Economics and the challenge of moral values

The tra­di­tion of inter­dis­cip­lin­ar­ity has exis­ted since Adam Smith, who was both a philo­soph­er and an eco­nom­ist. Part of eco­nom­ics has always been inter­ested in the con­nec­tion with soci­ology and philo­sophy. Yet, in the last twenty years, it is psy­cho­logy that has nour­ished our dis­cip­line, with the trend of beha­vi­our­al eco­nom­ics which attempts to use labor­at­ory exper­i­ments to study the appar­ently ‘non-ration­al’ beha­viour of agents. Our work is part of this inter­dis­cip­lin­ary tra­di­tion, which encom­passes Gary Becker’s work, but we have turned our atten­tion to an issue which, rather than a prom­ise of cross-fer­til­isa­tion, is a chal­lenge for our dis­cip­line: the import­ance of mor­al val­ues, and espe­cially their plur­al­ity with­in the population.

Why is this a chal­lenge? Because this plur­al­ity can­not be reduced to the ‘altru­ist­ic pref­er­ences’ which eco­nom­ists refer to. When we look at the plur­al­ity of val­ues, we come across phe­nom­ena that are much more dif­fi­cult to ration­al­ise. For example, people value free­dom for its own sake, without neces­sar­ily using it. Or they have a vari­able geo­metry altru­ism, which favours the group, the com­munity. Or, accord­ing to the psy­cho­lo­gist Jonath­an Haidt, pur­ity. There are also cul­tur­al or nation­al dif­fer­ences. For example, when presen­ted with options for reg­u­lat­ing traffic in the city centre, the French are more hos­tile to pay­ing tolls than the Amer­ic­ans and Ger­mans and are more in favour of redu­cing the num­ber of park­ing spaces. Behind these pref­er­ences, there are values.

Eco­nom­ic ana­lys­is struggles to take into account the plur­al­ity of these val­ues, even though eco­nom­ists know that it is not only effi­ciency that counts. They under­stand that human­ity is not just made up of ration­al cal­cu­lat­ors and that there is a form of altru­ism. But in the util­it­ari­an tra­di­tion of Jeremy Bentham, they see this altru­ism in an abstract and uni­ver­sal form. In oth­er words, eco­nom­ists them­selves have a par­tic­u­lar value sys­tem, yet they are temp­ted to pro­ject it onto the rest of the pop­u­la­tion. And the dif­fer­ences are very significant. 

What interests us are the val­ues that res­ist both pro­jec­tion and gen­er­al­isa­tion into col­lect­ive pref­er­ences. Those, in short, that can­not be reduced or absorbed by our dis­cip­line. For example, when asked about the altern­at­ive between a car­bon tax and envir­on­ment­al stand­ards for car man­u­fac­tur­ers, 92% of eco­nom­ists sup­port the car­bon tax, com­pared with only 22% of Amer­ic­ans. There is clearly a con­flict here between two forms of justice.

I would say that it is a ‘middle ground’ approach, even if poten­tially the price of our val­ues can be infin­ite (no com­prom­ise pos­sible). There is a tend­ency today to favour the “win-win” approach. Par­tic­u­larly in polit­ic­al debate where pro­pos­als involving val­ues are sup­posed to be eas­ily palp­able. For example, the energy trans­ition, driv­en by con­cern for future gen­er­a­tions, will pro­duce growth. Or again: the respons­ible com­pany sat­is­fies its con­sumers, investors, and employ­ees, so it is doing very well. But in many cases, defend­ing our val­ues can come at a high price, and rather than telling ourselves that all will be well in the best of all pos­sible worlds, we must admit that they are in con­flict with the eco­nomy. The dilem­mas posed by the inva­sion of Ukraine illus­trate this: are we pre­pared to turn down our heat to stop the war? And above all, to what extent?

Not in the sense that everything would even­tu­ally fall into line. We men­tioned beha­vi­our­al eco­nom­ics above. This field explores the idea that people do not max­im­ise their mater­i­al well-being, that they make sys­tem­at­ic mis­takes (they extra­pol­ate past trends too much, lack self-dis­cip­line, etc.). But beha­vi­our­al eco­nom­ics deduces that people must be taught to optim­ise their lives bet­ter, or even forced to do so! How­ever, this ambi­tion is a very ques­tion­able philo­soph­ic­al pos­i­tion. It pro­motes the hedon­ist­ic way of life pro­moted in the 19^th Cen­tury by the eco­nom­ist Jeremy Bentham with his ‘util­it­ari­an’ philo­sophy: the world will be a bet­ter place when every­one max­im­ises their pleas­ure and min­im­ises their pain. 

This is the value sys­tem that many eco­nom­ists apply to their ana­lyses. But there is no evid­ence that this is the value sys­tem of the people. A par­tic­u­larly glar­ing con­tra­dic­tion con­cerns free­dom: eco­nom­ists are lib­er­als in the sense that free­dom is an instru­ment for achiev­ing eco­nom­ic efficiency.

Beha­vi­our­al eco­nom­ics deduces that people must be taught to optim­ise their lives bet­ter, or even forced to do so.

People do not only have effi­ciency in mind, and they are will­ing to pay for it. We invest­ig­ated the fol­low­ing situ­ation: in order to sup­port a loc­al man­u­fac­turer and pre­serve 1,000 jobs, it is pro­posed to buy trams at a high­er cost by increas­ing the sub­scrip­tion price. Three groups, each with a dif­fer­ent price increase, are asked to rate the pro­ject (from 0 for com­plete dis­agree­ment to 10 for com­plete agree­ment). The aver­age score is 7.4 for the group sub­ject to a 5% increase, 6.6 for those sub­ject to a 10% increase and 6.1 for those sub­ject to a 50% increase. The value of solid­ar­ity with­stands even a sub­stan­tial increase. 

In the world of eco­nom­ists, the mar­ket with its free indi­vidu­als could be replaced by a com­puter cap­able of alloc­at­ing resources. On the con­trary, in real life the value of free­dom is strong, but it is also the free­dom to make ‘bad’ choices. And it is a free­dom in itself, dis­con­nec­ted from any idea of effi­ciency. In a word, it is a mor­al value.

Durkheim high­lights the exist­en­tial vacu­um into which indus­tri­al soci­ety plunges indi­vidu­als, because it pro­motes the max­im­isa­tion of indi­vidu­al interests to the det­ri­ment of the group. Durkheim believes that util­it­ari­an indi­vidu­al­ism is a ‘soci­olo­gic­al hell’: it chills hearts and causes des­pair. For eco­nom­ists like us, this is a very het­ero­dox thought, but an enlight­en­ing one. It helps us to meas­ure what res­ists our meth­ods. And the mor­al val­ues that are at the fore­front of his world­view are pre­cisely those that are least taken into account by our dis­cip­line. They help us to devel­op our research programme.

But the cent­ral chal­lenge remains to enrich eco­nom­ic think­ing. Even in its most tech­nic­al and spe­cial­ised aspects. My aca­dem­ic spe­ci­al­ity is fin­an­cial eco­nom­ics. There is a lot of talk about respons­ible invest­ment and socially respons­ible busi­ness. Of course, investors are primar­ily motiv­ated by profit, by return, but more and more, soci­et­al, or envir­on­ment­al con­cerns are becom­ing import­ant, to the point where they will end up erod­ing the pure logic of prof­it­ab­il­ity. It is a fas­cin­at­ing subject.

Eco­nom­ic thought has everything to gain from con­sid­er­ing this con­front­a­tion between effi­ciency and val­ues. This will enable it to bet­ter inform polit­ic­al debates. We start from the prin­ciple that people should be asked what they think, in a ser­i­ous man­ner, so as to reveal ten­sions and bring out con­tra­dic­tions. But if people are will­ing to pay a lot of money to reduce pol­lu­tion, to take con­trol of their com­munity (through decent­ral­isa­tion) or to do without Chinese imports, why not? There is a need to inform some of the debates by tak­ing into account people’s mor­al pref­er­ences, and by meas­ur­ing what this means economically.

Interview by Richard Robert