And the Real Butchers, Brewers and Bakers? Towards the Integration of Ethics and Economics
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Abstract
The difficult dialogue between human rights and business shows that neither the adoption of codes of conduct nor the enforcement of legal norms would overcome the supposed incompatibility of ethics and economics. Such a general supposition is the effect of a narrow understanding of economic activities, which in turn is the result of both neoliberal ideology and the traditional externalising approach of economics. I stress the necessity of the integration of ethics and economics, which would require not only the broadening of the economic horizon, but also the redefinition of the status of economic theories. I propose to conceive of this redefinition as a shift of the theoretical allegiance of economic conceptualisations, from the supposedly descriptive natural and social sciences to the discourse of politics.
This paper develops the important argument that, if policy is to be effective in encouraging ethical behaviour in business, a change in ideology away from neo-liberalism is required, but also methodological change in economics. In particular, rather than classifying ethics as an external constraint on efficient economic activity, the scope of economics needs to be broadened to encompass politics and also to incorporate ethics as an integral aspect of socio-economic activity.
The paper is wide ranging in its coverage, drawing on disciplines outside economics. It is particularly interesting in its concluding discussion of addressing performativity. Since actual behaviour has been influenced to conform to the mainstream account of atomistic self-interest, it is argued that economics should expand to incorporate political theory in order to help us understand actual behaviour in the economy.
The title is taken from Smith’s famous quote, which is used in modern economics to provide rhetorical support for the fictional concept of economic man. This use departs from Smith’s own understanding of behaviour. But the account of Smith is confused by the assertions (page 7, para 2) that he sought to establish universal laws and that he separated economic activity from other behaviour. This account of Smith’s methodology is not central to the argument, but it is controversial and thus distracting. This is particularly a pity since Smith’s thought arguably already had the characteristics this paper is advocating, as acknowledged in several passages (eg page 5 line -6).
The analysis considers the narrow focus of economics on variables which can be ascribed monetary value, to the exclusion of a range of factors, including ethics. These are classified as externalities which are defined as ‘everything economic thought refuses to deal with’ (page 8). But normally economic externalities refer only to non-marketed consequences of economic activity for third parties, and in many cases these may be ascribed monetary value. But this customary definition also doesn’t extend to everything that goes into economic activity, including ethics, and it is this which seems to me to be more central to the argument in the paper. It may be that the term ‘externality’ has different meanings in other disciplines (the term is taken here from a paper by Galtung), in which case its use requires more discussion. But preferably an alternative should be found in order to avoid confusion.
Minor editing suggestions
Page 2 line -5: delete ‘as’
Page 4 line 3: substitute ‘of whether’ for ‘if’
Page 4 para 2 line 9: substitute ‘over’ for ‘since’
Page 5 line 2: substitute ‘Over the last’ for ‘Since’
Page 5 line -7: substitute ‘enforcement’ for ‘enforcements’
Page 6 para 3 line 1: substitute ‘dealing’ for ‘deal’
page 7 line -11: substitute ‘looking’ for ‘look’
page 8 line 5: substitute ‘into’ for ‘in’
page 8 line 7: substitute ‘words’ for ‘terms’
page 9 para 2 end line 12: substitute ‘against’ for ‘towards’
A) General comments
This paper centres on the “difficult” dialogue between ethics and economics. The aim of the Author is to challenge the assumed divergence of economics and ethics resulting from a “neoliberal ideology” and from the “externalising approach to economics”. It is argued that the narrow understanding of economic activities provided by mainstream ideas prevents an integration of these fields. Conversely, such integration is viewed as crucial for knowledge advancement and for improving policy. To support his arguments, the Author draws from a number of scholars (for example, Amartya Sen). In advocating major methodological and theoretical improvements, the Author stresses the need to broaden economic horizons and redefine “the status of economic theories”. The need to improve the use of concepts and terminology in economics is also addressed by the paper (p. 10). In the concluding remarks of the paper, a better application of economics in addressing important social problems is being advocated: to achieve such a goal, economics should encompass politics.
The paper is both insightful and quite easy to read. It is promising and, all in all, quite well-written (even though some parts should be developed a bit further). From my point of view, the following points are particularly relevant. They emerge as the major points in the paper:
the ability to elicit discussion and, at the same time, stimulate research on the relatedness between ethics and economics;
the ability to attract a wide readership ranging from economists and policy-makers to scholars working on ethical issues in economic thought;
the underlying assumption that both ethics and economics (economic theory and thought) can impact economic practice, improve social relations and, more in general, social reality;
The ability to spot some of the flaws in economic theory: for instance, the simplistic idea that economic actors operate individually, which is often used on the one hand to support the view that economics is a quasi formal science; and on the other hand to legitimate unregulated business.
B) Recommendations for improvement
In providing my comments, I aim at being frank. Comments and recommendations should be useful primarily to the Author as their purpose is to help him in finalising the paper. Needless to say, I leave to the Author the faculty to either accept (some of) them; or reject them.
1) The Author manages to successfully discuss a number of different viewpoints in economics, and to list some of the causes for the lack of a substantial integration between ethics and economics. Nonetheless, even though the content of the paper is clear, some chapters should be better integrated. Specifically, some parts of the analysis and related discussion need to be further substantiated: for instance, a major reference to Adam Smith – on page 5 – needs to be better conceptualised and framed, as it ultimately provides the inspiration for the title of the paper.
2) An introduction stating the purpose of the paper could be added at the beginning. Such introduction would provide the reader with a framework to better follow subsequent developments. The introduction could already summarize the proposal by the Author based on his analysis as well as the recommendations developed in the last part of the paper. Also, readers would benefit from a summary of the chapters and a short outline of the structure of the paper. This would help to focus the reader’s attention from the very beginning.
3) Key concepts such as “ethics” and “human rights” seem to be used somewhat interchangeably throughout the paper. These concepts should be used with caution as each of them has specific meaning(s). While in practice it is difficult to clearly separate between human rights, ethics, and politics due to their relatedness, defining these concepts at the outset is nonetheless crucial.
4) The statement on page 5 (paragraph 1) based on a reference to Susan George appears to be somewhat questionable. To cite from the Author, “… the ideological climate shapes our common ideas”. This sentence is quite straightforward. Although it is difficult to disagree with the fact that mainstream ideas do have an influence on the society as a whole, it is debatable whether (and to what extent) common ideas are actually “shaped” by a given ideological climate. What exactly do common ideas stand for, and are such ideas similar in kind? In democratic societies, it is a matter of individual choice, values and tastes (and, often, wisdom) to either accept or discuss, question and improve common ideas regardless of the “ideological climate”. While the masses may be subject to ideology and ideological influence, individuals still retain the chance to discuss common ideas, provide new ideas and, thereby, improve the ideological climate.
5) On Adam Smith. Adam Smith is a major – though indirect – source of inspiration for this paper. However, it seems to me that the Author somehow accepts the “neoliberal” interpretation of Adam Smith. It could be argued that the discussion is centred on the interpretation of Smith (e.g. by neoliberal scholars) rather than on the original as such. The reading of Smith by neoliberal scholars could be questioned further. On the one hand, the Author manages to effectively spot some of the flaws in it. This is clear, for example, from his remark with reference to the settings and legal contexts in which economic agents operate: “Smith knew it well, but his neoliberal epigones prefer to let the contracting actors perform in a social vacuum” (p.5). On the other hand, however, legal enforcement and behavioural ethics in economic contracts and exchange, and particularly Smiths’ understanding of them, could be discussed a bit further.
One possible strategy to tackle this issue is to simply stress the fact that, in the past, Smith has been interpreted without adequate attention and sufficient depth. His reputation rests largely upon his ideas of how rationality and self-interest in market economies translate into economic well-being. Such a reading leads to a simplistic, straightforward and, possibly, misleading interpretation of his ideas. It should be noted that in some of his essays, Smith does acknowledge the importance of morality, moral sentiments, and ethical conduct. As far as I know, he views “sympathy” as complementary to “self-interest”. Therefore, a general suggestion for future research is to try to assess whether a different (e.g. sociological) interpretation of Adam Smith is possible; and to evaluate whether one can find inconsistencies in Smith’s scholarly work, as this would open the room for new perspectives on his seminal work.
6) Concepts such as “neoliberal ideology” and categories such as “neoliberals” and “neoliberal theorists” should be clearly defined from the outset of the paper. Currently, these concepts are open to discussion (see, for instance, the working paper by Thorsen and Lie, referenced below). Who are the “neoliberals” criticized in the paper? Are they economists such as Milton Friedman? Policy-makers inspired by a “laissez-faire” ideology? Or political theorists discussing the (assumed) inefficiency of the welfare state?
The following quote from Paul Davidson may be useful to shed light on the concept of neoliberalism: “…[since the 1970s, economists and government policy-makers have buried and almost forgotten Keynes’s economic ideas and philosophy]. Led by Milton Friedman and his colleagues at the University of Chicago, the ideas of the economics profession were recaptured by a free market, laissez-faire ideology. The public and government policy-makers were educated in the classical economic ideas that only two things had to be done to promote economic progress and prosperity: (1) end the era of big government by reducing taxation to a bare minimum so that government would have had no money to spend on “lavish” programs, and (2) liberalize markets from all the government rules and regulations that had been installed by Franklin Roosvelt’s New Deal administration. This alleged desirability of small government and unfettered markets was embraced by politicians such as President Ronald Regan in the United States and Prime Minister Margaret Thatcher in the United Kingdom” (Davidson, 2009, 3).
In sum, there is still some controversy and dispute around the concept of neoliberalism (see for instance Harvey, 2005). The entry for “neoliberalism” in Wikipedia suggests that the meaning of the concept “has changed over time and come to mean different things to different groups”. I believe that providing references to the neoliberal scholars would only add substance to the analysis in the paper. On the other hand, this would help to substantiate the proposals advanced in the last part of the paper. One way to improve this point would be to provide an appendix with some references to the neoliberal school of thought, for instance to the most influential neoliberal scholars and some of their essays. I believe this would, ultimately, add substance to the paper.
7) The idea that economic agents neither operate in a social vacuum nor are they being driven simply by self-interest clearly emerges from the discussion. This, in turn, favours a social perspective on economics and business (which is, in my opinion, a major achievement of this paper). In order to support such a point of view, the Author takes the concept of “self” into account (last paragraph on page 5, continuing on page 6). I agree with the fact that the “concepts of ‘self’ and ‘interest’ are problematic, because they … are shaped through social interaction”. To further support this argument, I recommend to reference the work of the American psychologist Kenneth Gergen, for instance his insightful book “The Saturated Self” (1991). Indeed, Gergen challenges the idea of a coherent and unified self as well as that of subjectivity. He takes the debate further by arguing that the Western discourses for understanding the “self” (and, thus, the “others”) are subject to transformation. Such ideas – which are rarely considered by economists – may become a source for scholarly investigation.
8) It seems to me that the concept of “externality” – on page 8 – lacks in clarity. Some additional references to Johan Galtung and his understanding of the concept would be useful to shed light on the discussion, as some readers might be unfamiliar with his work. A discussion of the concept of “externality” would also help to better explain why it is largely mistaken to view ethics as an external constrain to economic success and prosperity.
References
Davidson, P. (2009) The Keynes Solution. The Path to Global Economic Prosperity. New York: Palgrave Macmillan.
Gergen, K. (1991) The Saturated Self. Dilemmas of Identity in Contemporary Life. New York: Basic Books.
Harvey, D. (2005) A Brief History of Neoliberalism. Oxford: OUP.
Thorsen, D. E. and Lie, A., (?) What is Neoliberalism? (University of Oslo, mimeo) http://folk.uio.no/daget/What%20is%20Neo-Liberalism%20FINAL.pdf (last accessed: 14 January 2013)
Wikipedia, ‘Neoliberalism’. http://en.wikipedia.org/wiki/Neoliberalism (last accessed: 14 January 2013)
First I would like to thank Sheila and Mitja for their precise, insightful and constructive comments on my paper. As these comments partially overlap, I will address their suggestions by grouping them together by issue.
1) Adam Smith, or better, the two Adams: the moral philosopher author of The Wealth of Nations, and the caricature appealed to by his pretended neoliberal epigones. I do agree, I did not underscore enough the divergence between the two Adams (I probably took it too much for granted).
2) Externalities: again, because I (wrongly) thought it obvious, I did not clarify how Galtung’s rendering of the concept of externalities recasts its previous (and well established) neoclassical interpretation.
3) Neoliberalism: I did not give a definition of the term, as it is a kind of portmanteau for a heterogeneous mixture of theories and policies, which well exceeds the merely economic dimension. Probably, neoliberalism can be best grasped in historical terms, as did Foucault in his cycle of lectures published, somewhat misleadingly, as The Birth of Biopolitics. In a similar vein, I may also refer to my own short genealogy of economic theories, which appeared on the real-world economic review with the title ‘Beyond Economic Fundamentalism.’
4) The indistinction between human rights and ethics was intentional, as I used these concepts as (different) expressions of the theoretical field of values, as opposed to the theoretical field of facts, to which is generally ascribed the economy. My paper targeted precisely the dichotomy facts/values, which inevitably severs business from human rights, as well as (in more general terms) economics from ethics. I proposed to rethink economic thought within the paradigm of political thought because the latter does not exclude issues of value.
5) I would like to share Mitja’s trust in the power of individuals, but I am afraid that cultural fashions (ideologies, religions, scientific theories etc.) shape our ideas no less than the dresses available over time on the market shape our bodies. I like to think that the project of a pluralist economics of our World Economic Association is meant to be the joint production of a cultural fashion alternative to the neoliberal one.
I will revise my paper in the light of the previous considerations.
Last but not least, I am grateful to Sheila for her precious editing contribution
Riccardo