Mark D. White

In today's Wall Street Journal, there is a book review by Burton Malkiel of Models. Behaving. Badly., a critique of excessive reliance of mathematical modeling in finance and economics, written by Emanuel Derman, a key player in developing the very techniques he now criticizes. Judging from Malkiel's review, Derman's book echoes themes which are familiar by now, but are no less welcome for that. Some excerpts from the review:

Mr. Derman's particular thesis can be stated simply: Although financial models employ the mathematics and style of physics, they are fundamentally different from the models that science produces. Physical models can provide an accurate description of reality. Financial models, despite their mathematical sophistication, can at best provide a vast oversimplification of reality. In the universe of finance, the behavior of individuals determines value—and, as he says, "people change their minds." ...

"In crises," Mr. Derman writes, "the behavior of people changes and normal models fail. While quantum electrodynamics is a genuine theory of all reality, financial models are only mediocre metaphors for a part of it." ...

The basic problem, according to Mr. Derman, is that "in physics you're playing against God, and He doesn't change His laws very often. In finance, you're playing against God's creatures." And God's creatures use "their ephemeral opinions" to value assets. Moreover, most financial models "fail to reflect the complex reality of the world around them."

And my favorite:

He sums up his key points about how to keep models from going bad by quoting excerpts from his "Financial Modeler's Manifesto" (written with Paul Wilmott), a paper he published a couple of years ago. Among its admonitions: "I will always look over my shoulder and never forget that the model is not the world"; "I will not be overly impressed with mathematics"; "I will never sacrifice reality for elegance"; "I will not give the people who use my models false comfort about their accuracy"; "I understand that my work may have enormous effects on society and the economy, many beyond my apprehension."...