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ASSIGNMENT COVER SHEET 2016-2017

Please copy a completed sheet to the beginning of your essay

DEPARTMENT: …Political and Cultural Studies ……………………………………

STUDENT NUMBER: …799843…………………………………
MODULE CODE/TITLE: …HUP304 Philosophy and the Social Sciences ………………………..
ASSIGNMENT TITLE: …Is there a legitimate place for ethics, and ethical considerations,
within economics? ………….
WORD COUNT: … (Not including references)……4270…………….
LECTURER/TUTOR: … Dr Mario van der Rhur… (the person who will mark your assignment)
DEADLINE: …19……/…05……/…2017…….. ( 4 pm)

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DATE:....19/05/17................... time:............11:25

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penalty of zero will be applied for late submissions.
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 this is all my own unaided work, and does not contain unreferenced material copied from
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Humanities Handbook for Undergraduate Students’, and accept that this assignment may
be copied, stored, and used for the purposes of plagiarism detection
 this assignment has not been submitted, or any part of it, in connection with any other
assessment

Student number.............799843................................................ (In place of signature)

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HUP304 Assignment

Is there a legitimate place for ethics, and ethical considerations, within economics?

The study of economics, as with science, is one that should lead to practical outcomes. It is a

topic that strong political connotations, where the structure of political society, and society in

general, is influenced by the economic principles and structure that is in place. Therefore,

economic principles, and their application, directly affect the lives of people that live within

its structure in a way that other social sciences, such as psychology and psychiatry, do not.

The study of ethics, like economics, is a branch of philosophy that should also have

real world applications. Ethical considerations play a role in daily activity, and quite often

feature in the economic choices of individuals, where consumers may choose to purchase free

trade coffee, animal free food products, or clothing featuring fake fur. These choices of

individuals marry the fields of ethics and economics together, however, debate continues as

to whether ethics, and ethical considerations, should play a role in determining the economic

structure of society, economic policy, or in the way free market capitalism operates in

western countries.

It is therefore the scope of this essay to begin by examining ethics, whereby its

purpose is looked at, as well as general definitions. One branch that will be focused upon is

that of Utilitarianism, due to its links with economics, of which will be discussed later. Here,

Peer Singer, and his views on practical ethics will be highlighted, due to the links he makes

between ethics and real world issues.

Economics will then be discussed whereby the purpose of economics, according to

various economic schools will be seen. This will lead into looking closely at the two

dominant schools of thought, namely neoliberalism and Keynesianism, due to their huge
 3

influence on western economic policy in the twentieth, and twenty-first century, along with

what they prioritised regarding economic growth, the value placed on welfare systems, and

tax systems.

The essay will then look directly at ethics regarding economics, where the ethical

consequences of economic action will be discussed, such as the consequences of economic

growth. From this, it will be discussed whether greater utility for the poorest countries and

people, would occur if ethical considerations were considered when pushing for economic

growth, paying attention to economic growth and climate change.

This essay will then briefly deal with individual economic concepts that play a role

in economic thought, including self-interest, and rational behaviour theory. Looking at these

issues mentioned, it will be seen that the case for ethics to play a role in economic affairs is

strong, whether it be in individual economic relations, or on a global scale.

Therefore, to begin, it is important to get an understanding of what is meant by

ethics within this essay. Generally, ethics is a branch of moral philosophy that “refers to

beliefs concerning right and wrong, good and bad – beliefs that can include judgements,

values, rules, principles, and theories”.1 These beliefs and ideas are aspects that affect daily

life, due to the continued choices that are made by each individual, whether they be in

relation towards another person, or the economic choices that are made when purchasing

goods. The importance of ethics and morality is foundational to society, and to many of the

actions that a person could partake in. One area where ethics takes an institutional position

within society is within the criminal justice system, whereby unethical action can often lead

to financial penalties or imprisonment, therefore linking ethics with individual action.

1
Lewis Vaughn, Doing Ethics, 4th edn (New York: W. W. Norton & Company, 2016), p.3
 4

This linking of ethics with action also gives rise to a third important element, that of

outcome. This outcome is generally a key factor in terms of determining if an action is

deemed worthy of punishment in the justice system, and it is one key factor in the ethical

school of utilitarianism. Utilitarianism, of which was brought to prominence by John Stuart

Mill (1806-1873), was a “doctrine that the basis of morals is utility, or the greatest happiness

principle, holds that actions are right in proportion as they tend to promote happiness, wrong

in proportion as they tend to produce the reverse of happiness”.2 This therefore links the

action of a person with that of the outcome, and deems whether an action is right or wrong

based on whether the outcome is a preferable one or not for those involved. This one branch

of utilitarianism, known as preference utilitarianism, is most notably advocated by Peter

Singer, where he states that “an ethical judgment that is no good in practice must suffer from

a theoretical defect as well, for the whole point of ethical judgments is to guide practice”.3

Taking this view of ethics for the purposes of this essay, it is clear that ethics should

be used to guide the actions of individuals in daily life, and should not solely be a theoretical

concept. Areas such as the eating of animals, euthanasia, as well as the giving of aid to

developing countries are all topics of discussion that have an ethical argument, an argument

that seeks to cause change in the behaviour of people, as well as countries.4 Following these

lines, it could be said that economics, economic decisions, and considerations, should be

influenced by an ethical framework that seeks to increase the utility of those that are affected

by them.

However, first it should be noted that economic theory differs to a large extent with

regard to what underlying beliefs are held by the various schools of thought. These

differences, from the outset, place the importance of ethics on varying levels, whereby policy

2
John Stuart Mill, Utilitarianism, 1st edn (Ontario: Batoche Books Ltd, 2001), p.10
3
Peter Singer, Practical Ethics, 1st edn (Cambridge: Cambridge University Press, 2011), p.1
4
These topics can be viewed throughout many chapters in Practical Ethics
 5

can be void of any direct concern for ethics. This is often the case within the neoliberal

school, where the underlying ideology stresses the ineffective, and ultimately destructive

concern for ethics on a societal level. This is clearly seen in the writing of Friedrich Hayek,

where he states that, regarding the accumulation of great wealth:

What those who attack great private wealth do not understand is that - by directing resources
to the most productive uses that wealth is chiefly created. And there can be no doubt that
most of those who have built up great fortunes in the form of new industrial plants and the
like have thereby benefited more people through creating opportunities for more rewarding
employment than if they had given their superfluity away to the poor.5

This statement shows that the thinking of Hayek is one that is not directly concerned with

economic principles, or altruistic action, that economically would directly benefit the poor in

society. However, the word ‘directly’ here is of prime importance, as it could be argued that

Hayek is in fact concerned with ethics, but does not believe direct ethical action would be

beneficial to the poor. Instead his faith in free market economics, and in the neoliberal

principle of non-interference within the economy in general, makes it possible to say that

Hayek is ethically minded when dismissing directly giving wealth to the poor. This would not

be the case if he believed the giving of wealth directly to the poor was of benefit to them, and

still advised against it.

Clearly then, it can be argued that despite the outward appearance that ethics does

not play a role in neoliberal thought, due to its almost religious adherence to free market

principles, from a neoliberal’s perspective, the system of economics that is advocated is a

system that does not need any direct ethical considerations to be taken into account due to

maximum utility being gained without them.

However, a second dominant school of thought to emerge in the twentieth century,

whose influence is present in various western governments, is Keynesianism. The ideological

5
Friedrich A. von Hayek, Law, Legislation and Liberty: Volume 2 -The Mirage of Social Justice, 1st edn
(London: Routledge, 1982).p.98
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opponent of neoliberalism, Keynesianism places direct emphasis on programs of government

that could be argued to be ethical in nature, ranging from the calling for a full employment

economy, to the implementation of a strong welfare system. Of these two, it is the welfare

system that has the strongest ethical connotations attached to it, of which will be discussed

later.

One common ground that these two schools of economics share is the importance

that they place on the value of economic growth. The continued push for economic growth is

one aspect of economics where ethics, and ethical considerations, could be seen to play a

role, due to the various consequences on people, as well as the planet, that economic growth

can incur. The advocates of pushing for continued economic growth speak of its benefits, of

which include higher average incomes, resulting in higher living standards.6 However, while

this could be said to be of direct benefit it individuals, “where living standards are low,

greater life expectancy, fewer diseases, less infant mortality and malnutrition – have mostly

played out long before a countries per capita income reaches the levels enjoyed in todays

advanced industrialised economies”.7 This does remove the link between the greatest ethical

considerations for developing countries and economic growth, as it could be argued that to

act in the most ethical way is to act on behalf of individuals, societies, or countries that are in

most need. However, with regard to the utilitarian argument, it could be said that the

continued emphasis for economic growth in developed countries is ethical as there would be

an overall increase in utility that does not affect the utility of the poorest countries in a

negative way. However, it will be discussed later whether the economic growth of developed

countries does negatively affect developing countries, and hence not promote a positive

overall utility.
6
"Benefits of Economic Growth | Economics
Help", Economicshelp.Org http://www.economicshelp.org/macroeconomics/economic-growth/benefits-growth/
[accessed 15 May 2017].
7
Benjamin M Friedman, The Moral Consequences of Economic Growth, 1st edn (New York: Vintage Books,
2006), p.3
 7

However, regarding economic growth in general, the relationship between

government policy and the net benefit of said growth for the individuals in society is strong.

As economic growth is measured in Gross Domestic Product (GDP), a country, due to policy,

could create large amounts of growth without it having much direct benefit to the poorest in

society. For example, a ‘progressive’ tax policy could be seen to be ethical in nature, where

individuals who are most able to contribute to the country’s finances via ta are expected to do

so. However, the opposite could be said with regard to this supposedly ethical tax policy. As

“economists almost universally subscribe to utilitarian ethics – a policy is good if it increases

wealth, best if it maximises it”.8 This therefore links ethical policy with that of efficiency, as

economists “would argue there is no inconsistency between morality and efficiency”.9 This

therefore gives rise to questions regarding the ethical nature of progressive tax policies due to

their inefficient nature. The inefficiency arises due to it being “primarily the most productive

people who save, invest and create jobs, a graduated tax will retard economic growth by

reducing the amount of capital available for investment”. 10

Secondly, ignoring the link between ethical policy and efficiency, it could also be

argued that progressive tax policy is exploitative in nature, where it is “based on the

exploitation of the wealthy by the less wealthy for no other reason than the fact that they have

more money than other people”.11 However, while it is clear that progressive tax policy forces

a higher payment of tax in real terms by those who are wealthy, it is quite often the case that

overall, members of society who are below average in terms of wealth, that are a part of a

regressive tax system, “pay larger percentages of their incomes in taxes compared to higher-

income taxpayers”. 12 Of these two ways of taxation, both of which have vocal advocates in

8
Robert McGee, The Philosophy of Taxation and Public Finance, 1st edn (New York: Springer, 2004), p.112
9
Ibid, p.112
10
Ibid, p.112
11
Ibid, p.113
12
Donald R. Nichols and William F. Wempe, "Regressive Tax Rates and The Unethical Taxation of Salaried
Income", Journal Of Business Ethics, 91.4 (2009), 553-566.
 8

today’s political system, both apply ethics, and make ethical considerations in ways that

produce results that are opposite I nature. However, as the argument that ethical

considerations should weigh heavily in favour of those that are the poorest in society is

strong, as well as that there are a greater number of poor people that rich in society, the

libertarian rhetoric that talks of ‘the exploitation of the rich’ seems to have little weight

behind it, and furthers the neoliberal thought that self-interest is the driving force of human

nature, of which will be discussed later.

Continuing the debate regarding ethics and economic growth however, an area

which is of current concern and susceptible to strong debate is that of climate change and

the environment. This area, when concerned with economics and ethics, is not a simple one,

where ethical arguments that support various sides of the debate can be made. One such

example is with regard to the increase in carbon dioxide (CO2) production that occurs when

a country becomes industrialised. This increase in CO2 is widely known to be a leading

cause in climate change, a change of which negatively effects the poorest countries of the

world a disproportionate amount to those that are developed. One ethical debate which

stems from this is whether poor countries should be encouraged to develop in a way that

western countries did in order to alleviate their poverty, even though this would continue,

and worsen, the climate change that is currently occurring. This ethical problem is

highlighted by Benjamin Friedman, where he states that “bringing the developing world

closer to the living standard of the Western world, presumably in large part through

industrialisation, would only exacerbate the problem” of climate change. 13 A solution to

this problem is not easy to find, as the ethicacy of limiting, or slowing down the

development of a country that had low infant mortality, poor healthcare, and education can

seem dubious. However, when looking at the economic and ethical utility of such a scheme,

13
Benjamin M Friedman, The Moral Consequences of Economic Growth, 1st edn (New York: Vintage Books,
2006), p.374
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economic long run and short run outcomes need to be examined. Regarding short run

outcomes, the retardation of development without the promise of long run gains in utility

would be unethical in nature. However, with positive long run utility gains forecasted for

improved living standards due to the curtailment in climate change expected, the ethical

dilemma for the steering of lesser developed countries away from fossil fuel use during

their industrialisation is strong.

However, while the actions of developing countries can be said to be of hindrance

to the combatting of climate change, it is currently the actions of developed countries, such

as the USA and China, and to a lesser extent those in Europe, that produce the greatest

amount of CO2. Therefore, developed countries responsible greatly for the consequences of

climate change. 14 However, it is clear that the arguments concerning the economic growth

of these countries, and with that the potential job losses in certain industries, are brought

directly into the public mainstream as ethical questions, again putting into conflict short

term utility gains with that of long term ones. It is these ethical considerations that play a

role in policy making, whether for the short run gain in economic growth 15or for a long run

increase in living standards, as advocated by the Paris Agreement. 16.

So while the link between ethics, climate change, and economic growth is well

documented, where direct ethical questions concerning human wellbeing and living

standards are prevalent, there are other aspects to economic growth where the ethical limits

of such growth are questioned due to the negative impact on other living species. These

questions put in conflict the potential improvement in living standards of humans, and

therefore things such as infant mortality and food production, with the needs of other

14
Ibid, p.374
15
"Trump Signs Order Undoing Obama Climate Change Policies - BBC News", BBC News, 2017
http://www.bbc.co.uk/news/world-us-canada-39415631 [accessed 16 May 2017].
16
United Change, "The Paris Agreement - Main Page", Unfccc.Int, 2017
http://unfccc.int/paris_agreement/items/9485.php [accessed 17 May 2017].
 10

species, where their living environment is destroyed. “In industrialised countries, this is

mostly a matter of isolated cases arising from logging operations, damming rivers, or land

development”. 17 However, “in the developing world what is the issue is the large-scale

conservation of primal forest and other natural areas to agricultural use, human settlement,

or industrial facilities”. 18 Clearly then, the issue is one that, like the consequences of

climate change, is centred in the developing countries. However, also like the issue of

climate change, many of the driving forces of deforestation, and the push for land to be

used for agriculture, stem from developed countries, and their need for sustained economic

growth. Therefore, it could be asked whether this growth in GDP in developed countries, of

which causes climate and environmental damage in developing ones, is a “legitimate focus

for our continued hopes and expectations? Or is there perhaps some other path towards a

more sustainable, a more equitable form of prosperity?”19 Either way, ethical considerations

come into play in the course of development, where the moral agents (in this case countries)

“must consider the interests of all others, and – must weigh these equally with their own”.20

Clearly, the points mentioned above are feature approaches to ethics that are

outcome based, as outcome based ethical systems seem to be the link that carries over from

the outcome orientated economic systems to other factors that influence human wellbeing.

This consequentialist approach is one that states that “action ought to be directed toward

producing the best foreseeable outcome”.21 However, the difficulty arises in knowing which

current action will lead to the best outcome. When dealing with actions on an individual

level, such as when deciding to purchase a brand of coffee, “should the only outcomes that

count be those that affect (the individual)”, where the individual buys the cheapest brand

17
Benjamin M Friedman, The Moral Consequences of Economic Growth, 1st edn (New York: Vintage Books,
2006), p.374
18
Ibid, p.374
19
Tim Jackson, Prosperity Without Growth, 1st edn (London: Earthscan, 2009), p.4
20
Johnathan White, Ethics in Economics: An Introduction to Moral Frameworks, 1st edn (Stanford: Stanford
University Press, 2015), p.29
21
Ibid, p.23
 11

possible in order to increase their own utility, or “should the action be judged based on the

outcomes produced for all”.22 This second possible action would be one that possibly

involves the purchasing of free trade coffee, where the utility for growers is increased at the

expense of a slight reduction in utility for the consumer.

This outcome based choice is one that asks questions of ethical obligation and moral

responsibility. Is a person obligated to put the interests of another on the same level footing

as his own? Adam Smith in The Theory of Moral Sentiments, “with his focus on virtue ethics

– would certainly say (it is not virtuous) that one’s obligation to a stranger’s child is morally

equivalent to the obligation to one’s own child”,23 therefore implying that different actions

can be ethical despite a potential for different outcomes.

However, “a number of ethical systems scorn the notion that ‘being victorious’

(achieving a particular outcome) should be the standard for right conduct”.24 With just

outcomes determining morality, a person that attempts to kill another, but inadvertently saves

them, has acted in a moral way. Rather a system of morality could be utilised that relies “on

rules or duties or on one’s character”.25 Putting this another way, instead of the term ‘playing

well’ to mean a victory in a game (outcome orientated), ‘playing well’ would “refer to the

process by which one engages others” in a game (non-outcome orientated).26 However, these

two variants are not mutually exclusive, as one could ‘play a game’ with the full intention of

having a positive outcome while still maintaining one’s adherence to the rules, or one’s own

duty to others.

This adherence to duty is one that can be used to justify a welfare system, and the

tax contributions of individuals to support it. This duty that a state has to its citizens could be

in part associated with outcome based economics, where the desired outcome could be having

22
Ibid, p.23
23
Ibid, p.32
24
Ibid, p.37
25
Ibid, p.37
26
Ibid, p.37
 12

the fewest number of people in poverty.27 However, while an increase in GDP is the most

common indicator of economic success, a strong welfare system, as was mentioned regarding

a progressive tax system above, could be a net loser with regard to efficiency due to lack of

incentive.28 So while ethical considerations, driven by either goal orientated thinking or duty,

could be argued to drive welfare policy, on an individual level, in order for welfare

economics to function, it must be assumed that the actual behaviour of human beings is

affected by ethical considerations (and influencing human conduct is after all, a central aspect

of ethics), then clearly welfare-economic considerations must be allowed to have some

impact on actual behaviour”.29 However, human behaviour and the causes of it are up for

much debate within the realms of economics, and of ethics, where the argument whether

humans act as rational agents continues.

While within classical and neoliberal economic theory, the rationality of individuals

to act in their own self-interest is assumed. This assumption however, leaves no room for

ethics, or ethical considerations to be made on a societal level. However, on an individual

level, where the direct outcome of an altruistic action is known, such behaviour is not

ignored.30 Looking at this topic on the surface, it could be misinterpreted that this line of

thinking is ‘selfish’ in nature, however, looking at the normative beliefs of such neoliberals of

whom hold these belief, we see again, as when looking earlier at the direct giving of money

to the poor, the lack of direct ethical action does not necessarily imply a lack of ethical

consideration. The normative beliefs of neoliberals paint a picture of a large society to be

something that is complex, where the information required to plan a system that takes into

account all the relevant information is not possible. As all current information that is needed

in order to plan, or to make large scale decisions about a course of action (e.g. a societal plan

27
Ibid, p.61
28
Ibid, p.59
29
Amartya Sen, On Ethics and Economics, 1st edn (Malden: Blackwell Publishing, 1987), p.52
30
"Hayek On Moral Values & Altruism", Youtube, 2010 https://www.youtube.com/watch?v=2HhsWHfGRIA>
[accessed 18 May 2017].
 13

for welfare) is not held by any one person of institution, but instead split between all

members within the society.31This normative concept of society, where any potential altruistic

planning on a large scale by government will be ineffective, clearly does not demonstrate a

lack of ethical consideration. It does however, show that there is no place for ethics within the

branch of economics, as the nature of the free market means that ethics, when taken into

account, produces an outcome that is not directly of benefit.

To conclude, this easy began by first setting out what the term ethics means in

general, and of what will be meant by it within the scope of the essay. In particular, attention

was paid to utilitarianism as developed by John Stuart Mill. The practicality of ethics was

discussed, where topics such as the criminal justice system and the eating of animals were

mentioned as examples of how ethics can play a role on a personal, as well a societal level in

society.

The discussion of economics proceeded, where two major schools of thought were

mentioned, that of neoliberalism and Keynesianism. With regard to neoliberalism, the

thoughts of Hayek were seen to be in favour of a ethics having no direct interference within

economics, however, later it was seen that his normative beliefs were such that any ethical

action taken on a societal level would be seen to be ineffective due to the structure of society

and information. Regarding Keynesianism, policy, including welfare policy, could be seen to

possess ethical forethought, suggesting it is not just possible for ethics to play a role in

economics, but it also desirable. This is also seen with regard to tax policy, and the ethical

problems associated with a regressive, as well and progressive tax policy.

The essay then continued to focus to a large extent on the issues surrounding

economic growth and its link to ethics. The growth prospects of developing countries and the

ethics of supporting such growth was put against the problems associated with climate

Friedrich Hayek, Law, Legislation and Liberty: Volume 2 – The Mirage of Social Justice, 1st edn (London:
31

Routledge, 1982), p.11

 14

change. The link between economic growth and environmental concerns was also discussed,

where again it was seen that there is a battle between the ethics of short run gains in utility

and living standards against those of long run utility gains.

Overall, this essay showed that there is a definite role for ethics to be taken

seriously within economics. The decisions that economic policy makes have direct ethical

consequences, whether they be on a small scale regarding tax levels for high earners, or no a

large scale regarding the industrial development of countries. Ethics, and ethical

considerations are intrinsically tied to economic thought, even when the economic ideology

calls for ethics to be ignored.

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 15

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