A Reply: Economics and Ethics

A correspondent of mine suggests we need to define both economics and ethics better if we are to resolve my ongoing angst with the state of the two combined.

This is true.

Ethics is, I think, well defined. The literature is full of notions of ethics and its evolution. Behavior that was once ethical is no longer so. Behavior that was once unethical is now acceptable. Clearly ethics is a relative and socially determined concept with changing views altering where its boundaries are. Currently there are behaviors falling outside those boundaries that economists seem blithely to continue to accept. This I attribute to the general out of date nature of the discipline. Remember that economics has successfully sealed itself off from reality, other disciplines, and society at larger for a while now. Instead it has taken on board its own vision of society, its own view of human nature, and its own calculus of how people interact. This allows it to have its own ethical standards separate from those being developed in the outside world.

Thus economists can genuinely argue that competitive pressures will reduce the incidence of unethical behavior. After all they invoke those pressures to resolve practically every other social problem, so why not ethics? Those of us less convinced by the ubiquity and efficacy of market forces would prefer to see a more interventionist element to ethics – a set of rules perhaps – to establish boundaries of behavior.

This is problem enough. More problematic is defining what economics is at all.

I don’t see a generally accepted definition that can survive close scrutiny.

The current orthodox definition is extraordinarily restrictive. It focuses the discipline only on the market and the supposed market forces that allocate resources within the market. Thus a whole host of other obvious features of a holistic economy are ignored. Such features include things like the institutional structures of an economy, the impact of class, gender, networks, and the business firm even though all these have notable and deep effects on the allocative outcomes of markets.

The single minded focus on markets represents, itself, an ethical stance. Or, perhaps, it is better understood as an ideological statement. It biases the language used and shapes discussion. Thus perfectly normal occurrences are called “market failures” with a negative connotation from the outset rather than being treated neutrally pari-passu with markets. Worse the supposition that markets when left to their own devices trend back towards an equilibrium throttles any ability to study non-equilibrium regularities in an economy. They are “unexpected” precisely because of the a priori assumption of equilibrium. They are thus not studied as deeply. Even though they are frequent or endemic in real world economies. Hence the ability of orthodox economist to deny the existence of bubbles even in the midst of one.

As ever, the language we use to describe a phenomenon plays a considerable part in limiting or enabling our ability to comprehend it. Economics seems particularity prone to this restriction. Looking back at the history of the discipline it has morphed and adapted to its political milieu, its social role, and the outcomes desired by the elites most invested in it. Thus it has variously produced ideas to attack or defend capitalism. It can bolster free trade or to explain the damage that such trade can do. It allows exponents of government intervention to co-exist along side libertarians. The contradictions are endless. There is no coherence to the subject through time with various ideas, and thus definitions, achieving temporary prominence as it serves the socio-political environment within which it seeks to add value.

The only exception to this chameleon like nature is the market focus of orthodoxy which has existed in one form or another since the discipline’s inception.

Given the slippery nature of its definition it is no wonder that its practitioners find it hard to coalesce around a common set of ethical standards.

I am not sure we can resolve this any time soon.

I remain disheartened by the lack of willingness to engage in discourse about ethical behavior within the discipline. Too often the topic of ethics slides towards a discussion of the social outcomes of economic policy advice – and hence the theory upon which that advice was based. This is valid since, surely, no discipline should willingly cause harm in society. Yet I see the larger challenge as being setting sound boundaries for personal and professional behavior. I acknowledge that such boundaries would then affect the subject’s content, or at least the way in which that content is taught.

Let me end this response to my correspondent with one example.

I do not see how anyone can be called an economist if they are not thoroughly steeped in the subject’s various components. As I have mentioned above the subject is diverse and almost defies description as a coherent body of thought. It is all over the lot. Thus to call someone an “economist” is misleading and a disservice to the public for whom the arcane and intricate differences of opinion within the discipline are irrelevant. The current dominance of market forces-eqilibrium-rational expectations orthodoxy, and the restriction of the subject by its adherents, ought to be made transparent to the public. So too should the subject’s constant defiance of empirical outcomes, its dependence upon other-worldly assumptions – Friedman notwithstanding – and its inability to construct a more comprehensive, inclusive, and noticeably reality based set of theories.

What I find most repugnant about economics, whatever that may be, is that it represents itself as knowing something that it palpably doesn’t know. That it continues to peddle advice based upon that ignorance without admitting its manifest failure. And that it attempts to hide its confusion behind a veil of rigor undeserved by its state of development. Yes, economics has brought order to some important ideas, intuitive and counter-intuitive both, but it falls well short of having understood its basic topic: the economy as we live it.

But there I go imposing my own definitions.

Maybe we should just leave economics alone as its current melange of assumption, rhetoric, and ideology.

Doesn’t that make getting some ethical standards of behavior even more important?