Economics and Ethics

Virtue ethics, evolutionary psychology, and human nature

Mark D. White

The latest Royal Institute of Philosophy Supplement (70, 2012) examines a number of issues concerning human nature. From the editors' introduction:

The study of human nature has always been of central importance to philosophy. ... Questions such as ‘what is human nature?’, ‘is there such a thing as an exclusively human nature?’, ‘through what methods might we best discover more about our nature?’, and ‘to what extent are our actions and beliefs constrained by it?’ are of central importance not only to philosophy and science, but also to our general understanding of ourselves as people who belong to the human species.

The essays collected in this volume collectively address key issues and taboos surrounding the theme of human nature by bringing together philosophers working in a multitude of areas including the philosophy of cognitive science, evolutionary psychology, the philosophy of biology, psychoanalysis, ethics and moral psychology, developmental psychology, the philosophy of mind and action, the philosophy of psychology, the philosophy of religion, and the history of philosophy.

The  papers all looks fantastic, but because of my interests in both virtue ethics and evolutionary psychology (or biology), I found Rosalind Hursthouse's contribution, "Human Nature and Aristotelian Virtue Ethics," most intriguing:

Given that it relies on claims about human nature, has Aristotelian virtue ethics (henceforth AVE) been undermined by evolutionary biology? There are at least four objections which are offered in support of the claim that this is so, and I argue that they all fail. The first two (Part 1) maintain that contemporary AVE relies on a concept of human nature which evolutionary biology has undercut and I show this is not so. In Part 2, I try to make it clear that Foot's Aristotelian ethical naturalism, often construed as purporting to provide virtue ethics with a foundation, is not foundationalist and is not attempting to derive ethics from biology. In Part 3, I consider the other two objections. These do not make a misguided assumption about Aristotelian ethical naturalism's foundational aspirations, nor question AVE's use of the concept of human nature, but maintain that some of AVE's empirical assumptions about human nature may well be false, given the facts of our evolution. With respect to these, I argue that, as attempts to undermine AVE specifically, they fail, though they raise significant challenges to our ethical thought quite generally.

On Barry Schwartz's "The Danger of Too Much Efficiency" in The New York Times

Mark D. White

In the New York Times, psychologist Barry Schwartz (author of The Paradox of Choice: Why More Is Less) warns us of "The Danger of Too Much Efficiency," in which he argues that, while efficiency is generally a good thing and enables increases in standards of living, more efficiency is not necessarily better. The first half of his piece is an excellent summary of the benefits of efficiency, which he illustrates using the concept of friction:

...firms compete to become more efficient, and we as consumers, along with Bain and its like, benefit from this competition.

What stands in the way of efficiency is friction. When automobile manufacturers struggle to squeeze as many miles per gallon as possible out of their car designs, friction is the enemy. Their aim is to design a vehicle that uses every ounce of fuel to move the car forward.

And so it is in the world of finance. As the historian Niall Ferguson reminds us in his book The Ascent of Money, hard as it is to imagine, people didn’t always have money. The invention of money went a long way toward reducing the friction, the inefficiency, in financial transactions. No longer did the farmer have to bring sacks of potatoes to the marketplace to trade for eggs and milk. Money was a medium of exchange that greatly reduced what some have called the financial coefficient of drag.

But Schwartz recognizes that increasing efficiency by reducing friction is not the only important concern to individuals or society. After summarizing the efficiency gains from securitizing mortgages and increased access to consumer credit, he turns to the downside:

All these examples tell us that increased efficiency is good, and that removing friction increases efficiency. But the financial crisis, along with the activities of the Occupy movement and the criticism being leveled at Mr. Romney, suggests that maybe there can be too much of a good thing. If loans weren’t securitized, bankers might have taken the time to assess the creditworthiness of each applicant. If homeowners had to apply for loans to improve their houses or buy new cars, instead of writing checks against home equity, they might have thought harder before making weighty financial commitments. If people actually had to go into a bank and stand in line to withdraw cash, they might spend a little less and save a little more. If credit card companies weren’t allowed to charge outrageous interest, perhaps not everyone with a pulse would be offered credit cards. And if people had to pay with cash, rather than plastic, they might keep their hands in their pockets just a little bit longer.

Rather than focus on his policy recommendations (with which I have much disagreement, as regular readers of this blog can easily imagine), I want to address his normative analysis of efficiency, which with I have much sympathy. I do think, however, that the particular way in which he criticies the emphasis of efficiency is strange, and obscures his greater point to some extent--a point with which, again, for the most part I agree.

Using the Aristotelian language he adopted in his more recent book (written with Kenneth Sharpe), Practical Wisdom, Schwartz recommends finding the "golden mean" of efficiency rather than simply purusing its maximum level. While I don't disagree with this in principle, I do think it is an odd way to put the problem, since it suggests that we can find the optimal level of efficiency without consideration of other values. If there is a golden mean of efficiency, the only way to find it is to determine how much efficiency is consistent with other values we want to promote (such as justice, dignity, and equality). This is really no different from the Aristotelian determination of the golden mean of characteristics like courage, in which the extremes of foolhardiness and cowardice offend other values and ends, as opposed to being internally inconsistent.

But I find the golden mean analysis to be misleading in a deeper sense when applied to efficiency. The reason we can't determine the optimal level of efficiency is because it is an empty value--it's a mean to an end, not an end in itself. And as such, it should be maximized in order to provide the means to pursue valuable ends, except insofar as it conflicts with those ends themselves. In other words, the pursuit of efficiency must be limited, but out of recognition that other values are more important, not that there is something inherently bad about a certain level of efficiency. The only "danger with too much efficiency" is that it implies that important values have been neglected in its name.

To a large extent, this all cashes out the same way; my disgreement with Schwartz on this issue is largely rhetorical rather than substantive. He emphasizes the excessive attention given to efficiency, and then recommends that it be frustrated (by increasing frictions through regulation) in order to correct the resulting problems. But as I said above, the issue is not an excessive focus on efficiency, but on neglect on other values which should temper it. It is as if we said that, if people neglect their families to spend time at the gym, then we should discourage gym use by raising membership fees or reducing hours of operation. But exercise--also a good thing in general, though it can be taken too far in many ways--is not the problem here. The neglect of family is the problem, and it is that neglect that should be addressed. In general, our focus should be placed directly on the neglected values (justice, equality, and so forth) rather indirectly on limiting the threat to them (too much efficiency).

Indeed, Schwartz does emphasize the importance of corrective norms, although he resorts to regulation to bolster them:

Perhaps we can use the criticism of Bain Capital as an opportunity to bring a little friction back into our lives. One way to do this is to use regulation to rekindle certain social norms that serve to slow us down. For example, if people thought about their homes less as investments and more as places to live, full of the friction of kids, dogs, friends, neighbors and community organizations attached, there might be less speculation with an eye toward house-flipping. And if companies thought of themselves, at least partly, as caretakers of their communities, they might look differently at streamlining their operations.

True, increased observance of these norms would increase friction and reduce efficiency, but that shouldn't be the goal--the goal should be increased observance of the norms themselves! Again, the result is the same, but I worry that focusing on efficiency as the "target variable" risks obscuring the more important issues behind it.

I think Schwartz would agree with me that, in the end, the best way to conceptualize of efficiency is as a means to an end, in which the values we hold individually and collectively are promoted by it at the same time that they temper its pursuit.

Deirdre McCloskey featured in the Wall Street Journal's Cultural Conversation

Mark D. White

Our dear friend Deirdre McCloskey is featured in today's Cultural Conversation in the Wall Street Journal, which briskly covers some of her background, laments the separation of ethics and economics after the latter became intensely mathematical, and covers key points from her recent books, The Bourgeois Virtues: Ethics for an Age of Commerce and Bourgeois Dignity: Why Economics Can't Explain the Modern World.

Another Ultimatum Game – with a Twist

Jonathan B. Wight

The current AER (December 2011) has an interesting article by Steffen Andersen, Seda Ertaç, Uri Gneezy, Moshe Hoffman, and John A. List entitled, "Stakes Matter in Ultimatum Games."

The authors set up high-stakes Ultimatum Games in eight villages in northeast India. The stakes varied from 20 to 20,000 rupees. At the time of the study, 20,000 rupees equaled about $410, or 200 days of labor at prevailing wages). That's a lot of cash!

One of the problems with determining if stakes matter to choice outcomes is that historically there are very few low-ball offers. To try to artificially manufacture more low-ball offers, the authors added this explicit bit of framing to the instructions for proposers:

Notice that if the responder's goal is to earn as much money as possible from the experiment, he/she should accept any offer that gives him/her positive earnings, no matter how low. This is because the alternative is to reject, in which case he/she will not receive any earnings. If the responder is expected to behave in this way and accept any positive offer, a proposer should offer the minimum possible amount to the responder in order to leave the experiment with as much money as possible. That is, if the responder that you are matched with aims to earn as much money as possible, he/ she should accept any offer that is greater than zero. Given this, making the offer that gives the lowest possible earnings to the responder will allow you to leave the experiment with as much money possible. (p. 3430)

The authors point out: "This frame informs proposers that the rational decision, if both parties aim to maximize earnings, is to offer the lowest possible amount" (Ibid., emphasis added).

Note that two things are going on here. The first is that a key insight of Ultimatum Games that in many cases people do NOT consider "gaining the most money" to be most important objective. We know this because they routinely chose to punish anonymous others at a cost to themselves. But including these instructions creates a not-so-subtle framing that the objective "should" be to earn as much money as possible.

The second point is that the authors suggest that people "ought" to make "rational" decisions, that is use logic to calculate gains and losses using a consequentialist ethical approach. But people may in fact use their moral sentiments or feelings to make such decisions. By framing both the method and the goal, the authors attempt to get an anomalous result and they succeed: Their main finding is that the demand curve for justice is negatively sloped—if sacrifice becomes more costly, there will be less sacrifice.

This study is important because it demonstrates that price does matter (an important criticism of virtue ethics that we need to consider) and second, because it shows the powerful effects of framing. This is a cautionary note to all econ teachers who claim they are only doing "science" when they frame the economic question and its method (see previous post on ethical principles for the classroom).

Does Character Matter?

Jonathan B. Wight

David Brooks presents an account of Newt Gingrich's flirtation with government economic policies in "The Gingrich Tragedy." Turns out Gingrich favors interventionist industrial policies, linking them in his own mind to the nationalistic achievements of Alexander Hamilton and Teddy Roosevelt.

Gingrich has an active imagination—too active if that implies thinking up new things for government to do—like setting up a lunar mining colony and building giant mirrors in space to light up the night sky. As Brooks notes, "He has no Hayekian modesty to restrain his faith in statist endeavor."

Nor does Gingrich worry too much about facts. His latest Civil War novel apparently writes out of Virginia's history the massacre of black Union soldiers at the Petersburg Battle of the Crater (see Kevin M. Levin in The Atlantic, "How Newt's New Novel Plays Politics With the Past"). If truth doesn't fit the cliché you're pitching of American exceptionalism, well… make up some new facts! [A writer of historical novels has different moral obligations than a writer of alternative history. Gingrich has apparently blended the genres.]

Newt's boyish enthusiasm and willingness to think grandly can be admired, if these qualities were tempered with other virtues. But Brooks ultimately rejects Gingrich's presidential candidacy not for its policies but for the man who represents them. Brooks concludes:

"But how you believe something is as important as what you believe. It doesn't matter if a person shares your overall philosophy. If that person doesn't have the right temperament and character, stay away."

Adam Smith, the virtues, and motivation crowding out

Mark D. White

An article in the latest issue of Politics, Philosophy & Economics (10/4, November 2011), discusses the contrast between higher and lower virtues in Adam Smith's thought, in particular concerning the market, and links this to modern thinking in economics and psychology on motivation crowding out:

"Higher and Lower Virtues in Commerical Society: Adam Smith and motivation crowding out"

Lisa Herzog

Abstract: Motivation crowding out can lead to a reduction of ‘higher’ virtues, such as altruism or public spirit, in market contexts. This article discusses the role of virtue in the moral and economic theory of Adam Smith. It argues that because Smith’s account of commercial society is based on ‘lower’ virtue, ‘higher’ virtue has a precarious place in it; this phenomenon is structurally similar to motivation crowding out. The article analyzes and systematizes the ways in which Smith builds on ‘contrivances of nature’ in order to solve the problems of limited self-command and limited knowledge. As recent research has shown, a clear separation of different social spheres can help to reduce the risk of motivation crowding out and preserve a place for ‘higher virtue’ in commercial society. The conclusion reflects on the performative power of economics, arguing that the one-sided focus on models of ‘economic man’ should be embedded in a larger context.

Utilitarians aren't psychopaths--are they?

Mark D. White

The Economist published a short note recently summarizing the results of a forthcoming paper in Cognition that reports that experiment participants "who indicated greater endorsement of utilitarian solutions had higher scores on measures of Psychopathy, machiavellianism, and life meaninglessness" (from the paper abstract). The experimenters presented subjects with variants of trolley dilemmas--either watch five passengers in a runaway trolley car die, or push one bystander onto the tracks to his death to stop the car--and also asked questions to track their psychological dispositions, finding a strong link between the antisocial tendencies and willingness to kill the bystander to save the trolley passengers.

I'm not going to address the secondhand claims by the authors regarding the "characterization of non-utilitarian moral decisions as errors of judgment," which are inevitably and necessarily made from a utilitarian point-of-view; it's the same problem as with Kaplow and Shavell's Fairness versus Welfare, which dismissed nonwelfarist policymaking as insufficiently welfarist. (I happily note that the paper's authors do criticize these statements in the discussion section of the paper.) But I do want to discuss briefly the results reported in the Cognition study, and explain why I have mixed feelings about it.

First, the trolley problem is too nuanced to make a quick-and-easy judgment regarding deontology and utilitarianism (as the authors acknowledge in the discussion section of the paper, albeit for different reasons). True, simple utilitarianism would demand that, all else aside, you kill the one person to save the five. But a deontological outlook--which is much less well-defined--would not necessarily forbid this, as deontology is not categorically opposed to consequentialist considerations. Rather than simply comparing one to five and making a decision based on the equally valid interests of all the person involved (as a utilitarian would), a deontologist would more likely think about the moral status of the individuals in the case, considering any factors related to responsibility or desert in that particular situation. After ruling out such concerns, a deontologist--even a Kantian--may very well kill the one to save the five (for instance, by judging the duty to save five people to have a "stronger ground of obligation" than the duty not to kill the one, according to Kant's only guidance in such cases of conflicting obligations). The brute utilitarian would regard the decision as the implication of a simple comparison (1<5), while the deontologist would more likely use judgment based on the rights of the persons involved--even if they both come to the same result.

Furthermore, the trolley dilemma also wraps up in it the relative moral status of acts and omissions (itself tied into the deontology vs. utilitarianism debate), as well as issues of identity and virtue (am I the kind of person who can take a life, even to save others?), which themselves have greater implications if taking the one life leads to a change of attitudes toward future moral dilemmas. In other words, the trolley problem should not be used as a moral barometer distinguishing between utilitarianism and deontology. This becomes particularly clear when one considers the different reactions people have to the surgeon problem, in which a surgeon considers harvesting organs from his healthy colleague to save five patients who will die without them--very few endorse this action, even those who would push the bystander in front of the trolley, but it can be difficult to parse out the salient differences in the two situations. (Several variants of these problems, including both the trolley and surgeon dilemmas, were used in the study, apparently with no distinctions made.)

As any regular readers of my work (either on this blog or in print) know, I'm no fan of utilitarianism. But I would never go as far as to say its adherents and practitioners are psychopaths. Utilitarians obviously do care about the well-being of people--my problem is that they are concerned with aggregate well-being that ignores the distinctions between persons (as Rawls said so well) and the inherent dignity and rights of each (as Kant wrote). And that is problematic: regarding persons as nothing but contributors to the collective good implies that each person has no independent, distinct value. And if so, why care about people's interests at all? To my mind, the utilitarian's disregard for the dignity of the individual is self-defeating, since it eliminates any imperative to consider persons' well-being at all (much less to consider it equally with all others').

Of course, the popular press coverage leaves out all of the nuance and qualification present in the academic article, but that is par for the course. The study's authors recognize, of course, that all the "psychopathic" respondents who chose the "utilitarian solution" are not necessarily well-read in Bentham or Mill, nor did they necessarily use utilitarian thinking at all. Nonetheless, the results are suggestive, and if it leads us to look at the differences between utilitarians and deontologists in a different way, it's all good--and right!

"Don't Ask, Don't Tell" officially ends

Mark D. White

As this New York Times article celebrates, the U.S. military's "don't ask don't tell" policy is officially over. Military personnel who are gay or lesbian no longer have to suppress their identity and compromise their cherished virtue of honesty to serve their country.

(H/T: Erica Greider.)

Social MarketIng and Ethics

Jonathan B. Wight

Paul Zak, James Otteson and I participated on a panel yesterday at the first annual National Conference on Teaching Economics, sponsored by the AEA and held at Stanford. The keynote speaker was Vernon Smith talking about ... Adam Smith and ethics!

Our session built on Vernon's paper to flesh out the arguments about why economics instructors needed to treat complex human behavior rather than stereotypes of max U.

At the conference, Paul Zak discussed the physiological basis for social networking. Not coincidentally, I'm now in San Francisco with social marketing guru Darby Williams (@DarbyWill) who leverages social media to drive engagement and revenues for businesses. "People can sniff out fakes," Williams agreed, "even on line.

  Transparency is the name of the game." Adam Smith would have endorsed this view. Williams continued:

If you are too positive about a product, people will think you're connected with the company. I help brands be authentic in how they communicate with customers and the world so they are believed and allowed into the "conversation." The conversation is already happening in the social world between consumers, and brands can become part of this conversation only if they are truly authentic. To be authentic is to not only be genuine it is to be willing to accept criticism and respond to it honestly. 

In other words, it is to cultivate a moral conscience and the self control to live it through.

New book: Julia Annas, Intelligent Virtue

Mark D. White

I was very excited today to receive the new book from Julia Annas (and Oxford University Press), Intelligent Virtue, in the mail:

Intelligent Virtue presents a distinctive new account of virtue and happiness as central ethical ideas. Annas argues that exercising a virtue involves practical reasoning of a kind which can illuminatingly be compared to the kind of reasoning we find in someone exercising a practical skill. Rather than asking at the start how virtues relate to rules, principles, maximizing, or a final end, we should look at the way in which the acquisition and exercise of virtue can be seen to be in many ways like the acquisition and exercise of more mundane activities, such as farming, building or playing the piano. This helps us to see virtue as part of an agent's happiness or flourishing, and as constituting (wholly, or in part) that happiness. We are offered a better understanding of the relation between virtue as an ideal and virtue in everyday life, and the relation between being virtuous and doing the right thing.