Ethics and Economics
An introducti on to Free Markets, Equality and Happiness
Johan Graafl and
Summary: Philosophy of Economics & Economic Ethics for ECO
1
,Table of Contents
Chapter 1 - Introduction.........................................................................................................................4
Chapter 2 – Utilitarianism.......................................................................................................................8
2.1 - Characteristics of utilitarianism..................................................................................................8
2.2 - Cost-benefit analysis...................................................................................................................9
2.3 - Problems with Utilitarianism......................................................................................................9
2.4 - Adaptations of utilitarianism....................................................................................................10
Chapter 3 – Three economic perspectives on the ‘good’ market system.............................................12
3.1 - The free market perspective of neoliberalism..........................................................................12
3.2 - The perfect market perspective of the neoclassical school......................................................14
3.3 - The welfare state perspective of the Keynesian school............................................................16
3.4 overview.....................................................................................................................................17
Chapter 4 – Free markets, welfare and happiness...............................................................................18
Chapter 5 – The ethics of duties and rights..........................................................................................20
5.1 - Consequentialist versus deontological ethical theories............................................................20
5.2 - Ethics of duty of Kant................................................................................................................21
5.3 - Negative rights ethics: libertarianism.......................................................................................22
5.4 - Positive rights ethics.................................................................................................................26
Chapter 6 – The ethics of justice...........................................................................................................28
6.1 – The concept of justice..............................................................................................................28
6.2 – The theory of justice of Rawls..................................................................................................28
6.3 - The entitlement theory of Nozick.............................................................................................32
6.4 – Meritocracy..............................................................................................................................34
6.5 - Distributive justice: an overview of criteria..............................................................................34
Chapter 8 - virtue ethics and care ethics..........................................................................................35
8.1 - Characteristics of virtues..........................................................................................................35
8.2 – The virtue ethics of Aristotle....................................................................................................37
8.3 – The virtue ethics of Adam Smith..............................................................................................39
8.4 – modern virtue ethics: Macintye, Bruni and Sudgen, McCloskey..............................................41
8.5 – Care Ethics...............................................................................................................................43
Chapter 9 – Adam Smith on markets, virtues and happiness...............................................................44
9.1 – The doux commerce and self-destruction thesis.....................................................................45
9.2 Smith on the effects of markets on virtues.................................................................................45
9.3 – Virtues and happiness: On the worldview of Adam Smith.......................................................45
Chapter 11 – Liberalism and communitarianism..................................................................................48
2
, 11.1 – Liberalism: Utilitarianism, Rights and Justice ethics...............................................................48
11.2 - Communitarianism: Virtue ethics and Care ethics..................................................................49
11.3 – I & We paradigm....................................................................................................................50
Chapter 12 – The morality of free markets...........................................................................................51
12.1 – Overview of analysis of free markets from different ethical standards.................................51
12.2 – Moral evaluation of ‘noxious’ markets..................................................................................52
12.3 – Applying economic ethics to market institutions: A practical approach................................53
3
, Chapter 1 - Introduction
Ethics (normative study – attempts to reach normative conclusions on good/bad)
The study of morality
Morality
Morality concerns the standards than an individual or a group has about what is right and wrong
Moral standards (moral duties)
What people are ought to do, how the world should be
1) Prescriptive statements (Imperative in nature) action-guiding imperatives
2) Moral standards > non-moral standards
3) Impartial, evaluated from universal standpoint (everyone’s interests are impartially
counted)
4) Deal with issues that have serious consequences for the welfare of human beings
(Moral content)
! include the values/ideas we place on objects we believe are morally right or wrong +norms we have
about the kinds of actions we believe are right or wrong
A moral judgement must, for a person that accepts the judgement, apply to every similar
circumstances
Values
Values concern ends or ideals that persons pursue and give content to how they define the good life
Sustainable convictions of persons about what makes certain acts or a certain way of life
valuable
- Intrinsic or extrinsic in nature
- Global in nature and hold in most situations
- Motivate persons
EXAMPLES of moral values: freedom, respect for other people and justice
Intrinsic values
Something one values it in itself, apart from valuing anything else
Extrinsic values (instrumental values)
Values that are merely good as a means to something else
Can be used to purchase goods and services that have intrinsic value
Norms
Rules or conventions that should be followed up in order to realize moral values
! without norms, values remain unattainable
- Dependent on the context of the situation
- Regulate behavior
4
An introducti on to Free Markets, Equality and Happiness
Johan Graafl and
Summary: Philosophy of Economics & Economic Ethics for ECO
1
,Table of Contents
Chapter 1 - Introduction.........................................................................................................................4
Chapter 2 – Utilitarianism.......................................................................................................................8
2.1 - Characteristics of utilitarianism..................................................................................................8
2.2 - Cost-benefit analysis...................................................................................................................9
2.3 - Problems with Utilitarianism......................................................................................................9
2.4 - Adaptations of utilitarianism....................................................................................................10
Chapter 3 – Three economic perspectives on the ‘good’ market system.............................................12
3.1 - The free market perspective of neoliberalism..........................................................................12
3.2 - The perfect market perspective of the neoclassical school......................................................14
3.3 - The welfare state perspective of the Keynesian school............................................................16
3.4 overview.....................................................................................................................................17
Chapter 4 – Free markets, welfare and happiness...............................................................................18
Chapter 5 – The ethics of duties and rights..........................................................................................20
5.1 - Consequentialist versus deontological ethical theories............................................................20
5.2 - Ethics of duty of Kant................................................................................................................21
5.3 - Negative rights ethics: libertarianism.......................................................................................22
5.4 - Positive rights ethics.................................................................................................................26
Chapter 6 – The ethics of justice...........................................................................................................28
6.1 – The concept of justice..............................................................................................................28
6.2 – The theory of justice of Rawls..................................................................................................28
6.3 - The entitlement theory of Nozick.............................................................................................32
6.4 – Meritocracy..............................................................................................................................34
6.5 - Distributive justice: an overview of criteria..............................................................................34
Chapter 8 - virtue ethics and care ethics..........................................................................................35
8.1 - Characteristics of virtues..........................................................................................................35
8.2 – The virtue ethics of Aristotle....................................................................................................37
8.3 – The virtue ethics of Adam Smith..............................................................................................39
8.4 – modern virtue ethics: Macintye, Bruni and Sudgen, McCloskey..............................................41
8.5 – Care Ethics...............................................................................................................................43
Chapter 9 – Adam Smith on markets, virtues and happiness...............................................................44
9.1 – The doux commerce and self-destruction thesis.....................................................................45
9.2 Smith on the effects of markets on virtues.................................................................................45
9.3 – Virtues and happiness: On the worldview of Adam Smith.......................................................45
Chapter 11 – Liberalism and communitarianism..................................................................................48
2
, 11.1 – Liberalism: Utilitarianism, Rights and Justice ethics...............................................................48
11.2 - Communitarianism: Virtue ethics and Care ethics..................................................................49
11.3 – I & We paradigm....................................................................................................................50
Chapter 12 – The morality of free markets...........................................................................................51
12.1 – Overview of analysis of free markets from different ethical standards.................................51
12.2 – Moral evaluation of ‘noxious’ markets..................................................................................52
12.3 – Applying economic ethics to market institutions: A practical approach................................53
3
, Chapter 1 - Introduction
Ethics (normative study – attempts to reach normative conclusions on good/bad)
The study of morality
Morality
Morality concerns the standards than an individual or a group has about what is right and wrong
Moral standards (moral duties)
What people are ought to do, how the world should be
1) Prescriptive statements (Imperative in nature) action-guiding imperatives
2) Moral standards > non-moral standards
3) Impartial, evaluated from universal standpoint (everyone’s interests are impartially
counted)
4) Deal with issues that have serious consequences for the welfare of human beings
(Moral content)
! include the values/ideas we place on objects we believe are morally right or wrong +norms we have
about the kinds of actions we believe are right or wrong
A moral judgement must, for a person that accepts the judgement, apply to every similar
circumstances
Values
Values concern ends or ideals that persons pursue and give content to how they define the good life
Sustainable convictions of persons about what makes certain acts or a certain way of life
valuable
- Intrinsic or extrinsic in nature
- Global in nature and hold in most situations
- Motivate persons
EXAMPLES of moral values: freedom, respect for other people and justice
Intrinsic values
Something one values it in itself, apart from valuing anything else
Extrinsic values (instrumental values)
Values that are merely good as a means to something else
Can be used to purchase goods and services that have intrinsic value
Norms
Rules or conventions that should be followed up in order to realize moral values
! without norms, values remain unattainable
- Dependent on the context of the situation
- Regulate behavior
4
