Economics, Friend or Foe of Ethics

Abstract

In this Chapter, I point out that economists who do not relax the utility maximizing assumption and its underpinning in psychological egoism, make economics a foe of ethics. I also note ironically, that economists do not push their psychological egoism assumption to its natural conclusion-that economic actors will cheat when it is in their interest to do so. However, by relaxing that assumption, new forms of economic analysis, such as transaction cost economics, can explain why codes of ethics may not be a good sign of a company’s morality, why an ethical climate can give a company a competitive advantage, and why multinational corporations have universal moral standards. Also relaxing the utility maximizing assumption allows fairness to be an explanatory variable. Lastly, economists tend to ignore the otherness of economic actors and thus promote peace.