Economics should not be divorced from morality

by Michael De Dora

Last week, our friend Massimo Pigliucci published an essay here in which he argued for an idea I have long thought to be true: that economic considerations cannot be divorced from moral ones. Here is the appropriate passage from Massimo’s article:

“I simply do not buy the fundamentalist (yes, I’m using the term on purpose) libertarian idea that economics is all there is or that should count in pretty much all human transactions and social problems. The hallmark of a just society is precisely that it does consider issues of intrinsic rights — not just to life and property, as the libertarians would have it — but also to health, education, housing and jobs. The whole point of living in a structured society, as opposed to Hobbes’ war of all against all, is so that our lives are not going to be ‘solitary, poor, nasty, brutish and short.’ Which means that what [Larry] Summers dismisses as ‘social concerns’ really ought to be central to the way we structure our societies. Economic systems ought to be the servants of human flourishing, not its masters.”

As it turns out, I have been thinking about the relationship between morality and economics for a couple of months now. However, my thoughts have remained scattered in a Word document sitting in a folder on my laptop with several other essay ideas that are incomplete. Unfortunately, I have been suffering from an extended case of writer’s block coupled with real-world demands (you know, my full-time work advocating for reason and science at the Center for Inquiry). So, I should thank Massimo for piquing my interest in writing again.

The idea I would like to propose in this brief essay is this: economics cannot be divorced from morality because one’s values determine which economic structure he or she prefers. There are no such things as purely economic ends divorced from all other ends because economic decisions are made based on moral values. They also have a moral impact on other people.

At this point, I should define my terms. Morality is the sphere of one’s foundational beliefs and attitudes about right and wrong. Economics is the matter of how to set up and manage the financial situation of a given society or community. I think it is clear that morality, by its very definition, will play a major role in shaping the economic structure of a given society. Morality simply shapes how we approach most things in life, including economics. I also submit that economics is inextricably tied to the welfare of the citizens for which it functions.

But people in several political camps, namely libertarianism and neoliberalism, disagree that economics is so closely linked with morality. They believe economics is a discussion about business and bottom-lines, not ethics. This divide is also present in political news coverage. Take this quote from Mark Caleb Smith, director of the Center for Political Studies at Cedarville University: “Economic issues always dwarf social issues. … [The 2012 election] is shaping up to be an economically driven election with a possibility of foreign affairs entering the discussion as well.” This is precisely how most news outlets and polling organizations frame pre-election public sentiments. How many times have you heard that “people are voting on the economy, not social issues, this election cycle"?

Yet, while economic issues are in some way different than social ones — in the same way that, say, economics and philosophy are two different fields — they are also undoubtedly intertwined at many levels. At the interpersonal level, business transactions hinge on a basic sense of morality. When you purchase something, you trust that your source of information (sales person, gas attendant, waiter/waitress, Amazon.com review) is being honest about the quality of the goods offered. You also expect a certain degree of performance from the product you are buying.

Morality is also present in larger economic debates. Consider the question “how can we create jobs?” At face value, there might be little in this question that concerns morality. It is simply about increasing the number of jobs available to human beings. But what if I answered that the way to create jobs is to eliminate the minimum wage? Or to loosen restrictions on workday hours and factory conditions? Or to lower the tax burden on corporations and the wealthy? Or to repeal last year’s health insurance reform package? These questions all contain a moral aspect as well. Would it be right to allow companies to pay their employees however little they can get away with? Would it be right to rescind worker safety laws? Would it be right to increase the tax burdens on the middle and lower classes and allow further disparity? Would it be right to repeal legislation that increases the availability of health care?

Fortunately, we have a recent example of the public valuing morality over a purely economical calculation: the recent budget debates. Over the past couple of weeks, federal Democratic and Republican leaders have been working to finish a budget deal before the August 2 deadline that would cause the US government to default on its financial obligations. If the deadline is not met, there will be an immediate loss in federal funding for social programs like Social Security, Medicare, and Medicaid. Even if a deal is made in time, those programs could still see budget cuts or qualification changes. Meanwhile, at the state level, New Jersey Gov. Chris Christie’s budget cuts to public education were so drastic that they were ruled unconstitutional. The public has been outraged at every aspect of these potential and actual cuts and changes. The argument: such cuts are immoral given that these are necessary programs that benefit children and the worst off -- especially when there are other options, like taxes on corporations and the ultra-rich, or cutting, for example, the defense budget.

No matter where you stand on these issues, you cannot deny there is a moral component to all of them. Take the issue of taxing the wealthy. Many urge for higher taxes on the rich because they think it is immoral for a small band of people to horde most of the nation’s wealth while the majority suffers. Others argue that the rich should not be deprived of the money they’ve earned (though it should be noted much of this money is inherited or made at the expense of the lower classes through practices put in place by the rich class). Someone might desire to settle the debate by asking, “what is best for the economy?" But my point is that, at bottom, the question of “what is best for the economy” is really a question of “what should we want the economy to do or accomplish?” And that is a question not of pure mathematical reasoning, but of ethical contemplation.

In closing, allow me to spell out how I think the relationship between morality and economics might work. The first step is to figure out our necessary assumptions. For instance, what is the nature of human behavior and desires? How do humans act and interact? The second step is to think about our shared moral goals. I think the U.N. Declaration of Human Rights is a good starting place for that. The last step is then to assess which economic ideas and systems to employ so that our assumptions can be taken into account and that our goals can be realized. Economics is not just about studying and applying knowledge of trends, numbers, math, and business practices. It is also about taking into account the reality of human behavior and our moral concerns before making economic decisions — and then considering the moral consequences of those decisions.