The Economics Of... Philosophy
The decision between what is profitable and what is moral has been the topic of debate for as long as business has been conducted. Philosophers have tried to address these challenges for just as long, and their theories on the most moral way to live don’t always value justice or rights over the material benefits of a choice. So what is the connection between philosophy and economics in the age-old question of right versus wrong?
18th century utilitarian philosopher Jeremy Bentham supported valuing an action based on its utility in producing happiness and maximizing this happiness across all members of a society. The largest criticism of this form of consequentialist moral reasoning is the disregard for individual human rights, as the distribution of happiness is not a consideration in utilitarianism. Libertarian economics, or the laissez-faire policies of capitalism, face the same criticism as it discourages redistribution as a tactic against unilateral growth (a form of consideration for human rights). In this way, you could say that capitalism is like economic utilitarianism! How morally defensible is maximizing profits, though, simply because it creates the most happiness?
Thinkers that are considered philosophically libertarian, Robert Nozick and John Locke, vehemently advocated for the protection of individual rights as the main responsibility of government, including the right to reject taxation as coercion. They are considered libertarian thinkers because they do not consider the morality of an action to be limited by its individual moral worth, but rather in the justice that comes with one’s ability to freely choose this action. So it is no surprise that Nozick praises justice in transfers, or a free market, which could be considered another defense of capitalism as it ensures the individual right to choice as a principle. While John locke is a libertarian philosopher, he interjects a defense of modern human rights in his Second Treatise of Government when he says “no other man can have a right to anything [his] labour is joined to—at least where there is enough, and as good, left in common for others” (Section 27). This consideration for the rights of members of a society, or economy, is further defended by 18th century philosopher Immanuel Kant.
Kant defines freedom as acting outside of just our empirical desires, such as happiness that utilitarians maximized exclusively, but rather autonomously according to universal maxims, or imperatives, that one gives themselves. He gives us credit for being humans qua intelligence, or belonging to a world of understanding, in addition to empirical desires and provides one of 3 categorical imperatives as a formula of humanity. This imperative commands that all choices made freely with morality consider human rights as an end instead of a means to an end in order to fulfill one’s duty to seek perfection for all humans equally. As an aside, one form of categorical imperative is superrationality, which is a vital assumption in game theory (one of my personal favorite theories of economics). This may seem like a huge leap from the laissez-faire beliefs of Bentham, but it does raise an interesting question as to the extent of our obligation towards the wellbeing of others in our business decisions and economic policy management. How can we answer that question in a fair and actionable way?
One last philosophical theorist attempts to do just that and, in my opinion, does so realistically for modern social conditions. John Rawls’ A Theory of Justice addresses the moral considerations of communal structures from feudalism and libertarianism to a meritocratic system similar to a welfare state as a method of correcting social inequalities. The egalitarian system where he victoriously plants his flag is built on the difference principle, where only the inequalities permitted are those who benefit the least well off economically; “Those who have been favored by nature may gain from their good fortune but only on terms that improve the situation of those who have lost out” (101). In other words, celebrity athletes and entertainers may have income wildly disproportionate relative to their efforts, but in an egalitarian system their taxes or dutiful contributions to those of society in the worst economic condition justify this inevitable outcome, in a moral sense. Rawl’s message to stringent capitalist economists, an economic system our theories often point us towards as a cohort, would be that libertarian monetary and fiscal policy can serve its purpose in a moral, egalitarian government.
"Those who have been favored by nature may gain from their good fortune but only on terms that improve the situation of those who have lost out" -- John Rawls, A Theory of Justice
Works Cited
Locke, John. “Second Treatise of Government.” Early Modern Texts,
www.earlymoderntexts.com/assets/pdfs/locke1689a.pdf.
Rawls, John. “A Theory of Justice.” Rawls Theory of Justice,
web.csulb.edu/~cwallis/382/readings/160/TheoryofJustice.html.
A special thank you to Professor Michael J. Sandel, the instructor of “Justice” provided by Harvard Edx, by which many references to the theories of philosophical thinkers are provided.