Reclaiming Ethical Economics – Moral Economy Series Part 7

Ethical Economics is not a purely Christian endeavor. In fact, one need not be Christian to be a proponent of ethical economics. One, does, however, need to recognize there is a moral or ethical component to economic study and decision-making. Economics was originally considered a part of moral philosophy and maintained moral or ethical considerations as it emerged as a more distinct field of study. Nonetheless, tensions existed between ethical considerations and economic science as moral considerations can complicate economic decisions.

Moral considerations are not easy; just as following Jesus is not easy. They both demand something from us in opposition to injustice and oppression. Moral Theology or even purely ethical considerations in economics are more complex endeavors than simply evaluating issues of supply, demand, and dollar value cost-benefit analysis. When economic analysis of social outcomes began to rely less on moral considerations for social welfare and more on pure observations of economic actors in a market system, economics as a discipline began to shift away moral and ethical considerations.

By the mid-1960s, economics became more scientific in its use of mathematics and drew inward with respect to the questions, methods, and goals pursued. Most modern economists, unlike early economic moral philosophers, rarely examine or debate the moral foundations of economic activities. This is not to say that the economic discipline is completely absent of the pursuit of economic justice. There are certainly debates over economic policies and outcomes with some economists advocating for policies which focus more on income equality and a mixed-market where there is a role for government to ensure more just economic opportunities for all. Nonetheless, as a discipline of study, modern economics has largely lost the ability to think in terms of moral philosophy and engage in ethical debates as central component of economic theory, analysis, and policy decisions.

Adam Smith’s The Wealth of Nations is widely recognized as the birth of economics as an independent field of study. The Wealth of Nations is also looked at as advancing the cause of purely free-markets by proponents of unfettered capitalism. This line of economic thinking likes to quote Smith’s observation of the “invisible hand” at work guiding markets to their most efficient outcomes. The only problem is that most people who quote Smith from The Wealth of Nations have never actually read it very closely or choose to “cherry pick” select on passages out of context.

Adam Smith considered economics part of moral philosophy and stated that economic markets, and their division of labor, needed to produce not only wealth from market activity, but also justice and freedom — particularly for the poor. Smith was a critic of European empires (known for supporting crony-capitalism) and the slave trade. While Adam Smith supported free-markets over other forms economic society, he advocated that no society could be completely free and flourish unless there was equity in the sharing of a nation’s wealth produced from those markets:

No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, cloath and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, cloathed and lodged. (Wealth of Nations I.viii.36)

While Adam Smith believed in free markets over other economic systems, he was far from advocating the type of unfettered free-market capitalism promoted by neo-classical economists today. In fact, Smith stated a need for a mixed economic system where both government and the private sector had a role to play in bringing about a vibrant and happy society. He put fairness (the welfare of people in society) above the efficiency of the markets.

This is far from how he is portrayed by those who lift the “invisible hand” comment out of the context of the entirety of The Wealth of Nations. For those who have read and consider The Wealth of Nations in its totality, rather than gleaning only select passages, the clear conclusion is that Adam Smith had a sense of economic justice.

To hurt in any degree the interest of any one order of citizens, for no other purpose but to promote that of some other, is evidently contrary to that justice and equality of treatment which the sovereign owes to all the different orders of his subjects. (Wealth of Nations IV.viii.30)

So Adam Smith advocated for a commercial society based on its ability to contribute to prosperity, justice, and freedom for a nation’s citizens. What is most important to note is that Smith believed those contributions needed to be realized by all in society, particularly the poor and powerless. This was guided by his engaging deeply with economic issues first as a moral philosopher where economic decisions must be evaluated from a moral and ethical foundation.

While not yet widespread throughout the modern economics profession, there are more economists calling for an ethical economics which finds itself engaging in moral and ethical considerations.

Here are some resources for further reading:

The Wealth of Nations by Adam Smith

On Ethics and Economics by Amartya Sen

Ethics in Economics: An Introduction to Moral Frameworks by Jonathan B. Wight

“Recovering Adam Smith’s ethical economics” by Thomas R. Wells in  Real-World Economics Review, issue 68, August 2014

About the Moral Economy Series

The Moral Economy Series looks at the faith tradition of proclaiming economic justice, economics’s roots in moral philosophy, and how we might restore a sense of ethical economics toward building a moral economy that works for all. The Rev. Jay Lawlor draws on over twenty years of exploring the intersection of faith and economics in this new blog series on the Moral Economy. You can follow the Rev. Jay Lawlor’s blog – including the Moral Economy Series, by subscribing to updates via email, and/or following post updates on Facebook, and Twitter.