Environmental Ethics
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Ernest Partridge, Ph.D
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Classical Guitar:
"The Other Profession
"

 

 

 

Conscience of a Progressive

Ernest Partridge


Chapter Fourteen

Prices and Values


Most of this chapter is adapted from my paper, “In Search of Sustainable Values,” presented at an International Conference, "Reflections on Discounting" Vilm Island, University of Greifswald, Germany, May 28, 1999. Subsequently published in The International Journal of Sustainability, 6:1, 2003

 

 

The economist . . . keeps the motivations of human beings pure, simple and hard-headed, and not messed up by such things as goodwill or moral sentiments... [T]here is ... something quite extraordinary in the fact that economics has in fact evolved in this way, characterizing human motivation in such spectacularly narrow terms. One reason why this is extraordinary is that economics is supposed to be concerned with real people. It is hard to believe that real people could be completely unaffected by the reach of the self-examination induced by the Socratic question, "how should one live?"

Amartya Sen2

 

Should the Future be Discounted?

A six year old girl wanders from the campsite, while her parents set up camp and prepare dinner. About a hundred meters from the site, she falls through some underbrush into an abandoned mineshaft, and is killed instantly. The fact that the mine owner is criminally responsible for failing to cover the mine, is no comfort to the grief-stricken parents.

A dreadful tragedy! But I neglected to identify the date of this accident. Does it matter? Is it any less a tragedy if it happened last week? Or if it is to take place in ten years? Or one-hundred or a thousand years?

Insurance companies and tort law are required to measure the value of a human life in monetary terms. Thus, since the value of money is necessarily discounted through time, it follows that according to insurance and tort law, not to mention the presuppositions of economics-based policy analysis, from the perspective of time-present, at a discount rate of 5% one child's life today is worth two lives in fourteen years, one hundred and thirty-one lives in one hundred years, and more than a thousand lives in two-hundred years.3

Laws aside, if a mine owner could be absolutely certain that his unattended shaft would cause no injury in two-hundred years, then even a modest cost of sealing the shaft would be far greater than any imaginable discounted damage costs that might result from an open shaft after two-hundred years. After that, the "disvalue" of a child's accidental death would count, from the perspective of time present, less than a thousandth of the disvalue of that death next week.

This scenario of safe-now and hazardous in the future is more than a fanciful thought- experiment. It describes the actual conditions with ozone depletion, global warming, and the "storage" of radioactive waste. In each of these cases, the misery and loss of life more than two-hundred years in the future "matters" less, by three orders of magnitude, than the lives and utilities of our contemporaries.

Surely something is wrong with this moral arithmetic. And yet, once we put a cash-value on human life, or anything else for that matter, and if we accept the universal economic premise that monetary value depreciates through time, then these conclusions are inescapable.

And yet, a failure to discount the future also appears to lead to absurd conclusions. For if we must share equally all non-renewable resources with all future persons, then we will each be personally entitled to less than a cup of petroleum and a lump of coal. Neither our resources nor our moral attention can or should be equally divided amongst all future persons and all future time. A brief answer to the “cup of petroleum” conundrum is that we owe the future, not an equal amount of petroleum, but rather a sustainable supply of what petroleum provides; namely, energy. And we fulfill that obligation by funding education, scientific research, and technological research and development.4

Is time-discounting an unquestioned premise in economics? I once posed this question at a seminar at the University of California, Santa Barbara. A prominent environmental economist at the table replied, "of course it is, and this is simple common sense. After all," he continued, "would you rather die in twenty days or in twenty years?" I replied, "you mean, with all other things equal?"

Of course, "all other things" are not "equal" in this case. My economist colleague was not describing, as his example (i.e., "my death"), an analytically detachable event like a toothache, assignable without further entailment at two separate points along the time continuum. "My death," now rather than later, bears entailments - namely, twenty years of my life.

In fact, under close examination, it appears that it is not the passage of "pure time" itself that inclines us to discount the future; rather it is a number of contingencies that attend the passage of time that leads to the devaluation of the future. So argues Oxford philosopher Derek Parfit, and I find his case persuasive.

Parfit presents and then refutes six arguments commonly proposed in defense of discounting. They are arguments from democracy, probability, opportunity costs, "better-off" successors, excessive sacrifice, and special relations (e.g., with friends and family). To these I would add two more: Psychological discounting (implicit in "the argument from democracy") and epistemic discounting (due to declining knowledge, through time, of the future).

"Psychological discounting" refers to the commonplace fact that people generally prefer earlier gratifications to later, and later pains to earlier - "all else equal." But this is a condition of human psychology, not of "pure time" itself. Moreover, far from a universal trait, exceptions to this rule are commonplace. For example, love and parental duty will dictate that a child's future education counts more than an indulgence today - quite apart from any inducements of "return on investment." And both the probability and our knowledge of future consequences can, in some noteworthy cases, be greater in the remote future than in the near future - thus reversing the usual concomitant decline of both probability and knowledge through time. Ozone depletion, global warming and the release of radwaste, noted above, are cases-in-point.

In similar manner, Parfit "disconnects" the six proposed "arguments" for discounting from pure time simpliciter. He concludes that none of these arguments succeeds:

The most that they could justify is the use of such a [discount] rate as a crude rule of thumb. But this rule would often go astray. It may often be morally permissible to be less concerned about the more remote effects of our social policies. But this would never be because these effects are more remote. . . . All these [six] different reasons need to be stated and judged separately, on their merits. If we bundle them together in a Social Discount Rate, we make ourselves morally blind.5

And yet, it is an indisputable fact that money depreciates through time. Thus cash-in-hand can only be saved or invested through a promise and expectation of "return on investment" or "interest income" in the future sufficient to offset the "discounted" future value of the present cash. And yet, if future values and disvalues are discounted at normal rates of cash-depreciation, it is clear that the value of the natural environment and of human life just two-hundred years hence - approximately the current span of United States history - will be insignificant from the perspective of time-present. And there is scarcely any imaginable amount of human suffering or planetary devastation a thousand years hence that can not, at normal discount rates, be justified as an acceptable cost of trivial advantages to the present generation.

If such indifference to the remote future is be avoided, then clearly our policies must be based upon values that do not share the properties of money. We must, in short, detach values from prices. This will be the primary task of this chapter.


Why economics fails as a sole foundation of public policy.

Immediately upon assuming office in 1981, President Ronald Reagan issued an Executive Order requiring all federal administrative agencies and departments to justify proposed regulations with a cost-benefit analysis.

Similarly, on his first day in office, January 20, 2001, George Bush ordered all cabinet officers to withhold implementation of more than fifty federal regulations that had been approved late in the Clinton administration. They were to be kept “on hold” until Bush’s Office of Management and Budget determined that their benefits exceeded their costs.6

As Amanda Griscom reports:

“The frozen rules included more than a dozen significant environmental ones. They called for less arsenic in drinking water, a ban on snowmobiles in national parks, controls for raw sewage overflow, stronger energy-efficiency standards, and protections against commercial logging, mining, and drilling on national lands. Of the environmental regulations that came under scrutiny, only half have since made it past the cost-benefit analysis and into the Federal Register.”7

Cost-benefit analysis (CBA), an exclusively economic assessment of public policy proposals, is based upon the assumption that the public values that enter into policy decisions can all be quantified in monetary terms. This is a remarkably impoverished concept of "values" to be coming from an administration that proclaims its commitment to "moral values."

But does anyone really believe that values can be reduced to (monetary) costs and benefits? Apparently more than a few economists believe this.

Consider, for example, the following suggestions that public environmental policy issues are most appropriately regarded as economic issues - i.e., that values are best regarded in terms of prices.

First, William Baxter:

All our environmental problems are, in essence, specific instances of a problem of great familiarity: how can we arrange our society so as to make the most effective use of our resources... To assert that there is ... an environmental problem is to assert, at least implicitly, that one or more resources is not being used so as to maximize human satisfactions.... Environmental problems are economic problems, and better insight can be gained by economic analysis.8

A. Myrick Freeman agrees:

To the economist, the environment is a scarce resource which contributes to human welfare. The economic problem of the environment is a small part of the overall economic problem: how to manage our activities so as to meet our material needs and wants in the face of scarcity... All goods that matter to individuals ... must be capable of being bought and sold in markets.9

Consider also the following from standard texts and respected publications in environmental economics: "the benefit of any good or service is simply its value to a consumer;" "in principle, the ultimate measure of environmental quality is the value people place on these services ... or their willingness to pay;" and finally, "anything that is valued instrumentally ... can in principle be handled by economics, be it acts of friendship or love."10

While historically utilized by both Democratic and Republican administrations, cost-benefit analysis is especially favored by corporate and business interests, and not surprisingly, the Bush administration – described by two CBA critics as “populated by the most ardent defenders of cost-benefit analysis in executive branch history.” These critics, Frank Ackerman and Lisa Heinzerling continue:

The administration of George W. Bush is the most hostile to environmental protection of any in recent memory. It is also the most enthusiastic about the use of cost-benefit analysis to screen proposed regulations. Perhaps this is only a coincidence. Perhaps [this] process of carefully summarizing people’s preferences has found that the American public wants to weaken the Clean Air Act, drill for oil in the Arctic National Wildlife Refuge, ignore the dangers of global warming, allow more polluting snowmobiles into national parks, use cheaper and less effective safeguards against SUV tire blowouts, accept high levels of mercury in our food and water, and so forth.

However, Ackerman and Heinzerling tell us, “we don’t believe it.” Cost-benefit analysis and the monetization of values are somehow failing to measure the authentic values of the American public. They continue:

Gamblers know that dice that always roll snake-eyes are loaded. The same holds true for a decision-making method that repeatedly tells us to do less about environmental protection, even when public opinion polls tell us that the American people want to do more. The problem ... is that cost-benefit analysis is incapable of making meaningful choices about things that matter to most people.11

Why, therefore, are the Republican administrations of Ronald Reagan and George W. Bush, not to mention many economists and policy analysts (worthy exceptions noted below), so eager to apply monetary prices to values? And why is CBA “incapable of making meaningful choices about things that matter to most people?”

To these two questions we now turn.

First of all, why is "the economic approach" to public policy – cost-benefit analysis and the monetization of values -- so attractive to legislators and policy makers?

In the case the Bush administration, the White House’s Office of Management and Budget has managed, through subtle and arbitrary “pricing” of costs and benefits, to come up with cost-benefit analyses that support pre-determined administration policies – i.e., policies favorable to business and corporate interests, and critical of the federal regulation of these interests. Chief among these devices is the inflation of costs and the exclusion of benefits that can not be measured economically. To put it bluntly, Bush’s OMB “rigs” the cost-benefit analyses to favor corporate interests. As Public Citizen reports in a February, 2004 news release:

Cost-benefit analysis attempts to assign a monetary value to the costs and benefits of regulations, with an eye toward eliminating rules with a higher cost than benefit. The method ignores benefits that cannot be expressed in terms of money and disregards the principle that industry should bear the cost of alleviating the harm it causes.

"Regulatory accounting [i.e., CBA] suffers from fatal flaws that make it useless for any purpose other than lending a false appearance of technical objectivity to a political decision that regulated industries’ interests trump the public’s interest," [Public Citizen President, Joan] Claybrook said.

OMB’s report to Congress is misleading also in that it ignores the costs to the public of scores of public health, safety and environmental protections that have been weakened and blocked during the past three years.
12

Bush administration aside, economists and policy analysts cite these general advantages of cost-benefit analysis and the monetization of values:

  • They appear to be sensitive to particular and identifiable facts - namely consumer choices, market prices, etc.
     

  • They employ precise, formal modes of quantification and calculation that are public and replicable, and thus appear to be "scientific."
     

  • They exhibit "value neutrality" (as "a positive science") - thus, while cost-benefit analysis reports "consumer preferences" it makes no moral judgments regarding these preferences.13
     

  • They are "democratic," reflecting the actual (rather than the "desirable") values of the public.
     

  • They are tolerant and libertarian, assuming that "each individual is the best judge of his own welfare" (William Baxter).
     

  • They commensurate values in terms of a common and quantifiable denominator: cash. (Thus enabling the aforementioned advantages of quantification and formalization).
     

  • They are determinate: they arrive at unequivocal conclusions - the so-called "bottom line."

That final advantage ("the bottom line") may suggest why, at congressional hearings, economists are many and philosophers are few. The former are willing to supply answers, while the latter are disposed to raise further questions.14

With advantages such as these, why not base policy on economic values? As many critics have pointed out (among them such economists as Kenneth Arrow, Kenneth Boulding, Herman Daly and Amartya Sen), many of the values most cherished by cultivated human beings are either independent of, or even inversely related to, economic values. Four such categories of values immediately come to mind: those of the scholar and scientist, the citizen, the moral philosopher, and the friend and lover.

(a) The primary value of the scholar and scientist, of course, is truth -- as supported by evidence and sound argument. An authentic scholar will say, "show me your evidence, and if it is well-founded and your argument is sound, then you will convince me." Never will he, qua scholar, say, "how much are you willing to pay to have me believe you?" Similarly, judges and juries ideally decide their verdicts on the weight of evidence. A purchased verdict is not only invalid; it is quite properly regarded as a crime. And even classical economists, when they read economic journals, require sound arguments, not bids.

(b) What an individual values (as a citizen) for his community may be quite contrary to what he might value for himself as a consumer. Mark Sagoff vividly illustrates this contrast:

Last year I bribed a judge to fix a couple of traffic tickets, and was glad to do so because I saved my license. Yet, at election time, I helped to vote the corrupt judge out of office. I speed on the highway, yet I want the police to enforce laws against speeding. I used to buy mixers in returnable bottles -- but who can bother to return them? I buy only disposables now, but to soothe my conscience, I urge my state senator to outlaw one-way containers. ... I send my dues to the Sierra Club to protect areas in Alaska I shall never visit... And of course, I applaud the endangered Species Act, although I have no earthly use for the Colorado Squawfish or the Indiana bat... I have an 'ecology now' sticker on a car that drips oil everywhere it's parked.15

In fact, as these examples point out, a complete human being is both an individual with consumer preferences, and a citizen with loyalties and moral aspirations, which frequently over-ride the self-serving, "utility maximizing" motives of homo economicus.  The consumer views the world through "the mind's I." The citizen takes "the moral point of view," perceiving oneself as an equal member among many in a community. "The governing impulse of the consumer is "I want." The governing impulse of the citizen is "we need.” (We will expand on these points later in the chapter).

(c) Distributive justice. As economists and utilitarian philosophers have long acknowledged, "economic efficiency" and "utility maximization" do not, by themselves, touch upon the essential moral issue of the just distribution of wealth. Economic theory is silent on the question of whether the wealth of the cooperative enterprise which is society, goes to those who most deserve it. "Just desert" is a moral, not an economic, concept. “Pareto optimality” is the economist's term for that condition in society of "perfect efficiency" whereby there are no further transactions that can benefit anyone without making another individual worse off. It is noteworthy that "Pareto optimality" can describe a slave economy. For while justice demands the emancipation of the slaves, this can not be accomplished without making the slave owners "worse off."

(d) Love, friendship and loyalty that is bought is less valuable than that which is given freely. Economists enjoy telling the tale of new member of the Economics Department encountering a colleague in the Quad. "How do you like it here?" asks the veteran. "OK, I guess," replies the newcomer, "intelligent students, good research facilities -- trouble is, I don't seem to have many friends." His colleague suggests, "well, if you value friendship that much, why not buy a friend?" Further analysis is clearly superfluous.

As for love, Mark Sagoff makes the point with characteristic wit and eloquence: "A civilized person might climb the highest mountain, swim the deepest river, or cross the hottest desert for love, sweet love. He might do anything, indeed, except be willing to pay for it."16

(e) Finally, the market place can obscure Adam Smith's essential distinction between "values in use" and "values in exchange." "The things that have the greatest value in use," he writes, "have frequently little or no value in exchange; and on the contrary, those which have the greatest value in exchange have frequently little or no value is use."17  As examples, Smith cites diamonds, which have little value in use but great value in exchange, and water which has effectively infinite value in use (we can not survive without it), but very little cost (exchange value). Significantly, "environmental values" such as clean air and water tend to be "values in use," and thus greatly undervalued in markets.

Neo-classical economists are quite correct when they state that theirs is a "positive discipline" that attempts to report values, rather than prescribe values - and, as we have noted above, only a limited realm of values at that. For while they might tell us what is valued by "the consuming public," they can not tell us what is valuable. But the latter question, "what is valuable," is of most basic and urgent concern to the policy-maker, the legislator and the citizen. Ask an uncritical economist, "what is the value of X?" and he will likely ask in reply, "what are you (or 'the market') willing to pay for X?" The astute citizen, asked such a question, will reply: "What am I willing to pay for X? Before I can answer that, I must first assess the value of X?" And that "value" will, of necessity, be normative, not economic. And if this value is environmental (for example, the value of clean air, access to wilderness, biodiversity, and the availability of these amenities into the remote future), or political (e.g. the rights of life, liberty, property, free speech, free association, free exercise of religion, etc.), then the most appropriate means of assessing that value just might be not an assessment of the marginal price in a "free market" to self-interested, utility-maximizing individuals (“how much are you willing to pay”) but rather a consensus through evaluation in a forum of informed and deliberating citizens or their elected representatives.18


Economic Prices and Moral Values: Analysis and Contrast

(A fair warning: The following section will be rigorous and difficult, for it amounts to a mini-course in moral psychology and critical moral philosophy. So stand up, take a stretch, and put on a pot of hot coffee, then dive in. I’ve endeavored to make it as bearable as possible and well worth the effort.)

In the foregoing I have argued that economic values do not fully account for all values, or even those values most cherished by cultivated human beings. But while I may have indicated that (economic) prices are distinct from (moral) values, I have yet to offer an account as to why and how they are distinct. That will be the task of this section.

I will examine eleven paired contrasts between prices and values, some of which we have already encountered. Space constraints allow only a brief account of six of these. However the remaining five are of sufficient importance to require a more circumspect analysis.

Here, all at once, is the list of contrasts:

                             PRICES                                                 VALUES


Descriptive
Monetary
Commensurable (Cardinal Ordering)
Reductive, Aggregative
Relativistic, Conservative
"Economic man"
Society as a ("Perfect") Marketplace
Agent ("egocentric") Point of View
First-Order Motivation
Non-Moral
Discounted

Normative
Non-Monetary
Non-Commensurable (Ordinal)
Organic, Holistic, Contextual
Objective, Reformative
"Persons" (moral agents)
Society as a Community
Spectator (Moral) Point of View
Second Order Evaluation
(Some) Moral
Time Neutral


Descriptive/Normative: Here we stipulate what the economist proclaims: his discipline is rigorously descriptive. He passes no moral judgment on what the individual consumer (or the collective market) values - as determined by "willingness to pay," and as reflected in prices. But a rigorously descriptive approach to values does not, because it can not, banish normative concerns from policy decisions. Policy-making is an informed and forced choice among alternative futures which will variously affect the welfare and rights of morally considerable individuals. As such it is necessarily a morally significant enterprise. Recall our contrast between the economist and the citizen: ask the former, "what is the value of X?" and he will likely ask in reply, "what are you (or "the market") willing to pay for X?" To this, the astute citizen will reply: "What am I willing to pay? Before I can answer that, I must first assess the value of X?" As the ever-astute Amartya Sen puts it, "desiring is at best a consequence of valuation.."19

Monetary/Non-Monetary. As noted above, the fundamental human values of truth, justice and love are not "captured" by economic analysis. These are unquestionably "non-monetary values" – a few among many.

Commensurable/Non-Commensurable. The myriad indexes (e.g., Gross Domestic Product, Cost of Living, etc.), formal concepts (e.g., indifference curves, marginal values), and the virtuoso mathematical skills of the economists are all made possible by their quantification of economic data, and their combining together of this data in terms of the single measure of cash-value. (I.e., “commensuration”). Given one economist’s assumption that "all goods that matter to individuals (that is, all goods over which individuals have preference orderings) must be capable of being bought and sold in markets,"20 cash then becomes the "common coin," the cardinal measure, through which economic values are rendered fungible, transitive and determinate. In contrast, for non-economic normative values, there is no comparable metric. This does not mean, of course, that it is impossible to make choices among competing normative values. In fact, such choices are both unavoidable and even commonplace in practical life and public policy, and the problem of prioritizing competing values is one of the most troublesome issues of applied ethics. In such cases, however, competing values are ranked ordinally and moral decisions made in context. Lacking a "bottom line" of prices, one is left with moral deliberation and "the moral sense." (See Chapter 13).

Reductive-Aggregative/Organic-Holistic-Contextual. In microeconomic analysis, the focus of attention is upon the preference-map of the individual - upon his degree of willingness to buy or sell, thus maximizing his self-interested "utility." Society - or better, "the economy" - is thus regarded as an aggregate of individual preferences by these "utility maximizers."21  The "best result" for all is a summation of the best result for each, aiming toward "Pareto optimality," wherein no further exchange is possible without making someone "worse off" (according to one's personal assessment of his preferences). In contrast, the normative approach recognizes human communities as organic wholes, with "emergent properties" that are more than the sum of the utility exchanges of the component individuals – a crucial principle that I attempted at length to establish in Chapters Five and Six.22  The normative perspective takes more seriously such game-theoretical paradoxes as the Prisoner's Dilemma and the Tragedy of the Commons, whereby the self-interested pursuit of maximum utility by each agent proves to be self-defeating. (“Good for each, bad for all”). Non-economic value perspectives are more sensitive to "the moral paradox:" an appreciation that the most effective means to maximize one's satisfactions in life is not to seek to maximize one's satisfactions. (See Chapter Six).


Relativistic-Conservative/Objective-Reformative. Economic analysis describes values as they are - i.e., as reflected in the "willingness to pay" of consumers, as reflected in market prices. Implicit in this analysis is that the consumer "is the best judge of his own welfare" (Baxter). Thus there is no criterion of value outside the individual (relativism), and furthermore no advocacy from this point of view for an alternative set of values (conservatism). "The desirable is that which is desired." In contrast, the normative approach is usually equipped with reasons and arguments in support of its claims (objective), and insists that the values it defends are not fully realized in personal lives or in social conditions as we find them. It makes perfect sense, from the normative perspective, to argue that consumer desires are not desirable, or that preferences are not "really" preferable, and he is prepared to present a reasoned argument in defense of his moral claims.


"Economic Man"/The Moral Agent.  "Economic man" is, to borrow Herbert Marcuse's term, "one-dimensional." As noted above, he is a self-interested utility maximizer - with "utility" defined (variously) as "want-" or "preference-satisfaction," manifested as willingness to pay in a free market. In established economic discourse, this behavior is described as "rational."23  This is, as Sen observes, an account of human motivation that is "pure, simple and hard-headed, and not messed up with such things as goodwill or moral sentiments."24  Of course Sen is among the economists who reject this account of human nature. Instead, he proposes:

The object is to understand, explain and predict human behaviour in a way such that economic relationships can be fruitfully studied and used for description, prognosis and policy. The jettisoning of all motivations and valuations other than the extremely narrow one of self-interest is hard to justify on grounds of predictive usefulness, and it also seems to have rather dubious empirical support. To stick to that narrow path does not seem a very good way of going about our business.25

Fortunately for the rest of us who live in human communities, "economic man" does not exist. We should not want him as a neighbor.

In contrast, "the moral agent" (or “person”) - that individual whom we can properly praise or blame morally for his or her conduct - is multidimensional. While the list of criteria that identify moral agency is in some dispute, most moral philosophers would include most, it not all, of the following. This list will be crucially important in later chapters, as we explore the foundations of a progressive morality.26  The first five criteria, which apply also to "economic man," are necessary though not sufficient for moral agency:

  • sentience, or the ability to feel pain
     

  • consciousness of external objects and events.
     

  • reasoning, the ability to solve problems.
     

  • self-motivated activity.
     

  • the capacity to communicate through the use of a complete, syntactic system of significant symbols (i.e., a language).

In addition, the following capacities (each grounded in the use of articulate language) are essential to the acquisition of moral agency:

  • the ability, through language, to conceptualize abstractions and to formulate rules.
     

  • a concept of oneself as a being continuing through time
     

  • a capacity to conceptualize and choose among alternative futures.
     

  • a capacity to act on principle -- to deliberately govern one's behavior according to rules.
     

  • recognition of the personhood of other persons.

This final capacity, the recognition of the personhood of others, is the source of "the moral sentiments" of benevolence and sympathy -- the foundation of morality, according to David Hume and (as many economists neglect to notice) his friend, Adam Smith.

The reason that this definition is crucial to moral philosophy is that only such a being as that described above can be said to be "morally responsible" or "duty-bound" (as, for example, infants and animals are not).27  But while only such "moral agents" can meaningfully be said to be "duty-bound," a larger set of individuals such as animals and very young humans (so-called "moral patients") may be said to have rights.28

Essential to moral agency are the capacities to be both hypothetical spectators of oneself among others ("the moral point of view") and to be a critic and judge of one's own desires. I will have much more to say about each of these capacities below.


Society as a Market Place / Society as a Community. Strictly speaking, the "marketplace" need have no "place" at all. Though traditionally "placed" at a specific location (e.g., at an Arabic souk or on Wall Street), now, thanks to electronic communication, a market need not be placed anywhere in particular (e.g., the NASDAQ "market"). All that is required is some means by which buyers can communicate with sellers and agree to transactions. It is the conditions of that exchange that defines the "perfect markets" of formal economic theory. These conditions require that the participants be completely informed and numerous (virtually infinite), and that the transactions be voluntary, mutually beneficial ("Pareto improvements"), open and independent (without collusion), and finally that these exchanges involve no transaction costs or externalities. Strangely, the same economic theories that eschew moral value judgments, require, in their "perfect markets," that the participants be both trusting and trustworthy. It is immediately obvious that there is no such thing as a "perfect market" in "the real world."

To call such aggregate transactions of self-serving utility-maximizing individuals a "society" may in fact be a misnomer. Some political leaders distrustful of "big government" and enamored of "the wisdom of the free market" seem to agree. Consider, once again, Margaret Thatcher's observation that strictly speaking "there is no such thing as society, there are individual men and women and there are families."29  But if, as this former Prime Minister proclaims, "there is no such thing as society," one wonders what Lord Nelson was talking about when he said to the fleet before the Battle of Trafalgar, "England expects each man to do his duty?" And for what did the "few" airmen in the Battle of Britain, for whom so many owed so much, fight and die? Surely not for a marketplace!30

The moral agent has a ready answer to these questions: these warriors, along with saints and heroes throughout history, sacrificed their lives for their communities. Successful "communities," unlike markets, are what John Rawls calls "well-ordered societies," where individuals are joined in "civic friendship" by tacit mutual agreements to respect the rights and integrity of each other. Communities are typically bound by shared religious or moral beliefs, and by political compacts (such as the United States Constitution) which embody common values and objectives. Life in flourishing communities nurtures such civic sentiments as pride, loyalty, compassion, and allegiance - "other-directed" sentiments that stand in stark contrast to the "self-interested" motivations of the economic agent.


Egocentric Point of View / Spectator (Moral) Point of View. "Economic man" sees the world through "the mind's I." He perceives himself as surrounded by opportunities to exchange goods, services and cash, all to be utilized toward the end of satisfying his needs and maximizing his utility. The interests of "others" is of no concern for, either (1) those interests are this “other’s” responsibility, and (2) the interests of others will be "taken care of" through the spontaneous benevolence of the "invisible hand" of the free market. Just as the conscious center of "economic man's" universe is ego, the central time-locus thereof is now. From this perspective, the value of all future events and interests degrade with time; i.e., the future is "discounted."

Because I have devoted two chapters (Five and Six) and part of another (Twelve) to the concept of “the moral point of view,” we can be brief here.

“The moral point of view” is the perspective of a hypothetical benevolent spectator of a community or society, which includes the moral agent (i.e., “myself”) and others with whom the agent is involved. By abstracting the point of view from the agent to all concerned, each participant counts equally. Qua “benevolent,” the hypothetical spectators desires what is best for all even if this optimum outcome requires some sacrifices by some of the participants. “Bad for each, good for all.”

This very simple formulation entails some difficulties, as the libertarians are quick to point out. “Democracy,” they say, “is two wolves and one sheep voting on what’s for dinner.” So the formulation of the moral point of view must include a mutual acknowledgment of the inviolable rights of each. The libertarian’s objection is countered by a recognition that the “benevolent observer” would stipulate a “bill of rights” that would serve to benefit all. [“Rights” and “Justice” will be treated in Chapter 12, still to be written. When that chapter is completed, this difficult paragraph will be expanded and clarified].

It was from a moral point of view that the Declaration of Independence (“all men are created equal”) and United States Constitution were drafted, along with the Bill of Rights. As it happens, the Constitution was drafted imperfectly, since it failed to afford equal rights to slaves, and restricted the franchise to white male property owners.

There is a familiar proverb: “My right to swing my arms ends where your nose begins.” This saying expresses the like liberty principle: “each individual is entitled to the maximum liberty consistent with the equal liberty of others.” The principle is endorsed by both progressives and libertarians. However, as I will argue in the next chapter, libertarians fail to acknowledge the full implications of the principle – implications that prove to be fatal to libertarianism.

The egocentric point of view of the libertarians, and of “economic man,” fails to adequately assess the “liberty costs” and the “welfare costs” of an individual’s exercise of his or her rights. The moral point of view is explicitly designed to do just that: determine what rules of conduct best protect the rights of each individual while maximizing the welfare of the community. The moral point of view is the perspective of the concerned citizen.

As I noted earlier, the motivating concern of “economic man” is “I want.” The motivating concern of the citizen is “we need.”


First-Order Motivation / Second Order Evaluation. Mainstream economists proudly proclaim that their methodology is "value neutral." To "economic man," all desires and preferences are created equal. The terrorist's purchase of a thousand dollars of explosives and the humanitarian donation of a thousand dollars for the Red Cross for disaster relief, are counted equally in the economic metric of cash. Neither is there a distinction to be found in economic analysis between the addict's "consumer preference" for a bag of heroin, or the reformed addict's "consumer preference" for addiction therapy. There are no distinctions drawn between virtuous and selfish motives. Desires are interpreted as "willingness to pay," which are all measured by the common denominator of cash.

However, as we will further explain in Chapter 12, the moral evaluator distinguishes between desires for food, sex, prestige, power, and wealth (“first order desires”), and desires regarding these desires (“second order desires”). Thus, for example, a reformed alcoholic has a second-order desire not to satisfy a first order desire to have a drink. The “second-order” manifests obedience to moral principle, or “conscience.”

Harry Frankfort,31 who introduced the terms “first order desires” and “second order desires” recognizes that there are individuals whose motives are confined to the first order – individuals, that is to say, who are a-moral. Frankfort calls these individuals, “wantons.”

“Economic man” is a wanton.


Non-Moral Values / Moral Values. This distinction is fundamental to moral philosophy, and quite simple to define. A “moral value” is a value that exhibits the worth of persons.  Moral "worthiness" is manifested in the virtues, which include honesty, fidelity, courage, compassion, temperance, etc. Moral "unworthiness" is displayed in the vices which traditionally include pride, gluttony, lust, avarice, sloth, etc.. It is noteworthy that the vices generally betray a failure of "second-order" control over first-order desires and impulses.

Moral value applies also to communities of persons, which can be judged to be just or unjust, according to how the rights, responsibilities and rewards are apportioned among the persons in that community.

The term "non-moral value" refers to anything else that might be "graded" (termed good or bad), including beauty (of art objects or natural landscapes), function (of machines), viability (of organisms), stability (of societies or ecosystems), enjoyments (of experiences) - and prices (of commodities and services). Thus, while we speak of "good" automobiles, we never regard them as "virtuous." And while locusts who devour our crops are (from our point of view) "bad," it would be inappropriate to condemn them as "wicked," for they are not moral agents. “Good” and “bad” are the vocabulary of non-moral values; “right” and “wrong” are the vocabulary of moral values.

Our response to moral agency, in ourselves and others, gives rise to the moral sentiments. Satisfaction with our own worth evokes the sentiment of self-respect; lack of such satisfaction causes guilt. Concern about other's opinions of our worth leads to feelings of shame. Similarly, positive or negative evaluations of the worth of other persons evokes sentiments, respectively, of admiration or contempt.

Price, especially as it is treated by economists, is a paradigmatically "non-moral value." The personal "worth" of the buyers and sellers in the market are of no concern to the economist. While the economist wishes to know what is "desired," he does not ask whether that which is "desired" is, in fact, desirable. Economic analysis, observes Mark Sagoff, "treats people as of equal worth because it treats them as of no worth, but only as places or channels at which willingness to pay is found."


Discounted Future / Time Neutrality. If the foregoing analysis has been successful, we have distinguished personal value ("virtue") and social value ("justice"), from economic value or "price." Furthermore, we have demonstrated that prices alone are insufficient measures of the worth of persons and communities, and thus of public policies regarding persons and communities. For all the advantages of facility, objectivity, and clarity that are obtained through economic analysis of social phenomena and public policy, it is a serious error to believe that these advantages are enough. To reduce human beings to self-interested utility-maximizers, and their values to a "willingness to pay" is to engage in an analytical amputation of all that makes us admirable - our aspirations, our accomplishments, and our virtues. Unlike prices, these values, apprehended from the timeless "moral point of view," do not diminish through time.

Accordingly, the unfortunate girl in our opening example was not a bundle of preferences, she was a person. Because our perspective upon her hypothetical misfortune is from "the moral point of view," it is timeless. If the motive (and the law) to render the mineshaft safe is morally defensible, it constitutes a second-order "trumping" of the mine owner's first-order economic motive to reduce operating expenses in order to maximize profits. His moral obligation to render his property safe for all future time prevails, regardless of how little that future might "count" when discounted in terms of cash-values.


Fairness requires that we anticipate a rebuttal by the economist: "We never meant to suggest," he might reply, "that homo economicus describes all dimensions of human existence, and thus we do not contend that prices are the only values. While agreeing with all the distinctions that you present above, we would only insist that economic motives and values happen to be the subject-matter of our discipline. In some conditions of ordinary life, and even of public life, human beings, both individually and collectively, act upon economic motives. When they do, the concepts and methods of economics might prove to be illuminating."

Fair enough! I have little quarrel with economists who thus qualify and confine the application of their methodology and concepts. Unfortunately, as we have seen, such commendable modesty is not universal among economists. Moreover, these wise qualifications are more likely to be found among scholars, especially as they write papers for, and discuss public issues with, their colleagues. My quarrel is with regressive policy-makers, popular writers, legislators, and politicians, such as Lady Thatcher, who believe that "there is no society" apart from individuals and families, and who trust the mysterious and "invisible" hand of the free-market to provide the best solutions to all social problems. My quarrel extends to scholars who, in their public pronouncements, choose to shed their scholarly reserve as they proclaim that economic values are the only values of relevant interest in state policy: [find an example and quote.] Finally, my criticism is directed at those who believe that all provision for the remote future should be interpreted through the lens of economic analysis -- meaning, of course, that the future should be discounted. It has been twenty-seven years since Ronald Reagan, in his first inaugural address, proclaimed that "government is not the solution, it is the problem." Even a superficial survey of the public opinion and debate on public policy will reveal that beliefs in "the wisdom of the free market" and "the evils of 'big government,'" have generally moved out of arena of serious dispute and into the background of unexamined presupposition.

If this chapter has been successful, I have demonstrated that economic analysis, by itself, falls far short as measure of social value and as a guide to public policy.  Prices constitute a small fraction of human values, and arguably among the least significant values.  Moreover, prices are non-moral values.  They fail to assess personal virtue, social justice, scholarly and scientific achievement, or interpersonal civility, affection and love.

Those economists and politicians who insist that economic analysis suffices as a measure of national worth or as a guide to public policy, approach Oscar Wilde's description of a cynic: "one who knows the price of everything, but the value of nothing."

To my knowledge, no one has summarized the essential message of this chapter better than Robert F. Kennedy, in a speech given at the opening of his ill-fated 1968 campaign:

Too much and for too long we seem to have surrendered personal excellence and community values for the mere accumulation of material things. The Gross National Product .., if we judge the United States by that, counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwoods and the loss of our natural wonders in chaotic sprawl. It counts napalm and nuclear warheads and armored cars for the police to fight the riots in our cities. It counts [the killer's] rifle and [the rapist's] knife and the television programs which glorify violence in order to sell toys to our children. Yet the Gross National Product does not [include] the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry, or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, our wisdom nor our learning, neither our compassion nor our devotion to our country. It measures everything, in short, except that which makes life worthwhile, and it can tell us everything about America, except why we are proud that we are Americans.32



7/21/08

 



NOTES AND REFERENCES



2. On Ethics and Economics, Oxford: Blackwell, 1987, pp 1-2.

3. For the mathematically inclined: the loss of "present value" through time ("the discount rate") is the mathematical reciprocal of the added value required to motivate saving or investment ("the interest rate"). The equation for the discount rate is as follows: Present Value = FV/(1 + i)t – where "FV" = Future Value; i = annual interest rate; and t = time in years. Accordingly, the "present value" of $100 in fourteen years ("future value"), at an interest rate of 5% is $50.50.

4. For more of my proposals regarding our responsibilities to future generations, see my “Posterity and the Strains of Commitment,” in Creating a New History for Future Generations, ed. Kim and Dator, Institute for the Integrated Study of Future Generations, Kyoto, Japan, 1995. Also at: www.igc.org/gadfly/papers/strains.htm .

5. Derek Parfit, Reasons and Persons, Oxford: Clarendon Press, 1984, p. 486.

6. It was not always so. Early environmental legislation often took no notice of economic factors. As Paul Portney reports,

When the U.S. Congress drafted the environmental legislation of the early 1970s, [environmental] problems were thought to be so obvious and so serious ... that members simply could not envision directing EPA to address them only if it was affordable to do so. As a consequence, most of the early laws effectively directed the agency's administrator to disregard cost altogether in setting ambient air quality standards and some water quality standards...

Paul R. Portney, "Counting the Cost: The Growing Role of Economics in Environmental Decision Making," Environment, 40:2 (March, 1998), p. 15.

7. Amanda Grsicom: “The Rollback Machine,” Keeping tabs on the Bush administration's environmental record,” Grist Magazine, Setpember 4, 2003 http://www.grist.org/news/muck/2003/09/04/rollback/

8. William Baxter, People or Penguins: The Case for Optimal Pollution, New York: Columbia University Press, 1974, p. 15, 17.

9. A. Myrick Freeman, "The Ethical Basis of the Economic View of the Environment," The Environmental Ethics and Policy Book, Belmont, CA: Wadsworth, 1994. P. 307, 309.

10. Joseph Seneca and Michael Taussig, Environmental Economics, 2nd ed., Englewood Cliffs, NJ: Prentice-Hall, 1979. p. 6.

A. Myrick Freeman, Robert H. Haveman, AllenV. Kneese, The Economics of Environmental Policy, New York: Wiley, 1973. P. 23.

Steven Edwards, "In Defense of Environmental Economics," Environmental Ethics, 9:1 (Spring, 1987), p. 79.

11. Frank Ackerman, Kerry Smith and Lisa Heinzerling: “Choice Cuts. Cost-benefit analysis is often used to support industry wish lists. Should we blame the method or the masters?” www.prospect.org/articles?article=choice_cuts

12. News release, Public Citizen: "OMB Reliance on Cost-Benefit Analysis Threatens to Undermine Vital Public Protections," February 25, 2004.
 http://www.citizen.org/pressroom/release.cfm?ID=1652

13. "The approach of the economist is amoral [that is] economists cannot say what is 'just' or 'fair.' Richard B. McKenzie and Gordon Tullock, The New World of Economics, Homewood, IL: Richard D. Irwin, 1978, p.7.

"We do not have any [means] of resolving ethical disagreements, they are ultimately judgments of value ... and cannot finally be proved or disproved." Paul Heyne and Thomas Johnson, Toward Economic Understanding, Chicago: Science research Associates, 1976, p 767.

14. "'The economic approach' is sensitive to particular facts, it is specific, and it suggests a method for resolving questions of trade-offs between competing and valued ends. [It] ... seems 'practical,' 'hardnosed,' and 'realistic,' and its use of precise, formal modes of quantification and calculation is alluring." Donald VanDeVeer and Christine Pierce, "Letting the Market Decide," Environmental Ethics and Policy Book, Belmont, CA: Wadsworth, 1994, p. 296.

15. Mark Sagoff, The Economy of the Earth, Cambridge, 1988, p. 52.

16. Ibid., 69.

17. Adam Smith, The Wealth of Nations, Book 1, Chapter 4.

18. Mark Sagoff expresses this point directly:  "Willingness to pay ... is not a value or a definition of value or a reason to value anything.  It is rather the response we have to make collectively and individually, in order to acquire or to keep many of the things we do value after determining how much we value them.  To find out what we are willing to pay for, then, we have to determine what we value, not the other way around...  It is specious to suppose that willingness o pay is itself a value that can enter [public debate]; it is the outcome of that discussion."  "Ethics and Economics in Environmental Law," Earthbound (ed. Tom Regan), Random House, 1984, p. 164.

19. Op. cit., p. 46.

20. Freeman, op.cit., p. 309.

21. "The most widely accepted [economic policy] criterion asks whether the aggregate of the gains to those made better off measured in money terms is greater than the money value of the losses of those made worse off. If the gains exceed the losses, the policy is accepted by this criterion. The gains and losses are to be measured in terms of each individual's willingness to receive the gains or to prevent the policy-imposed losses..." A. Myrick Freeman III, "The Ethical Basis of the Economic View of the Environment," Center for the Study of Values and Social Policy, University of Colorado at Boulder, 1983.

22. “The self,” writes the economist Herman Daly, “is in reality not isolated atom, but is constituted by its relations in community with others - the very identity of the self is social rather than atomistic." "Free Market Environmentalism: Turning a Good Servant into a Bad Master," Critical Review, Vol. 6, No. 2-3, 171-183.

23. "We live in a world of reasonably well-informed people acting intelligently in pursuit of their self-interests." George Stigler, "Economics or Ethics," in Sterling McMurrin (ed), The Tanner Lectures on Human Values, v. II, 1981, p. 176.

24.  Sen, loc. cit., pp. 1-2, see opening quotation. If rationality is defined as "self-interested utility maximization" then by implication, the behavior of saints and heros such as Gandhi, King and Mandella is "irrational." The reply is familiar: "But these individuals behaved as they did because they chose to do so." Thus "self-interested acts" are redefined to mean "voluntary acts," and the apparent egoism of economic theory is reduced to a tautology. If, in fact, the claim that "human beings are fundamentally motivated by self-interest" is to be empirically meaningful, then it must also be falsifiable - the defenders of this psychological egoism must be prepared to describe what it would be like (allegedly contrary to fact) to encounter voluntary acts that are not self-interested. If the lives of Gandhi, King and Mandella are not contrary evidence, then what would be?

25.  Sen, op. cit., p. 79.

26. The first five criteria are adapted from Mary Anne Warren's paper, "On the Moral and Legal Status of Abortion" (The Monist, 57:1, Jan. 1973, p. 55). The final four criteria are my additions to Warren's list.

27. Because the only "persons" we know of are human beings, there is a widespread temptation to treat the terms "person" and "human being" as synonymous. This careless equation of meaning leads to a great deal of confusion and befuddlement in moral arguments, most notably arguments over such issues as abortion, euthanasia, and environmental ethics. The distinction between person (a moral concept) and human being (a biological concept) can readily be grasped by citing contrary cases. In the TV series, "Star Trek" the android, "Data," not to mention numerous "aliens" are depicted as non-human persons. Dolphins may be persons, although we have not determined this to be the case. On the other hand, a severely brain damaged or irreversibly comatose human being is not a person.  More about this in Chapter 12.

28. As Amartya Sen observes, the concept of "rights" is very problematic for traditional economists. In fact, he writes, "it is fair to say that the view that rights cannot be intrinsically important is fairly ingrained in the economic tradition now established." (op. cit, p. 29). Still worse, "the moral acceptance of rights ... may call for systematic departures from self-interested behavior. Even a partial and limited move in that direction in actual conduct can shake the behavioral foundations of standard economic theory." (Ibid., 57).

29. When I first heard this quotation, I didn't believe it. Then a British friend tracked down the source for me. Margaret Thatcher, The Downing Street Years, London: Harper-Collins, p. 626.

30.British Tory ideology has traveled a long distance from Winston Churchill’s “there will always be an England, to Margaret Thatcher’s proclamation (by implication), “there is no such thing as an England.”

31. Harry Frankfort, "Freedom of the Will and the Concept of a Person," Journal of Philosophy, 68 (January, 1971), p- 5-20.

32. This quotation is often cited and heard today. I transcribed it from RFK’s voice from an NPR broadcast. The term “Gross National Product” was later supplanted with the term “Gross Domestic Product.” In the speech, Kennedy spoke of “Richard Speck’s knife” and “Charles Whitman’s rifle.” These references, fresh and vivid at the time, are unfamiliar today. Speck was a rapist who attacked a dormitory of student nurses, killing eight of them. Firing from the University of Texas tower, Charles Whitman, killed thirteen and wounded thirty-one.
 


Dr. Ernest Partridge is a consultant, writer and lecturer in the field of Environmental Ethics and Public Policy. He has taught Philosophy at the University of California, and in Utah, Colorado and Wisconsin. He publishes the website, "The Online Gadfly" (www.igc.org/gadfly) and co-edits the progressive website, "The Crisis Papers" (www.crisispapers.org).  Dr. Partridge can be contacted at: gadfly@igc.org .