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