Rethinking Economics as Moral Philosophy

Toward the end of his New York Times article, “Obama the Centrist Irks a Liberal Lion” (1/8/11), Michael Powell quotes Robert Reich as saying that he has been rightly criticized for failing to address the moral dimensions of economic theory, public policy, and business decision making. Because economics originated from moral philosophy, which still frames its purposes, key issues, and basic concepts, Reich acknowledges that economists today cannot claim a neutral or value-free intellectual and political space for their discipline or for their individual analyses and proposals. Instead, they must take responsibility for the intellectual tradition that empowers their work and gives them a platform to influence processes of public reasoning, especially in light of the impact on human lives that their work has had in recent memory. Reich admitted that some of his own work has lacked careful attention to the moral dimensions of economics: “I left out the questions of power and inequality…The Great Recession has made it impossible for me to ignore that.”

It is not easy to rethink economics as moral philosophy today, in part because mainstream moral philosophy has become an abstract enterprise rather than the practical one it was for Adam Smith and David Hume. Today’s moral philosophers tend to be ignorant of and unconcerned with the details of economic theory and practice, and economists return the favor, knowing little about moral philosophy. Small parts of the work of influential contemporary political philosophers like John Rawls and Jurgen Habermas may be taught in economic theory and business ethics classes. However, these thinkers still assume Kant’s eighteenth century division between public and private values, and they carry this over into their treatments of social justice and public reason. Their philosophical projects aim to rationalize the kinds of abstract economic and political models they believe Western democracies now share. Because their work neither draws upon empirical analyses nor challenges how well these models describe and guide our actual political and economic institutions, processes, and policies, they do not offer much critical leverage for thinking about the issues of power and inequality Reich rightly raises. Thus, if we are to rethink economics in terms of those aspects of moral philosophy that are and should be part of its meaning, its social function, and its consequences, we also need to rethink moral philosophy in ways that reconnect it more practically with political and economic realities.

One of the odd features of the Great Recession is that it has revealed how strange it is to rely on the Stock Market and corporate profits as indicators of a nation’s economic well-being, as Reich says President Obama and his team of economic advisors have continued to do. Instead of the hard-headed, fact-based reasoning that guides market exchanges in the standard model of capitalism undergraduates study, we have seen decision by rumor, reputation, spin, group think, and computer models too complex for their human minders to understand and critically evaluate. Most of those countless Americans who still regard the determinations of “the Market” as a sacred kind of mystical reckoning that promotes their welfare even while it secures their freedom have been badly harmed by the poor judgment of a small number of highly educated and well-paid market managers and economic gurus. Reich says Obama’s biggest economic mistake has been his failure to challenge a “Republican narrative” – “a big lie” – that blames our economic misery on unions and big government, instead of on deregulation and the concentration of wealth in the hands of a tiny portion of our population due to misguided and unjust government policies since the Reagan years.

However, the “wider lens” Reich employs to see the flaws in this narrative is still not wide enough, nor is the clouded lens Michael Powell employs in vaguely labeling Reich, Paul Krugman, and Joseph Stiglitz “liberals.” Most of his readers will probably read this label in contemporary political terms, as meaning that these three economists belong to the team on the left, in contrast with the Republican team on the right, and with Obama’s “centrism” that annoys both. However, “liberal” has an older meaning in moral philosophy, emphasizing individuals’ equal rights and responsibilities, the guidance of reason by evidence and logic, the importance of education in cultivating such habits of reason and that of democratic institutions in protecting the freedoms and assuring the opportunities that allow all to live well and in peace. Surely Reich, Krugman, and Stiglitz are liberals in this original sense, as are Obama and many of their Republican opponents. In contrast, those who are “conservatives” in the original meaning of that term exemplified by Kant’s contemporary Edmund Burke may argue that human well-being requires placing greater reliance on slow-developing traditions than on science and personal opinion while directing greater moral concern toward the stability of institutions and social groupings like families and nations than toward the equality and life satisfaction of individuals. Some of those who call themselves “conservatives” today actually believe exactly the opposite of what Burke believed and would be more accurately labeled “individualists” or “libertarians.” It would help if we used all these labels more carefully, to help us focus on the moral, theoretical, and empirical claims the thinkers we rely on are actually making, instead of vague teams in political struggle.

We also need something more and harder to achieve than such a communicative ethics: we need a still-wider and clearer lens or set of lenses that can help us to understand what markets are and how they work, what powers drive them and toward what ends, in what conditions markets work well and in what conditions alternative social choice mechanisms are more effective and desirable for achieving the larger moral purposes that ought to guide economies and political systems. Such a lens or set of lenses is not presently available to economists, political scientists, or moral philosophers practicing in the mainstreams of their disciplines. Nor can it simply be unearthed by rereading the classical tomes of Adam Smith, Edmund Burke, Karl Marx, and Friedrich Hayek. It must be fashioned by contemporary scholars from new thinking combined with still-useful models and methods of all three of these disciplines to frame a new, interdisciplinary paradigm of political economy: one that requires empirical evidence, careful thinking and guidance from precedents, directed toward worthy goals by more inclusive and realistic narratives that tell the truth about power and inequality, even as they highlight meanings and purposes that our experiences and those of differently situated peoples show us can stimulate “the better angels of our nature.”