Jonathan B. Wight
The picture on the left shows the opening of a new “eye”—the blinders are coming off as we explore ethical dimensions of economics. For more on why this matters to your students, click here to read “Teaching the Ethical Foundations of Economics,” The Chronicle of Higher Education Review (cover article) August 15, 2003, pp. B7-B9.
This page seeks to answer some commonly-asked questions and to provide a list of pedagogical materials. It also provides a vehicle for our readers to add their own good ideas! And, you can get involved with a new text in progress (see below). Let us know your thoughts!
Part 1: Why should moral inquiry be a part of the economic teacher’s toolkit?
The answer is simple: the subject matter of economics involves individuals making decisions within a social environment. Even the “greatest ruffian, the most hardened violator of the laws of society” is not altogether without social feelings, as noted by Adam Smith, the founder of economics, in The Theory of Moral Sentiments. Choices in economics are often framed by social relations and governed by different types of ethical norms and viewpoints.
While economic actors are sometimes correctly portrayed as homo economicus—socially isolated and morally disinterested egoists—a significant number of economic interactions are governed by expectations of ethical conduct that go far beyond enlightened self-interest. Human nature may equally well be portrayed by what Matt Ridley calls homo empathicus—a socially-embedded person who engages others. What exactly this means we will explore in this blog and in a forthcoming book, Ethics in Economics: A Critical Thinking Approach (see below for details).
Part 2: What are the arguments against introducing ethics into economics?
Criticism #1: Adding ethics introduces complexity.
This is true; economic models need to be as simple as possible but not too simple. The issue then becomes, can adding some ethics enhance student understanding of the world and provide important insights that leaves the standard model in the dust? The answer is—yes, without a doubt, yes!
Criticism #2: Why can’t economists let others—say, specialists in philosophy and ethics—deal with the messy ethical issues?
Economists are “doing” ethics whether they realize it or not! When economists talk about maximizing the economic surplus so as to be “efficient” they are both using a moral framework (consequentialism) and applying a particular version of that framework. Moreover, that moral framework does not logically hold up unless other normative concerns are also met. Even more importantly, that moral framework has changed substantially over the years, from the standard utilitiarian view of Benthan and Mill, to the views of Pareto, and finally to the moral standard of Kaldor-Hicks.
Many economists (wrongly) teach the story of efficiency as only being about voluntary (win-win) trade. However, the problem with this Paretian view is that it puts economists in a strait-jacket. There is no policy change that would benefit everyone, hence any change would cause harm to someone. The Kaldor-Hicks formula for efficiency says that as long as the winners from a trade policy earn more than the losers, it is efficient to implement the change, even if the losers are not compensated. It takes only a moment to realize that this standard for efficiency is coercive. Some are winning and others are losing; the losers would not voluntarily agree to this, so they are being coerced! The only way this can be justified ethically is if we are living in a democratic society with a transparent legal system, good property rights, low transactions costs for defending their property rights, and an honest political system. In short, efficiency is a questionable ethical concept in most parts of the world where these pre-conditions do not exist. (These arguments are elaborated in chapters 5-7 of the forthcoming book.) This is why economists need to know the philosophical roots of their discipline.
Criticism #3: Ethics is outside the scope of competence of most economists; economists are not equipped to deal with ethics.
Tough! Learn to stretch! Pleading incompetence means one is obsolete. Instead, take advantage of the resources highlighted here and elsewhere to slowly and gradually get started. After all, haven’t economists had to learn new skills over the years? In the 1930s everyone had to master Keynesianism. Then in the 1940s and 1950s they had to master Samuelson’s mathematics. In the 1960s we stretched to learn econometrics. More recently, economists are scrambling to learn behavioral economics and lots of other new stuff. Ethics is no different.
Part 3: Are there resources available to help get started?
Be a beta user of this new text! Email me to discuss its use in your class: firstname.lastname@example.org. To read the first few chapters and see the table of contents, go to: https://facultystaff.richmond.edu/~jwight/Wight.Ch1and2.pdf
Jonathan B. Wight and John S. Morton, Teaching the Ethical Foundations of Economics(The National Council on Economic Education, 2007).
This is a book of ten lessons on ethics in economics for teachers. Each is self-contained and has careful step-by-step instructions, reading materials, student handouts, and everything else you need to introduce one or more ethics concepts into the classroom. For slideshows to each lesson, go here. To see the table of contents, the introduction, and a user’s guide, go here.
Jonathan B. Wight, Saving Adam Smith: A Tale of Wealth, Transformation, and Virtue(Prentice-Hall, 2002).
This academic novel has been widely used as a supplement in a variety of courses around the country. The novel format allowed me to bring Adam Smith into the present era, using his own words to see how his wisdom about social and moral capital still resonate in our modern economy.
Part I of the book connects the reader with wealth creation in The Wealth of Nations. Part II develops Smith’s moral theory from The Theory of Moral Sentiments. The final section applies these concepts to the operation of a business in Silicon Valley. It’s important for students to know that wealth creation and morality are interrelated, and this is readily apparent when seeing what motivates workers and entrepreneurs.
For information and a slideshow to use with Saving Adam Smith, go here. (NOTE: if you decide to use the book in your class please e-mail me at email@example.com and I will send you a study guide, test questions, and sample essay answers.)
Daniel M. Hausman and Michael S. McPherson, Economic Analysis, Moral Philosophy and Public Policy, 2nd edition (Cambridge University Press, 2006).
Hausman is a philosopher and McPherson is an economist, who together have wrriten an excellent and provocative book that raises important issues. The appendix, “How Could Ethics Matter to Economists,” is a very good summary that could be assigned to students. I’ve used the book in an undergraduate class but found it difficult; I think it is geared to graduate students or to advanced undergraduates. Faculty may want to buy the book to read it and take some good ideas.
Charles K. Wilber and Amitava Dutt, Economics and Ethics: An Introduction (Palgrave Macmillan, 2010).
Chuck Wilber is former president of the Association for Social Economics and is a huge figure in the field of ethics and economics, retired from Notre Dame, where Dutt is also from. An earlier book edited by Wilber, Economics, Ethics, and Public Policy (Rowman, 1998), is a valuable collection of articles that could be used in class; unfortunately it's out of print, but you can probably get it from any university library (or used at the link above).
Jonathan B. Wight, “Sociability and the Market,” Forum for Social Economics 39 (2/3) (2009): 97-110.
This paper addresses two classroom activities for exploring sociability and ethics and the role they play in market and non-market allocations. The “Desert Island activity” is played on the first day of class, and shows that students have innate or instinctual beliefs about justice in allocation methods. This is a great way to start a Principles of Economics course and takes just a few minutes. The paper also covers a quick and easy way to play the Ultimatum Game in class and bring out the significance for markets.
The movie Wall Street (1987) is a great teaching vehicle; the “greed is good” speech is classic. You can have the class watch just that scene here: http://www.youtube.com/watch?v=PF_iorX_MAw
To deal with the greed thesis—and to demonstrate that it is completely false from an economic viewpoint (that considers the outcomes for both winners and losers)—I wrote a short paper: "Adam Smith and Greed," Journal of Private Enterprise, 21(1) (Fall 2005): 46-58.
Students seem to fall into two groups: a) those who are innately against the “greed is good” philosophy (and who may have antipathy towards markets because they think markets are only about greed); and b) those students who have been brought up reading Ayn Rand and who want to believe that greed works out best for society. Further, they use the “invisible hand” of Smith to justify this view. Let’s be perfectly clear: it is completely and utterly wrong to invoke Adam Smith in support of the “greed is good” philosophy (this is a great 20th century fallacy). This is Mandeville’s thesis and Smith attacks it relentless. Hence, I assign my students brief readings from both Mandeville and Smith’s rejoinder to him:
Bernard Mandeville, “The Grumbling Hive: or, Knaves Turned Honest” (1705)
Adam Smith, excerpt from The Theory of Moral Sentiments (VII.ii.4.8) (1759)
To deal more carefully with Smith’s “invisible hand” you might assign or read Jonathan B. Wight, "The Treatment of Smith’s Invisible Hand," Journal of Economic Education, 39(3) (2007): 341-358.
The invisible hand is a controversial topic, as this article addresses. The mistake many people make, I believe, is to just focus on the specific paragraphs where Smith uses the exact phrase. That misses the big picture, as discussed in this article. Smith did not endorse laissez-faire because he was more pragmatic than ideological. Hence, he advocated regulations on financial markets because he worried about speculation and collapses that would hurt the poor and slow economic growth. Hmmm… should we have paid attention to Smith?
How can insights on ethics be brought into a business classroom? One way is by showing that the famous economist Milton Friedman relied on concepts of duty and virtue when discussing how managers maximized profits for the benefit of shareholders. Martin Calkins and Jonathan B. Wight, "The Ethical Lacunae in Friedman’s Concept of the Manager,” Journal of Markets & Morality 11(2) (2008): 221-238.
Part 4: How do other instructors structure their ethics-and-economics classes?
Jonathan Wight, University of Richmond, “Ethics and Economics”
David Brat, Randolph Macon, “The Ends of Economic Justice”
Mario Rizzo, New York University, “A Course in Ethics and Economics”
Thomas Leonard, Princeton, “Ethics and Economics”
Kahlil Mir, Lahore University, “Philosophy and Economics”
John Davis, Marquette, “Economics and Ethics”
Please send us any syllabi that you have found useful, as well as any teaching resources or tips for incorporating ethics into economics education!