post-autistic economics review
Issue no. 20, 3 June 2003
article 1



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Ethics In Economic Theory

Charles K. Wilber   (University of Notre Dame, USA)

© Copyright Charles K. Wilber



Economics and ethics are interrelated because both economists (theorists and policy advisers) and economic actors (sellers, consumers, workers) hold ethical values that help shape their behavior. In the first case economists must try to understand how their own values affect both economic theory and policy. In the second case this means economic analysis must broaden its conception of human behavior.

In this article I will focus on the first of these two issues-- economists construct theory upon a particular world view, resulting in basic concepts, such as efficiency, being value-laden.


Values, World Views and the Economist

There is a substantial body of literature on methodological issues in economics (though seldom found in the “top” journals), much of it calling into question its supposed scientific character. Part of that literature deals explicitly with the impact of ethical value judgments on economics as a science. Of this literature, a greater amount argues the value‑permeation thesis than defends the idea of value‑neutrality. However, value‑neutrality of economics as a science remains the dominant position in the day-to-day work of mainstream economists. It seems expedient to begin by laying out its arguments.

Value-Neutrality. There are two pervasive tenets to the value‑neutrality argument. The first is a reliance on the Humean guillotine which categorically separates fact (`what is') from value (`what ought to be'); also known as the positive/normative dichotomy. The second basic tenet strongly supports the first by claiming that since we have objective access to the empirical world through our sense experience, scientists need not concern themselves with `what ought to be.' This second tenet is the really crucial point and the one which post‑positivist philosophy of science has sought to undermine.

The value neutral position argues that scientific economics is comprised of three separate components:  pre‑scientific decisions, scientific analysis, and post‑scientific application. However, there is a difference between the value judgments of pre‑science and of post‑science. Hume's guillotine is protected by drawing a distinction in social science between two types of value judgments. A characterizing value judgement expresses an estimate of the degree to which some commonly recognized (and more or less clearly defined) type of action, object, or institution is embodied in a given instance. An appraising value judgment expresses approval or disapproval either of some moral (or social) ideal, or of some action (or institution) because of commitment to such an ideal. Some value judgments are thus not really value judgments of any ethical significance, but judgments that merely allow one to carry on the scientific enterprise.1

In other attempts to reconcile value judgments and objective science, the notion of `brute fact' is often used. This is the claim that facts are in some sense `out there' for all to see, independent of scientific theory. Unfortunately for the value neutral position, the idea of brute fact has fallen on hard times in the philosophy of science literature. Today it is generally recognized even by sophisticated logical empiricists that facts are theory‑laden and that theories are tested by those facts deemed important by the theory.

The defense of value-neutrality still stands, but the pillars have been shaken. Blaug conceded that both `factual' and `moral' arguments rest `at bottom' `on certain definite techniques of persuasion, which in turn depend for their effectiveness, on shared values of one kind or another.'2 And, of course, McCloskey’s writings on the “rhetoric of economics” have taken this argument into the heart of economics– The American Economic Review– where mainstream economists have studiously ignored it.3

Value Permeation. The value permeation position argues that while science is driven by a search for truth, it is not interested in just any truth. The relevant truth must be both `interesting' and `valuable,' and thus all science is goal‑directed activity. Further, the criteria for a `good' or `acceptable' scientific theory cannot be ranked in terms of their intrinsic importance, but only in relation to the degree they serve particular goals of the scientific community.

Theory choice is not, therefore, based objectively on non‑controversial criteria (e.g., degree of verification or corroboration), but on criteria that are inevitably value‑laden (i.e. the extent to which each theory serves specific ends). The scientists' search for `valuable truth' is directed by what they think society (and science) ought to do. No amount of evidence ever completely confirms or disconfirms any empirical hypothesis but only renders it more or less probable.

Another line of reasoning, Kuhnian in character, has been another line of attack. Kuhn, referring to the natural sciences, speaks of paradigms, characterized by the shared values of a given scientific community.4 It is Kuhn's rejection of the second tenet‑‑ that we have objective access to the empirical world through our sense experience‑‑ that is important for those opposed to the value‑neutrality position. He argues that the empirical world can be known only through the filter of a theory; thus, facts are theory‑laden. Thus, a major argument of those who build on Kuhn's approach runs as follows: A world view greatly influences the scientific paradigm out of which one works; value judgments are closely associated with the world view; theories must remain coherent with the world view; facts themselves are theory‑laden; therefore, the whole scientific venture is permeated by value judgments from the start. This world view, or Weltanschauung, shapes the interests of the scientist and determines the questions asked, the problems considered important, the answers deemed acceptable, the axioms of the theory, the choice of relevant facts, the hypotheses proposed to account for such facts, the criteria used to assess the fruitfulness of competing theories, the language in which results are to be formulated, and so on.

The Neo‑Classical World View:  A  Case in Point

Let me illustrate this world view argument by applying it to neo‑classical economics.5 The world view of mainstream neo‑classical economics is closely associated with the notion of the good embedded in its particular scientific paradigm. It is founded on a world view made up of the following propositions:

1. Human nature is such that humans are a/ self‑interested and b/ rational. That is, they know their own interest and choose from among a variety of means in order to maximize that interest.

2. The purpose of human life is for individuals to pursue happiness as they themselves define it. Therefore, it is essential that they be left free to do so.

3. The ideal social world is a gathering of free individuals who compete with each other under conditions of scarcity to achieve self‑interested ends. As in the natural world with physical entities, in the social world too there are forces at work which move economic agents toward equilibrium positions.

Neo-classical economists either accept the preceding empirically unverifiable and unfalsifiable statements or, barring overt acceptance, conduct scientific inquiry with methods based thereon. The first two propositions contain the motivating force in economic life (satisfaction of self‑interest) and the third proposition spells out the context in which that force works itself out. It is interesting that experimental studies by psychologists indicate that people are concerned about cooperating with others and with being fair, not just preoccupied with their own self-interest. Ironically, these same studies indicate that those people attracted into economics are more self-interested and taking economics makes people even more self-interested. Thus economic theory creates a self-fulfilling prophecy.6

It seems fairly clear that judgments of value, of a particular notion of the good, are directly implied by propositions one and two of this world view. If the purpose of life is that individuals pursue happiness, and if they do so self‑interestedly, then it certainly would be good for individuals to receive what they want. Here is the basic notion of the good permeating all neo‑classical economics: individuals should be free to get as much as possible of what they want. There are two basic judgments required to translate this concept of the good into economic theory, such as cost‑benefit analysis. The first of these is that individual preferences are what count. The second is a value judgment on distributional equity. But this value judgment is rather superficial, for it is external to the neo-classical paradigm. Because it is external it often obstructs our view of the more fundamental value judgments, those deeply embedded in the paradigm itself.

Other ancillary value judgments of the neo-classical paradigm either qualify what types of individual wants will be considered or are derivative from this basic value judgment. These other ancillary value judgments can be summarized in this way:

1. Competitive market equilibrium is the ideal economic situation. Therefore, a/ competitive market institutions should be established whenever and wherever possible; and b/ market prices should be used to determine value.

2. Means and ends should be bifurcated into two mutually exclusive categories.

3. Means and ends should be measured quantitatively.

The first ancillary value judgment derives from elements one and three of the neo‑classical world view and from the basic value judgment that individual preferences should count. If one takes the core ideas of individualism, rationality and the social context of harmony among diverse and conflicting interests, along with a number of limiting assumptions, it can be shown that competitive equilibrium maximizes the value of consumption and is therefore the best of all possible economic situations. This ancillary value judgment does not stand alone. Competitive market equilibrium is good, in part, because it allows the greatest number of individual wants to be satisfied. Moreover, this value judgment is also determined by the world view. Without the third proposition such a judgment could not be made, for then some other economic condition could be found to satisfy individual wants. Competitive market equilibrium is good because the world view insists that only this condition can be ideal.

The notion of competitive equilibrium carries out two basic functions: it serves as an ideal and as a standard by which to measure the real value of current economic conditions. Because it serves as an ideal for which we strive, it leads directly to the value judgment that wherever competitive markets do not exist or are weak, they should be instituted or promoted. Wherever markets do not exist, the natural competitiveness of human beings will be channelled into other non-productive directions. It would be better to establish markets where this competitiveness and self‑interest seeking behavior could be channelled into mutually satisfying activities. Wherever markets are weak and distorted due to monopoly power or government interference there is sure to be a reduction in actual consumption. Therefore, perfectly competitive markets should be promoted so that the ideal competitive equilibrium can be achieved.

The second and third ancillary value judgments do not spring directly from the world view. Instead, they make the paradigm based thereon operational. The separation of means and ends is not strictly required by the world view itself, but is an operational requirement, without which the paradigm could generate no meaningful research or study. If means and ends were not mutually exclusive, then neo-classical economics would be nothing more than a simple statement that humans do what they do because they wish to do it. There could be, for example, no inquiry into how satisfaction is maximized by choosing among various alternatives. If some activity (e.g., production or consumption) could be both means and end then one could not determine which part is which. This results in the value judgment that consumption is the end or `good' to be achieved. In so doing, any good inherent in the process or means for obtaining higher consumption is ignored. For example, if the production activity of human labor were more than just a means-- if work was good in and of itself regardless of the final product-- then it would be impossible for the neo-classical economist to discover how much individual wants are satisfied by the activity. The ends and the means would be all mixed together and it would be impossible to speak of the value of the product and the cost of the resources independently.

The splitting of economic activities into means and ends by its very nature promotes a particular notion of the good. It may be an operational necessity, but it is also a judgment of value. With means and ends separated, it becomes convenient to measure the satisfaction given by particular ends and the dissatisfaction (costs) resulting from employing various means. It becomes possible to measure how much better one situation is than another, by comparing numbers instead of concepts or ideas. Things that are apparently incommensurable thus become commensurable. This is evident in many branches of neo-classical analysis; when money values are unavailable or inappropriate, quantified units are used in their place.

The emphasis on quantification in neoclassical economics adds another element to its particular notion of the good. While the second ancillary value judgment separates means and ends, the third ancillary value judgment tells us to focus on means and ends that can be quantified. One practical outcome of this is a heavy emphasis on `things' over interpersonal relationships, education, cultural affairs, family, workplace organization, etc. Things are countable while the quality of these other spheres of human life is not. In the area of economic policy especially, such concerns are treated often as obstacles to be removed or overcome.7 To the extent that this occurs, the notion of the good which focuses on quantifiable inputs and outputs is embedded in the paradigm.

Within neo-classical economics there are thus judgments of value which are rooted in a fundamental world view. There are also ancillary judgments of value which operate in concert with the world view and which allow the neo-classical approach to be operational. Together these judgments make up the neo-classical position on the character of the good, and when an economic policy is planned, implemented and evaluated, it is done on the basis of these clearly defined standards.

To conclude this discussion, the paradigm or research program of any scientific community is circumscribed by boundaries laid out in a world view which, while not perhaps individually subjective, is nevertheless empirically untestable, or metaphysical as Boland would say.8 How then do value judgments about the good, the just and the right enter into scientific analysis? Such value judgments are themselves entailed by the same world view which gives rise to theoretical and factual analysis. `What is' and `what ought to be' are thus inextricably commingled in the data, the facts, the theories, the descriptions, the explanations, the prescriptions, and so on. All are permeated by the a priori world view.

Economists must recognize that there is no alternative to working from a world view. Making explicit the values embodied in that world view will help keep economics more honest and useful. For example, many institutional economists see the social world as characterized by interdependence of economic actors with the result that “externalities” are ubiquitous. The assignment of rights by the political and legal systems, therefore, determines “who gets what.” The distribution of income, wealth, and rights that results from economic transactions and public policies becomes as important as efficiency.9

Furthermore, it is not sufficient to simply reject the neo-classical position that satisfying individual preferences, as expressed in the market, is the only measure of economic welfare. Alternatives must be proposed and developed. Let me sketch out one possible alternative.10

We must broaden our view of human welfare from that of a simple consumer of goods and services with consumer sovereignty as the goal. Rather, once biological needs are met, people derive welfare primarily from social activities such as working, dancing, theorizing, playing golf, painting, partying, and so forth. In order to engage in such activities people need instruments, capacities, and a social context or environment.

People need instruments (goods and services) to engage in activities-- fishing poles to fish, tools to work, shoes to dance in. Traditional economics focuses solely on this need. However, the instruments are worthless unless people have the capacity to use them-- training is needed to learn how to fly-fish, to use tools to repair a car, to dance the Tango. Finally, people need a social context or environment to carry out these activities-- a clean river is needed to fish in, good working conditions are needed to enjoy working, clean air and safe streets are needed to enjoy jogging.

The result of such a world view is that the measure of human welfare expands from consumer sovereignty to also include worker sovereignty (Do people have the jobs they want; are the jobs fulfilling; does the work enhance people's capacities?) and citizen sovereignty (Do people have the communities and environments they want; do they have the power to construct the social contexts within which they can develop their capacities?). With this expanded conception of human welfare the evaluation of economic policies can be quite different.





1. see Ernest Nagel, The Structure of Science: Problems in the Logic of Scientific Explanation (New York: Harcourt, Brace and World, 1961).

2. See Mark Blaug, The Methodology of Economics: Or How Economists Explain (Cambridge: Cambridge University Press, 1980), p. 132.


3.See Donald N. McCloskey, The Rhetoric of Economics (Madison: University of Wisconsin Press, 1985) and the voluminous literature generated by it.

4. See Thomas S. Kuhn, The Structure of Scientific Revolutions, 2nd Ed. (Chicago: University of Chicago Press, 1970); `Reflections on My Critics,' in Imre Lakatos and Alan Musgrave (eds.), Criticism and the Growth of Knowledge (Cambridge: Cambridge University Press, 1970); `Notes on Lakatos,' in R.C. Buck and R.S. Cohen (eds.), Boston Studies in the Philosophy of Science, vol. 8 (Dordrecht, Netherlands: Reidel, 1971).

5. This section is based on Charles K. Wilber and Roland Hoksbergen, `Ethical Values and Economic Theory: A Survey,' Religious Studies Review, 12, 3/4 (July/October 1986), pp. 211-212.

6. See Robert H. Frank, Thomas Gilovich, and Dennis T. Regan, `Does Studying Economics Inhibit Cooperation,' Journal of Economic Perspectives, 7, 2 (Spring 1993), pp. 159-171.

7. A classic example is the construction of public housing for the poor. Square footage per household is the key variable, not such intangibles as neighborhood, community, or access to services. Another example is welfare policy that concentrates on levels of support and ignores the psychological impact of means testing or the prohibition of able bodied males in the household.

8. See Lawrence Boland, `On the Futility of Criticizing the Neo-classical Maximization Hypothesis,' American Economic Review, 71, 5 (December 1981), pp. 1031-1036 and his The Foundations of Economic Method (London: Allen & Unwin, 1982). The recent literature on `rhetoric' takes the argument another step--economic theory is a conversation, and different groups of economists (neo-classicals, marxists, institutionalists, et al.) have their own conversations which are different. See McCloskey, The Rhetoric of Economics.

9. See A. Allan Schmid, Property, Power, and Public Choice: An Inquiry into Law and Economics (New York: Praeger, 1978) and Benefit-Cost Analysis: A Political Economy Approach (Boulder, CO: Westview Press, 1989). Also see the exchange of correspondence between Warren Samuels and James Buchanan: `On Some Fundamental Issues in Political Economy: An Exchange of Correspondence,' Journal of Economic Issues, 9 (March 1975), pp. 15-38.

10. See Herbert Gintis and James H. Weaver, The Political Economy of Growth and Welfare, Module 54 (MSS Modular Publications, 1974); Denis Goulet, The Cruel Choice: A New Concept in the Theory of Development (New York: Atheneum, 1971); Charles K. Wilber and Kenneth P. Jameson, Beyond Reaganomics: A Further Inquiry into the Poverty of Economics (Notre Dame, IN: University of Notre Dame Press, 1990); and “The Ethics of Consumption: A Roman Catholic View,” in Ethics of Consumption: The Good Life, Justice, and Global Stewardship, eds. David A. Crocker and Toby Linden(Lanham, MD: Rowman & Littlefield, 1998), pp. 403-15

Charles K. Wilber, “Ethics In Economic Theory”,  post-autistic economics review, issue no. 20,  3 June 2003, article 1,