SAT OG 2016 Reading - Test 2 reading 2

Recent debates about the economy have

rediscovered the question, “is that right?”, where

“right” means more than just profits or efficiency.
Some argue that because the free markets allow
₅ for personal choice , they are already ethical. Others

have accepted the ethical critique and embraced

corporate social responsibility. But before we can

label any market outcome as“ immoral,” or sneer at

economists who try to put a price on being ethical,
₁₀ we need to be clear on what we are talking about.
There are different views on where ethics should

apply when someone makes an economic decision.

Consider Adam Smith, widely regarded as the

founder of modern economics. He was a moral
₁₅ philosopher who believed sympathy for others was

the basis for ethics (we would call it empathy

nowadays). But one of his key insights in The Wealth

of Nations was that acting on this empathy could be

counter-productive —he observed people becoming
₂₀ better off when they put their own empathy aside,

and interacted in a self-interested way. Smith justifies

selfish behavior by the outcome. Whenever planners

use cost-benefit analysis to justify a new railway line,

or someone retrains to boost his or her earning
₂₅ power, or a shopper buys one to get one free, they are

using the same approach: empathizing with

someone, and seeking an outcome that makes that

person as well off as possible—although the person

they are empathizing with may be themselves in the
₃₀ future.
Instead of judging consequences, Aristotle

said ethics was about having the right

character—displaying virtues like courage and

honesty. It is a view put into practice whenever
₃₅ business leaders are chosen for their good character.

But it is a hard philosophy to teach—just how much

loyalty should you show to a manufacturer that keeps

losing money ? Show too little and you’re a“ greed is

good” corporate raider; too much and you’re wasting
₄₀ money on unproductive capital. Aristotle thought

there was a golden mean between the two extremes,

and finding it was a matter of fine judgment. But if

ethics is about character, it’s not clear what those

characteristics should be.
₄₅ There is yet another approach : instead of rooting

ethics in character or the consequences of actions, we

can focus on our actions themselves. From this

perspective some things are right, some wrong—we

should buy fair trade goods, we shouldn’t tell lies in
₅₀ advertisements . Ethics becomes a list of

commandments, a catalog of “dos” and “don’ts.”

When a finance official refuses to devalue a currency

because they have promised not to, they are defining

ethics this way. According to this approach
₅₅ devaluation can still be bad, even if it would make

everybody better off.
Many moral dilemmas arise when these three

versions pull in different directions but clashes are

not inevitable. Take fair trade coffee (coffee that is
₆₀ sold with a certification that indicates the farmers

and workers who produced it were paid a fair wage),

for example: buying it might have good

consequences ,be virtuous, and also be the right way

to act in a flawed market. Common ground like this
₆₅ suggests that, even without agreement on where

ethics applies, ethical economics is still possible.
Whenever we feel queasy about “perfect”

competitive markets, the problem is often rooted in a

phony conception of people. The model of man on
₇₀ which classical economics is based—an entirely

rational and selfish being—is a parody, as

John Stuart Mill, the philosopher who pioneered the

model, accepted. Most people—even economists—

now accept that this“ economic man ” is a fiction.
₇₅ We behave like a herd; we fear losses more than we

hope for gains; rarely can our brains process all the

relevant facts.
These human quirks mean we can never make

purely “rational” decisions. A new wave of behavioral
₈₀ economists , aided by neuroscientists ,is trying to

understand our psychology, both alone and in

groups ,so the can anticipate our decisions in the

market place more accurately. But psychology can

also help us understand why we react in disgust at
₈₅ economic injustice, or accept a moral law as

universal. Which means that the relatively new

science of human behavior might also define ethics

for us. Ethical economics would then emerge from

one of the least likely places: economists themselves.