Ethical Economics, Not Ethics vs. Economics

Economics concentrators are often characterized as robots completely devoid of ethics, chasing professional ambitions that are as sterile and soulless as they are. Authors, including in these pages, have written that human ethics are incompatible with good economic policy. This line of argument claims that our economic logic should be free from our personal values, and we must prevent our moral judgments from “getting in the way” of objective decisions.

This logic is flawed. A general call to keep our values out of economics assumes they are inherently problematic and gives us no way to use them productively. Instead, it ignores nuances in economic theory and fails to place the “head versus heart” conflict within its proper historical context.

The issue is not that facts and subjective values are fighting, with one side dominating the other. In fact, there should not be a fight in the first place. Economic science procures facts, which are then shifted down the assembly line and scrutinized through the lens of our ethics.

People can disagree over ethics. Some people hold strong ethical beliefs, and others have only weak moral inclinations. It is not the strength of one’s feelings that matters, but rather that they fulfill their proper role in the decision making process.

An intellectual infrastructure for that already exists. Economists distinguish between “positive” and “normative” judgments. Positive judgments are testable and predicated on objective facts. Normative judgments weigh those facts according to subjective personal values.

Although Enlightenment-era economics was normative and philosophical, contemporary economics is a precise and quantitative science that seeks to determine what happens in the world under a particular set of assumptions. Policymakers, political philosophers, and ordinary citizens can then evaluate those occurrences according to their own normative judgments and determine whether they find them desirable.

Although “bleeding-heart” liberals who tend to favor equality over efficiency are often accused of muddling objectivity with emotion, it is perfectly reasonable to voluntarily sacrifice some efficiency to achieve greater equality. Whether it is actually desirable is a matter of ethics and personal philosophy, but philosophical differences about economic scenarios shouldn’t be dismissed as a confused, emotional approach to economics.

Responsible economic scholarship requires assigning positive and normative judgments separate roles in the policymaking process. They do not simply trade off; they have entirely different jobs. At the same time, acknowledging their differences should not become a totalizing narrative or the entirety of our understanding of economic policy.

Some critics of raising the minimum wage make that mistake when they frame the debate as a conflict between the economic benefits of corporate profits and an ethical aversion to supporting the existence of low wage labor. In fact, most respected economists who disagree on the minimum wage do so for different reasons. Their dispute centers more on the magnitude of the policy’s impact and whether the policy benefits some people more than it harms others. Economists who oppose the minimum wage claim that it is actually an example of a policy for which efficiency and equity overlap surprisingly well.

Every intro economics textbook contains a simple graph that depicts an effective price floor. If the government mandates that some good be sold only above a certain price, and it would otherwise sometimes be sold below that price, there will be a surplus of the good. The minimum wage is effectively a price floor on labor. If the government says that people cannot be employed under a certain wage, lower-skilled people (often young people or minorities) won’t be employed at all.

A surplus of labor is called unemployment, and it will disproportionately harm those who have the lowest skill levels and are already most disadvantaged in the job market. In fact, the desire to shut minorities out of the job market was historically one of the main reasons Progressive-era policymakers pushed for a high minimum wage.

This intro-econ version of the argument is certainly an oversimplification. But the crucial point is that, for opponents of the minimum wage, an ethical concern for the poor can coincide with a pursuit of economic efficiency.

Characterizing the minimum wage debate as a conflict between efficiency and ethics is an irresponsible analysis of a complex academic debate. By failing to account for the theoretical context of the debate and its historical ties to oppression, the example makes a caricature of a serious policy inquiry and could harm the very people who need the most help.

Good economic policy is informed by both facts and subjective moral judgments. While they do not simply “trade off,” policymakers should strive to separate the two by first procuring facts and then judging their value. At the same time, that process is not all that is required of economic policy. We must embrace complexity where it exists and deviate from simple narratives when they fail to explain the nuances of the economic dilemmas we face.

Laura M. Nicolae ’20 lives in Winthrop House.