Supply, Demand and the ‘Real World’
Chapter: Lecture IX: Values and prices: reintroducing ethical considerations into economics
LECTURE IX Values and prices: reintroducing ethical considerations into economics INTRODUCTION Non-economists often perceive economists to be immoral or, at a minimum, amoral. Periodically, this view receives strong aﬃrmation. An example that captured the public’s attention occurred in the early 1990s when Lawrence Summers, then the World Bank’s Chief Economist, set oﬀ a controversy with his famous memorandum that concluded that “the economic logic behind dumping a load of toxic waste in the lowest-wage country is impeccable and we should face up to that” (New York Times, Feb. 7, 1992, p. D2; Washington Post, February 10, 1992, p. A9). Non-economists, not surprisingly, took this statement to be another sign of the profession’s moral bankruptcy. Characteristically, Summers attributed the resulting controversy to “political correctness.” While I will not review the speciﬁcs of this controversy, I do believe that substantial insight may be gained if we understand that Summers was simply drawing out an inference from mainstream economic theory. Underlying the “clash of cultures” between many economists and the rest of the citizenry is a way of thinking about choices and policy that periodically reveals that the former are often prone to confuse values with prices. For example one can simply, and correctly, refute Summers’ memo by observing that in our post-aristocratic era most thinking people believe that each life should be accorded an inﬁnite value. Since this idea is unworkable in practice, ethical reasoning ascribes a high and equal value to each life. It follows that systematically imposing...
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