This book is not about ethics in economics, which
can cover a vast range of topics, such as business ethics or the
morally questionable behaviour of many of the actors in the world
of business, or some important ethical aspects of economic theory.
There are several excellent books that deal with such issues.
This book is very different. It is designed to do
two things. First, it is designed to provide a simple method for
breaking down the analysis of economic policy issues into what are
matters of fact and what are matters of values. Second, for this
purpose it highlights the main value judgements – mostly of an
ethical nature – that tend to be ignored in the analysis of what
policies contribute to society’s economic welfare. Of course, the
fact/value distinction is not as sharp as might be supposed. Even
the ‘facts’ are not totally objective. Many of the people involved
in collecting and presenting the ‘facts’ have their own agendas or
biases. Furthermore, there is no value-free method of measuring
most economic variables, such as the degree of income inequality or
the level of unemployment or national income.
But for present purposes the fact/value
distinction is useful and important. It should help people who hold
conflicting views on economic policy issues – and any other issues
for that matter – to identify how far their differences reflect
different assumptions about the relevant facts and how far they
reflect differences in values. Thus it should enable reasonable
people to arrive at a peaceful agreement about what – if anything –
they still differ about.
Economics is an applied science, like medicine or
engineering. Few people would want to study medicine if there were
no intention of improving people’s health. In the same way the
study of economics would be far less attractive if it were not to
be used to tackle the economic ailments of society. As Pigou, the
father of welfare economics, put it, ‘If it were not for the hope
that a scientific study of men’s social actions may lead, not
necessarily directly or immediately, but at some time and in some
way, to practical results in social improvement, not a few students
of these actions would regard the time devoted to their study as
time misspent’.
In order to understand how
our bodies work, medicine has to call on many other disciplines,
such as anatomy, physiology, biochemistry, pharmacology, psychology
and so on. Similarly in order to find out how economies work,
economics has to take account of many special disciplines, such as
statistics, history, politics, sociology and psychology. But in
order to judge how it ought
to work it also has to take account of ethics. Indeed, it would be
difficult to think of any important current economic policy
question that did not raise questions about society’s ethical
values. These range from issues such as the concern with increasing
economic inequality in society to relatively technical questions
such as how much ought to be spent on improving transport
facilities.
The first two chapters will explain the key to
the method I believe is essential in the analysis of most problems
of social policy. This method consists of making a clear
distinction between questions of fact and questions of value. In
spite of contributions to economics made by pioneers such as
Bergson, Samuelson, Little and Graaff, the role of value judgements
in economics is not always adequately recognised. Perhaps this is
why economics has been described as ‘the dismal science’. Following
the first two chapters in which the basic concepts used are
explained there are a few chapters that discuss the role of value
judgements in the general theory of welfare economics. This will
include some discussion of what is meant by the ‘welfare’ of
individuals and of society as a whole. These will be followed by
chapters in which some of the applications of the method to certain
specific contemporary problems are examined in more detail, such as
how we define the boundaries of the society in whose welfare we are
interested, and what concept of ‘equality’ we should be concerned
with.
I assume that most readers of this book have some
knowledge of elementary economic theory, or are prepared to acquire
some in the course of reading it, if only by accident. For the
analogy between medicine and economics goes further. Outside
primitive societies one would not take much notice of a medical
practitioner who did not have a basic medical training. Similarly,
one ought not to attach too much importance to the economic
pronouncements of pundits who have no basic economic knowledge,
especially if they are politicians or businessmen who have their
own axes to grind. Let me give one example.
Not long after I arrived as a Fellow of Balliol
College, Oxford, in 1964, I was invited to attend some special
College dinner at which most of the other guests were successful
businessmen. (Any reader of this book can guess why.) At various
points during the evening I was introduced to several of them as
the new economist on the block. Every one of them quickly proceeded
to explain to me what was wrong with the British economy at that
time. What was interesting was that many of their diagnoses were
totally contradictory. For example, one said that the trouble with
the British economy was that it was too difficult to make a profit.
And another said that the trouble with the British economy was that
it was too easy to make a profit. Not one of them mentioned the
real reason, namely that Britain was stuck with a fixed and
uncompetitive exchange rate.
Today most ‘men of affairs’ may be a little less
confident about the way to solve the grave economic problems facing
most developed countries. But this book is not directly addressed
to those problems, although it is hoped that the method of analysis
set out in this book will contribute to sensible discussion of
them.