Economics and Ethics

Economics and Ethics

Economics is the domain of the selfish. Ethics is the domain of the selfless. So we have been schooled to think. In economic activity (exchange, purchase) we acquire goods: we benefit from what we receive; we get what we want. The act is essentially selfish—self-interested, even greedy. Ethics doesn’t come into it, except negatively. We may be berated for our lack of concern with less fortunate others. Charity belongs to ethics: to give selflessly, expecting no return. We benefit others not ourselves. The charitable person is a good person; the regular consumer is something less than that—morally neutral or morally deficient. It is better to give than to receive, we are told. The person who gives, gives, and gives is better than the person who buys, buys, and buys. The buyer is self-indulgent; the giver is self-sacrificing. The buyer cares only for himself; the giver cares for others. Egoism versus altruism, me versus you. This fits with our puritanical streak: we shouldn’t indulge ourselves; we should help others. It’s not Christian to buy, but it is Christlike to give—to sacrifice for others. What you give away you cannot spend on yourself, so charity is an act of ascetism. And the more you give the better you are. There are some who maintain that we should all give away as much of our income as will lead to material equality and stop our rabid consumerism. The charitable act is the right act; the purchasing act is the wrong act (given the state of the world).

Is all this true? There are two sides to the question: is buying morally questionable, and is giving morally unquestionable? The first question has obvious and well-known replies: in buying we give as well as receive; we stimulate the economy leading to greater prosperity; we treat others as equals not victims or incompetents. Our motives may be selfish, but selfishness can lead to good consequences; and anyway, we may take pleasure in benefitting the seller (what will happen to her if we refuse to buy from her?). A thriving active economy benefits all. In buying we give the other employment, self-respect, and a source of wealth. That is why spending is morally better than saving: saving benefits no one; spending encourages economic progress. A society of rich misers is a stagnant society. Thus, the invisible hand, accidental altruism, selfish selflessness. Egoism entails altruism. Buying is not ipso facto an immoral act; in fact, it is quite admirable in its way. But is it as admirable as pure giving (buying is impure giving)? On reflection, charity looks uncomfortably close to theft. Someone else takes from you and gives you nothing in return—they benefit from your labor. They steal time from you, in effect. That may not be their motive but they end up in the position of the thief—better off at your expense. They do no work, yet they benefit from your work. You might be a coalminer giving to a charity for unemployed miners—you work at the coal face while they lounge at home, funded by you. You may also be pressured to give in this way by social sanctions, even ostracism. You may resent it. It doesn’t feel right to you. But it’s better to give than to receive etc. What if charity were mandatory by law? Would that be a good law? Robin Hood used to rob from the rich and give to the poor—yes, but he did rob the rich. What about robbing the moderately well off to give to the slightly less well off? It’s still robbery, and isn’t robbery wrong? Isn’t giving to charity really like working for no pay? And isn’t the recipient of charity in the enviable position of being paid to do nothing?

There are other questionable aspects of charity. When does it become folly not generosity? Suppose someone of moderate means decides to give away most of his money to his well-off friends: he thus suffers a significant reduction in his quality of life while benefitting those who need no more income (they buy fancy hi-fi equipment with his donations to them). Is that charity? If it is, it is pretty stupid charity, certainly not morally required. But when does giving slide into the silly category? There seems to be no principled answer except when the recipients are in dire straits (how dire?). Second, there is the question of respect: it is natural to feel embarrassment or shame when receiving charity (some reject it on principle); and the giver can easily slip into a sense of superiority. That doesn’t happen in economic exchange. Each party both gives and receives, but in charitable giving there is an asymmetry: the giver has the better hand, is morally and financially superior, can feel a glow of self-satisfaction. No one really wants to be the object of other people’s charity. It would be better if no charity were needed. Third, charity can be morally wrong if it discourages self-sufficiency and creates dependence. It can stifle economic development. It treats people like children. It undermines self-esteem and energetic activity. It is best seen as a stop-gap measure not an ongoing policy. Fourth, it creates obligation: the recipient is obliged to be grateful and to show gratitude. Not so in the case buying and selling—no such obligation is conferred. No one is doing anyone a favor. But doing someone a favor is not doing them a favor, because favors need to be repaid. Beware of favors—they will need to be returned, sometimes with interest. Letters of thanks were the traditional way of responding to an act of giving: these took time and energy to write, and they had to be good. You don’t have to do that if you buy something from someone. The recipient becomes indebted, and nobody enjoys that. Don’t you feel a touch queasy when receiving presents that you don’t reciprocate (birthdays as opposed to Christmas)? You become the object of someone else’s generosity; you feel a powerful obligation to express gratitude in fulsome terms, not always sincerely. You are put in an awkward situation. Doesn’t a part of you not want to receive presents—to become the recipient of someone else’s charity. Charity is thus hedged about with moral perils, not always clearly avoided. It would be a better world if it were not needed or practiced.

The general point is that buying gets a bad name while charity is overly prized. I’m not saying charity is never morally indicated or required, only that it is not the unalloyed virtue it is commonly supposed to be. It is in the nature of a regrettable necessity as the world stands not an indispensable component of the ideal society (in that society charity does not exist). Nor am I saying that all buying is good; it depends on the consequences (also the motives). But it is not bad in virtue of being self-interested—that is a misplaced indictment of the economic act. The economic act is a bit like the sexual act—a two-way street in which both participants benefit (ideally). It is reciprocal, symmetric, mutually beneficial, not a sacrifice by one to bring aid to another. Economics is ethical in this sense—generally a good thing. It is not a domain in which the ethical is irrelevant (or “unscientific”). The conventional division between the amoral economic and the moral charitable is too simple. John Maynard Keynes viewed economics as a “moral science”, and he was right to do so. So was Adam Smith right to emphasize the power for good inherent in economic activity, as opposed to pure altruism. The idea of the virtue of self-sacrifice plays too large a role in the old (Christian) way of thinking. Selfishness can be good, and unselfishness less than good.[1]

[1] Smith and Keynes were both interested in economics as a means for improving the human condition, and therefore morally motivated. Economic action is a type of moral action, to be assessed as such, positively or negatively. Sound economics is sound ethics. We don’t hear much about this in the Judeo-Christian moral tradition—entrepreneurial virtue, business ethics. It’s mainly prohibition and self-denial, not enterprise and self-assertion. One does not hear any commandments to build and develop, invest and labor, keep interest rates down, avoid inflation and deflation. Wherein is it stated that it is God’s will to divide thine labor? On the contrary, the money changers are regarded as the epitome of depravity; but aren’t they just currency traders with a place in a thriving economic system? Money is not the opposite of morality but one of its tools. Charity is what we resort to when economics fails. Economics should recognize its ethical dimension and ethics should welcome economics to the fold. Productivity is good.