Why my doctor is a Kantian and my car mechanic is an Aristotelian: bringing marketplace ethics into the classroom

Abstract

This article makes the case for bringing ethics more explicitly into the economics classroom. It outlines a theory of pluralist ethical institutions, explains how these may solve certain problems in markets and relates them to a model of human behaviour proposed by Adam Smith. Markets operate not only on the foundation of outcome incentives tied to contracts and property rights, but also on the basis of Kantian duty and Aristotelian virtue. These latter concepts explain the development of deeper trust, which reduces transaction costs and risks. Trust can be achieved through reputational effects in repeat trade and from sharing sentiments and principles. Smith’s moral sentiments model describes how individuals come to develop the self-control needed to obey social norms and laws relating to honesty and treating others with respect. The article provides examples of markets that are enhanced by non-consequentialist ethical institutions, as well as some of the constraints imposed by them. It thus provides a strong case for dealing with ethics in standard economics courses and it makes some suggestions for how this can be done simply and effectively.