Ethics and Economics

EC311 Ethics & Economics (Spring 2016)

Seminar Leader: Martin Binder
Course Times: Tue 13:30-15:00, Thu 13:30-15:00

Course Description
This course aims at highlighting how economics and ethics intersect in various ways: Is it legitimate to dump our trash in lesser-developed countries because it is economically speaking ‘efficient’? Are high salaries for managers or movie stars justified? Should a company be allowed to bribe officials in foreign countries in order to do business there? Should we encourage markets for organs or blood if they are efficiently allocating ‘resources’? This seminar deals with these aspects of the economy, where different value judgments may be in conflict. While it is often useful to analyze various aspects of human life in economic terms, there may be spheres where economic calculation might seriously distort our judgments of goodness and rightness and hence might be in need of correction by other forms of measurement. The module balances the positive aspects of economics (such as alleviation of poverty and development of nations) with its negative sides (such as corruption of values and neglect of fairness issues). It elaborates on the value judgments underlying economics and its often utilitarian or libertarian commitments. The module seeks to help students critically assess the potential and the pitfalls of economic reasoning and equip them with the necessary knowledge to differentiate between market logic and market ideology.

Learning Outcomes

  • Understanding of the value commitments underlying economics
  • Critical assessment of the benefits and drawbacks of market exchange and market economies
  • Knowledge of theories pertaining to the relationship between economics and ethics
  • Ability to connect ethical value judgments to economic theorizing and to critically assess the role of different value judgments in economics

For this course, we will not use a textbook but a series of relevant book chapters and articles that are provided in the form of a course reader. Additional readings will be provided as necessary as the course progresses. At the end of the syllabus, you’ll also find an assortment of further readings and background literature to the topics covered in class (the background literature is not mandatory but can help you writing your essays and in general provides a deeper understanding of the topics covered).
Attendance at ALL classes is expected. More than two absences (that is absences from two sessions of 90 minutes) in a semester will significantly affect the grade for the course.
Assessment will be based on attendance, preparation for classes, regular and active participation, professionalism (see below), as well as two in-class presentations and a short midterm essay (1000 words) and a longer final essay (5000-6000 words).
Policy on Late Submission of Essays
As per the student handbook, essays that are up to 24 hours late will be downgraded one full grade (from B+ to C+, for example). After that, I will accept late submissions only until the end of the week in which they were due (Sun, 23:59), but these cannot receive a grade of higher than C. Thereafter, the student will receive a failing grade for the assignment.

Grade Breakdown
Seminar preparation, professionalism, and participation 30%
Presentation of one week’s seminar topic 10%
Presentation of final essay 10%
Outline and structure of final essay (due after mid-term) 10%
Writing and peer-grading of formal essay requirements/citation 10%
Final essay (on a seminar topic, which cannot be equal to the one presented in class) 30%

(Quizzes will be administered regularly only if the instructor deems the preparatory reading morale of the class to be unsatisfactory. There will be no quizzes if everybody comes to class prepared.)

Classes start on Monday, January 25 and run until Friday, May 6, with spring break planned for March 21-28. Completion week is from may 9-13. Attendance is mandatory during completion week and the final will be scheduled during this week.

Scheduled class times are available online under the relevant course heading:

The schedule provided is provisional in order to allow for flexibility. It is students’ responsibility to keep themselves informed of any changes to the schedule provided here. An up-to-date schedule will be maintained by the course management on the internet in Google classroom. The password to join google classroom will be handed out in class.

We start the course by looking into some of positive aspects of markets, capitalism and economics in general next to their darker side. In accordance with the necessity of exploring the normative and ethical value commitments of economics, we analyse the relationship between economics as positive social science and diverse (ethical) value judgements. A first example of how economics is permeated by (ethical) value judgments concerns its definition of well-being (‘welfare’).

In a series of guest lectures, we then explore the relationship between markets and the state and its political and ethical foundations. We then turn to the moral roots of economic thought, namely utilitarianism. We will trace how the drive to make economics a science has led to purging these moral foundations and led to an ethically rather impoverished modern version of economics.

The third part of the course will then deal with alternatives to the standard view in economics that aim to incorporate ethical insights into economics as well as with a detailed analysis of core ethical values (liberty, autonomy/paternalism, and equality) and their role in economics.

Week 1 – Introduction; The Benefits of Capitalism
Jan 26, Jan 28
Reading: Sandel, Justice, ch.1 (excerpt), The Capitalist Revolution

Week 2 – The dark side of capitalism and limits to markets: Does economics need ethics?
Feb 02, Feb 04
Reading: Sandel, What money can’t buy, ch. 3, Barber, Consumed, ch. 3

Week 3 – Economics and value judgements
Feb 09, Feb 11
Reading: Hausman/McPherson, ch. 1 & Appendix, Sandel, Justice, rest of ch. 1

Week 4 – Moral considerations in economics I: Welfare
Feb 16, Feb 18
Reading: Reiss, ch. 12, Offer, ch. 2, OECD, “How’s Life?”, ch. 1

Week 5 – Guest Lecture: Markets & State
Feb 23, Feb 25 (no class on February 25th, class will be rescheduled)
Reading: tba

Week 6 – Guest Lectures: Social Choice & Welfare; Taxation & Redistribution
Mar 01, Mar 03
Reading: tba

Week 7 – Guest Lecture: Lobbying and Interest Groups; Utilitarianism: The moral roots of economics
Mar 08, Mar 10
Reading: tba; Mill, Utilitarianism

Week 8 – Utilitarianism
Mar 15, Mar 17
Reading: Kymlicka, ch. 2, Mill, Utilitarianism

Outline for final essay due, Short essay due (18.03.2015)

Spring Break

Week 9 – Modern day economics: The ethical poverty of the standard view
Mar 29, Apr 01
Reading: Hausman/McPherson, ch. 9

Week 10 – Ethics and economics: Alternative approaches
Apr 05, Apr 07
Reading: Lütge, Economic ethics, Ulrich, chs. 6, 8

Week 11 – Moral considerations in economics II: Liberty/Freedom
Apr 12, Apr 14
Reading: Hausman/McPherson, ch. 10, Sandel, Justice, ch. 3

Week 12 – Moral considerations in economics III: Paternalism
Apr 19, Apr 21
Reading: Reiss, ch. 15, Offer, ch. 6, White, ch. 5

Week 13 – Moral considerations in economics IV: (In)Equality
Apr 26, Apr 28
Reading: Hausman/McPherson, ch. 11, Economic Inequality (excerpts)

Week 14 – Student presentations
May 03, no class on May 05 (federal holiday)
Reading: –

Week 15 – Completion Week (FINAL ESSAY DUE: 12.05.2016)

Classes missed due to federal holidays will not be rescheduled.

Being a student is your full-time job and with it come a set of responsibilities and expectations, as with any other job. Maintaining a professional attitude towards your course of study is something that also prepares you for later work life. A professional attitude towards your studies is shown by coming to class on time, being prepared, being courteous to your teachers and fellow students. It is exhibited by writing your essays with care, actively participating in class, avoiding distractions (excessive bathroom breaks, using smartphones to check on irrelevant issues during class etc.), not missing classes except for the most dire of circumstances and in general by adapting to the rules of the course without trying to bargain for personal exceptions.

Ethics/Academic honesty
A core value of the academy is truth and the pursuit thereof. Nothing can shake the foundations of this pursuit as much as academic dishonesty as it undermines the trust that is indispensable to it. This is why I will not excuse any instance of academic dishonesty. Plagiarism, cheating during exams, copying homework assignments (or doing individual assignments with a classmate) all constitute violations of academic honesty and of the clause on “academic integrity” that each student has signed in the student handbook. They can lead to failing the course and will be reflected in the student’s record (having a record of academic dishonesty can make obtaining scholarships, achieving a study abroad place or admission to another program difficult if not outright impossible).

Background literature

  • Barber, B. S. (2008). Consumed – How Markets Corrupt Children, Infantilize Adults, and Swallow Citizens Whole. W.W.Norton & Company.
  • Binder, M. (2010). Elements of an Evolutionary Theory of Welfare. Routledge, London.
  • Binder, M. (2014). Should evolutionary economists embrace libertarian paternalism? Journal of Evolutionary Economics, 24(3):515–539.
  • Binder, M. and Lades, L. K. (2015). Autonomy-enhancing paternalism. Kyklos, 68(1):3–27.
  • Binder, M. and Witt, U. (2011). As innovations drive economic growth, do they also raise well-being? Papers on Economics & Evolution #1105.
  • Blaug, M. (1998). The positive-normative distinction. In Davis, J., Hands, W., and Maeki, U., editors, The Handbook of Economic Methodology, pages 370–374. Edward Elgar, Cheltenham/UK.
  • Brennan, J. (2012). Libertarianism. Oxford University Press, Oxford/New York.
  • Falk, A. and Szech, N. (2013). Morals and markets. Science, 340(6133):707–711.
  • Foot, P. (1967). The problem of abortion and the doctrine of the double effect. Oxford Review, 5.
  • Frey, B. S. and Oberholzer-Gee, F. (1997). The cost of price incentives: An empirical analysis of motivation crowding-out. The American Economic Review, 87(4):746–755.
  • Hausman, D. M. and McPherson, M. S. (2006). Economic Analysis and Moral Philosophy. Cambridge University Press, Cambridge, 2nd edition.
  • Kymlicka, W. (2002). Contemporary Political Philosophy. Oxford University Press, Ox- ford/New York, 2nd edition.
  • Luetge, C. (2005). Economic ethics, business ethics and the idea of mutual advantages. Business Ethics: A European Review, 14(2):108–118.
  • Luetge, C. (2015). Order Ethics or Moral Surplus. Lexington Books, Lanham.
  • Mill, J. S. (1998[1863]). Utilitarianism. Oxford University Press, Oxford/New York.
  • Nozick, R. (1974). Anarchy, State and Utopia. Basic Books, New York.
  • Offer, A. (2006). The Challenge of Affluence. Oxford University Press, Oxford/UK.
  • Piketty, T. (2014). Capital in the Twenty-First Century. Harvard University Press, Cambridge/Mass.
  • Qizilbash, M. (1998). The concept of well-being. Economics and Philosophy, 14:51–73.
  • Rebonato, R. (2012). Taking Liberties – A Critical Examination of Libertarian Paternalism. Palgrave-Macmillan, Basingstoke.
  • Reiss, J. (2013). Philosophy of Economics. Routledge, New York/London.
  • Sandel, M. (2010). Justice: What’s the right thing to do? MacMillan, Basingstoke.
  • Sandel, M. (2012). What Money Can’t Buy. Farrar, Strauss and Giroux.
  • Sen, A. K. (1987). On Ethics & Economics. Basil Blackwell, Oxford.
  • Sunstein, C. R. (2013). The Storrs lectures: Behavioral economics and paternalism. Yale Law Journal, 122:1826–1899.
  • Thaler, R. H. and Sunstein, C. R. (2008). Nudge – Improving Decisions about Health, Wealth and Happiness. Penguin Books, London.
  • Ulrich, P. (2008). Integrative Economic Ethics: Foundations of a Civilized Market Economy. Cambridge University Press, Cambridge/UK.
  • Varoufakis, Y. (2009). Where the customers are always wrong: Some thoughts on the societal impact of a non-pluralist economic education. International Journal of Pluralism and Economics Education, 1(1/2):46–57.
  • White, M. D. (2013). The Manipulation of Choice – Ethics and Libertarian Paternalism. Palgrave Macmillan, New York.
  • Wilkinson, R. G. and Pickett, K. (2009). The Spirit Level: Why More Equal Societies Almost Always Do Better. Allen Lane, London.

(version: 07.01.2016)