There are few times of the year when the existence, or otherwise, of ethics and morals spring readily to mind; and this may be true of Christmas as well. However, it seems likely that the probability of hearing the phrase ‘goodwill to all’ is greater at Christmas and so, in the spirit of the festive season, it seems reasonable to ask whether ‘goodwill’ – or indeed, any other moral sentiment – is compatible with economics.
In their book, Freakonomics, Levitt and Dubner (2005) suggest morality and economics are somewhat at odds as: ‘Morality … represents the way that people would like the world to work – whereas economics represents how it actually does work’. This is not the view held by the neo-liberal economist Milton Friedman, whose analysis affords economics a far more active role. Rather than treating economics as passive descriptor of what is, he sees the discipline as a means of achieving efficiently what might be.
For example, in Capitalism and Freedom, Friedman sought to promote freedom through appropriate political-economic policy as:
Economic arrangements play a dual role in the promotion of a free society. On the one hand, freedom in economic arrangements is itself a component of freedom broadly understood, so economic freedom is an end in itself. In the second place, economic freedom is also an indispensable means toward the achievement of political freedom.
So important is the moral imperative for freedom, even considerations of economic growth take second place in this analysis. According to Friedman (emphasis added):
we use government to provide a general legal and economic framework that will enable individuals to produce growth in the economy, if that is in accord with their values
The economic promotion of social goals without comment on their underlying validity is an example of positive economics (Friedman, 1953). A positivist, such as Friedman, would not seek to use economics to comment on the validity of ends, but rather simply to determine the most efficient means of achieving these ends. In this sense, positive economics is amoral; lacking moral commentary. This does not, of course, make economics immoral. The promotion of freedom is a moral goal.
Unfortunately, because positive economics does not comment on the ethical nature of goals set, it often may appear to suggest that any goal is equally useful to society at large. The neglect, in positive economics, of the discussion of ethics may lead people to conclude that ethics is not even necessary. However, this is not the case: Freedom itself must be subject to some limitations, as Milton Freidman has argued (in Capitalism and Freedom):
it is important to preserve freedom only for people who are willing to practice self-denial, for otherwise freedom degenerates into license and irresponsibility
This is a seeming paradox, that freedom should be reserved only for those who are prepared to limit their own freedom. The resolution is that ethical considerations must precede economic considerations. As the classical economist Marshall (1890) has it:
Everyone who is worth anything carries his higher nature with him into business; and, there as elsewhere, he is influenced by his personal affections, by his conceptions of duty and his reverence for high ideals.
These high ideals have been summarised by the so-called ‘father of modern economics’, Adam Smith (Smith, 1759: I:I:V:5):
to feel much for others and little for ourselves, that to restrain our selfish, and to indulge our benevolent affections, constitutes the perfection of human nature; and can alone produce among mankind that harmony of sentiments and passions in which consists their whole grace and propriety
If Levitt and Dubner are correct and ‘Morality … represents the way that people would like the world to work’, it follows that economic analyses may be utilised so as to promote morality. This may seem unusual, in the sense that economics purports to be about efficiency – however there is no reason why we might not pursue morality efficiently. Indeed, if we are to pursue it at all, to do so efficiently seems only reasonable.
Economics is, therefore, compatible with ‘goodwill to all’, if that is the way that we would like the world to work. On the assumption that it is, may I take the liberty of wishing you the most efficient goodwill of the season.
1 Levitt, S.D. and Dubner, S.J. (2005) Freakonomics: A rogue economist explores the hidden side of everything, William Morrow/HarperCollins
2 Friedman, M. (1962) Capitalism and Freedom, Chicago: University of Chicago Press
3 Friedman, M. (1953) The Methodology of Positive Economics, in Essays in Positive Economics, Chicago: University of Chicago Press, 3-43
4 Marshall, A. (1890) Principles of Economics, (8th ed. reprinted 1966), London: MacMillan
5 Smith A. (1759) The Theory of Moral Sentiments, (6th ed. reprinted 1790), London: A. Millar. Available at http://www.econlib.org/library/Smith/smMSCover.html
Please note that blog posts do not necessarily represent the views of other authors on the blog or of the Manchester Metropolitan University and its staff.