Recent debates about the economy have rediscovered the question, “is that right?”, where “right” means more than just profits or efficiency. It’s everywhere: from the Occupy movement to corporations being damned for “immoral” tax avoidance, and public outcry over “unfair” solutions to the eurozone crisis.
Some argue that because free markets allow 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, we need to be clear on what we are talking about.
For some, “ethical economics” is about using resources in a sustainable way. Reducing carbon dioxide emissions, for instance, is certainly kinder to future generations than accepting the dictates of supply and demand. Ethical investing typically goes beyond ecology to consider several other criteria: are factory workers paid the minimum wage? Would the investment support a dictator? Is anyone being harmed? If all investors followed a rule not to support dictators, then the world would probably improve. Investors can be offered a long menu of these considerations, and have their portfolio moulded around their own understanding of “ethical.” Interestingly, their answers often reveal more consensus on what isn’t ethical than what is. Arm sales, tobacco products, and human rights abuses are all out. But what should be in?
Where these approaches consider ethics within the market, other systems of ethics call for more fundamental change. In Islamic finance, for example, religious tenets forbid usury and favour sharing risk across the whole economy. Islamic investments tend to offer low but safe returns. Critics might call this inefficient but that’s a market-based verdict. Banning usury, alcohol, pork or slavery is itself a judgement on the market—and one that cannot really be priced.
Most radical of all are the ethical systems that reject the market completely. Marxists, some feminists and a few Buddhist approaches to economics take this line: their ethics dispute the starting points of classical market economics—ideas like individual consumer sovereignty, private property and the attractiveness of material wealth. They conclude that to be ethical, an individual…