Ethics in Positive Economics: Two Examples

Abstract

Although some economists have envisioned the possibility of a value-neutral normative economics that merely investigates the consequences of policies for the satisfaction of preferences, most would be willing to concede that moral judgments do play a role in normative economics. For that reason, they might also concede that when evaluating policies economists should pay attention to matters of ethics. But when it comes to positive economics – the attempt to predict and explain economic outcomes and processes – few economists see any role for ethics. Although it is possible (even in economics) to investigate features of the world without evaluating them, it is often hard to do so. When matters of economics bear strongly and immediately on people's interests, those interests and the moral considerations that are relevant to them are likely to influence the questions economists ask and the answers they defend. Because of this, it is important to understand the values that are at stake. Familiarity with moral philosophy can help here. Although values will be most obvious in debates over practical policy questions – consider debates over energy policy, prescription drug benefits, agricultural policy, or tax policy – moral considerations can have a much broader influence. We shall show this influence in two examples. Both concern matters of fact about economies that bear on policy questions. The first example, which concerns whether there is any involuntary unemployment, is likely to seem odd to readers who are not familiar with economics. How, one might ask, could anybody doubt that some people are unable to get a job? We shall shortly see. Whether workers are unemployed voluntarily or involuntarily seems to bear on the question of what sort of unemployment compensation they should be paid, but its normative implications and presuppositions go deeper. The second example, which involves Paul Samuelson's overlapping generations model, might appear to have no bearing on policy; but as we shall argue, its normative implications have in fact driven what is purported to be a purely theoretical debate in positive economics. Is Unemployment Involuntary? “Macroeconomics” – which treats the institutions and processes governing the economy as a whole – was born during the worldwide economic depression of the 1930s with the publication of John Maynard Keynes's General Theory of Employment, Interest, and Money .