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TWELFTH ESSAY 10-6-00 Moral Economics - Essays On The Relation of Economic Theory to the Moral Perspective in POVERTY AND DEVELOPMENT: AN INTER-FAITH PERSPECTIVE. [www.wfdd.org.uk/] This is the twelfth of an occasional series of short essays about how economic theory interacts with a moral perspective. Readers are invited to discuss and to re-post widely, but please quote the source. PEOPLE ARE THE PRIMARY CONCERN OF DEVELOPMENT "Development is a process which should be initiated and carried out by people as well as for people, and it cannot be reduced to technical abstractions." [POVERTY AND DEVELOPMENT: AN INTER-FAITH PERSPECTIVE, para 5.1] ECONOMICS IS A SOCIAL SCIENCE Some economists like to think that economics is an objective science, which can be studied in the abstract without reference to its effects on people. This is clearly wrong for a number of reasons, among which is the inability of economists to produce an experiment whose results can be verified in other situations; real world situations are too complex to admit of the precisely controlled experiments which mark the 'harder' sciences. Economics is the study of the reasons behind, and the cumulative effects of, human behavior. It is impossible to separate such a study from impacts on real people. SOME ECONOMISTS ARE SEDUCED BY MATHEMATICS - WITH CATASTROPHIC RESULTS Some of the theories economists use in an attempt to explain human behavior can be represented by graphs and formulae; this seeming mathematical precision sometimes leads otherwise well meaning students into the study of economics as a mathematical discipline. Unfortunately, this focus on mathematics can result in real world policy recommendations that cause upheaval and disaster. For example, economic growth is widely recommended as the best cure for poverty. Economists define growth as an increase in a country's real GDP from year to year. As such, economic growth is a mathematical abstraction - it is a number created by civil servants and taken largely from tax returns. TROUBLES WITH GROWTH AS A CURE FOR POVERTY The focus on economic growth as a cure for poverty has many faults: GDP can increase without a reduction of poverty or an increase in incomes; it can increase without any reduction of income or wealth inequalities; and, it possesses inadequacies of data gathering which call into question the reliability of GDP numbers in some of the poorer economies. That said, economic growth can help reduce poverty - provided that it is real growth in goods and services, it is properly managed and if it is not elevated over people as an objective of policy makers. A moral economist, then, is an economist who uses mathematics to further understand how policies can help or hurt people; such an economist does not retreat into mathematics and the study of graphs based on flawed numbers as his primary focus. 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/ %%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%