Economics, Ethics and Values: Part I
Throughout the last two centuries, the discipline of economics has increasingly come to identify itself as an exclusively formal and mathematical enterprise. Its public image is that of an analytically rigorous scientific discipline seeking to attain objective truth about certain phenomena, independent of opinion.
A key aspect of this development within economics has been to implement a sharp distinction between facts on the one hand, and values on the other. If you want to be scientific and attain objective truth, the story goes, you must deal only in empirically testable facts.
Values, on the other hand, are the things that are important to us: freedom, equality, justice, fairness, loyalty etc. At first glance, these are a matter of opinion and can be debated ad infinitum depending on one’s cultural background or ideological preferences. With values, there is no obvious measure of who is right or wrong.
In intro economics textbooks across the globe this is articulated as the distinction between ‘positive’ and ‘normative’ economics. Positive economics is the formal and empirically testable aspects of economics that deals with how things actually are in the world. Normative economics deals with how things ought to be in an ideal world.
Thus young economists are taught very early on, that if they wish to be as objective and accurate as possible – which the majority do – then they best focus on positive economics and leave subjective values out of it.
Hence, we have a situation where economists play the societal role of pragmatic analysers of data: scientists who perform detailed technical analysis on certain issues, and leave the values up to politicians and policy makers.
On closer inspection, however, this view of economics as value-free is, at best, illusory and, at worst, dangerous.
Firstly, it is illusory in that expressing our values, or what is important to us, is an unavoidable aspect of any human act or behaviour; this goes for the hard sciences as well as economics.
The very decision about what aspect of the world to examine is an expression of what is important to us, i.e. an expression of our values. We could spend billions of Euros on weapons research, or we could spend it on researching agricultural methods to alleviate hunger. Both are scientific projects, yet the choice to devote time and money to one or the other is based on what we care about.
Likewise, economists can choose to aim their analysis at the private financial markets and the banking system, or they could focus on public issues such as welfare economics, or how to make healthcare affordable. Each analysis may display incredible intellectual and mathematical sophistication, yet the choice is a normative one. It means that you deem some particular issue to be more worth your time and effort than the myriad of other issues you could investigate.
Values are inescapable.
Similarly, the way in which economists, the rating agencies and the media, choose to measure the success of an economy is a matter of specifc values. More often than not, we report growth in GDP as meaning things are going well within an economy. Yet, GDP can grow even while inequality is rising, our healthcare system is cut, and unemployment is high. For whom is such growth a success? We must realise that there are other choices when it comes to measuring the success of an economy.
One can see this gap between how economics presents itself and its value-based motivations by recalling our friends from the Troika. These technical bureaucrats shuffled into our public arena like a group of physicists coming to solve a problem with a nuclear reactor. There was a job to be done, and they were going to do it practically and pragmatically. What they neglected to openly discuss was that their solution to the problem was a choice: an expression of their values. In this case, it was the stabilisation of European financial markets: ensuring that certain risky investments were paid back, at the expense of the people of Ireland, their income, and their health and education budgets.
Secondly, the idea that economics is a value-free enterprise is dangerous because it leads to a situation (in which we currently find ourselves) where undeclared and unarticulated values are allowed to creep in and determine the direction and priorities of our economic system. By operating under the assumption that economics is value-free, we lose the opportunity to consciously create the kind of world in which we wish to live. We are removed from the discussion. (The technical jargon associated with economics serves to reinforce this assumption, propagating the illusion that it is a technical science we are ill-equipped to discuss.)
We then become subject to the values and interests of other forces that shape and manipulate the system in ways that support their interests. We are told the ‘free’ market is an efficient processer of information, and that if left to its own devices, it will naturally produce efficient results that are better for everyone. But this is simply not the case.
The market expresses the values of those who control it. It is no coincidence that our current market structure works better for some rather than others. This is hardly a controversial claim. One need only look at the contemporary results of an unregulated market. Oxfam just released a report which found that the wealth of the richest 85 individual people in the world (1.2 trillion dollars) equals the wealth of the poorest 3.5 billion people in the world. That is, the 85 wealthiest people own as much as half of the population of the entire earth.
To redress this problem, we first need to admit that economics is not value-free. By this admission we give ourselves the opportunity to openly discuss what kind of values we want such a system to be based upon. This is what our President, Michael D Higgins calls introducing an “ethical discourse” into our economic culture. And it is something he hopes to do this year through an ethics initiative he is launching across the country.
We must stop alienating ourselves from this discussion by assuming the work of economists is a matter of pure technical precision. It is certainly the case that there are powerful mathematical tools at the disposal of economists today, but like all tools, they can be used as means to a variety of ends, depending on what you value. We must take back the reigns of this discussion by first dispelling the myth that there is no discussion to be had in the first place.