Thursday, February 8, 2007

Economics and Morality

TCS Daily has a good article entitled "The Morality of Rising Inequality". The article touches upon at least three different, very large topics of interest and concern to me: the relation of Economics to Ethics/Morality, Relative Wealth, which we have been posting about recently, and inequality. I will have to reserve most of my thoughts for future, more well planned posts.

Right now, I would simply like to highlight the point made in the article that Economics and Morality are separate disciplines. That is, Economics can tell us what is happening, usually why it is happening, usually whether it will continue and for how long, etc. It doesn't attempt to tell us whether or not this event/effect is a good or bad thing - except in economic terms. The specific case in question regards the situation of rising inequality among classes of people and whether this is a good, bad, or neutral thing. Economics does not attempt to answer that question - that is the realm of other disciplines (perhaps Morality, Politics, Socio-Political Philosophy, etc.).

Therefore, I propose the following analogy (poor as it may be): when people opposed on one level or another to what is generally called capitalism or derogatorily called "laissez fair capitalism" attack economics based on their perception that it is responsible for institutionalizing greed, materialism, etc., it is like a person who criticizes the indicator lights on a machine that, under the supervision of an operator, is producing a product that the person doesn't like. What they should really criticize (I leave the issue of whether their criticism is valid or not out) is either the machine that is not capable of producing what they consider to be a good product or the operator who is operating a perfectly good machine in such a way that it produces an unacceptable product or both, insofar as they both contribute to the undesired outcome.


Dane said...

You say that economics can tell you whether something is good "in economic terms." What are those? Efficiency comes to mind, but who says that efficiency is good or desirable?

In point of fact, I would say that economics can only be descriptive. As such, economics cannot tell us whether capitalism or socialism is better. It can only tell us which is better for achieving a given goal. Now, if the given goals are specified and identified with what is truly good, then economics will inform us about which systems and decisions are good.

Ken said...

In my post, I took for granted that the "given goals" of which you speak are things like higher GDP per capita, efficiency, etc. I agree with your points, but don't really think they are at odds with anything I said in the post.

Dane said...

Perhaps. Perhaps. But GDP per capita, efficiency, and the like are not the goals everyone desires. In fact, people who would rather not be labeled either "capitalist" or "socialist" would likely disagree with GDP per capita and efficiency as worthwhile economic goals. This difference of goals is usually the fundamental difference, I have found, between competing economic systems.

Ken said...

Can you elaborate on why (and which) different schools of socio-economic thought would think that such a thing as increased GDP per capita is not a good thing? It seems that differing economic systems usually argue that they are better than others precisely because they will increase the material well being of people.

I understand that there are systems of thought that argue that material well being is not the end all and be all of human existence and, therefore, should take a back seat to things like happiness, true fulfillment, etc., but I don't think that they would say that increased GDP per capita is not a good thing, just that it is not necessarily the best thing. After all, it is often easier to be happy, fulfilled, have time for leisure and recreation, etc. when you enjoy a high enough standard of living that you don't have to worry about where the next meal is going to come from or even where the money for the next child's dentist appointment is going to come from. Increased GDP per capita (read: "increased wealth or disposable income" - I am assuming that we are not talking about the type of situation as we have in many parts of Africa or South America where dictators and their cronies horde all the wealth of a nation so that, even if GDP per capita is increasing, the vast majority of people are not; rather, I am assuming that we are talking about an at least mostly free economic system where increased GDP per capita is indicative of increased material well being for at least most of the citizenry) frees people from those types of concerns and allows them to focus on higher things.

Thus, I find it unlikely that any socio-economic school of thought worth its salt would say that increased GDP per capita is a bad thing. I would also hold that for efficiency, but for reasons that are much more complicated and are not appropriate for a comment thread. If there are schools that think increased GDP per capita is a bad thing, I think they either don't understand basic economics well enough to call themselves a school of thought or I think they are malevolent towards the majority of people in favor of benefiting a small minority (which would presumably include themselves).

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