Home > Papers > What Constitutes Ethical Conduct for Economists? First group of papers

What Constitutes Ethical Conduct for Economists? First group of papers

This is the first group of papers for discussion. We propose to begin publishing comments on 12th March.You are welcome to post comments before then; we currently propose to hold them in a queue until the 12th, to allow time to read the papers. If the number of comments mounts, or if we are assailed by a clamour of requests to open the discussion we may reconsider – the merit of an online conference format is flexibility.

Riccardo Baldissone And the Real Butchers, Brewers and Bakers? Towards the Integration of Ethics and Economics

Stuart Birks No ethical issues in economics?

George De Martino  Professional Economic Ethics:Why Heterodox Economists Should Care

Sheila Dow Codes of Ethics for Economists: A Pluralist View

Peter Earl Real-World Economics and the Ethics of Teaching

Alan Freeman Towards an assertive pluralist code of conduct for economists

Tom Walker Crisis, Credit and Credulity: the incredible circulation of a counterfeit idea

  1. Stuart Birks
    March 11, 2012 at 10:41 pm

    I read Peter Earl’s paper with interest and appreciated his discussion on the difficulties faced by economists wishing to present alternative material. As for strategies to follow, I wonder if more should be said about the nature of courses as part of an overall degree package. If content is interrelated, with some courses acting as prerequisites for others, then either basic conditions have to be met, or some coordinated planning has to occur.

  2. Stuart Birks
    March 12, 2012 at 12:32 am

    One thing I liked in George DeMartino’s paper is the challenge to the standard, perfect competition/market failure perspective in mainstream economics. if I read him correctly, he is pointing out that the approach is: (i) using a maxi-max decision rule; (ii) based on the compensation principle, and therefore ignoring redistributive effects (which can be severe); and (iii) based on a simplified view of the world and hence liable to unintended consequences. His ethical point of harm avoidance (as in “first do no harm”, which is implied in the Hippocratic Oath), challenges the emphasis in economics of the search for an optimum.

    He also states (P.11), “an ethics‐inspired recognition of the limitations to economic science provides strong ethical support for the demand for genuine pluralism in economics – in the classroom, and beyond”. Support for this can be found in literature outside economics. Fairclough (1995) refers to “ideological-discursive formations” (IDFs) which groups may use to define debate in a way that favours their perspective. If a particular IDF dominates to the exclusion of others, it may be seen as the norm, rather than as a particular perspective. Note also Gramsci’s concept of hegemony. To quote:

    “hegemony is a ruling class’s (or alliance’s) domination of subordinate classes and groups through the elaboration and penetration of ideology (ideas and assumptions) into their common sense and everyday practice; it is the systematic (but not necessarily or even usually deliberate) engineering of mass consent to the established order.” (Gitlin, 2003, p. 253)

    Plurality of viewpoints is important, if only to maintain a critical approach to dominant beliefs.

    Fairclough, N. (1995). Critical discourse analysis: the critical study of language. London: Longman.
    Gitlin, T. (2003). The whole world is watching: mass media in the making & unmaking of the New Left (New ed.). Berkeley, Calif.: University of California Press.

  3. Stuart Birks
    March 12, 2012 at 9:55 pm

    Tom, I liked the historical aspect to your paper, especially the emphasis on political and rhetorical dimensions.

    A lot of the debate between competing interests seems to have been in terms of assigning motives to opponents. These are hard to prove, and hence also hard to refute. Non-verifiability has been given as a problem in law [see, for example, Laffont, J.-J., & Martimort, D. (2001). The theory of incentives: the principal-agent model. Princeton, NJ: Princeton University Press].

    Many issues hinge on this, however. Given that this is a conference on ethics in economics, perhaps we should also be considering what motives are implicitly assumed by economists. Tony Lawson has identified an assumption of atomistic individuals, for example, and there is a focus on fixed preferences based on individual consumption of goods and services. Are we assigning the wrong motives, and hence drawing the wrong conclusions?

  4. Karey
    March 14, 2012 at 12:11 am

    DeMartino claims that

    ‘Professional ethics does not privilege one theoretical perspective over another. This implies that one can be an ethical neoliberal just as one can be an ethical Marxist; and one can be an unethical Marxist just as easily as one can be an unethical neoliberal’ (p6).

    My paper (Harrison, group 3) examines the ontological assumptions of different approaches to economics and ethics to demonstrate that DeMartino’s claim is not true. Deontological ethics and utilitarianism, for instance, share the same ontological assumptions of individualistic, atomistic, and mechanistic model of society and economy as mainstream economics. I showed that the ontological assumptions of Virtue ethics is compatible with many of the contrary assumptions in various forms of heterodox economics. I argue (group 3, p2, elaborated in Harrison & Galloway 2005) that my interpretation of virtue ethics is closer to eastern traditions such as Buddhism, which is in line with Chick’s discussion of Schumacher’s Buddhist ethics (group 2, p9), but also with Ono’s discussion of Confucian ethics (group 3).

    In using the principle of harm avoidance to critique mainstream economic practice, DeMartino is using the powerful rhetorical practice of using the principles accepted by an opponent to undermine their argument. ‘Harm avoidance’ as an ethical principle is derived from the same assumptions of autonomy, individualism and atomism accepted by mainstream economics. While this works as a rhetorical principle, it is also fraught in an exploration of ethical approaches as it reaffirms potentially problematic ontological commitments. In Fahy, Thompson & Harrison (1998, p3) we explore the example of the conflict imposed by the principles of ‘do no harm’ and ‘informed consent’ in the case of a woman in labour, where doing no harm to her conflicts with doing no harm to the baby. This is an example which confounds the assumptions of atomism and independence. The baby’s life cannot be saved without doing harm to the mother, which requires her informed consent, while the baby is not capable of giving consent, informed or not. Similar problems of interdependence emerge in relation to environmental issues like greenhouse emissions, where effective action requires everyone’s agreement. The ‘do no harm’ principle also assumes that ‘doing harm’ is a mechanical action of one agent on another, whereas in situations of interdependence maintaining the status quo or doing nothing can cause harm.

  5. Karey
    March 14, 2012 at 1:00 am

    Peter Earl’s commitment to a ‘real-world’ approach to economics is inconsistent with his uncritical adoption of ‘utility-maximizing’ and ‘contractual’ market based interpretations of ethical obligations in relation to teaching. Earl provides no justification for his adoption of this approach and considers no alternatives. His reliance on ‘Conventional utility-maximizing approaches to consumer behaviour’ (p3) is challenged by the critiques of this principle in relation to ethics by Offer (group 2), Aylesworth, Gutenschwager, Nelson, Ono, and Puyana (group 3), and Tomer (group 4).

    My paper (group 3) shows why adoption of an ethical perspective needs to be examined in relation to broader ontological commitments one holds. The ontological commitments of ‘real-world’ economics are not compatible with the ‘ethical’ principles Earl adopts.

    Earl accepts uncritically the acceptance of ‘Course outlines … as contracts between the university as supplier and the student as customer’ (p7-8) which impose contractual obligations on the academic ‘delivering’ the course. Offer’s critique of ‘market ethics’ in comparison with an ‘ethic of care’ is just as relevant to education as it is to health. Autonomy is a potential outcome of education, not its precondition, and academics need to act in the interests of their students – caring for them as for themselves, to achieve this. There is wide resistance by academics to treating the relationship between students and academics as a ‘market-contract’ relationship. The imposition of ‘contractual obligations’ on academics is commonly resisted as in breach of principles of ‘academic freedom’. Earl fails to consider how ‘contractual obligations’ in the context of the dominance of mainstream economics in academia would more likely lead to the exclusion of ‘real-world’ economics than to its inclusion.

    • davetaylor1
      March 20, 2012 at 11:01 am

      I read this very differently, Karey. It seems to me Peter was suffering from, and not adopting, the atomistic ethic you reject.

  6. peterradford
    March 14, 2012 at 8:09 pm

    I have been asked by one of our contributors – Angelo Fusari – to post his various comments and reactions to other contributions on his behalf. He references several of our papers, but I am posting his comments together as a whole since I think they have a theme running through them:

    Comments by A. Fusari

    It may be useful that I point out a premise to my comments
    All the contributions to this conference have omitted to consider what seems to me a crucial question: the possibility and the lines to build up a workable (i.e. non utopian) market and financial system able to achieve the highest possible level of equity and efficiency, as section 6 and 7 of my paper attempt to do. I hope, therefore, that my attempt will receive attention and an implacable criticism

    I start with a general comment to Giuseppe M. F. Russo:

    I refer to the first part of his comment, ending with the phrase ‘The gravity cannot be judged unethical even if it is often killing a lot of people’
    This statement forgets that society is substantially a human construct, what causes a substantial difference of method between natural and social sciences. The distinction between the PRINCIPLES OF ECONOMY and ECONOMIC POLICY, that the author emphasizes, is a misleading one. Both the fields are strictly linked and must be the expression of a unified methodological context. An example of that is Keynesian economics; it is not a case that it provides one of the most profitable teachings of economics from both a theoretical and practical point of view.
    Unfortunately, I cannot consider the question at large here and hence I am obliged to a reference to Chapters I, III and V of the book by H. Ekstedt and me on ‘Economic Theory and Social Change, Routledge 2010

    My subsequent comments are displayed in alphabetic order:

    Alicia Puyana Mutis
    On ethics and economics

    I appreciate very much your emphasis on ‘the principle that efficiency and equity form a unit’ and the denunciation of the growing violations, in various forms, of equity; as well as the statement that ‘the reduction of inequality, in wealth and income, must be the immediate and principal concerns of economists and the main political objective’ in developing countries. How to do this within a market economy? Is that possible? Can be the market reduced to a pure mechanism of imputation of costs and of efficiency, i.e. having a very low influence on income distribution and hence on the possibility to perform social justice? There is the way of making markets and financial systems servants of production, instead of having both a despotic power on production and the final word on income distribution? This is what my contribution to the conference attempts to do.

    Riccardo Baldissone
    Towards the integration of ethics and economics

    I agree with the author stress of the necessity to integrate ethics and economics. It seems to me that a crucial point for such integration is to make evident the objective character, from a scientific standpoint, of some fundamental values, in opposition to the view of the dominating ethical relativism. This requires some substantial revisions on the method of social thought (see the first three chapters of the book by H. Ekstedt and me entitled ‘Economic Theory and Social Science. Problems and Revisions’, Routledge 2010.
    The question is not only referable to neoliberal thinking. The dominating relativism on values goes well beyond liberal thought and impedes to say something of stringent on ethics, so that each one has reason on his own point of view. Section I of my contribution to this conference gives examples of some important objective values. It is important the identification of objective values as well as the main subjective ones attached to the forms of civilization and that, once established, determine the dominating ways of thinking and acting. Such identification is indispensable, among the other things, to may discuss the aptitude or ineptitude of a civilization to promote social development, etc.

    Some consideration on Juan Carlos Moreno-Brid’s and Martin Puchet Anyul contribution on ‘Ethics and macroeconomics’

    This author gives a detailed and impressive description of the perverse effects of high inequalities (in income distribution) mainly in developing countries. I agree with author’s insistence on equity. But it seems to me that ‘the precautionary principle’ is insufficient to warrant against abuses. The problem is that often action can be justified through mystifying theories unfortunately enjoying a great prestige. It needs, therefore, to unmask mystifications. In particular, the emphasis on equality and social justice (both strongly violated in developing countries, a violation that obstructs development) reinforces the need to explore the possibility and the ways to reduce inequalities mainly by showing what is the real degree of independence of income distribution from production and the unnecessary degeneracy of financial system, and hence making evident the possibility to put into effect strong policies toward social justice without affecting efficiency but, on the contrary, stimulating this. In sum, the problem seems to be to explore the possibility and the ways of making the market and financial systems servants, instead of master, of production. This is what my contribution attempts to do: an exploration that seems to me the major lack of this conference.

    Gerald Gutenschwager
    Is economics a value free science?

    I appreciate very much this author’s challenge to the value free pretension of social science and the underlining of the values implied by mainstream economics. In particular, I think it is right the opposition to methodological individualism. But in my opinion it is not sufficient to contest the methodological foundations of neoclassical economics. To defeat this one, it is also necessary to rebuild the method devoted to investigate social reality on some sound and realistic standpoints; in fact, nowadays such method is, at the best, afflicted by a disarming fragmentation.
    Economic principles are not value free. But an important problem is to see if objective values exist. Or all is possible in terms of value choices, as ethical relativism maintains? And how specifying, in an uncontroversial way, objective values, if these exist? This raises some important methodological questions that we challenge in the three first chapters of the book ‘Economic Theory and Social Change’, Routledge 2010.
    The first section of my contribution to this conference gives examples, in a simple way, of some important objective ethical values. In the absence of a reliable method of inquiry on social reality, an absence which is flanked by a disconcerting methodological confusion, the dominant views inevitably will be those supported by the dominating capitalist power, interests and influence.
    It is crucial from a methodological standpoint the assessment that society is a human construct. It is also important, close to the distinction between subjective and objective values, to consider the implications of the choice of different subjective values, the most relevant of which are at the basis of civilization forms, and the way civilizations are forced to vary by the appearance, with the variations of the general conditions of development, of new objective values.
    Finally, it seems to me that cooperation is important in the life of social systems, but competition and individual’s role too are very important. The problem is to make competition consistent with social justice and cooperation. This I try to do in my contribution to our on line conference. And I shall be glad to fully discuss what is enunciated here briefly.

    Some consideration on the contribution entitled ‘A warrant for pain. Market liberalism’
    By Avner Offer

    I agree with the author denunciation of the insane mystifications of Just World Theories and, in particular, of the theoretical approaches at the basis of Market Liberalism. The author rejects the income distribution attached to the market mechanism as implying great iniquities. Well. What to do? Which the alternative is? There exist some fields where market failure is unquestionable, e.g. health, as the author well knows. But with reference to many other fields, a competitive market is an essential mechanism for the imputation of costs and efficiency, for mobilizing the large variety of individual skills, and avoiding the grey domination power and inefficiency of bureaucracy. But to what a kind of market competition we should refer? Certainly not the perfect competition of Neoclassical theory, mainly the one at the basis of the general equilibrium theories, which is a nonsense, but real or, more precisely, dynamic competition i.e. including innovation with the associated temporary monopolies, radical uncertainty and hence entrepreneurial action.
    The author says: ‘Both Freedom and Justice are attractive, for example, but the two principles are not easy to reconcile’. I find that the difficulty to reconcile them is not such as the author thinks (at least in principle i.e. from a theoretical point of view). The problem is to unmask the theories that assert such difficulty or impossibility in a market system.
    One thing is the market and price system that, in conditions of dynamic competition, is an essential tool for the imputation of costs and efficiency, and another thing is income distribution: this can be largely separated with respect to the price system. My contribution to this conference attempts to show that both the market and financial system can be reduced to servants instead of master of production. This is, from a theoretical standpoint, the crucial question, the solution of which implies the possibility of largely reconciling Freedom and Justice. This is what my contribution manages for showing, and that the book by Ekstedt and me entitled ‘Economic Theory and Social Change’ , Routledge 2010, studies at large, also using some mathematical formalizations showing that it is not mathematics by itself but its use at the basis of the extraordinary non senses so frequent in economics.

    Stuart Birks
    No ethical issues in economics?

    I agree with the author’s insistence on the fact that simplifications are inevitable in research and on the fact that they often cause deep mystifications both in heterodox and mainstream approaches.
    Discussing the limitations of mainstream economics, the author insists on the simplifications and, let me add, the distortions attached to the wide use of mathematics. But I find inappropriate the generalization, in the wake of Lawson’s thinking, of the reservations on the use of mathematics. In fact, it is not clear, in the author’s quotations of Lawson, if the reservations apply to neoclassic thinking or intend to have a more general character.
    Not necessarily the use of mathematics implies methodological individualism and atomism, and/or requires regularity and predictability of events. It is true that ‘we cannot rely solely on mathematical formulations to analyze economic phenomena’. But mathematics, properly used, can provide important contributions to the understanding of those phenomena and to rigorously show the mystifications of the neoclassic use of mathematics. Much depend on the degree of realism and the operation of postulates. Let me indicate, as an example, a large simulation model of dynamic competition with endogenous innovation, radical uncertainty and entrepreneurship as crucial variables (just the opposite of neoclassical mathematical modeling) that I expose in chapter V of a book on ‘Economic Theory and Social Change’, Routledge 2010.
    The question of subjectivity and objectivity in social thinking is particularly controversial with reference to ethics, where it is afflicted by deep and diffuse misunderstandings. This is clearly evident in the opposition between ethical relativism and absolutism. Relativism has gained the hegemony in our time. Can this outcome be accepted? It seems to me that it is misleading. In my contribution to this conference, section I, I show that there are important ethical principles having an objective, not subjective, character. But this probably goes beyond Birks’ contribution.

    • riccardobaldissone
      March 15, 2012 at 3:53 pm

      Thank you for your comments Angelo.
      Whilst we agree on the necessity of integrate ethics and economics, my proposed path does not require the appeal to objective ethical values, not even within the courte durée (to play with Braudel’s words) of a mode of production. In general, I find problematic the definition of objective values, both in historical terms (for example, social justice had maybe similar but different meanings for classical Bacaude, medieval Dolcinians and modern Luddites) and in cultural ones (dignity in the sense of a a Japanese entrepreneur or a Dogon shepherd?). Seventeenth-century natural philosophers construed the world of facts also to bypass these intractable (from their theology-influenced and essentialist point of view) issues, which were tearing apart Europe during the religious wars.
      By doing so, they escaped the stake, but they shaped scientific objectivity (albeit improvable) on the model of theological objectivity, and left us with the poisonous gift of the divide between facts and values, or description and prescription.
      However, though the founders of modern science followed the fundamentalist path of theologians, we are no longer bound to adopt a similarly fundamentalist stance, both in ethical and in economic matters. In other words, we can refuse to reduce ethics to immediately universal principles, and economics to the ‘discovery’ of the ‘truth’ of the economy. In turn, this relatively increased intellectual autonomy would imply an increased responsibility for economists, who could no longer hide their performative intervention behind the finger of economic facts.

  7. Stuart Birks
    March 18, 2012 at 11:11 pm

    Thanks for your comment, Angelo. I should probably leave it to Tony Lawson to clarify his position on the use of mathematics in economics, if he is following this discussion. As I understand it, and in my opinion, he is not saying that mathematics has no part to play, but rather that it is dangerous to rely solely on mathematical methods. He identifies atomism and closure as major limitations in mainstream economics, but does state that atomism is only encouraged, In other words, I am not sure that there is any disagreement there.

    As for your objective ethical principles, your paper refers to “equality in dignity”, but is this unambiguous, and why is it an objective principle? Similarly, you place value on a “dynamic economy”, which may be justified, but is it an objective or subjective view? You also talk of “the ontological imperative of individuality”, but might there be a subjective assessment as to how far to go in this direction as compared to group cohesion and social responsibility, for example?

    In your paper you state, “the stagnation of demand causes unemployment and hence the pauperization of population, so that the consumption of new products will depend on the preferences of very rich men”. It is not clear to me that the various components of this claim are all inevitable, if only because you are taking a highly aggregated view and overlooking the possibility of major changes in an economy that does not have overall growth (growth is just the net effect of all these changes).

    You also state, “People owing rare qualities (e. g. managerial skills) have not a strict need of money incentives to be induced to use them being rewarded by their mere use: Modigliani painted for nothing and even tormented by hunger”. This does not mean that financial reward can be ignored as an influence on the overall level of supply.

    For these and other reasons, I suspect that it might be better to separate out your criticisms of standard approaches and you suggested alternative. Concerns for the latter may detract from strengths in the former.

  8. March 21, 2012 at 11:02 pm

    World Economics Association – 2012 Ethics Conference – Comments on First Group of Papers
    by Frederic B. Jennings Jr., Center for Ecological Economic and Ethical Education (CEEEE), U.S.A.

    Riccardo Baldissone: Baldissone calls for the integration of ethics and economics, saying it involves a challenge to neoliberal ideology and a recognition of how cultural and institutional influences shape and are required to enforce an ethical frame around market behavior. It is not all about “pure” self-interest.

    He then calls for the reintegration of “externalities” into economics, where externalities are defined negatively as “everything economic thought refuses to deal with” though externalities may and need not be quantifiable. Baldissone also advocates a reframing of economics as political theory, implying at the end of his paper that economics should become more inductive and less deductive in its analyses.

    My own view is that Baldissone doesn’t go quite far enough, or perhaps deep enough, into the conceptual frame of orthodox economics to see that substitution assumptions themselves are a part of this problem. Substitution assumptions – or an emphasis on negative feedbacks in the language of systems theory – invite the notion that economic phenomena are self-contained, justifying partial analyses thereof. Substitution assumptions are in large part dependent on an often disputed claim of diminishing returns (cf. Jennings 2011) in orthodox economics. This is an important part of the justification for treating “externalities” as a special case, and thus “external” to economic analysis.

    If increasing returns is, instead, the general case for most productive activities – and this is certainly the case for most intangible goods, such as information and love, for example – then the nature of economic interdependence is not substitutional in these contexts, but rather is complementary (e.g., cf. Kaldor 1972, 1975; Jennings 2008). Complementarity in turn implies that positive feedbacks dominate these situations in a process that institutional economists describe as “cumulative causation” (Myrdal 1978).

    In the presence of complementary interdependence or cumulative causation, externalities cannot be seen as “external” to anything. Instead, they are an inherent part of all economic activity and cannot be so easily dismissed as is done under substitution assumptions. A proper recognition of the crucial role of complementarity in economic analysis comes with the realization that everything is interdependent and that there are no bounds to our causal effects, and that externalities therefore are not “external” but rather must be treated as inherent in all economic activity. Within such a frame, every choice matters, with effects rippling outward forever on everyone else (as well as oneself).

    In the presence of complementarity, one cannot even do economic analysis outside of an ethical frame, preferably (in my opinion) based on a notion of planning horizons as an ordinal index of conscience (in the specific sense of expressing the social or ecological range of consequential effects taken into account – namely, “internalized” – before any decision, which horizonal range is then bounded by surprise, i.e., truncated at the point when unanticipated outcomes occur). It is the near universality in economics of substitution assumptions – and the almost complete absence of any discussion or recognition of complementarities – that should be challenged here. The entire economic arena before us starts to look very different once complementarities are introduced and taken seriously in an “ecological” model…

    Stuart Birks: Birks addresses three aspects of the case that ethical issues are inherent in economic research: incompleteness; subjectivity; and rhetoric and roles, noting in addition that the concept of framing gets little recognition among economists. Again, a proper recognition of complementarity would directly call for recognition of ethics as central to all economic analyses. On incompleteness, the fact of unbounded interdependence (as implied by complementarity and by Lawson’s “open and highly inter-related social systems,” as Birks describes them) in turn demands a recognition that the relevant analytical boundary (cf. Georgescu-Roegen 1970, pp. 2-3) lies in our horizonal limits, namely in our range of (accurate) prior anticipation of the effects of decisions, given that attention is inherently selective and therefore must try to focus on correct “essentials” in any situational context. On subjectivity, this sort of selective focus is inherently normative – as is any choice, as an assertion of value – and therefore involves “subjectivity” although I see this as almost the same point as the previous one.

    All of this selectivity in our theoretical processes – where selective focus is also and at the same time restrictive blindness (since no theory will offer any insight to those matters it deems insignificant or “nonessential”) – suggests a very strong case for pluralism, as stated in Birks’ conclusion, since the only way we can penetrate the penumbrae of focal awareness is by examining the same situation through multiple lenses, each with their own blind spots but all shedding light on the others in terms of the restrictive assumptions and implications of each. “If all you have is a hammer, then everything looks like a nail” (cf. Jennings 2007). The more diverse set of tools we have, the better our chances of finding the model most appropriate to the job at hand, whose assumptions fit best to the situation, and thus whose prescriptions might apply with a greater reliability as well.

    George DeMartino: I heard George’s presentation of this paper at the AHE and ICAPE conferences; I like his energy and assertiveness in this work and agree with virtually all of it. I like his statement that “professional ethics draws attention first and foremost to the complexities that arise out of relationships” (his emphasis), and that among our professional duties as economists “is the duty to promote pluralism.” I also like this: “Professional ethics at its best involves perpetual interrogation of professional conduct.” We humans are so good at rationalizing and justifying to ourselves what we want to believe – which might serve well to explain the tenacity of “orthodox” economics in spite of its many flaws and failures – that it is imperative that we examine things from multiple vantages. Indeed, one might surmise that any insistently monotheoretical view amounts to a confession (of fear) that one cannot justify its use or applicability against other approaches, so simply cannot allow or risk their realistic consideration.

    DeMartino offers a provocative sentence that seems worthy of note and of further discussion here: “If the argument that the profession has adopted maxi-max implicitly is correct, then it ought not be surprising that in the name of social welfare the profession has committed professional atrocities, attended by gross violations of human rights and substantial economic suffering and even death, all the while purporting to do what’s best for others.” It is rare to hear an economist utter such dark and shameful truths. And this supports yet another cogent argument for pluralism. As DeMartino puts it: “Finally, an ethics-inspired recognition of the limitations to economic science provides strong ethical support for the demand for genuine pluralism in economics… Closed-mindedness and hubris close off the appearance of genuine choice, and thereby substitute paternalistic judgment for autonomy.” Amen. Two cheers for humility!

    Sheila Dow: I like Dow’s argument, though I’m not sure that the closed-minded center of our profession would ever accept a professional ethics stressing pluralism as its central precept. I do believe that an open mind must be taken as axiomatic in scientific research, as it is a necessary condition for same, and thus is not subject to “proof” or in need of additional “justification.” But this may be the challenge before us…

    Peter Earl: Earl is the only author in this first group who explicitly addresses the “principle of gross substitution” though he characterizes it too narrowly (in my humble opinion) as “the idea that everything has its price and that everyone will, if the terms of a trade-off are successively improved, give in to incentives to substitute in a particular direction,” which view Earl sees as “the start of a slippery slope” because people “come to see deeply held commitments … as exchangeable goods” (from Augier and March as quoted by Earl). Earl characterizes this matter as central to our concerns: “It is a rejection of the idea that anything can, and should, be traded off against anything else if the price is right that lies at the heart of the question of ethics…” Earl goes on to talk about trade-offs within the frame of substitution assumptions, especially in regard to an academic “trade-off between teaching, research and leisure.” He acknowledges that “introducing an ethical perspective … requires us to move away from the traditional substitution-based view of preferences and instead frame the problem in terms of setting … achievable goals in these areas.” He then goes on to a lengthy discussion of how one might deal with these trade-offs.

    I wanted Earl to go further with this idea and venture into a realm of complementary interdependencies, especially as manifested in academic communities, such as the possibility of positive feedbacks between teaching and research (particularly in a context of economics as a cognitive science, where research on the learning process could be exercised through one’s teaching endeavors). And if the process of learning (or, if you must, of “transacting and transmitting information”) is indeed a complementary process involving mutual benefits (where the teacher is learning as much from the students as they are learning from him or her), then complementarities should be addressed. As Boulding (1962, p. 133) said, teaching “is the one clearly observable process in the universe where the strict laws of conservation do not hold. … Teaching is in no sense an exchange, in which what the student gets the teacher loses.” There are no tradeoffs here, or at least not those we typically analyze in economics. This is a realm of complementary gains, the economics of which remain largely (and tragically) unexplored, imposing a high cost on us all.

    Alan Freeman: Freeman echoes Dow and DeMartino in calling for pluralism in ethical standards, for “a new contract … in which the duty of the economist is seen, not as providing the ‘one correct answer’ but the range of answers that are offered by the different relevant approaches and assumptions to the problem.” I think this focus on pluralism is a very strong argument, though I have some misgivings on whether a deeply entrenched doctrinal mainstream will ever invite or allow such a standard, to the degree that they understand the outright and indefensible bankruptcy of their own intellectual capital (which they probably don’t, in general) and thus the associated danger of exposing the many fallacies on which it depends, were the alternative views given an equal and realistic claim on their students’ attention. I think it’s a great idea, however. Let’s go with it!!!

    Tom Walker: I found Walker’s paper a bit confusing in places, where the “lump of labor fallacy” seemed to be used at cross-purposes at times. I liked his discussion of credit as “both a belief and a belief about a belief” and the comment that the entire basis of credit lies in trust. I am impressed with his historical research on this fallacy and its persistence, and his descriptions of its use for political purposes are enlightening, although he might have pointed to some more modern examples as well. He might have developed the point that seems implicit in his closing paragraph, that any inaccuracy or fallacy that invades our economic constructions will likely lead our choices astray from more efficient or advantageous alternatives that will remain unexplored as a result of these misconceptions. All our decisions, after all, are based on theoretical projections in advance of any empirical information on what we choose, while our evaluations of the opportunity costs down our “roads not taken” remain forever untestable and theoretical. Perhaps an example would help on this point.

    If we always suppose substitution as the basic character of economic relations among agents, input factors and products, then we will see collusion and cooperation as inefficient and always opt for competition as the best way to organize society. If we don’t entertain the idea of complementarity as an alternative form of economic connection, in which there are positive feedbacks and mutual reinforcement of gains, then we may never realize that – in this situation – competition is inefficient, and that collusion will lead to lower prices and higher output, and thus enhance social welfare. Furthermore, in the presence of both substitution and complementarity, as in network contexts of fully interdependent transactions of various kinds (such as the relation of end-to-end and parallel linkages in transportation), there is no prima facie case for competition or cooperation based on static cross elasticities at all. That is one of the grounds for introducing ‘horizon effects’ and their impact on the balance of static interdependencies in any context, as a means of addressing the issue (cf. Jennings 1985, 2006, 2008). And that will lead us to a much more generalized case for cooperation as social welfare enhancing within an inherently ethical economics, at least in my opinion (Jennings 2009, 2012).


    Boulding, Kenneth E. 1962, ‘Some Questions on the Measurement and Evaluation of Organization,’ in Harland Cleveland and Harold D. Lasswell, eds., Ethics and Bigness: Scientific, Academic, Religious, Political, and Military, Harper and Brothers, New York, pp. 385-95; reprinted in Boulding’s Beyond Economics: Essays on Society, Religion and Ethics, University of Michigan Press (1968), Ann Arbor, pp. 131-40.

    Georgescu-Roegen, Nicholas 1970, ‘The Economics of Production,’ American Economic Review, Papers and Proceed¬ings, Vol. 60, No. 2, May.

    Jennings, Frederic B. Jr. 1985, Public Policy, Planning Horizons and Organizational Breakdown: A Post-Mortem on British Canals and Their Failure, Ph.D. dissertation, Department of Economics, Stanford University, Stanford, CA.
    _____ 2006, ‘A Horizonal Challenge to Orthodox Theory: Competition and Cooperation in Transportation Networks’ in Michael Pickhardt and Jordi Sarda Pons, eds., INFER Research Perspectives, Volume 1: Perspectives on Competition in Transportation, Lit Verlag, Berlin.
    _____ 2007, ‘Hammers, Nails and New Constructions – Orthodoxy or Pluralism: An Institutional View’ presented at the International Consortium of Associations for Pluralism in Economics (ICAPE) Conference on ‘Economic Pluralism for the 21st Century’ at the University of Utah, Salt Lake City, Utah, 1 June 2007.
    _____ 2008, ‘A New Economics of Complementarity, Increasing Returns and Planning Horizons’ in Wolfram Elsner and Hardy Hanappi, eds., Varieties of Capitalism and New Institutional Deals, Edward Elgar, Cheltenham, England.
    _____ 2009, ‘The Economics of Conscience and the Ethics of Externalities,’ in Christian Richter, Antonio Caleiro, and Carlos and Isabel Vieira, eds., Challenges for Economic Policy Design: Lessons from the Financial Crisis, Lambert Academic Publishing, Saarbrucken, Germany, pp. 417-52.
    _____ 2011, ‘“The Hicksian Getaway” and “The Hirshleifer Rescue”: Increasing Returns from Clapham to Kaldor,’ presented at the IIPPE Conference, Istanbul, Turkey, May.
    _____ 2012, ‘Planning Horizons, Conscience and the Ethics of Externalities: Organizational Theory and the Emergence of Social Responsibility,’ presented at ASSA, ASE Sessions, Chicago, IL, January 2012; to be presented at the ASE World Congress, Glasgow, Scotland, June 2012, and at the AHE/IIPPE/FAPE Conference, Paris, France, July 2012.

    Kaldor, Nicholas 1972, ‘The Irrelevance of Equilibrium Economics’, Economic Journal, Vol. 82, pp. 1237-55.
    _____ 1975, ‘What Is Wrong With Economic Theory’, Quarterly Journal of Economics, Vol. 89, No. 3, pp. 347-57.

    Myrdal, Gunnar 1978, ‘Institutional Economics,’ Journal of Economic Issues, Vol. 12, No. 4, pp. 771-83.

    • April 30, 2012 at 11:40 am

      I’m forwarding this comment from Dave Taylor who has difficulties logging in. Hopefully this is where it’s intended to go – Alan Freeman

      From Dave Taylor

      I’ve been moved to attempt a response by Frederick Jennings’s fascinating group comment, but of course, even when I log in, I still can’t gain access. I’d be obliged if you would post the attached comment for me. Whether or not anyone likes what I have tried to say, it is to the point and ultimately crucial.

      I did send Riccardo Baldissone my paper, and in subequent discussion of his comment (#8) in group 1, he clearly appreciated my interpretation of “objective”. Not least because comment seems to have dried up, the following exchange also seems to me worthy of inclusion:

      I find many of the statements in your comment very much to the point, but following conventional thinking on the very points my paper was trying to show an alternative to. May I first say I too have long had difficulty with the word ‘values’, which in the present context is used in a woolly manner at odds with mathematical usage, i.e. as in ‘the value [in particular circumstances] of a variable’. I don’t have any difficulty with the idea of ‘objective’, but then I understand an objective to be what you are intending to do, which ties in with the ALGOL68 classification of values and variables in terms of what they can do to you and you to them. But the whole point of my ‘family’ model is that the objective looks different depending on your specialist function, and even allowing for instrumental objectives there is an ambiguity about the appearance of relative motion which leaves one having to decide between reality and appearance, i.e. between feeding the kids or inflating the numbers in a few bank balances.

      Might I suggest that ‘essentialism’ is more an Aristotelian than a theological position, while recognising that pre-Reformation theology was couched in Aristotelian terms. This is also a form of atomism, centuries before the discovery that atoms had inner structure. Likewise, it seems to me that taking the letter rather than the spirit of scripture as fundamental was a consequence of the printing of the bible, opening it up to diverse interpretation in the spirit of its Old Testament beginning, and to peer rather than authoritative review (allowing that papal authority too often interprets scripture in the spirit of the pope). So while I am agreeing with you about “the poisonous gift of the divide between facts and values”, the 17th century model of objectivity was in fact still atomistic and anti-papal. The Christian model had four Gospels for different types of audience, its good news including the story of a sower broadcasting seeds, where though many were lost to the birds, the briars and to stony ground, and where enemies sowed weeds among the rest, enough grew well enough to provide an adequate harvest. As an instance of the universal relationship between cause and effect, the truth about economics (and the WEA conference) is partly that we cannot reap what has not been sown, but complementing this is the fact that not all that has been sown will bear reaping. So for me ethics is not about principles or moral codes, it is about opening up the understanding of the choices open to us: broadcasting good seed or trying to bugger other people with wild oats; accepting responsibility for tomorrow or living for the day like Aesop’s grasshopper and leaving the kids to fend for themselves. It is about evaluation of objectives, not values. [DT]

      I obviously like your take on the word objective, which keeps the intentional aspect of setting something as the object of an action (planning, observing, defining etc.). Unfortunately, seventeenth-century natural philosophers turned the objects of their enquiries into the touchstone of their new ideology of facts, which we now call modern science. It is this kind of de-contextualized or, if you prefer, de-humanized objectivity that is currently deployed as a de-resposibilizing tool – “it’s the economy (and its laws) that leaves you jobless and homeless!”

      Within this decontextualized perspective, it does not matter if the mouthpiece of objectivity is a centralized authority (the pope, the Royal Society, the FMI) or a plurality of agents (from the Lutheran readers of the Bible to heterodox economists), because in any case objective reality is already defined prior to the relation with the others. As a consequence, negotiation is always a loss, a concession to the necessity of dealing with the others.

      On the contrary, if the object is the objective (in your sense), that is a commonality to be construed, both negotiation and responsibility could be conceived of as assets rather than liabilities. More in general, ethical concerns could be productive tools rather than restrictive filters. [RB]

      Yours sincerely

      Dave Taylor

  9. March 23, 2012 at 5:04 am

    Many thanks to Frederic Jennings for his constructive set of comments. I agree wholeheartedly with his suggestions for how I might have gone further as regards the issue of substitution. The time we spend on teaching obviously chews up our time for reading and writing but it is important to be aware of how teaching and research complement each other. Most obviously this occurs when academics supervise postgraduate students (in my own case, having the privilege of serving as Jason Pott’s PhD supervisor had major spin-offs beyond joint work we have done: his work enabled me to understand much more clearly what I was trying to do and say in my own). But it can also happen with undergraduate teaching where students make academics think anew via the questions they ask or critical observations they offer, and from time to time I’ve acknowledged particular undergraduates in my published work. To get the benefits of what our students can offer, it is important to make it plain at the outset that we want them to be active in class and that we take them seriously and do not see the interaction as a dualistic ‘us’ and ‘them’ encounter. This is another reason for taking seriously William Perry’s work on how students develop intellectual maturity, about which I’ve written in my chapter in Edward Fullbrook’s collection on Pluralistic Economics (London, Zed Books, 2008; originally in Earl and Frowen, eds, 2000, Economics as an Art of Thought: Essays in Memory of GLS Shackle, London, Routledge). However, the need for economists to take complementarity seriously goes well beyond the academic/student interaction: if we wish to understand limits to substitution, we need to understand the structure of complementarities in the system we are analysing. It is therefore most unfortunate that, for many students, the notion of complementarity passes by briefly with homely examples of bread and butter or gin and tonic, after which the analysis stays focused firmly on substitution. Jennings’ work on complementarity (which complements my own writing on lifestyles and resistance to change and which I only came across recently via Google Schlar), as referenced in his comments, needs to be more widely ready by real-world economists and included in their teaching.

  10. Stuart Birks
    March 25, 2012 at 12:26 am

    I am grateful to Frederic Jennings for his comments on my paper. As he says, there is not much difference between my points on incompleteness and on subjectivity given that there is a subjective aspect to simplification. My aim was in reaction to two commonly observed positions, however. The first is in response to those who take theoretical findings as if they are truths for the real world. I wished to stress that theories only address some of the relevant issues, and therefore that we should be aware of and consider additional dimensions, including cross-disciplinary aspects, for any practical application. One way to bear this in mind is to consider a theory as an analogy, as compared to alternative representations as a paradigm or lens. These latter suggest that we are seeing the object itself, whereas our theories, commonly expressed as models in economics, are quite distinct representations (note Plato’s allegory of the cave, http://www.youtube.com/watch?v=d2afuTvUzBQ). My second point, that of subjectivity, was in response to the positivist position.

    On both points, this goes a step further than Jennings’ analogy of a hammer and a nail, in that they suggest that we should not just be choosing a “best” theory and applying it. Instead, we should see our theories as tools which only go part of the way towards addressing the issues we are considering. Whenever we apply a theory, we have also to allow for, “necessary reserves and qualifications and the adjustments” as Keynes has said.

    A third point in my paper was that ethical behaviour may depend on the role being played by an economist, as this also determines obligations and expectations. I have not seen this point discussed so much in this conference, although some aspects have been raised in the associated material at: https://weaethicsconference.wordpress.com/2012/03/19/punish-economists-for-bad-advice/

    Thanks also, Frederic, for the pointer to the paper by Georgescu-Roegen. I like his statement about “the harm caused by the blind symbolism that generally characterizes a hasty mathematization” (p.1).

  11. macroambiente
    March 28, 2012 at 5:36 pm

    Tom Walker is one of those non-economists who, instead of always accept what some economists say, use the common sense when thinking economics. His contribution is welcome. The counterfeit idea referred to by Tom Walker is the defence of the “lump of labour” assumption made by those some economists. Walker shows that this assumption has been considered a fallacy by many other economists, and reminds that The Economist Glossary describes “Lump of labour fallacy” as “One of the best-known fallacies in Economics”. The term fallacy may touch the cognitive dissonance of mainstream economists and some of them react emotionally, as for example in the long byzantine discussion at the Talk Page of the entry “Lump of labour fallacy” in the Wikipedia.
    More specifically, Walker stresses that economists and everybody else who defend the applicability of that fallacious notion perform an “inexcusable ethical lapse for the economics profession”. Using a historical methodological approach, Walker’s analysis leads to important conclusions. One of them is that some technical economic analyses are fraudulent. “Especially when such counterfeit claims disparage, discredit and seek to exclude legitimate opinion and analysis from policy debates, they undermine the foundations not only of academic discourse but of credit, economic exchange and distribution”. A question at the end of the summary seems to go straight to a major point in a debate on ethics: What does the ingenuity of economists toward a counterfeit fallacy suggest about the prospects for the economics profession to admit, confront and remedy its ethical failures?
    This commentary is not focused exclusively on the Walker’s paper, which is an outstanding work per se. It is intended to show that the Walker’s approach to the subject also suggests a broader discussion of the question: where may the world and the economics profession be led by this amazing combination of fallacy, counterfeit, fraud, ingenuity, ethics, economics and economists?.
    The usual definition of fallacy is a proposition which carries a false, misleading, erroneous and logically unsound nature. Worse still, it has been seen as a deliberate creation intending to benefit a few and to harm the most. Fallacious then generally refers to things which are deceptive, delusive, disappointing, false persuasion, and so on. A statement becomes a fallacy when somebody collect real facts to prove that it has no grounds; otherwise it becomes ideology. So, it is anti-ethical to abide by a fallacy, or simply accept it as an ideological matter despite the evidences on the contrary. Looking at their definitions, fallacy, fallacious and so ethics sound like polite words.
    Walker talks about one fallacy, but the economic mainstream is plenty of fallacies. At the micro level the main are: utility curves, differential calculus for utility and profit maximization, and perfect competition. These fallacies are combined together to create a greater one: there is no supply curve outside the perfect competition world. Therefore, the frustrating conclusion of the course in neoclassical microeconomics is that there is no such a thing known as supply and demand analysis . Nobody can prove that this set of fallacies, being a necessary condition for, was not intentionally perpetrated to give support to the profitable idea that prices are determined not by the buyer’s income and production costs but by the stock of money, be it backed or not by production.
    At the macro level main fallacies are: savings causes investment, interest rent is spent in consumption, free market, free worker’s option between income and leisure leading to full-employment, full capacity, no speculative financial capital and no speculative inventories. The frustrating offset of the neoclassical macroeconomics is a composed fallacy stating that the aggregate supply curve is a vertical line at the full or near-full employment level , which may be seen as another wording for lump of labour. In this fallacious world an expansion of the aggregate demand (if done with cost-free money emission) causes inflation and should be banned. The simple observation that fiscal policy (even if “financed” by T-bonds) does create jobs is sufficient to falsify this neoclassical statement. However, cognitive dissonance, a polite term for ingenuity or stupidity, prevents monetarists from seeing it.
    These two sets of neoclassical fallacies gave room to the master-fallacy which created the monetary doctrine: government should never print (cost-free) money because this causes inflation. Let’s call it monetarist paradigm . Despite all criticism, monetary and neoclassical doctrines have been said theories, but they are no more than a poor result of fallacies stockpiling. “The Neoclassical model that dominates economics today is riven with logical and empirical fallacies” (KEEN, 2011).
    What monetarists can do and actually have done is to deny everything and be confident that the repetition of their fallacies will consolidate the ideology. “The rich and powerful create strong demand for economic ideology that justifies their wealth and power” (SOOS, 2012). Monetarists, relying on popular fallacies, supply that market, becoming then priests of “organized, systematic, conceptualized and financially motivated subversions of the democratic process” leading to the political power identified by FULLBROOK (2012). More than an “inexcusable ethical lapse for the economics profession”, the monetary paradigm is not economics but a huge fallacy or fallacy and fraud combined (GALBRAITH Jr, 2010; WRAY, 2010).
    Among others, two major economists’ ethical faults follow directly from the monetarist paradigm. The first is the advice which contradicts the basic law of economics, that one stating that every person and company should spend less than their earnings. What actually happens is that the monetarists say, with little or no academic resistance at all, that the government – the society – must pay his deficit with borrowed money. But in so doing government – in the name of the entire society – spends more than its earnings because the interest expenditure is greater than the earnings expansion. Government is not a profitable enterprise. The second one is a straight consequence of the first one: government cannot pay its debt and so the public debt grows to the infinite .
    Thus, central bank open market operations carry a fraud, a Ponzi scheme named monetary policy which is “sustained” by cost-free unbacked money daily printed by central banks when redeeming T-bills. Walker states that “credit is both a belief and a belief about a belief”. This may be extended to money because money is credit to the holder – the society at large – and a liability to the issuer – the central bank, by order of the government through T-bills. However, due to propaganda society believe that the government’s should not print money and the society believe government is not doing so. Society should not be afraid if government prints money to buy real stuff people produce with labour. Who would refuse to do business with government because it orders central bank to print money to pay the bill? Certainly not the financial capitalists who collect rent from T-bills. The question is not “printing versus not printing”, but printing cost-free money versus interest bearing money. “It is absurd to say that our country can issue $30.000.000 in bonds and not $30.000.000 in currency. Both are promises to pay; but one promise fattens the usurer, and the other helps the people” (Henry Ford in an interview to the Wall Street Journal, December 6, 1921). Printing bonds leads to the uncontrolled printing of unbacked money and to the capture of the government – and society – by financial capitalists (HUDSON, 2011).
    Unbacked money means also that this money donated by the central bank to the few do not promote production and employment, it goes to the financial market which by nature produces nothing real. This money donated by the government through “its” central bank is then used to buy more T-bills. Therefore the public debt, the interest payment, the interest rent and the stock of unbacked money follow an explosive trend to the infinite. On the other side, government cuts expenses to provide a primary surplus (which is always insufficient) to pay interests and people pay more interests to the few, pay more taxes and spend more money on housing and on those public services cut in the name of the useless effort of producing primary surplus, like road tolls, health care and education. Central banks enriches the 1% while the government impoverishes the 99%. When an economy is driven by the monetarist paradigm, what happens is, as said SY (2012), that crises are (inherent, inevitable and endless) endogenous phenomena leading to chaos. Society should be afraid of the big bad bank.
    Neoclassical and monetary approaches lead to other-worldly doctrines pervaded by fallacies, delusion, vested interests, fraud, and a lot of other human vices. Their survival and dominance depend upon human features like ideology, cynicism, ingenuity, vanity, jealousy, greed, and alike. The monetarist paradigm is, like credit, “both a belief and a belief about a belief”. Monetarists believe on the paradigm and people believe that monetarists actually believe and abide by the paradigm. Being human, those vices and features are expected to happen independently of what is the economic order or theory. However, a major case arises from the use of these human characteristics to create a doctrine whose credibility depends upon human vices, not virtues. Being other-worldly is a necessary condition for neoclassical and monetary doctrines creators because they are prone to ends and not to scientific recognition. Ethics may be not applicable here. So, nowadays the prospects for the economics profession to admit, confront and remedy its ethical failures seems to be none.
    Those who abide by fallacies believe they also abide by ethics because what they call ethics is naturally a fallacy all the same. They cannot realize what ethics actually is; ethics touches their cognitive dissonance. So, in order to charge such people with ethics they would come to the real world first. Notwithstanding, “If economics were a real science, it would have long ago been overthrown and replaced by something more realistic” (KEEN, op. cit.). It seems that a sound decision to be made is to admit that present mainstream is not economic science, stop discussing it, stop trying to fix it and look another way around. After all, in Kuhn’s words, “… proponents of competing paradigms practice their trades in different worlds” (KUHN, 1962, p. 149).
    This commentary converges then to those research works which propose a new paradigm to replace the monetarist one. On the matter, Sy adverts that “… there can be only one paradigm in any subject, just as there can be only one king in a kingdom”. And more: “An adverse aspect of a paradigm is that new ideas outside the paradigm will be difficult to understand by most and, the greater the originality of the ideas, the greater will be resistance to acceptance” (SY, 2012, p. 68).
    Organization and patience are required in a so ambitious project, at least because a … “paradigm-testing occurs only after persistent failure to solve a noteworthy puzzle has given rise to crisis. And even then it occurs only after the sense of crisis has evoked an alternate candidate for paradigm (KUHN, 1962, p. 144). SPREAD (2012) describes and discusses Fullbrook’s consistent ideas and suggestions for a leading role of the WEA in an imminent paradigm change. It is there stressed that a new theory is needed, a theory which must be realistic and capable of attracting old and new economists. On this search for a new theory, it could be interesting to obtain first a consensus on what is actually wrong with the monetary policy. If heterodox economists are to be divided in several lines, monetary policy will always be the mainstream. While economists do not see the monetary policy as a fallacy it will remain just an ideological matter and consequently bubbles and crises will rule the economy.
    A sound diagnosis is more than half a way through a solution. Following Walker’s methodological approach based on history, this commentary is closed suggesting a return to the past, looking for what has not been seen yet. The idea is to restart researching from the era just before the creation of the maximization principle through differential calculus. For instance, Marshall once said that the Cournot’s theory anticipates prices which are higher than the actual market prices. Many empirical works confirmed Marshall’s theoretical intuition. Possibly Marshall, himself also a brilliant mathematician, was telling us that, to be applied, differential calculus requires the ceteris paribus condition. So, competition must be “given”. Of course a given competition is a fallacy; no real-world company declares and sustains its announced market strategy. But this is the trick Cournot introduced: as Marshall said, a Cournot’s firm is a monopolist; when making decisions every firm knows exactly what all others will do. Going a step ahead one may conclude that the best interpretation of the Cournot’s theorems may be that they demonstrate the inapplicability of differential calculus to describe suppliers’ behaviour and therefore to explain how price and production are formed and whatever else in economics. What then is the meaning of the orthodox John Nash’s Nobel Prize?
    FULLBROOK, Edward. The political economy of bubbles. Real-world economics review, issue no. 59, pp. 138-54, March 12th, 2012. http://www.paecon.net/PAEReview/ issue59/Fullbrook59.pdf.
    GALBRAITH, James K. Washington D.C.: US Senate, Judiciary Committee, Subcommittee on Crime. Statement, May 4, 2010.
    HUDSON, Michael. Capital Account: Michael on Europe’s Transition from Democracy to Oligarchy. Posted in the Dandelion Salad Blog December 7, 2011. http://dandelionsalad.wordpress.com/2011/12/11/europes-transition-from-social-democracy-to-oligarchy-by-michael-hudson/
    KEEN, Steve. 1,000,000 Economists Can Be Wrong: The Free Trade Fallacies, posted by Steve Keen in the Real World Economic Review Blog, October 1st, 2011.
    KUHN, Thomas S. The Structure of Scientific Revolutions. The University of Chicago Press, 1962.
    SOOS, Philip. Time to stop rewarding economists for bad behaviour. The Conversation (Australia), March 15th, 2012. http://theconversation.edu.au/time-to-stop-rewarding-economists-for-bad-behaviour-5836.
    SPREAD, Patrick. “Science and Support: The Struggle for Mastery in Economics”, Real-world economics review, issue no. 59, pp. 39-57, March 12th, 2012. http://www. paecon.net/PAEReview/issue59/Spread59.pdf.
    SY, Wilson. Endogenous crisis and the economic paradigm. Real-world economics review, issue no. 59, pp. 67-80, March 12th, 2012. http://www.paecon.net/PAEReview/ issue59/Sy59.pdf.
    WRAY, L. R. The NY Fed (Finally) Turns on the Bank Frauds: Bank of America’s Foreclosuregate. Benzinga, The Trading Idea Network, October 20, 2010.

  12. riccardobaldissone
    April 2, 2012 at 12:52 pm

    Dear Frederic,
    thank you very much for your comments and for the (implicit) invitation to push further my expressed position. I will try to do it along the lines that you suggested. However, first I would like to reconsider a point in your otherwise fair resume of my paper. Neither deduction nor induction are part of my theoretical toolbox. To be more explicit, deduction and induction are supposed to lead us either way of the conceptual ladder, or if you prefer a more common metaphor, of the hierarchical tree of logical classification. Hence, deduction and induction are only effective if one believes, as medieval scholars and modern analytic philosophers did, that reality can be reduced to this simplistic hierarchical scheme. Unfortunately, logic and mathematical reductionisms plagued modern thought in general, including economic theories. Of course, we cannot deny the methodological convenience of reducing complex issues to more tractable models. We know that well before computer science, systematic procedural decomposition granted extraordinary results to physico-mathematical models, but we know also that the price of this success was the exclusion of all which did not fit these models. For example, early modern thinkers excluded from objective reality qualities such as odours, colours and tastes. If we move to the economic field, we may see that the relation of complementarity was ruled out in favour of substitution. I understand your claim of complementarity as a plea for collaboration against competition, and as a commitment to longer horizons, which would dispel the risk of tautological reconfirmation. This is why the framework of substitution cannot be simply integrated by complementarity, but it has to undergo a thorough deconstruction (which I prefer to Kaldor’s destruction).
    However, I would like to be reassured that the complementarity framework to come would not simply propose a more objective view of the world, but it would rather provide us with theoretical procedures for constructing a more participative reality. More in general, I am afraid that inasmuch as system theory, complexity theory, ecological and cybernetic models would not go beyond the purely representational model of scientific thought, they would only aim at a more sophisticated rendering of the supposed objective reality. This is why I suggest that economists should better deploy the (relatively) recent toolkits of non-Newtonian, non-deterministic and non-linear analyses from within the framework of political thought. Despite the modern attempt to constrain politics within the limits of descriptive science, I contend that political discourse can better account than sciences for the plurality and the self-determination of human agents (and also of non-human agents, as Bruno Latour argues). From the perspective of political thought, complementarities would not simply be a more articulate representation of economic activities, but a committed tool for reconfiguring and reorganizing economic realities.

  13. Stuart Birks
    April 19, 2012 at 9:58 am

    An alternative viewpoint to that of Tom Walker can be found in a post by Dean Baker on the RWER blog entitled “Work Sharing: The Way for States to Reduce Unemployment” at: http://rwer.wordpress.com/2012/04/19/work-sharing-the-way-for-states-to-reduce-unemployment/

  14. April 30, 2012 at 11:42 am

    A general comment by A. Fusari e-mail: anfusari@hotmail.it forwarded by Alan Freeman

    Some critical comments have suggested me this general clarification that hopes to stimulate (and add improvements to) the debate.

    One main feature of social thinking on ethics has been, for a long time, the irremediable opposition between ethical absolutism and relativism. The first substantially considers ethical values as acts of faith, while ethical relativism considers values like points of view. The victory, in the end, of ethical relativism against absolutism has set free social thought by suffocating theological interferences, but without improving scientific standard that instead has been submerged by an increasing variety of points of view on values. Is it possible to do better? This is the purpose of my distinction between cultural objectivism and relativism or, in other words, between objective and subjective ethical values, a distinction that may appear indigestible both to relativists and absolutists.
    Objective values are those linked to and, in some sense, generated by objective conditions of reality; as such, they do not express mere points of view. My contribution mentions some ethical values linked to (and motivated by) a basic aspect of human nature, the extremely wide variety of individual skills and inclinations that generates an immense evolutionary potential. This potential would be very poor if men, by nature afflicted by heavy limitations, had identical skills. This shows the objective character of the values linked to (and essential for) the expression of such an objective aspect of human nature; they cannot be considered as mere points of view.
    The considered objective content of important ethical values needs to be strongly clarified and stated. In fact, in our age, the triumphant ethical relativism denies such objectivity with strength and sometimes considers its statement a ridiculous proposition. But this relativist denial represents an outstanding example of scientific blindness.
    My contribution attempts to show that the disownment, by various civilizations, of values connected to or required by the appreciation of the great variety of human skills and propensities, and the exaggerated preference for opposite values stressing organization and homologation, have caused dead ends, sometimes in the form of proud and influent organizations (such as the great bureaucratic centralized empires) but that resulted, in the end, deprived of prospects. As an additional proof, I show that, on the contrary, the triumph, in the Western world, of civilizations hinged on values able to promote the effects and operation of the variety of skills and behaviors, as it is typical of capitalism, have opened the door to growing development paths and modern world.
    I clarify then that some heavy and growing iniquities of capitalism and its value system, mainly the usual forms of income distribution as largely dictated by the side of production and the pushiness of current financial systems, are more and more obstructing, together with the role of individuals’ diversities, the development of modern world and inseminate in nowadays societies paralyzing contradictions.
    In the last two sections, I make an attempt to develop what seems to me the most relevant ethical problem in economics, that is, the way to achieve the highest possible degree of social justice consistently with the highest possible degree of efficiency. More specifically, I try defining: a) some institutions and organizational forms of society that, differently from capitalism, cut-off as far as possible the dependence between the side of production and income distribution; b) some financial systems acting as servants, instead of masters, of production. The fulfillment of a) and b) seems to me indispensable to may conjugate social justice and efficiency.
    The analysis that my contribution sets out can be generalized mainly on the basis of three analytical categories:
    Ontological imperatives, i.e. consequent to basic characters of human nature; the objective values considered in my contribution represent some of these imperatives.
    Functional imperatives (not in T. Parsons’ sense), expressing organizational forms required by the level of the general conditions of development of the considered societies. These imperatives vary with the evolution of the general conditions of development and mark historical eras.
    The grand ethical options with the associated forms of civilization,
    The civilizations that suffocate or disregard important ontological imperatives push social systems in dead ends or in quasi-stationary societies sometimes of a high level. On the contrary, the civilizations that fulfill important ontological imperatives will benefit a continuous advancement of the general conditions of development; this will cause the advent of new functional imperatives that, in turn, will cause the need of new forms of civilization congenial to them; and so on. This helps to understand a main problem of nowadays, i. e.: capitalist civilization has opened the door to modern world and caused strong changes in the general conditions of development thus causing new functional imperatives, for instance, the necessity of a strong reduction of the relations between production and income distribution and of a financial system servant and not master of production, as we know; so that, some new civilizations are required, consistent with those new imperatives.
    In short, the three analytical categories above may provide a useful tool for the interpretation of history and the understanding of social-historical processes and hence for addressing some criticism to the large variety of existing theories in the subject.
    I hope that doubts and objections on my developments by the conference participants are expressed without any limitation.

  15. April 30, 2012 at 11:54 am

    The Economists’ Oath and the duty of truth: the case for a pluralist ethical practice

    I’ve been travelling while a lot of this interesting discussion developed – apologies therefore for throwing in a couple of late comments and also a couple of new points rather late in the day. I’ll post them in separate comments to provide a focus.

    Several writers and comments have referred to the Hippocratic Oath and its principle ‘first do no harm’. This is a good analogy but there’s a problem: how does an economist know if she is doing harm? And is it possible to tell? There is a difference between a doctor and an economist because a doctor is ‘called in’ and makes an intervention such as medication or surgery. Economists like to think that’s what they do but actually, it’s quite unusual for an economist to be the direct agent of economic policy. What economists do is offer ‘advice’ or formulate policy, which other people carry out – politicians or business-decision-makers, or whatever.

    My conclusion is that ethical conduct has to have something to say about the relation of adviser to decision-maker. A better comparison might be if you call in an engineer to tell you if your house has a structural problem. On the basis of the engineer’s verdict you decide what to do – shore it up, remove the radon, put in damp-proofing or (if you live in Winnipeg) sandbag it. So the harm doesn’t come from what the engineer does but from the advice she gives.

    What kind of advice is ethical? Well, basically, ‘true’ advice. If the engineer tells me my house is earthquake-safe (having failed to take due precautions to test if this might be a false statement), and then there is a Richter 5 shock and it falls down, then she’s given me bad advice and has behaved unethically. If she advises me that it isn’t safe, that I should spend $50,000 fixing it, and I choose not to do that, then it’s my fault, not hers.

    The difficulty then is to pin down what is ‘true’ advice. The problem with knowledge in general, and particularly economic knowledge, is that it’s never complete – we are never finally sure that, for example, Einstein has totally correctly formulated the principles of gravity and there will never be any need to revise it. With economics it’s even more complicated because of the multiplicity of causes and many other factors we don’t need to go into. The basic point is that it’s difficult to tell if an economist is telling the truth. It’s difficult for the economist, that is to say: truth is simply ipso facto a difficult thing to attain, so I am slightly wary of an ethical duty to tell the truth. An ethical duty to seek the truth, yes.

    This leads me to the issue of untruth. I attempted to address this in my submission to the last AHE conference. Generally speaking, whilst truth is not always definitively detectable, this is not the case with untruth. The statement ‘2+2=5’ is unambiguously false. There are several cases – relevant to an ethical economic practice – in which one can detect that a statement is unambiguously false, and also where there are relevant and due precautions to guide against falsehood. To take a simple example which many economists frequently transgress: if one cites somebody inaccurately, then this is an obvious neglect of the duty not to tell an untruth. To take a second example: if evidence is to hand, this evidence should be used to test the conclusions proposed. Thus if any economist now were seriously to defend the Efficient Markets Hypothesis, I would regard this as a serious ethical breach, equivalent to prescribing Thalidomide or recommending that cigarette smoking is good for you. A third example, which relates to pluralism, is that if there are two or more legitimate alternative theories which would lead to contrary advice, then there is an ethical duty to ensure that the recipient of the advice is aware of these alternatives. Failing to draw attention to a legitimate and relevant theory is concealment. It is unethical; this is one of the reasons that in my own contribution, I stressed that pluralism is an ethical duty. For that reason, my ‘Economist’s Oath’ would start with ‘First Tell no Untruth’. Do not give advice that manifestly conflicts with known facts. Provide evidence for conclusions. If citing somebody, cite them correctly and don’t falsify what they actually said; do not conceal alternatives.

    Taken together, I regard these precepts as a pluralist ethic. Thus pluralism is not as a vague moral commitment to apple pie, but as the most effective guarantee against untruth.

    So my two starting principles for the Economists’ Oath would be ‘First Tell no Untruth’ and ‘Do not conceal the alternatives’. Economics could go a long way from where it is now, on the basis of these two simple precepts.

  16. April 30, 2012 at 11:56 am

    What is to be Done? The Practice of Ethical Economics and the need to reform the Profession

    I think there has been a fascinating discussion on the relation between ontology and ethics which I take to be ‘if one has a particular economic belief is one more likely to behave unethically’. On this I would make only one point, which is that people can have good beliefs and still behave unethically. This is perhaps a necessary counterpoint: there is a sad tendency amongst heterodox economists to act and speak as if it were enough to be a Marxist, or a Keynesian, or an Environmentalist, to solve all major ethical issues. Sadly, there are unethical Marxists, unethical Keynesians, and unethical Environmentalists too. So I tend to side with George on this one – although of course ethical conduct is going to be connected to belief and ontology, we are not going to solve the problem of unethical behaviour by all adopting the right beliefs. I’m sure that Karey isn’t saying that – I’m just pointing out that this is a trap to be avoided.

    This brings me to the next point which is that the ‘problem’ is (in my opinion) now facing economics is really one of the lack of ethics. That’s why the problem has come up; because for example the AEA has only now, after a century-and-a-quarter of its existence, decided to adopt any ethical principles at all, and these were pretty limited, and secured only as the result of a very laudable and energetic campaign. It’s because the kind of practices highlighted in Inside Job are, sadly, widespread and regarded by too many economists as perfectly acceptable. It’s because economists have been – directly or indirectly – responsible for a lot of damage, through the terrible (and not in the least impartial) advice given to third world countries, and in the run-up to the present debt crisis, for example.

    For this reason I’d like to see pursued, in later discussions, an issue which George and I have already discussed at the AHE, namely, what action can be taken? I think the idea of a discussion on ethics is very important, and a huge step forward, so don’t get me wrong – I am not decrying the educational and persuasive effect of having a discussion. But at the end of it, I don’t think it will be enough to stop the bad practices that currently dominate. I think economics, essentially, needs to be reformed, and radically so. If I am disappointed with any aspect of the discussion, it would be the way it seems to be stepping around this particular elephant in the dining room.

    I have put the case for a Code of Conduct. George has put some cogent arguments against this, and I see his point of view. In an earlier article I raised the difficulty: if economics is asked to regulate itself, it will merely sanction its existing bad practice but if it is regulated from the outside, then there is a strong risk that even worse practices will be imposed. But I have a third option, and I think the subtlety of it may not have been understood. A Code of Conduct does not have to be regulated at all. It is simply what it says on the tin: a list of enunciated principles which allow us to judge if an economist is conducting her or himself ethically, or not. Where this would help is in the contractual relation between economist and the public, or between economist and clients; it allows the people that are paying for the economist to judge whether the money is likely to be well-spent. In essence, it’s a kitemark: a standard of performance which can be verified, just as when we hire a doctor, or an accountant, or a lawyer, or more or less any other professional, there are a list of things that we know that professional ought to do which constitute ‘good practice’; we can, and should, ask for some kind of proof that the people our money goes to, conform to this good practice.
    Like any Code, of course, it won’t work if the Code is wrong. But this is an argument for having a good code, not for having no code at all.

    So, all in all, I would be strongly in favour of actually sitting down and writing out what a Code of Conduct might look like, as a collaborative endeavour, and see where we go from there. Perhaps this is something the WEA can think about helping with.

    Alan Freeman

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