Morals of an Economist

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Michael Sandel

Where do economists sit when it comes to ethics?

A lot of people don’t understand the workings of economics and they look past the theoretical side of things. Most of the time we’re described as greedy and ruthless.

However I’ve recently been reading a fantastic book by Michael Sandel (picture above) called ‘What Money Can’t Buy’. This book has had a significant impact on me, it explains some everyday activities (such as ticket-touting) and debates whether we have taken the free-market approach a bit too far.

A sentence of significant highlight occurred on pages 47 to 48:

“Most economists prefer not to deal with moral questions, at least not in their role as an economist. They say their job is to explain people’s behaviour, not judge it. The price system allocates goods according to people’s preferences; it doesn’t assess those preferences as worthy or admirable or appropriate to the circumstance.”

I found this to be a particularly relatable paragraph, because as economists we have to make assumptions on rationality and often that means taking, what some people might describe, an ‘immoral’ stance. As Sandel states economists tend to see their role as explaining behaviours, not judging them, and sometimes that means we’re the ones who say ‘well why shouldn’t a banker be greedy, he’s only acting as a rational human being’.

Sandel however takes this another step, should economists begin to judge? We’ve let consumerism and capitalism take over our lives, with markets in just about everything from pokémon cards to paying someone to queue for a donut. Therefore as economists should we begin to implement procedures and debates that challenge our conceptions of human rationality and the free market? Lets imagine a scenario, such as a bank (Goldman Sachs) purchasing a significant amount of wheat futures to create a demand shock (read). As economists we have three reactions:

1. The market is efficient, the bankers are simply applying the laws of supply and demand and they made a lot of money from it. A famine was caused, but that’s just the way the market works.

2. This is completely immoral, millions of people in Africa were devastated as a result of greediness. Bankers shouldn’t be allowed to trade and there should be tight regulation to stop any more of this kind of free market activity.

3. The bankers have utilised the free market. But is this moral? Are there any ways of changing the way the system works to create not only a price efficient but a socially efficient market?

What you often get from staunch economists is Number 1. They’re firm believers in the free market, and as we determined earlier, economists are here to explain not judge behaviours. Number 2 is often the response from the average person, they cannot understand how bankers have been so immoral and ruthless and are determined to see it doesn’t happen again. Number 3 is the response that Sandel is suggesting; we should understand that this is how the free market works, but as economists it should be our role to begin to challenge the morality of these actions. As the pioneers and creators of free markets it should be our role to also identify its flaws and attempt to nullify them.

It should be the role of an economist to confront some of the free market ideals; for example the selling of human parts, is that not abusing drug addicts and homeless people, who in the heat of the moment would part with their incredibly scarce and unique organs for $400? Is the touting of tickets for a sold-out free event not transferring the willingness to queue to a more inferior position than the ability to pay (Sandel, pp.29)?

Let me know your thoughts, should economists begin to let ethics have an influence on their work or should it remain a pure-science, explaining and not judging human behaviour?

@Breadeconomics

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