Deirdre McCloskey

What Kind of Ethics in What Kind of Economics?

ScalesGuest post by Yannis Papadopoulos

The re-establishment of ethics in economics—and more precisely in economic theory—is now more than eminent. It is promoted and supported by numerous philosophically intrigued economists. The claim has shifted from Wertfreiheit to teaching economics’ students the importance of moral philosophy in the development of economic theory, and how virtues and moral values do not limit the objective perception of economists by dragging them down a road of vague cogitation, but offer a more concrete understanding of human action. “What to do, then, for economics? Answer: raise ethical men and women, some of whom become economists. We are not doing so now in the education of economists.”* Yet this procedure, even though presented and understood as a leap forward and an escape from the strict mathematical and narrow-minded neoclassical economics method, could still be inadequate and one-dimensional. The question is what kind of ethics are students being taught?

There is not just one ethical theory. As economic theories have their differences, so do ethical theories. Utilitarian and outcome-based ethics are embedded in economic theory and have played a crucial role in the formation of neoclassical economics. If utilitarianism and consequentialism are the only ethical theories that should play a role in economic theory, then we should rest assured that ethics never left and therefore there is no need for their re-establishment in economic theory. Thus, the argument is not to re-establish ethics in economics, since ethical values never left the discussion. The argument is to introduce other ethical theories in economics, which have not participated so far. Utilitarianism and outcome-based ethics can be found not only in neoclassical economics, but in some branches of heterodox economics as well. Kantian and rule-based ethics, however, have been limited to discussions concerning trade and transnational agreements and some policy making processes. Virtue ethics are nowhere to be found.

Students are not in need of introductory lectures that praise the importance of ethics in economics and present ethics only form the utilitarian point of view. Students can easily apprehend the utilitarian logic behind works of great classical and neoclassical economists without being taught the importance of utilitarian ethics. Economics’ students should be given the opportunity to connect economics with a variety of ethical theories. That could lead to a generation of open-minded and ethically-integrated economists and humans in general. By pretending to reexamine economics through ethics, yet being interested only in the utilitarian perspective of ethical values, the course is definite and parallel if not the same as the one economics have followed so far.

* Deirdre McCloskey, "Conclusion: Raising Up Private Max U," in Wilfred Dolfsma and Ioana Negru (eds), The Ethical Formation of Economists (London: Routledge, 2018), pp. 164-183, at p. 177. (Preprint here.)


Yannis Papadopoulos was born in Athens in 1993 and studied European and International Relations at Panteion University in Athens. He received his Master’s degree in Political Economy from King’s College London. At the moment, he is in the final year of his doctoral thesis entitled “The Ethics of Efficiency and the Efficiency of Ethics” at Panteion University, for which he has received a scholarship from the Hellenic Foundation for Research and Innovation (H.F.R.I).

Email: ioannisjohnpapadopoulos@gmail.com


Deirdre McCloskey on Humanomics

Bettering humanomicsBy Mark D. White

In case you missed it, there was a fantastic interview with Deirdre McCloskey—another of my main influences, as well as a longtime friend—conducted by Paolo Silvestri in the Spring 2021 issue of Erasmus Journal of Philosophy and Economics. Their discussion is wide-ranging and insightful, covering much of McCloskey's writing over the years, but a significant focus is on her book Bettering Humanomics: A New, and Old, Approach to Economic Science, released earlier this year by the University of Chicago Press.

In solidarity with Vernon Smith and Bart Wilson (including their recent book Humanomics), and all of them drawing ultimately on Adam Smith, McCloskey argues for a richer economics—"quantifiably serious, philosophically serious, historically serious, and ethically serious," as she writes in the preface to the book—that recognizes the subject of economics as human beings, not mathematical abstracts, which only gets us so far (and reasonable people can quibble about exactly how far that is).

McCloskey takes particular aim at behaviorism and positivism, "both top-down, infantilizing, as in nudging, and industrial planning, and other anti-liberalisms. And both are indefensible philosophically. And both are poor guides to understanding the economy" (p. 202 of the interview). For more on these points, see the discussion between her and Silvestri in the Journal of Institutional Economics (open access), which focuses more on her forthcoming book Beyond Behaviorism, Positivism, and Neo-Institutionalism in Economics (also from Chicago).


Much (More) Ado about Happiness

Mark D. White

In this morning's Wall Street Journal, James Bovard pokes a little fun at the US government's plans for measuring gross domesic happiness (of which Nicolas Sarkozy was a leading advocate), pointing to how well they currently measure the myriad economic statistics regarding things that aren't entirely subjective. Many economists take this very seriously, however; as it happens, I'm currently working on several projects that, to some extent, deal with this issue (as is Deirdre McCloskey, if I remember correctly). The literature is recent but already vast: a marvelous summary and critique can be found in Daniel Hausman's 2010 Economics and Philosophy article, "Hedonism and Welfare Economics."

My take, in a nutshell, is that measuring happiness is neither feasible nor desirable. It is not feasible because happiness is irreconciliably multifaceted (along several dimensions) and inescapably subjective. It is not desirable because any official focus on happiness violates ideals of liberal neutrality and personal autonomy regarding persons' individual pursuit of the "good life," and the measurement of such can only lead to excessive government manipulation (if not paternalism) towards that imposed end (as Bovard describes). Rather, institutions should be established and maintained to ensure that person have the maximal capacity to make choices in pursuit of their own interests consistent with all others doing the same. Only such a system can ensure respect for persons' own interests and the choices they make towards them.


Revise and resubmit... with style!

Mark D. White

SwordThis weekend's Wall Street Journal featured an article by Helen Sword entitled "Yes, Even Professors Can Write Stylishly," in which she criticized the quality of writing by most academics--and praised the exceptions, explaining some features that make good academic writing shine. (More can be found in her book, Stylish Academic Writing.) Having done my share of both writing and editing for various audiences, as well as lots of reading and refereeing, Sword's article got me to thinking about the challenges of academic writing and the pursuit of style in it.

I would tend to think that scholars in the humanities (such as philosophy and law) have more latitude--and more responsibility--to write stylishly than those in the physical and social sciences. Scientific writing is often rigidly formatted (sometimes explicitly by journals): present the problem, explain the model, derive results (theoretically or empirically), and interpret the results. This should all be written well, of course, but I think style is of less concern when you're explaining a negative second derivative or a statistically significant coefficient.

I remember writing my early economics articles (in theoretical industrial organization), in which it seemed all I was doing in the middle 80% of the paper was bridging the gaps between equations. The only "real" writing came at the beginning and the end, the parentheses that held the "stuff"--but ironically, the parentheses were the only part most people would read, so I learned quickly that careful attention to them was crucial.

Writing in the humanities--a category in which I would include non-scientific economics--is less structured. This gives scholars more freedom to exercise their personal style, and at the same time provides less scaffolding under which to hide bad writing. Naturally, philosophers and legal scholars, who are trained at crafting arguments, often have the most polished prose, but many economists excel at this as well.

Personally, I find much more stylistic freedom writing books (or contributions for edited volumes) than journal articles. While I agree with Sword that journal editors (and referees) value clear writing as much as anybody, I don't know if I'd agree that they appreciate stylish writing. Maybe it's just me, but I feel constrained to write very formally when I write for a journal; based on what I read in journals, it seems that is what most journal editors expect. (I say "most," because I know some journal editors that are exceptional in this way.)

I tend to be a fairly good mimic when I write, so I've been able to adopt my writing style to whatever venue I'm writing for, whether it be journal, newspaper op-ed, popular magazine, academic book or popular trade. Out of those, the journal "style" is definitely my least favorite, and happily I'm at a stage in my career where I'm no longer dependant on journal publications for professional advancement. But while books may reach a wider audience (especially outside academia), there is a degree to which regular journal publications help keep your name in the thick of things in a particular academic community, so in that sense I miss writing for journals. (It's just not as enjoyable--and shouldn't writing be enjoyable?)

Mimckry does not always pay off, though. For instance, Deirdre McCloskey is my favorite academic writer as far as style is concerned. I adore her tone--playful and gracious, yet firm and forceful--and I have to be very careful not to indulge my inner mimic and churn out third-rate McCloskeyisms when I write!

I make no claims to any significant degree of craft or style in my writing, academic or popular. I am very grateful when friends or colleagues read my work and say they can "hear my voice" in it, and I am especially happy when they say this in reference to my academic writing, in which it is more challenging to be myself. (My natural voice comes out much more easily in my chapters in the Blackwell Philosopy and Pop Culture books and my Psychology Today posts.) Whatever academic style I have is most apparent in Kantian Ethics and Economics: Autonomy, Dignity, and Character, especially in the introduction (available here). I'll just keeping trying to improve and hone my style as I keep writing. (And writing. And writing. And...)


Christianity, Greed, and Markets

Jonathan B. Wight

Via Mark White comes this link to a New York Times blog post by Gary Gutting, a professor of philosophy at Notre Dame. Gutting attempts to get inside the Republican candidates' debates and argues that a clearer and more careful understanding comes from seeing things from "inside" their world view. Here are some excerpts:

We could greatly improve the quality of our political debates if we simply held to the philosophers' rule of understanding and charitably formulating our opponents' views.

In particular, there is a basic tension between the two main elements of the conservative view: Christian ethical values and the free enterprise system. Christian morality is a matter of love for others and self-sacrifice on their behalf. A market economy assumes that all agents (employers, workers, buyers, sellers) act in their own selfish interests. The problem is evident in the New Testament's unease with the wealthy and sympathy for the poor; see, for example, Matthew 13: 22, Mark 10: 23-25 and James 5: 1-3.

The standard response to this sort of moral objection is that the "invisible hand" of the market produces public goods out of private selfishness. If we all act for our own selfish ends, there will be far more material goods for us to share than there would be otherwise. But this is a utilitarian argument; that is, one that judges actions as moral because they increase our material happiness. Christian morality, however, denies that moral good and evil depend on what maximizes such happiness. Christian love and self-sacrifice, in particular, are moral goods in their own right, regardless of their consequences.

Mark White rightly flags the second paragraph. First, Gutting makes the sort of mistake that Ronald Coase identified: science has no goals, only people have goals. Hence, the market economy itself makes no assumptions about agents, only people do. And it was a standard practice of economists to make such assumptions about selfish agents in the 20th century. But today such a view is largely obsolete. Anyone who has been reading Amartya Sen and Vernon Smith, or even anything written about Adam Smith, is by now aware that the old standard view is simply wrong.

Most markets—the ones that you and I frequent every day—do not operate in reality on the "greed is good" philosophy. To do so would be to alienate most customers. Yes, the butcher and the brewer and the baker want their lucre, but they acquire it within the context of a moral understanding—in which their self-interest is held in check by self-control and by genuine and natural feelings of benevolence and justice. Adam Smith, when writing about the invisible hand, explicitly noted that the "character" of the trader in a market was critically important to the operation of the invisible hand. For elaboration, see here.

Deirdre McCloskey has beautifully told this story in The Bourgeois Virtues: Ethics for an Age of Commerce (2006). Paul Heyne also provided a lovely short analysis in "Moral Criticisms of Markets," The Senior Economist 10(4): April 1995 (link not available). My own academic novel, Saving Adam Smith, traces Adam Smith's views on the role of virtues in the marketplace and shows its relevance for business operations, even seemingly cut-throat computer chip businesses in Silicon Valley. There's plenty to read on this subject.

The bottom line is that markets and virtuousness (in the Christian sense) are entirely compatible. The most exciting development for the 21st century is the rise of social entrepreneurs, who use the vehicle of a company and the institution of a market to lift people out of poverty and solve a myriad of problems. The motives can be many, and do not necessarily have to do with maximizing material consumption (think of all the entrepreneurs working to solve global warming or those solving local problems of survival by giving poor people access to markets). Profit is a necessary part of greasing the machine and making it sustainable over time. In a healthy competitive situation, profit is held in check.

No one would deny that the system breaks down sometimes, and there are many who use markets who are decidedly non-Christian in their pursuit of greed. But as McCloskey and Heyne make so clear, the motive of greed is operative under communism and all other systems as well—it is part of human nature. Nothing is perfect. But a competitive market is often the most transparent and easy way to deal with sociopaths like Bernie Madoff. That is not so say regulations are not needed. Even Adam Smith desired regulations in the financial sector to protect small savers.

So, while trying to get inside the world view of Republican candidates, Gutting does a service by calling attention to the need for understanding. But it is possible today to entirely rewrite his last two paragraphs using a more realistic science and philosophy of economics. I think his thesis still stands, crafted in a different way: The caricature of a market held by some Christians is that agents operate on the basis of greed and this caricature is indeed in opposition to Christian values. Much work remains to be done to overcome the ideological legacy of Scrooge and the "greed is good" image of entrepreneurs. Thanks to Gutting for bringing this to our attention.


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

Deirdre wsjMark 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.


Reading Ronald Coase – Pt. I

Jonathan B. Wight

I've been reading Ronald Coase's, Essays on Economics and Economists (Chicago: University of Chicago Press, 1994) and finding it a delightful collection. In these articles, Coase displays the virtuous attributes that Frank Knight insists are needed in a serious scholar: integrity, competence, and humility, and one should also add--courage. Getting inside Coase's mind is easy because of his clear and uncluttered writing style. He is quick to point out the weaknesses in his own knowledge and argument, which is refreshing.

In one of the first essays, "How Should Economists Choose?" Coase takes on Milton Friedman's essay on "The Methodology of Positive Economics," and argues that Friedman's account of evaluating models based on their predictions is essentially a normative judgment about how economists ought to proceed:

When Friedman says that the "ultimate goal of a positive science is the development of a "theory" or "hypothesis" that yields valid and meaningful... predictions about phenomenon not yet observed," I cannot help mentioning that a science has no goals, only individuals have goals. (P. 18, emphasis added).

While Friedman's normative goal for science is prediction, Coase argues that in actuality, economists choose the models they endorse in an entirely different way based on whether a model makes more sense intuitively:

Economists, or at any rate enough of them, do not wait to discover whether a theory's predictions are accurate before making up their minds. Given that this is so, what part does testing a theory's predictions play in economics? First of all, it very often plays either no part or a very minor part." (p. 24)

Furthermore, empirical testing is rarely conclusive. Coase observes that "... if you torture the data enough, nature will always confess." (p. 27). On a related point, economists are in a competitive situation. Their research is done to bolster the theory that they already believe in. Hence, "what we are dealing with is a competitive process in which purveyors of the various theories attempt to sell their wares." (p. 28). (This chapter was first published in 1982, and thus presages Deirdre McCloskey's work on rhetoric.)

If scientists are self-interested, and work in a competitive market, will the invisible hand work according to the maxim "Greed is good?" Coase doesn't address this directly, but there are enough hints here to strongly infer an answer. Coase quotes Frank Knight, who argues that the "basic principle of science -- truth or objectivity -- is essentially a moral principle, in opposition to any form of self-interest."

And yet, economists have their own self-interests at stake, which include not only money, but perhaps even more important, status. Coase quotes Samuelson as writing: "In the long run, the economic scholar works for the only coin worth having -- our own applause." (p. 31)

This market for ideas would not work as well unless individual researchers adopted moral principles that constrain self-interest. Coase again cites Knight: "[T]he presuppositions of objectivity are integrity, competence and humility." (p. 15) In other words, science needs virtue.


Assessing Competence to Refuse Medical Treatment

Mark D. White

Last night I read a wonderful and concise article by Jillian Craigie (King's College London) from the latest issue of Bioethics (25/6, July 2011) titled "Competence, Practical Rationality and What a Patient Values." The abstract follows:

According to the principle of patient autonomy, patients have the right to be self-determining in decisions about their own medical care, which includes the right to refuse treatment. However, a treatment refusal may legitimately be overridden in cases where the decision is judged to be incompetent. It has recently been proposed that in assessments of competence, attention should be paid to the evaluative judgments that guide patients' treatment decisions.

In this paper I examine this claim in light of theories of practical rationality, focusing on the difficult case of an anorexic person who is judged to be competent and refuses treatment, thereby putting themselves at risk of serious harm. I argue that the standard criteria for competence assess whether a treatment decision satisfies the goals of practical decision-making, and that this same criterion can be applied to a patient's decision-guiding commitments. As a consequence I propose that a particular understanding of practical rationality offers a theoretical framework for justifying involuntary treatment in the anorexia case.

Craigie argues for assessing the procedure--in this case, practical judgment--by which a person comesto the decision whether to refuse treatment, rather than applying external standards to the decision itself or the reasons that led to it. She emphasizes that in the past, simply exhibiting a behavior and expressing a preference that was characterized as or associated with a mental disorder was taken as evidence that the patient was "irrational." In the case of anorexia nervosa (on which she focuses in the article), if the patient expressed an overwhelming desire to be thin, this was judged to be irrational simply because that was one of the hallmarks of the disorder. Craigie correctly identifies this as circular reasoning, akin to listing homosexuality as a disorder and then "concluding" that homosexual desires are "pathological" (or interpreting denial of a problem as evidence of the problem--for one of the most disturbing instances of this that I've read, see Deirdre McCloskey's Crossing: A Memoir).

Instead, Craigie recommends looking into the quality of the reasoning by which the patient forms the value or preference that leads to the treatment refusal. She considers several approaches of evaluating the process by which the patient comes to a particular conclusion rather than simply judging the decision itself, or the value or preference that led to it. I was gratified to see this approach, because that is what I argue in much of my work on paternalism and welfarism: assuming that paternalism is justified in cases of involuntary behavior, involuntariness must be assessed procedurally--based on how the individual came to "act" in a certain way--rather than judging the value, prudence, or wisdom of the act itself. Whatever external evalutors think of an action is irrelevant--all that matters is how she came to that decision, and if she acted voluntarily.

Craigie argues that there is some evidence--though perhaps not enough at this point--to suggest that anorexics form their overwhelming desires for thinness in ways that compromise their true autonomy, and compares this case to Jehovah's Witness who refuses blood transfusions, in which case she recognizes that the religious value leading to that decision may be a core value of the individual, and is therefore less questionable. This is in line with what I have argued elsewhere (including chapter 5 of Kantian Ethics and Economics), we should assume that individuals make decisions in their own interests, as complex and multifaceted as they are, and interference with them is only justified if there is evidence that a decision (or action) was not made (or taken) voluntarily. (And yes, I realize that voluntariness is a topic of discussion all in itself, but I think the point stands even without specifying it further.) Refusal of medical treatment is  fantastic application of this, and I am very happy Craigie raised these issues.


The Royal Wedding and the Nobility of Commerce

Mark D. White

There's a very interesting article in today's Wall Street Journal about the commcerical background of the Middleton family, and how the impending royal nuptials can be seen as belated recognition of the worth of commerce and entrepreneurship:

Much has been made of the fact that Kate Middleton, Prince William's bride-to-be, is a "commoner." Her mother and father began their careers working as a flight attendant and flight dispatcher for British Airways, respectively. Yet she has known many of the privileges of aristocracy because her parents built a multimillion-dollar business that supported elite educations for her and her siblings.

Some have wondered if Kate will be a "people's princess," in the mold of Prince William's late mother, Diana. But Kate and her family actually embody a noble, if relatively modern, tradition of their own: a tradition of bettering oneself and one's family, while improving the lot of society. In other words, entrepreneurship.

For centuries in Britain, commercial activities were looked down upon by many in the aristocracy, whose wealth lay in landownership and who would not deign to dabble in trade. This week's wedding can be seen as the culmination of a long process of elevating the social status of entrepreneurship itself.

It's curious that Deirdre McCloskey's name didn't show up anywhere in this article, which is an straightforward application of her work defending the honor of commerce and tracing its historical development and importance.


Consequences of Economic Downturn -- Part I

Martha A. Starr

Thanks, Mark, for your invitation and warm and enthusiastic welcome! And also for your support and persistence in "nudging" us to get this book project done.  ;)

Conseq The central idea of Consequences of Economic Downturn: Beyond the Usual Economics is to discuss issues that usually get left out of discussions of the 2008 financial crisis and the "Great Recession" that accompanied it –- which threw one in 10 members of the labor force out of work. Such discussions usually emphasize specifically economic dimensions of the financial crisis: What role did mortgage securitization play in causing the crisis? Was it Greenspan’s fault for leaving monetary policy too lax for too long? What is wrong with incentive structures in financial institutions and markets that cause people to take on too much risk? Not that these questions are not important, but they’re only part of the picture. A much wider range of factors led to the crisis and downturn -- social, ethical, political, cultural, educational -- and this wider range needs to be discussed if we are to have any hope of bolstering the economic and financial system’s resilience against convulsions like this.

So over the next few weeks, I’m going to lay out some of the core ideas of the book -– beginning today with those of someone whose ideas Mark has already discussed, George DeMartino of the University of Denver, whose book The Economist's Oath: On the Need for and Content of Professional Economic Ethics has attracted attention on a global scale.

George’s chapter addresses the question of whether knowledge practices in economics may have contributed to the crisis and downturn. Unlike just about every other academic profession (statisticians, mathematicians, physicists, sociologists, and more), economists have always resisted adopting a code of conduct or ethical code spelling out how they are expected to act –- as matters of keeping the profession’s members from using their specialized knowledge in ways that could advantage them but harm others, and/or that could cast doubt on the value, integrity and competence of the profession’s work. George doesn’t actually advocate such a code, because he thinks it would oversimplify the thickly tangled ethical questions here. Rather he calls for the establishment of a field of professional economic ethics which, like the field of medical ethics, would seriously study how economists should tackle specific problems that come up in the course of their work.

Important here, for example, is the principle widely found across the professions that people should avoid courses of action that could do harm to others (like the physician’s oath). George argues that reasonable concern for the wellbeing of others –- especially vulnerable groups lacking the wherewithal to deal with a period of significant economic and financial distress -- would have impelled economists to think more squarely about the risks inherent in the constellation of developments in the years before the financial crisis (the housing price bubble, rise of subprime lending, proliferation of collateralized debt obligations, and so forth). This, in turn, would have clarified their social responsibility to try to stop practices that were contributing to these risks, and/or advocate policies that would tamp them down.

Personally, I think the economics profession does need a code of ethics because, as Deirdre McCloskey says, “words matter,” and a well-done code could go a long way towards making people think twice before (say) taking $135,000 speaker's fees from Goldman Sachs, then giving them privileged access to the White House. But George’s argument against oversimplifying is powerful and thought-provoking.

Up next: Robert Prasch’s chapter on policies and institutions that shift risk away from wealthy and powerful institutions onto folks like average taxpayers.