A question of economic morality

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Is economic morality an oxymoron? Not at all, according to Professor of Economics Donald E. Frey, author of a new book “America’s Economic Moralists: A History of Rival Ethics and Economics” (State University of New York Press, 2009). He writes that two economic moralities have guided economic policies and actions since Colonial Days and that one — “autonomy morality” — invites a culture of excess.

Autonomy morality is based on each individual pursuing his or her own self-interests, in the belief that what’s good for one individually is good for society as a whole. It defines as moral the very actions that many people view as bad, he argues. “Relational morality” places an emphasis on one’s responsibilities and rights within the human community. But don’t confuse the two with capitalism and socialism, he cautions. “If autonomy morality favors unbounded capitalism, or laissez-faire, relational morality is content with bounded capitalism, or markets with limits,” says Frey, who joined the faculty in 1972.

Economic moralities are intertwined with economic theory, he says; if economic theory “proves” that something can’t be done, then moral obligation vanishes. “For example, 19th-century laissez-faire took the view that unchangeable economic laws, like laws of nature, made reforms of economic ills impossible,” he explains. “That kind of ‘science’ undermined any obligation to deal with those ills.”

Frey tries to steer clear of political arguments in his book, but notes that the policies of President George W. Bush often reflected the values of autonomy morality. On the other hand, Barack Obama, during his campaign for president and during the early part of his administration, has often used rhetoric that draws on relational morality to back his policies.

The roots of the current recession can be traced back to an unhindered belief in autonomy morality, Frey says. “The recent Wall Street excesses were the climax to an era of deregulation and non-regulation. Deregulation was based on economic and moral arguments that maximum economic freedom (and faith in self-control) is better than social oversight.”