New book: Economics as Applied Ethics (Value Judgments in Welfare Economics)

Mark D. White

Beckerman New from Palgrave is Wilfred Beckermam's Economics as Applied Ethics: Value Judgements in Welfare Economics, a detailed account of the intrinsically ethical nature of welfare economics, discussing the nature of preferences, utilitarianism, equality, happiness, and other important topics in the philosophy of normative economic analysis. Furthermore, it is written in a style appropriate for upper-level undergraduate and graduate students as well as professional economists; in this way, it may have wider appeal and impact than even Hausman and McPherson's essential survey Economic Analysis, Moral Philosophy and Public Policy and Little's classic A Critique of Welfare Economics.

And the endorsements are superlative (with one glaring exception, of course):

"This book is witty and wise, and a delight to read. It will enlighten economists – both students and teachers – and will encourage non-economists skeptical of the subject's ability to contribute to human welfare to think again." Wendy Carlin, Professor of Economics, University College London

"As more people are starting to realize, economics without ethics is dangerous, and ethics without economics is foolish. This very timely book explains why these two perspectives can and must be combined." Mark D. White, Professor in Political Science, Economics, and Philosophy, College of Staten Island/CUNY & author of Kantian Ethics and Economics: Autonomy, Dignity, and Character
"Wifred Beckerman's Economics as Applied Ethics: Value Judgements in Welfare Economics elucidates many of the important ethical questions that are almost always suppressed in both mainstream economics teaching texts and advanced scholarship. The book provides a productive blending of abstract theoretical discussion with applications that focus on contemporary policy debates. It should therefore appeal both to students who are excited by and seek deeper understanding of abstract ideas, and those who are impatient with abstract debate and want to see just how these ideas matter concretely in policy making." George DeMartino, Professor and Co-director of the MA program in Global Finance, Trade and Economic Integration, University of Denver 

On What Matters

Jonathan B. Wight

Brad Hooker has an interesting post in The Philosopher’s Magazine on “Ideas of the Century,” focusing on Derek Parfit’s forthcoming book, On What Matters (Oxford University Press, 2011).  Hooker claims that:

The most widely discussed idea in moral philosophy to emerge in the last ten years is Derek Parfit’s conclusion that the best versions of three of the leading moral theories completely coincide in their implications.

 If so, this is partial justification for the view that moral theories are not conflicting, but rather complementary ways of understanding and guiding behavior.  In short, Parfit’s conclusion is that:

Rule-consequentialism is thus argued to be the upshot of the best forms of Kantian and contractualist ethics.

 Is rule consequentialism the version of consequentialism that Adam Smith would endorse?  Where would virtue ethics fit into this mix?  My own view is that in real life rule consequentialism evolves from society’s broad experimentation, not from a philosopher’s pen.  It takes social experiments to winnow out good from bad behaviors and to determine which rules are best.  In short, rule consequentialism is derived inductively rather than deductively. 

At the individual level people follow some rules but emotions give rise to impulses and individual deviations based on moral sentiments that produce new experiments.  Hence, the moral sentiments are essential for the evolution of rule consequentialism. Virtue is needed also to help people develop self control so as to follow the rules. 

Can Consequentialists Honour the Special Moral Status of Persons?

Mark D. White

That's the question posed and answered in the affirmative by Martin Peterson in an article of that title in the new issue of Utilitas (22/4):

It is widely believed that consequentialists are committed to the claim that persons are mere containers for well-being. In this article I challenge this view by proposing a new version of consequentialism, according to which the identities of persons matter. The new theory, two-dimensional prioritarianism, is a natural extension of traditional prioritarianism. Two-dimensional prioritarianism holds that well-being matters more for persons who are at a low absolute level than for persons who are at a higher level and that it is worse to be deprived of a given number of units than it is good to gain the same number of units, even if the new distribution is a permutation of the original one. If a fixed amount of well-being is transferred from one person to another and then transferred back again, two-dimensional prioritarianism implies that it would have been better to preserve the status quo.

I very much look forward to reading this one.

Baker, "A Stoic Defense of the Market" (from Accepting the Invisible Hand)

Mark D. White

Today we continue our preview of Accepting the Invisible Hand: Market-Based Approaches to Social-Economic Problems with Chapter 4, "Don't Let the Best Be the Enemy of the Good: A Stoic Defense of the Market," by Jennifer A. Baker. (Chapter 3 by James D. Gwartney and Joseph Connors was discussed here, Chapter 2 by John Meadowcroft was discussed here, Chapter 1 by me was discussed here, and the preface was posted here.)

From the introduction to the chapter:

The moral relevance of general affluence is often overlooked. We might wish for humane conditions, we might talk of human value, but short of some minimal level of general affluence, life is too grim to entertain ethical notions beyond it. It seems we can hardly count the very poor of the world into our moral considerations. If everyone has to be considered, “well,” the ethicists seem to harrumph, “then we are dealing with too much need and everything thought conventionally moral is off the table!”

In this chapter I would like to offer a corrective, a way to acknowledge the moral significance of general affluence without disassembling conventional morality. To do this we have to recognize that markets are our only means of bringing about general affluence. We have, literally, nothing else capable of doing the job. Yet markets are, for reasons we will go into, left out of our moral calculations. We either suggest “it isn’t personal, it’s just business” in the hopes that all moral bets are off when we are engaging in trade, or simply live with the cognitive dissonance of refusing to integrate our support for markets with the rest of our beliefs about what is good. (p. 69)


For many reasons, it will be helpful to point out a way in which we can situate support for general affluence within conventional morality. Clearing up the deep confusion we so often display about the role of ethics in the market is one, clarity about our own behavior is another, and what we owe other humans worldwide is a third. After reviewing approaches that will not work, I will offer a means for this. I argue that the solution is to organize our thoughts about morality using an ethical theory—Stoicism—that has a two-level structure. One of these must acknowledge the value of material inputs to human life, and the other must function to maintain a standard for personal choices. How these levels serve as a framework for making choices we already admire is what I aim to demonstrate. (p. 70)

Baker surveys the difficulties with justifying the market using standard theories of moral and political philosophy, as well as attempts by economist-philosopher to do so, before laying out her Stoic alternative, based on essential concepts thereof such as indifferents, neutrality, and the bi-level theory of value.

She phrases her conclusion exceptionally well (emphasis added):

Is the market just? Not in the sense that it meets some discrete ideal of political good. The market, not being an ideal, simply cannot measure up to such standards. If we are to dismiss it as amoral, we are left without guidance when it comes to how we should act in the market. Far better is to determine that the market has a peculiar status of “just enough.” It is not glorious. It is never how we would prefer it to be and never as good as it could be. But humans thrive in market-based systems and can do so without the cost of horrific violations of human dignity. Higher standards cannot be imposed on a social system until the possibility of meeting these higher standards exist. We are not to expect too much, or to confuse political ideals for actual social good. (p. 83)

No, Professor Krugman, Economics Is a Morality Play

Mark D. White

I usually try to ignore Paul Krugman, but sometimes I can't. (Sorry.) Thanks to Steve Horwitz (here and here), I lit upon Krugman's September 28 New York Times blog post, "Economics Is Not a Morality Play," in which he writes:

The market economy is a system for organizing activity — a pretty good system most of the time, though not always — with no special moral significance.

But as I've argued elsewhere, the (pure) market economy preserves individual choice and values and thereby embodies respect for the autonomy and dignity of persons. And this has tremendous moral significance, at least if you care about such things as autonomy and dignity.

What Professor Krugman does not seem to understand is that when he approves of something "working" ("Cuba doesn’t work; Sweden works pretty well"), he is making a moral judgment based on promoting the goal of "working" (whatever he means by that). Whether he adheres to some version of utilitarianism (promoting some measure of well-being) or a squishy undefined pragmatism ("whatever works"), his system is just as ethically loaded, and depends on just as many controversial moral presuppositions, as deontology or virtue ethics, which presumably is what he is referring to as "a morality play."

Economics cannot escape ethics, and people like Paul Krugman ignore that fact as their own peril--and, proportionate to their influence, ours as well.

An unintentional survey of the ethics of gays in the military in the WSJ

Mark D. White

In today's Wall Street Journal, Bret Stephens has a piece arguing why the GOP should let "Don't Ask Don't Tell" (DADT) lapse in the 2011 Defense Bill, and in it he happens to cover the three mainstream approaches to ethics: consequentialism (DADT forces the expulsion or rejection of qualified, eager men and women from the armed forces), deontology (DADT violates the rights of homosexuals), and virtue ethics (DADT discourages honesty). And, in a consequentialist twist on virtue ethics, he argues (correctly, in my opinion) that this incentive for dishonesty is what weakens the armed forces, not the existence of homosexual servicemen and women itself:

In the meantime, it's worth noting that there are an estimated 48,000 homosexuals on active duty or the reserves, many of them in critical occupations, many with distinguished service records. If they pose any risk at all to America's security, it is, paradoxically, because DADT institutionalizes dishonesty, puts them at risk of blackmail, and forces fellow warfighters who may know about their orientation to make an invidious choice between comradeship and the law. That's no way to run a military.

If you'll indulge me my comics habit for a moment, the origin of the new Batwoman included a similar message on DADT, when a young Kate Kane has to withdraw from the US Military Academy after word gets out that she is a lesbian. Her CO asks her to deny the rumor (subtly insinuating that he knows they're true), but she cites the military code of honesty, and chooses to accept a discharge rather than compromise that principle. (This scene can be found in Batwoman: Elegy, written by Greg Rucka and illsutrated by the incomparable J.H. Williams.)

This shows that DADT not only asks our men and woman in the armed forces to deny an essential part of themselves, but also to deny the very principles on which the military is grounded, in order to serve their country. Stephens emphasizes the more basic consequentialist argument (which is certainly valid as well), but I favor the others (naturally)--just ask Batwoman!

Ethics in science

A number of economists insist that ethics has no role in economics, at least not in positive economics.  Periodically, we have to keep relearning that internal ethics are the foundation on which trust in science is built.

Knowing this, it was still a shock to read this in the Aug 28th Economist Magazine:

Marc Hauser, a professor of psychology at Harvard who made his name probing the evolutionary origins of morality, is suspected of having committed the closest thing academia has to a deadly sin: cheating.

The article is unclear about what Hauser is accused of, but falsifying data is one likely charge. 

There aren’t enough journal referees out there with the time to monitor every would-be academic cheater.  And on a benefit-cost basis the risk of cheating may look quite good for someone trying to get tenure—a lifetime sinecure! 

That is why having a non-consequentialist ethical framework at work in science is so critically important.  We are better served by researchers who ascribe to a higher duty to the profession and truth-telling than to their own career outcomes. 

Even so, when was the last time any graduate school professor lectured to his or her students on professional ethics? 

Of course, internal restraints are not enough; we also need better external accountability to beef up the costs and probability of getting caught for cheating.  Ethical pluralism suggests we need a mix of ethical approaches to keep science progressing. 

Female genital mutilation and the "lesser harm" [UPDATED]

Mark D. White

From the New York Times, the American Academy of Pediatrics is recommending that doctors be allowed to "nick" young girls from cultures that practice female circumcision/genital mutilation if that would prevent their parents from taking them overseas for the full procedure.

This is a disturbingly visceral example of commtting a lesser wrong to prevent a greater wrong, a key conflict between consequentialism and deontology, and never an easy issue to resolve.

UPDATE (May 23, 2010): Here's Ayaan Hirsi Ali, author of Nomad: From Islam to America: A Personal Journey Through the Clash of Civilizations, on the AAP's recommendation.

That oldtime utilitarian economics (no, thank you) [UPDATED AGAIN]

Mark D. White

The Wall Street Journal today features a paean to A.C. Pigou and good old-fashioned utilitarian economics, written by John Cassidy, author of How Markets Fail: The Logic of Economic Calamities. To Cassidy's (or the editors') credit, statements from other economists (such as Milton Friedman and Ludwig von Mises) are included for counterpoint, and Cassidy even mentions some pre-Coasean insight from Pigou:

The mere existence of negative spillovers doesn't necessarily justify government intervention, Mr. Pigou conceded. In some cases, the parties concerned might be able to come to a voluntary agreement about how to compensate innocent bystanders. A landlord, for instance, may reduce the rents for tenants who have to live over a noisy bar.

The landlord doen't do this out of the kindness of his heart, of course; more likely he has to lower the rent to attract tenants to a less attractive apartment.

A better example would be the tenant confronting the bar owner directly for compensation; as Coase showed, if the two parties can bargain relatively costlessly, and one can be shown to have a right to control the noise in the situation, they will come to an agreement that will resolve the conflict efficiently, using information only they have (especially their subjective disutilities from various solutions), rather than relying on the incomplete information (and possibly skewed incentives) of government officials.

The role of the courts here is not a hindrance, as many have assumed, but rather highlights an ignored aspect of externalities that stands in contradiction to entire utilitarian/Pigouvian economics tradition: harm is only of social (and governmental) concern if it is wrongful, i.e. if it violates a legal right. It can be argued that all actions (except the most private ones) create externalities of some sort, but nonetheless only the wrongfully caused ones are of legitimate concern to society and to the government. Hence the requirement of the Coase Theorem that rights be clearly assigned; the legal right in a situation must be ascertained, either by statutes, common law, or judicial decision, and then (and only then) the wronged party can either demand compensation or consent to a deal with the party found to be at fault. After all, that's what tort law is for (according to most legal scholars, with subtle differences): providing a mechanism for harmed parties to shift their burden to parties that caused it (depending, in most cases, on fault).

But given their refusal to recognize rights (or wrongs), economists in the utilitarian/Pigouvian tradition cannot see this, and they simply add up benefits and harms. This is particularly pernicious when they counsel not the elimination of externalities, but the optimization of them: eliminate only the inefficient externalities, and leave the rest alone. If they acknowledged that some externalities are wrongful, they could not in good conscience (or at least without regret) recommend any less than elimination (recall the ridicule attending to 2004 presidential candidate John Kerry's statement that he would reduce terrorism to a "manageable level"). That's why normal people are so incredulous when you tell them it isn't efficient to eliminate pollution, because most people (for better or for worse) regard pollution as a moral wrong, not to be optimized but to be eliminated. (Imagine if some brilliant young economist were to recommend the "efficient level of torture.")

Rather than turn back to this Pigovian mindset (not that I think we ever left it), why can't we start looking at the roles of right and wrong in the economy (however one chooses to define them), rather than simply adding up benefits and harms?  We may see that not all the benefits are "right," not all the harms are "wrong," and all the benefit in the world might not be worth a little wrongful harm.

UPDATE (Dec 4): The Wall Street Journal printed my letter to the editor along the same lines today.

UPDATE (Dec 7): Another economist jumps on the Pigouvian bandwagon.

“Universal Synthesis” Not Required

Jonathan B. Wight

Richard Reeves visited campus recently on the invitation of Sandra Peart.  Reeves is the author of a new biography, John Stuart Mill: Victorian Firebrand (London: Atlantic Books, 2007). 

One thesis Reeves advances is that Mill—after escaping from a force-fed intellectual youth directed by his father and Jeremy Bentham—moved away from utilitarianism.  Mill wrote of the cathartic experience of discovering 1) his emotions and 2) his intuitions.  Neither of these sits well with utilitarianism or neoclassical economics.

In his Autobiography, Mill recalls being startled by the following question and his own spontaneous answer:

Suppose that all your objects in life were realized; that all the changes in institutions and policies which you are looking forward to could be effected at this very instant: would this be a great joy and happiness to you?  And an irrepressible self-consciousness answered ‘No!’ (cited by Reeves, p. 62).

Consequentialist ethics (by itself) failed to provide meaning for Mill.  It fails to justify why any particular outcome (happiness, efficiency, and so on) should be selected.

I’m working on a book in which I argue likewise: it is foolish consistency to insist that we adopt only one ethical framework, whether consequentialism, deontology, or virtue ethics.  Milton Friedman, for example, relied on all three types of ethical arguments in analyzing the social responsibility of business (elaboration here). 

Ethical systems are interwoven; let’s learn when to use certain arguments for certain purposes.  Like John Stuart Mill, I would argue that “there is no necessity for a universal synthesis” (cited in Reeves, p. 110) –  at least until we are no longer complex social creates with histories, norms, and constructed meanings.