Philosophy of Economics and Economical Ethics
Max Batstra
March 29, 2026
1
, 1 Introduction
1.1 Economic Ethics
What is ethics?
Morality (Velasquez )
Morality concerns the standards that an individual or a group has about what is right and wrong.
Moral standards differ from non-moral Standards in the following 4 aspects:
1. Moral standards are prescriptive statements.
They are action-guiding imperatives that do not describe states of affairs, but what people ought to do
2. We feel that moral standards should overrule opother non-moral standards
3. Moral standards should be impartial
Moral standards are evaluated from a point of view that goes beyond the interests of a particular
individual or group.
4. Moral standards deal with issues that have serious consequences for the welfare of human beings
Moral action guides have some reference to the welfare of others, or are at least concerned with serious
harm and benefit to others.
Moral standards include:
• Norms (social rules that tell us what’s expected)
Norms are rules or expectations that guide behaviour, prescribing what individuals ought to do or
ought not to do in specific situations.
• Values (what we consider important or worthwhile)
Values are deeply held beliefs or ideals about what is important, desirable, or good (for example freedom
and justice). They provide the moral foundation that justifies norms and guides ethical decision-making.
The following terms are linked to values:
• Virtues (the personal traits we should develop to live out those values)
Virtues are personal moral qualities like honesty or courage that guide how individuals should act,
especially in complex ethical situations, in order to act morally.
• Characteristics (how virtues are actually expressed in practice)
An example of a characteristic reflecting the virtue of honesty is a company that consistently demon-
strates transparency in its dealings, showing integrity in its ethical identity.
2
,Moral dilemmas
moral dilemma: a conflict between different moral standards, including values, each of which is morally
justified, but doing one means violating the other.
There are two types of standards (criteria that guide decisions):
• Moral standards (values, ideals and duties) → What is ethically right or wrong?
• Practical Standards (profitability, self-interest and pride) → What is effective, efficient, or feasible
in a given context? (do this to increase profits for example)
Moral standard Practical standard
Moral standard Moral dilemma Motivational dilemma
Practical standard Motivational Dilemma Practical dilemma
Table 1: Classification of dilemmas
Dilemma’s:
• Moral dilemma
Arises from conflict between two moral standards. In these dilemmas one has to weight two important
standards
• Motivational dilemma
Arises from conflict between a moral and practical standard. Confronts individual with problem of
moral motivation: what motivates people to act in accordance with their moral standards
• Practical dilemma
Arises from conflict between two practical standards. Deciding on the colour of the new company
vehicles for example.
Economics
Neoclassical definition of economics
The science which studies human behaviour as a relationship between ends and scarce means which have
alternative uses(Robbins)
Positive and normative statements
Economics is a descriptive study (describe, explain, predict), whereas ethics is a normative study (value
judgments, what ought to be).
• Normative Statement: These statements express an opinion about what ought to be, based on
subjective values or ethical considerations. An example:
”The government should increase minimum wage to ensure a living wage for all workers”
3
, • Positive statement: These statements are derived from positive theory that describes facts, they are
typically structured as follows:
”application of economic policy instrument y will improve the realization of goal x”
An example of such a statement is:
”An increase in interest rates leads to lower levels of investment in the economy”
Economic ethics
General normative ethics
General normative ethics is the philosophical attempt to formulate and defend basic moral principles.
Utilitarianism, Duty ethics, Rights ethics, Justice ethics, Virtue ethics, Care ethics are all general
normative ethics.
Economic ethics
Economic ethics reflect on the moral standards that apply to economic phenomena. Whereas economics
explains the relationships between economic phenomena, economic ethics evaluates them from a moral point
of view.
Two strands of economic ethics (Kouwenhoven):
• Microeconomic ethics
Morally evaluation of behaviour of individuals, firms, and institutions
• Macroeconomic ethics
Morally evaluation of large-scale economic systems and policies
The two depend strongly on each other and can seldom be studied distinctively.
1.2 Defense and Critique of Free Markets
The free market system
An economic system where prices and decisions are driven by individuals and businesses interacting freely,
with institutions regulating and coordinating economic behavior.
Institutions
Established social rules and systems that shape and guide social interactions.
There are three types of institutions:
• Regulatory (rules and enforcement)
These are formal rules, laws, and regulations that enforce behavior through rewards or punishments.
Example: Legal systems, government regulations, contracts
• Normative (values and norms)
These consist of shared values, norms, and standards that guide behavior by defining what is socially
acceptable or appropriate.
Example: Cultural traditions, professional ethics, social norms.
4
Max Batstra
March 29, 2026
1
, 1 Introduction
1.1 Economic Ethics
What is ethics?
Morality (Velasquez )
Morality concerns the standards that an individual or a group has about what is right and wrong.
Moral standards differ from non-moral Standards in the following 4 aspects:
1. Moral standards are prescriptive statements.
They are action-guiding imperatives that do not describe states of affairs, but what people ought to do
2. We feel that moral standards should overrule opother non-moral standards
3. Moral standards should be impartial
Moral standards are evaluated from a point of view that goes beyond the interests of a particular
individual or group.
4. Moral standards deal with issues that have serious consequences for the welfare of human beings
Moral action guides have some reference to the welfare of others, or are at least concerned with serious
harm and benefit to others.
Moral standards include:
• Norms (social rules that tell us what’s expected)
Norms are rules or expectations that guide behaviour, prescribing what individuals ought to do or
ought not to do in specific situations.
• Values (what we consider important or worthwhile)
Values are deeply held beliefs or ideals about what is important, desirable, or good (for example freedom
and justice). They provide the moral foundation that justifies norms and guides ethical decision-making.
The following terms are linked to values:
• Virtues (the personal traits we should develop to live out those values)
Virtues are personal moral qualities like honesty or courage that guide how individuals should act,
especially in complex ethical situations, in order to act morally.
• Characteristics (how virtues are actually expressed in practice)
An example of a characteristic reflecting the virtue of honesty is a company that consistently demon-
strates transparency in its dealings, showing integrity in its ethical identity.
2
,Moral dilemmas
moral dilemma: a conflict between different moral standards, including values, each of which is morally
justified, but doing one means violating the other.
There are two types of standards (criteria that guide decisions):
• Moral standards (values, ideals and duties) → What is ethically right or wrong?
• Practical Standards (profitability, self-interest and pride) → What is effective, efficient, or feasible
in a given context? (do this to increase profits for example)
Moral standard Practical standard
Moral standard Moral dilemma Motivational dilemma
Practical standard Motivational Dilemma Practical dilemma
Table 1: Classification of dilemmas
Dilemma’s:
• Moral dilemma
Arises from conflict between two moral standards. In these dilemmas one has to weight two important
standards
• Motivational dilemma
Arises from conflict between a moral and practical standard. Confronts individual with problem of
moral motivation: what motivates people to act in accordance with their moral standards
• Practical dilemma
Arises from conflict between two practical standards. Deciding on the colour of the new company
vehicles for example.
Economics
Neoclassical definition of economics
The science which studies human behaviour as a relationship between ends and scarce means which have
alternative uses(Robbins)
Positive and normative statements
Economics is a descriptive study (describe, explain, predict), whereas ethics is a normative study (value
judgments, what ought to be).
• Normative Statement: These statements express an opinion about what ought to be, based on
subjective values or ethical considerations. An example:
”The government should increase minimum wage to ensure a living wage for all workers”
3
, • Positive statement: These statements are derived from positive theory that describes facts, they are
typically structured as follows:
”application of economic policy instrument y will improve the realization of goal x”
An example of such a statement is:
”An increase in interest rates leads to lower levels of investment in the economy”
Economic ethics
General normative ethics
General normative ethics is the philosophical attempt to formulate and defend basic moral principles.
Utilitarianism, Duty ethics, Rights ethics, Justice ethics, Virtue ethics, Care ethics are all general
normative ethics.
Economic ethics
Economic ethics reflect on the moral standards that apply to economic phenomena. Whereas economics
explains the relationships between economic phenomena, economic ethics evaluates them from a moral point
of view.
Two strands of economic ethics (Kouwenhoven):
• Microeconomic ethics
Morally evaluation of behaviour of individuals, firms, and institutions
• Macroeconomic ethics
Morally evaluation of large-scale economic systems and policies
The two depend strongly on each other and can seldom be studied distinctively.
1.2 Defense and Critique of Free Markets
The free market system
An economic system where prices and decisions are driven by individuals and businesses interacting freely,
with institutions regulating and coordinating economic behavior.
Institutions
Established social rules and systems that shape and guide social interactions.
There are three types of institutions:
• Regulatory (rules and enforcement)
These are formal rules, laws, and regulations that enforce behavior through rewards or punishments.
Example: Legal systems, government regulations, contracts
• Normative (values and norms)
These consist of shared values, norms, and standards that guide behavior by defining what is socially
acceptable or appropriate.
Example: Cultural traditions, professional ethics, social norms.
4
