07-07-2025
Why economics should abjure ethics
The blog is named after Seeing the Invisible, the title of a book on economics for children that Sanjeev wrote in 2018. Economics involves the study of incentives, motivations and information flows which are invisible. Likewise, self-seeking ministers and bureaucrats often work invisibly (and insidiously) against the public interest - more so in socialist countries like India where governments take on many unnecessary functions. On the other hand, self-interested businesses – through their competition for our custom – end up fostering the public interest. This blog straddles a range of autobiographical, governance and policy topics, including the experience working in the IAS, letting go of the Indian bureaucracy and learning new things in different countries, and attempting to build a liberal party for India. LESS ... MORE
In 2023, I suggested why public health ethics is useless at best, harmful at worst. In 2024 I explained why, in my view, ethics must be expunged from public health. In doing so I also cited broader problems with the concept of ethics which make it unsuitable to inform public policy.
A recent paper by Jim Dorn argued that the best argument for free trade is its morality. The economist Donald Boudreaux supported this: 'Jim Dorn is correct: The ultimate justification for free trade is that protectionism is unethical. What right do producers A, B, and C have to the income that you earn that you wish to spend purchasing imports? The answer is none.' I believe that Don Boudreaux is one of the finest economists of our time but I disagree with such rhetoric. Morality operates in an irrational world and carries the risk of being used to drive entirely opposing arguments. I will attempt to show in this piece that not just public health, economics must also abjure ethics.
Ethics provides no tools to assess public policy
Ethical analysis is fully justified for individual-level medical interventions. That's why we have the Hippocratic oath. Individual-level ethics also tells us why enslaving someone is bad or why trading in children is bad. But ethics doesn't make sense for society-wide policy such as property rights (private or public), lockdowns, or vaccine mandates. That's because ethics has no methodology to assess and then aggregate harms and benefits across millions of people. Instead, it forces us to look within, to use the guidance of our 'soul', thus switching off the rational circuits of our brain.
The Nobel laureate George Stigler wrote in 1980 that an economist 'needs no ethical system to criticize error: he is simply a well-trained political arithmetician'. For society-wide policy, only empirical, rational methods, such as a cost-benefit analysis, are justified. There is a good reason why there is no economics textbook on theology and ethics but many textbooks on how to identify costs and benefits of policy. Economists can readily demonstrate that free trade provides a net benefit to society while socialism, which confiscates property and destroys trade, causes more harm than good. Once the net benefits of capitalism and free trade are proven, readers can draw their own conclusion. We don't need to embellish our already powerful arguments with ethics.
Ethics is often the first resort of the scoundrel
There's an aphorism in India: 'Munh mein Ram, bagal mein churi'. It cautions us against those who proclaim loudly to be ethical (chanting the name of God at every step), for such people are capable of plunging a knife into our back when we are not watching. In 2024, I elaborated how 'ethics is a devious concept that has often been deployed since antiquity by elites to justify their misdemeanours'. In 2023 I showed how : 'Every soldier's God is on his side. Ethics is the most malleable instrument of human imagination. It is always misused by zealots.'
Socialists and fascists lay claim to their superior ethics. In a chapter on 'Hitler's Ethics' in his 2004 book, From Darwin to Hitler, Richard Weikart explained that: '[I]t is clear from Hitler's writings and speeches that he was not amoral at all. On the contrary, he was highly moralistic and consistently applied his vision of morality to policy decisions'. Even when he was losing the war, in January 1945, Hitler said: 'The insight into the moral value of our conviction and the resulting objectives of our struggle for life give us and, above all, give me the strength to continue to wage this fight in the most difficult hours with the strongest faith'.
In describing Marx's ethical goals, Frederick Engels wrote in his 1877 book, Anti-Duhring, about how communism would achieve '[a] really human morality which stands above class antagonisms and above any remembrance of them'. Who could object to such warm and fuzzy goals? But we know what communism actually does. Likewise, the founding Fabian socialist, Dr Havelock Ellis wrote in 1922 that 'The inspiring appeal of Socialism to ardent minds is no doubt ethical.' R. H. Tawney, a British Christian socialist, is reported to have believed that 'socialism…involves a moral transformation, not just an economic one'. In his 1949 essay advocating socialism, Albert Einstein plied the ethical argument: 'socialism is directed towards a social-ethical end. ….there is only one way to eliminate these grave evils, namely through the establishment of a socialist economy'. In his 2012 book, How China became Capitalist, Ronald Coase noted that socialism was considered by China's leadership as the moral way 'to stamp out economic inequality, the perceived root of all social evils'.
Socialism brings an abrupt end to private property rights, markets and free trade because doing so is said to be ethical. John Rawls's social justice arguments for confiscation of private property are likewise based on ethics. But Jim Dorn claims that it is free trade, instead, that is ethical! So, who is right? None of them. Because ethics can't give us a unique, objective answer. It is unfit for purpose.
Socialists need to resort to the subterfuge of morality to persuade others because of overwhelming empirical evidence against socialism. Let them do so. We can easily refute them with objectively measurable rational facts.
Conflating private ethics with society-wide policy
When people ask me what drives me, I cite 'nishkama karma', i.e. doing the right thing with no regard to the consequences. I'm not religious by the remotest stretch of imagination but this phrase from the Gita works for me.
Everyone, however, differ on their understandings of 'right action'. We might think highly of our personal moral standards but that doesn't give us the authority to tell others how the world should be run. Instead, we should first rationally confirm that our beliefs do actually provide a net benefit to society, and then share these proofs with others. Objective, empirical proofs have a higher chance of persuading others than appeals to morality.
Nobel prize winning economist cautioned economists from using arguments other than purely rational ones. In his 1960 book, The Constitution of Liberty, he noted that 'noble sentiments' have often been 'mobilized in the service of greatly perverted aims'. He explained that using such (moral) sentiments is 'neither a safe guide nor a certain protection against error'.
Let's stick with empirical, rational arguments and not divert economics into the capricious and often deadly swamp of morality.
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Views expressed above are the author's own.
