The Case for Meta-Economics Part 4: Accounting for Ethical Dynamics and Disputes in Economics

While some disputes in economics are technical, some of the most obvious major fault lines in economic thinking are based on conflicts rooted in differing ethical ideals about how economies or economic actors should function.  In current disputes, left-of-center economic perspectives (mostly Keynesianism and leftward) give economics the task of increasing human welfare through direct government action or indirect government regulation that may direct investment and reduce economic inequality.  Their opponents on the Right both in professional economics and popular economics, believe that social or economic welfare is better served with each individual working to increase his or her own personal welfare without the aid or direction of government.  While there are positions that advocate a pure form of one or the other of these ideals, most often the argument is about whether the economy should have more either government-led activity or more individual economic initiative. Fault lines in, for instance, current disputes about deficit spending and public budgets are to a large degree a re-creation of this divide, with budget deficit hawks mostly on the Right and critics of the anti-deficit campaign more likely coming from the Left.

Even though economics (or political economy) itself evolved as a discipline that emerged out of the moral philosophy (ethics) of the 18th Century, a thoughtful consideration of the interaction of ethics with economics will require work to re-integrate insights in an ongoing manner from philosophical ethics, ethics as expressed in political philosophy, and psychology.   Adam Smith, considered by many to be the founder of modern economics was himself a moral philosopher yet most modern economists do not recognize this aspect of his work, perhaps in an attempt to safeguard the appearance of economics as a science.  Interestingly the division of Adam Smith into economist and moral philosopher roughly corresponds to how much attention a particular analyst gives to one or the other of his two main works: the Wealth of Nations or The Theory of Moral Sentiments.  The Wealth of Nations is by far the more popular of his works, due to in part to its function as the founding document of the economics as a discipline.  Subsequent heterodox economists and critics of orthodox economics have stressed the continuity or complementarity between Theory of the Moral Sentiments and his later work.

Engaging in an exegesis of Smith’s authorial intentions is important but in the end does not account for all issues within the interface of economics and ethics, especially given the evolution of society and economies since Smith’s time.  Only in a multi-disciplinary “space” that can fully examine both the economic and the ethical dimensions of human decision-making and action can provide enough detail on all of these dimensions.  I am calling this space “Meta-economics” for obvious reasons, as “meta” usually refers to an overarching framework surrounding a discipline or type of information.

Ethics through the Filter of Politics

While in the late 19th Century, the economics discipline attempted declare its independence from politics by changing its name from “political economy” to “economics”, the continuing mutual influence of politics and economics is well known, as economists often, though not always, are differentiated according to their political leanings.  While political actors often differ in ideology and therefore the ethical framework they profess and/or use to guide action and policy, they also differ in their own (social and economic) interests and the interests of those they represent:  interests and ideology are not always exactly aligned.  People have been more apt to express their ethical leanings through political than through economic affiliations (a great uncle of mine apparently used to say that his heart was on the left but his pocketbook was on the right).

The formation and activities of political groups are not themselves a pure expression of sole concern about large-scale ethical issues.  Political groups most often express a mixture of specific geographical, cultural and economic interests combined with some overarching (ethical) ideas about how society should be: some affiliate with the group because of their specific interests while others because they subscribe to the general ideas that are influence by ethics.  However in politics, we are able to express, as did my great uncle, some ideas and strivings that are not tied purely to a narrowly defined set of personal economic interests.

Ethical considerations in economics then are most often mediated by politics or political affiliations.  Professional and folk economists are not necessarily consciously expressing an ideal view of what society should look like as would an ethicist but are often enmeshed in fights with other interest groups that nevertheless express ethical tendencies. Political groups hire professional economists to help them express their views and struggle over economic policy projections with their political opponents.  Wealth of Nations, the founding document of economics, is itself a polemic about economic policy.

Meta-Ethics and Economics

Ethicists divide ethics into three basic types:  deontology, consequentialism and virtue ethics.  These meta-ethical systems do not dictate specific ethical principles, outcomes or decisions but are simply the overall classifications for types of ethical decision making.  They are not in many cases mutually exclusive, though they are distinct forms of argument.  Deontology is traditional rule-based ethics where it is incumbent upon an individual to follow rules usually originating in tradition or in a social consensus to promote the good or prevent the bad; “deon” means duty in Greek and another way to express deontological systems is that they are duty-based ethical systems.  In deontology, rules are a-priori, or come before, good acts, which are good because they comply with the rules.  Consequentialism or teleological ethics, tries to determine the good on the basis of outcomes; if something turns out well, then it is good.   Generalized to society as a whole, consequentialism attempts to maximize good outcomes and minimize bad outcomes for the greatest number.  Utilitarianism is the most famous consequentialist ethical school and famously economics, in particular neoclassical economics, is an outgrowth of utilitarianism.   Pragmatism is another form of utilitarianism.  Finally, virtue ethics seeks to promote conditions which encourage the development of virtues, i.e. good traits, in people.

Very few real-world ethical systems are purely either deontological, teleological or virtue ethics.  While neoclassical economics and the neoliberal/market fundamentalist political tendency are mostly teleological, the insistence that markets will always produce the optimal outcome is an a-priori rule and therefore is a form of deontology.  Loosely regulated or unregulated markets generally are teleological in their operation, with profit seeking defined as “the good”.  By contrast, a completely teleological, pragmatic economic system would “not care” whether a good outcome came from the use of markets or the use of government intervention, though “prima facie” would prefer markets.

Despite the single a priori rule with which neoclassical economics operates that favors market solutions over other economic institutions, most critics of conventional economics tend to criticize it from the point of view of a deontological ethics, in one form or another calling neoclassical economics “amoral”.   For instance, left critics of neoclassical economics criticize its indifference to economic inequalities from the standpoint of an a-priori commitment to human equality.  Or environmentalists criticize neoclassical economics from the standpoint of a deontological commitment to the integrity of natural systems as a greater good than maximizing short-term utility for human beings.  Alternatively, from the standpoint of a virtue ethics, neoclassical economics is criticized for fostering the vices of avarice, consumerism, and indifference to the suffering of others.  Defenders of neoclassical economics would maintain that it contains a minimal set of deontological commitments (obeying laws against fraud, criminality, private property rights) but otherwise encourages people to increase their well-being by trying to increase utility through privately selected actions within these limits.

An Example of an Ethical/Political Dispute within Economics:  Deficit Cutting vs. Deficit Spending

A very hot contemporary issue in our economic-political-ethical system is the campaign by so-called “deficit hawks” to cut government spending and/or raise taxes rather than continued stimulus spending, thereby increasing government budget deficits.   Against this campaign a number of, mostly left of center, economists, action groups, and bloggers have decried either the foolishness or inhumanity of these efforts to cut deficits at a time when the economy is weak and people are experience economic hardship.  While some of this dispute can be attributed to differing views on how public finance and capital markets work, which might be called a scientific dispute, a portion is related to ethical valuations in economics.

Those who are focused on cutting deficits hold up the ideal of a normal transactional morality, either explicitly or implicitly, that once you borrow money that it is an overriding priority to pay the debt back, making minimal differentiation between government and personal borrowing.   In this view intolerably bad things happen to nations who delay paying back their debts.  By contrast those who object to placing a high priority on cutting budget deficits at this time in order to continue deficit spending on stimulus, are often arguing that serving human needs, meeting a deep economic crisis with all tools available and reducing the effects of economic inequality all are more important than the appearance of complying with normal transactional ethics at this very moment.  They also distinguish public from private debt.  These ethical arguments can be viewed either as being the underlying motivations to or co-existing with a number of other motivations including protecting private gain for specific interest groups as well as preferences for technical economic arguments about aggregate demand and creditworthiness of governments.

Beyond the ethical and the economic arguments or implied arguments, this debate is also carried on in political terms, where the specific interests and characteristics of one group or another are glorified or denigrated by political advocates and adversaries.  Deficit hawks tend to suggest that those who want to spend on deficit represent the interest of shiftless unemployed people, greedy bureaucrats and public sector unions, while casting themselves as advocates of fiscal virtue.  Their critics consider themselves defenders of ordinary working people and those who have been unlucky in the downturn and accuse their opponents of representing a political group that wants to cut tax-funded public services in particular public pensions to hand over these functions to the private sector, from whom these advocates may receive implicit or explicit benefits.

In the case of this or any other major divide in economic opinion, to understand the multifactor interaction of ethical, political and economic arguments, a meta-economic framework can allow each dimension to be examined without reducing or flattening that particular concern.  A reduction of, for instance, the budget deficit argument to purely economic arguments shortchanges the political and ethical dimensions and vice versa.

The precise use of a meta-economic framework is to try to disentangle the multiple strands of arguments for or against, for instance, deficit spending, rather than intermingling those strands for simple, but short-lived, rhetorical effect.  As we shall see, professional economists and popular economists (meaning everybody) are wont to do just this to gain advantage but also potentially mislead.

Gary Lynne’s Metaeconomics

Though I came up with the label “Meta-economics” before I encountered his work, Prof. Gary Lynne of University of Nebraska has been working for a number of years on a type of economics that he calls “metaeconomics,” to which I am sympathetic though it is a different concept.  To minimize confusion, I will try to use a hyphen between “meta” and “economics” to distinguish between his approach and mine though there is some overlap, especially when it comes to consideration of ethical issues.

Lynne is an agricultural and environmental economist who is very critical of the focus of conventional neoclassical economics on ego-istic drives and rational maximization of individual or firm-level utility.   Like many others, he feels that in the area of microeconomics (the behavior of individuals and single firms) that ego-ism remains largely unchallenged.  He proposes metaeconomics as a branch of microeconomics that incorporates orientations other than ego-ism, enabling economists to account for behavior that is driven by empathy, by ego-ism, or perhaps by other motives.

While there are clear overlaps in the area of considering ethics as part of economics between Lynne’s metaeconomics and what I am calling meta-economics there are also key differences.  I am not proposing meta-economics as a prescriptive (what Friedman called “normative”) type of economics that attempts to displace other economic views (much as I might like some of them to be displaced) but rather as an overarching framework that includes all types of economics and a host of other related disciplines (as they impact economic thinking and action).  Lynne is proposing metaeconomics as a contender to replace microeconomics and his theory may very well be on the road to doing this.  Lynne proposes his metaeconomics as being more inclusive than microeconomics and is therefore “meta”.  Lynne is however generating economic hypotheses based on metaeconomics and is attempting to test them (to account for and validate non-egoistic behavior).  Meta-economics as I conceive it, is a framework to understand any and all economic theories, Lynne is attempting to understand any and all types of economic behavior by individuals or firms via his metaeconomics.   If you are into the “type-token” distinction, meta-economics, what I am proposing, is a “type of types”.


About Michael Hoexter
I'm a clean energy marketing and policy strategist and consultant based in the San Francisco Bay Area.

3 Responses to The Case for Meta-Economics Part 4: Accounting for Ethical Dynamics and Disputes in Economics

  1. Pingback: The Case for a Metaeconomics Pt. 5: Tracing the origins of economic demand and preferences « Meta-economics

  2. Pingback: The Public Debt and Deficit Debate as a Conflict of Types of Ethical Systems « Meta-economics

  3. Pingback: The Public Debt and Deficit Debate as a Conflict Between Ethical Systems « Meta-economics

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