Moral Economics - Essays On The Relation of Economic Theory to the Moral
Perspective in POVERTY AND DEVELOPMENT: AN INTER-FAITH PERSPECTIVE. 

INTRODUCTION

This is the first of an occasional series of short essays about how economic
theory interacts with a moral perspective written by Michael Pierce
McKeever, Sr. Readers are invited to repost widely, but please quote the
source. If you think that these messages will be inappropriate to this list,
please send me a private email naming the list and your objection to the
messages.

The book referred to above was written by Roger Riddel with the help of many
and is published by the World Faiths Development Council [email:
[log in to unmask]; URL: www.wfdd.org.uk]; it attempts to find common areas
of agreement among the world's major religions on economic development issues.

PURPOSE: STIMULATE DISCUSSION 

The purpose of these essays is to stimulate discussion about the issue of
morality and economic theory. I believe that economic theory is too
dangerous to be left to economists or to be left with no moral content. It
is similar to the theories of nuclear fission and fusion. Were these
theories left in the hands of practitioners and unregulated by social
concerns, they would blow up the world. Economic theory is now left in the
hands of economists and it is wreaking havoc.

FIRST POINT: DEVELOPMENT EMBRACES ALL DIMENSIONS OF HUMAN EXISTENCE

The WFDD's book begins with a Vision of Development and suggests that
development embraces all dimensions of human existence, not just economic
development. "If emphasis is placed only on economic development, even this
will fail, as the balance necessary for human well-being will be lost. As
the Jews say: 'Where there is no bread, there is no Torah, and where there
is no Torah, there is no bread'".

ECONOMIC THEORY AND HUMAN EXISTENCE

Economic theory addresses only those human interactions which involve an
exchange of money or commodities; as such, it ignores the larger part of
human existence. Economics does not address love, family, culture, health,
spirituality, the environment or many other things which make life rich and
meaningful. 

The question then becomes how to integrate non-exchange activities into
economic theory. One way to approach this question is to address the issue
of how economic theory is placed into action. Exchange activities today are
regulated and controlled by government; Adam Smith may have postulated a
"laissez faire, laissez passer" world devoid of government intervention in
the market, but that world does not exist today in any meaningful way. 

GOVERNMENTS ESTABLISH AND MODIFY ECONOMIC PRACTICE 

Governments establish the policies and practices by which economic activity
is conducted. Mostly, the governments are national governments, but they are
increasingly international as national governments cede sovereignty to multi
national institutions. Governments create the laws which create and protect
private property, public order, rules of exchange, the money supply and so
forth. But, many of the important aspects of life are created personally
within a family or neighborhood unit or collectively in civil,
non-governmental organizations. 

Economic principles begin from the structure created by government and civil
society; the principles describe how goods are created and acquired under
whatever system is being examined. Therefore, the principles will apply
under different sets of rules and different structures. So, it is possible
for the government and civil society to create or change those rules to
accommodate a wide variety of cultural and social values. It is also
possible for the government to include a moral component to the economic
rules of the society. 

As an example, let's look at the value of family. Economic principles, with
no moral component established by governmental authorities, may interfere
with family cohesion or stability. In the United States, many mothers and
fathers think they must work full time to create a decent life for their
children. Working time takes away from family time and is detrimental to
society to the extent that family ties are weakened. 

NON-MARKET UTILITY

A moral economic policy would create a climate for wages and benefits that
would strengthen family life by raising wages, providing benefits for
stay-at-home parents and encouraging family life. But, this value may
interfere with the economic principle of efficiency of production which
states that a society is efficient only when the marginal utility, or
satisfaction from the next unit of a good obtained, of all consumers is
maximized and any consumer cannot increase his or her utility by acquiring a
different set of goods. The amoral economic policy used today includes only
goods which are exchanged for money - a moral economic policy will include
values which are not part of the exchange system. 

The moral economic policy encourages higher wages so that workers can have a
more satisfying family life. This will result in higher consumer prices. The
choice is clear: it is more moral to pay slightly higher prices so that
workers can have a good life and it is less moral to pay lower prices which
force workers into marginal lives.

GOVERNMENT'S ROLE

Since a moral economic system includes the utility from values that cannot
be exchanged in a marketplace, it becomes the government's responsibility to
create an economic system which allows for the creation and protection of
values which cannot be traded. It does this by passing laws and regulations
which enable people to choose some of their utility from non-exchangeable
goods. For example, a high minimum wage would permit more people to stay at
home with children for more time. This system would balance the utility of
market goods, namely low prices for consumer goods, with the utility of
non-market choices, in this case time with the family. 

Making this choice will require a government to create protections for
companies which hire the workers since without protection from low wage
countries in other countries, the companies which employ workers will be
forced out of business. This policy would balance the desire for low cost
goods with the equally valid desire for utility from non-market goods. 





Michael Pierce McKeever, Sr.

Economics Instructor, Vista Community College, Berkeley, CA
MIEPA URL: http://www.mkeever.com/
Corp Ethics List: http://www.egroups.com/group/corp-ethics/



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