Ethics and Economics

New perspectives

Mark D. White, Irene van Staveren

• Publisher: Routledge
• Year: 2013
• eBook ISBN: 9781317988854
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Since the days of Adam Smith, ethics and economics have been closely intertwined, and were nominally separated only with the advent of neoclassical economics in the beginning of the last century. This book features eleven essays by leading scholars in economics and philosophy who argue for a renewal of the bond between the two disciplines.

Several of the contributors argue that the ethical content of economics and moral status of the market have been misunderstood, for better and for worse. Some recommend changes in the way that individual economic choice is modelled, in order to incorporate ethical as well as self-interested motivations. Finally, others question the way that societies assess economic policies that affect the welfare and dignity of their constituents.

A wide range of philosophical perspectives is offered, drawing from the classic writings of Adam Smith, Immanuel Kant, and the ancient Stoics, to that of current scholars such as Amartya Sen, Elizabeth Anderson, and Christine Korsgaard. This book provides a comprehensive introduction to the cutting edge of interdisciplinary research between ethics and economics, and is sure to be an important resource for scholars in both fields.

This book was published as a combination of the special issues Review of Political Economy and Review of Social Economy.

The ‘Dismal Science’ – Still? Economics and Human Flourishing

MARK A. LUTZ

University of Maine, USA

ABSTRACT This paper is an attempt to evaluate critically standard economic theory from the point of view of self-realization ethics and psychology. In doing so, there is considerable reliance on Abraham Maslow’s well-known theory of personality development. According to his penetrating insight, it is insecurity that keeps a person trapped in a world of materialism – be it a desperate survival mentality, a preoccupation with excessive sexuality, or an unabashed and omnipresent consumerism. Feeling secure, on the other hand, opens the gates to psychological health and real personal autonomy. Over time there has accumulated a considerable amount of empirical evidence supporting such a Maslowian insecurity-materialism link. The present paper surveys the problem of economic insecurity, especially the anxiety of job loss. Since there is ample evidence that, in today’s globalized world, this problem is quite serious and increasingly widespread, it would follow that Maslowian personality theory predicts a large part of the population finding it increasingly hard to embark on a life of personal flourishing. Economic theory, with its traditional emphasis on competitive markets for both output and input, its unflagging support of unregulated international trade and outsourcing, its tacit consent for the new lean, mean, and flexible corporation, and its purely instrumental treatment of work and workers, for all these reasons, must share much of the blame for what appears to be a massive stunting of personality development. In this regard, the dismal science of the nineteenth century may still warrant the same designation today.

The label ‘dismal science’ was conjured up by the mid-nineteenth century romantic critics of political economy. Thomas Carlyle and John Ruskin reacted against what they saw as a pseudo-science oriented toward begetting wealth rather than life.¹ For both, the fruit of the overly scientistic teachings of the ‘Dismal-Science People,’ especially their expressed desire to abstract from moral considerations, was manifested in laissez-faire, industrialism, and poverty of the masses. Instead, Carlyle, Ruskin, and a handful of others, called for a more just and humane path in matters of political economy.²

Today, some 150 years later, the human condition has, in general, improved; yet there are still certain aspects of economic theory and theory-derived policy that could benefit from exposure to critical thought from a humanistic perspective.

If a social science such as economics were confined to only positive description, explanation, and prediction, then the critical theme running through this essay would be rather irrelevant and inconsequential. But to the extent that economics also entertains normative propositions about welfare, or individual well-being, some kind of critique along the lines offered here seems long overdue. Economics with its emphasis on competition and labor markets may be encouraging the making of materialist and consumerist attitudes on a large scale – and at the expense of human flourishing, personality development, or self-actualization. The present argument will rely heavily on Abraham Maslow’s psychology and research involving anxiety and stress due to economic insecurity.

By now it is clear that feelings of economic insecurity are widespread. Lack of accessible health care is one big reason; another is the lack of adequate income after retirement. This paper will focus on yet another cause of anxiety: job insecurity. In this context, during the last two or three decades, in the field of psychology, there has been mounting evidence supporting Maslow’s thesis that insecurity tends to interfere with healthy personality development.

Obviously this paper is based on a presupposition that the quality of an economy is manifest in the degree of physiological and psychological health enjoyed by its members. For this reason alone the social sciences do well to embrace a normative dimension.³ In terms of economics, psychological health implies healthy preferences, or truly autonomous preferences (i.e. the preferences one wants to have), and not the preferences one happens to have (Frankfurt, 1971). A problem arises because economic efficiency is expressed in terms of satisfying existing actual preferences, whatever they may be. As a result, there tends to be a head-on clash between economic efficiency and human welfare, a conflict and tension that also run like threads through the present paper, and call for a rehumanization of economic thinking.⁴

It should be noted that the focus on economics and ethics here will not only be critical but also relatively narrow. Besides the perils of pervasive job insecurity, there are, needless to say, many other dimensions to a humanistic critique. They include: unfairness, discrimination, destitution, exploitation, disrespect of human dignity, environmental destruction, and ecological non-sustainability.⁵ None of these will be dealt with in this essay. Instead, the spotlight will be put on job-related anxiety – a relatively neglected but increasingly important topic.

On the Philosophy and Psychology of Self-Realization

Approaching ethics from the point of view of self-realization is nothing new. Pioneered by the Greeks and revived by Thomas Aquinas in the Middle Ages, the idea of self-improvement and self-perfection also characterized much of eighteenth-century Continental philosophy. It culminated with Hegelian Thought in Germany. According to one student of the period: ‘The movement of thought from Kant to Hegel revolved in a fundamental sense around the idea of man’s self-realization as a godlike being or, alternatively, as God’ (Tucker, 1972, p. 31). In the nineteenth century, self-realization as an idea was basic to the writings of Schelling, Feuerbach, and Kierkegaard. Karl Marx, too, in his early work, built his ethics around self-realization.⁶ It should also be noted that the current movement in welfare economics, led by Amartya Sen and others, to go ‘beyond utilitarianism,’ embraces a social ethics related to self-actualization (see Giovanola, 2005). Finally, in much of Eastern philosophy the concept continues to be very much alive, albeit in a more spiritual form.

We are told that it was German psychologists like Freud, Adler, Reich, May, Horney, and Fromm who, by leaving Nazi Germany, helped America import a Continental-type concern with psychological health and personality.⁷ For these and other humanist psychologists the unifying principle was nothing other than the human self. The American psychologist Abraham Maslow (1908–1970) spent much of his life studying aspects and traits of a healthy human personality. In the process he came up with his well-known hierarchy of basic needs.⁸ Such vital needs as food, shelter, safety, together with the higher human needs of belongingness, esteem, and self-actualization, are said to be biologically based and manifest the intrinsic aspects of human nature. This innate propensity to grow, develop, and flourish, he stipulated, ‘culture cannot kill, but only repress’ (Maslow, 1966, p. 136).

For Maslow the highest and most distinctly human need is the drive to self-actualize: to achieve self-fulfillment, to live a life full of meaning, to reach one’s potential. In psychology, the concept is generally identified with an integrated personality and psychological health. It encompasses such quasi-synonymous philosophical concepts as individuation, autonomy, good functioning, flourishing, creativity, integrity, love, and moral development.

One aspect of Maslow’s theory that makes it extraordinary is that he recognizes a drive or force enabling a mature person to go beyond the social. For example, the psychological freedom of self-actualizers enables them to make their own decision even in the face of contrary popular opinion. Similarly, he sets the foundation for intellectually recognizing the nature and importance of intrinsic motivation.

The half dozen basic needs, organized hierarchically, manifest themselves in a series of stages, and one has to satisfy the more basic need of the hierarchy before being motivated by the next higher one. For example, as hunger and the need for shelter are adequately stilled, the need for safety and security (i.e. the desired assurance that these physiological needs are also satisfied in the future) will arise. And before the social needs of belongingness and esteem kick in, the person has to be reasonably secure. In other words, without psychological security the road to social interests (i.e. belongingness and esteem) as well as self-actualization (e.g. moral development) is made very difficult; a tragic circumstance that tends to keep the stressed individual caught in the material domain of wanting to acquire ever more goods and services.⁹

In stark contrast to the idealist brand of much Continental thought, the modern British tradition emanating from Hobbes and Hume followed a line of materialism. Not surprisingly, it was bound to look upon the self as largely illusory, perhaps a mere bundle of perceptions. And with no real self, the whole idea of self-realization became nonsensical as well. Economics as a modern science, born in Great Britain, incorporated much of the materialist thinking so prevalent during the nineteenth century. Bentham, both a Voltairian social philosopher and early economist, put the new science on a utilitarian footing with hedonist overtones. The essence of moral action was turned into a matter of quantitative calculus, seeking a maximum of pleasure with a minimum of pain. A man’s identity was to be defined (and rather uncritically so) by his likes and dislikes. There was not much room for the idea of self-management, mature selfhood, or personality growth. With Adam Smith, the discipline’s main focus is on consumption, not production, and together with the subsequent assumptions of perfect knowledge and perfect mobility, work place anxieties and fears of job loss are conveniently relegated to the periphery. Such quasi suppression of an important aspect of any market economy renders economic theory dangerously unhelpful. Today, orthodox economists continue to stress the importance of flexible markets as the mechanism geared to best satisfy final demand of the population. In textbooks, the norm of allocative efficiency reigns supreme with painfully little consideration of workers’ insecurity and nothing about the consequences in terms of character and personality.¹⁰

Against this background, a handful of non-Marxist economists and social scientists have been concerned about poverty in general and the negative effects of job insecurity on psychological health. The next section briefly sketches some contributions to this subject.

Stressing the Psychological Need for Economic Security

Maslow spent little time concentrating on the deleterious effects of economic insecurity. Nevertheless, he seems to have been keenly aware of the problem. At one place he notes that the most obvious place to look for adults deprived of any real security is to turn to the ‘economic and social underdogs’ (Maslow, 1970, p. 41). Elsewhere, he singles out the special problem of job insecurity in obstructing personality growth, holding that ‘the person who becomes insecure in his relation to his employers tends also inexorably to become insecure in all social areas – in sexual life, in his relations to his family, etc’ (Maslow, 1942, p. 340). More generally, Maslow (1970, p. 41) suggests that the need for safety manifests itself in the common preference for a job with tenure and protection, and the desire for a savings account and insurance of various kinds (medical, dental, unemployment, disability, old age).

One of the earliest political economists alarmed by the spreading insecurity resulting from the Industrial Revolution was Simonde de Sismondi (1965, 1991). Confronted with the new phenomenon of the business cycle, he aimed to remake Smithian economics. His ‘new’ political economy was meant to help bring health, rather than just wealth, to all citizens. Such a reformed discipline would address the plight of the poor, especially the new class of agricultural and industrial laborers without property: ‘The first attention of society must be given to the securing of its material interests, of its subsistence.… We [must] consider political economy in its relation to the soul.… Subsistence is necessary to life, and with life, to all moral developments, all the intellectual developments, of which the human race is susceptible…; for without the vigour which bodily health supplies, … the health of the mind is impossible’ (Sismondi, 1965, p. 123).

During the first half of the nineteenth century, Sismondi advocated legislation to shorten working days and abolish child labor. Early on he wanted to enhance job security by requiring employers to provide for their workers in case of layoffs, illness, and old age. Tragically, he did not succeed in reorienting economic theory, but he is credited with significantly influencing the humanization of the nineteenth century economic system in ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• CONTENTS
• Notes on Contributors
• Introduction
• 1. The ‘Dismal Science’ - Still? Economics and Human Flourishing
• 2. Communitarianism and the Market: A Paradox
• 3. Not by P Alone: A Virtuous Economy
• 4. Virtue and Behavior
• 5. Freedom, Values and Sen: Towards a Morally Enriched Classical Economic Theory
• 6. Pareto, Consent, and Respect for Dignity: A Kantian Perspective
• 7. Identity and Individual Economic Agents: A Narrative Approach
• 8. Adam Smith on Instincts, Affection, and Informal Learning: Proximate Mechanisms in Multilevel Selection
• 9. Two Views of Corruption and Democracy
• 10. From ‘Hume’s Law’ to Problem- and Policy-Analysis for Human Development. Sen after Dewey, Myrdal, Streeten, Stretton and Haq
• 11. The Efficiency of Equity
• Index