Friday, October 8, 2010

Economics and Ethics: A Brief Survey

In the previous post (see “Rothbard on Mises’ Utilitarianism: Why the Systems of Mises and Rothbard both Collapse”), I pointed out that Rothbard’s natural law theory is untenable, and once that is recognised his whole case for anarcho-capitalism also collapses. While I will publish a longer post soon refuting natural law and natural rights theory, I present here a brief introduction to ethics. This post was also published as a guest post on the Cynicus Economicus blog ( “Guest Article: Economics and Ethics,” May 4, 2009).

For a number of economic systems (e.g., libertarianism, free market economics, neo-liberalism, social democracy, democratic socialism, communism etc), in intelligent debate many people justify their preferred system as public policy by appealing to some ethical theory, to convince other people of the morality or superiority of their system.

The Austrians who follow the praxeological system of von Mises claim that economic science is value-free, and that the inferences of praxeology are justifiable as economic laws independently of ethics, though that remains a questionable idea. But, as a public policy prescription, even Austrians will often require an ethical theory, and Rothbard explicitly used natural rights theory to justify his anarcho-capitalism.

In the end, when an economic system is urged as a policy it must often be justified or limited by an ethical/moral theory, and one needs an objective theory of right or wrong to do this. For the only effective theories available to justify a larger philosophical system in a consistent way are objectivist theories of ethics (that is to say, a subjectivist or relativist theory of ethics is self-defeating).

In essence, an objectivist theory of ethics holds that:
– moral judgements are propositions that have an objective value, either true or false (e.g, “The unjustified killing of another human being is wrong”);
– the truth of a moral proposition remains true regardless of the subjective opinions of a person or the values of a different culture (e.g., “Slavery is wrong”);
– morality is not subjective or relative.
If we want an objectivist theory of our morality, we essentially have these options:
(1) Moral absolutism
(a) Divine Command Theory
(b) Categorical Imperative ethics (Kantian ethics)
(2) Moral Universalism (minimal/moderate moral realism)
(i) Deontological theories:
(a) Natural law theories (Plato and many Christian philosophers)
(b) Thomist ethics
(c) Pluralistic deontology, the non-absolutist ethics of W.D. Ross
(d) Human rights objectivism (Rawls)
(ii) Consequentialist theories:
(e) Utilitarianism (act utilitarianism; rule utilitarianism)
(f) Ayn Rand’s objectivism?
(3) Ayn Rand’s objectivism?
(4) Utilitarian Kantian Principle of James Cornman (this combines deontology and utilitarianism).
All of these objectivist theories of morality/ethics can be divided into two basic groups as follows:
(1) Deontological theories (= duty or obligation based morality): the basis of morality is duty and some acts are always right no matter what consequences they can cause (the best example of which is Kantian ethics or some forms of divine command theory; Kant famously said that it is always wrong to lie, no matter what the circumstances).

(2) Consequentialist theories: the basis of morality is the evaluation of the consequences of acts on people (the most famous such theory is Utilitarianism). The greatest happiness of the greatest number of people is one way of describing it.

(I will not address the question whether Ayn Rand’s objectivism is consequentialist or in a category by itself, since this is disputed.)
Use your intuition and find out whether you subscribe to (1) a duty-based ethical theory or (2) a utilitarian or consequentialist ethical theory by thinking about this moral problem:
A known murderer comes to you and asks to know where a person he wants to kill is, and you are aware of his desire to commit murder. Do you:

(1) Lie to protect the innocent person and say you do not know, or
(2) Tell the murderer where that person is in the knowledge that a murder may occur?
Decision (1) makes you a utilitarian, and (2) a believer of duty-based ethics. Immanuel Kant held that (2) is the moral course of action, since lying is always immoral, under all circumstances.

Ethics as Applied to Economics

Divine command theory is easily refuted: e.g., if god orders someone to commit genocide, then this suddenly becomes a “moral” action, because God has ordered it. Thus divine ethics turns out to be a subjective theory of ethics: what is moral and what is not actually depends, in the end, on the arbitrary whim of God, not the goodness of actions or their consequences. If God’s moral laws are not arbitrary, then there must be some independent, objective standard or method he uses to determine what is right and wrong. But, if there is an independent, objective standard, then it is this system that tells us what is right or wrong, not the commands of God. We could presumably use reason to apply the standard ourselves to discover what is right and wrong, without any need for instruction from God. (And Kantian ethics was in fact partly an attempt to create an objectivist ethics that could defend Christian morality, but remove this problem by basing morality on moral principles derived from human reason.)

Many libertarians rely on a natural law/natural rights theory of ethics.

Thus they often argue that state intervention is bad when it violates private property rights, and that this government action is always immoral, irrespective of the good or bad consequences that state intervention has or may have.

Natural law as a theory can be traced back to Plato, the ancient Stoics, and many Christian philosophers. (Contrary to popular belief, the most widely-held theory of ethics in the Middle Ages in Christian philosophy was the natural law theory, not the crude divine command theory.)

Natural law was famously attacked by the English utilitarian philosopher Jeremy Bentham as “nonsense on stilts.”

One of the main weaknesses of natural law theory is that its main historical justification was the belief in a “divine order” and a divinely-created human nature that makes us conform to “natural law.”

For Plato, the divine soul made human beings conform to the natural law of the universe. In ancient Stoicism, all humans had a divine reason given by the gods to make them adhere to divine “natural law.”

When natural law theory was taken up by Christian theologians, they simply substituted the Christian god for the gods of the Greek and Romans.

In the early modern period, rationalist European philosophers like Grotius tried to defend natural law theory by removing God and the previous supernatural justification for it.

However, in doing so, they destroyed the only convincing explanation for belief in natural law (Tawney 1998: xxv-xxvi).

Thus anyone who accepts an atheistic and naturalistic scientific view of the universe, and who rejects all religion, has no reason to believe in natural law or natural rights.

I would note here that just because we appear to have an innate sense of right and wrong, this does not provide us with an objective system of ethics. That some scientists believe they can identify an innate sense of right and wrong, which humans have evolved through social life in communities during our evolutionary history, does not mean that they have found an objectivist theory of morality that can function as a consistent, logical and universal system for justifying our moral choices, both now and in the past. The well-known fact that there is a vast chasm between what can be regarded as moral in one society and immoral in another demonstrates that, like our language faculty (which also has a biological basis), our innate moral intuition can lead to quite different systems of morality in different cultures in different times (just as our core language faculty leads to vastly different languages, with different words, grammar and syntax). For instance, in ancient Greece and Rome, the killing of unwanted children by exposing them (i.e., leaving them at crossroads or abandoning them at birth) was widely accepted. Human sacrifice and slavery were also widely practised in many ancient societies, and this was apparently perfectly compatible with the “innate moral sense of right and wrong” that ancient people had, although it is no longer accepted today.

Only an objectivist theory of morality can demonstrate that these things are immoral now and also immoral in the past. So it turns out the innate sense of right and wrong is not the same thing as an objectivist theory of morality.

Nor does appealing to “nature” give us any objective standard of right and wrong. For example, cannibalism is observed in many species: does this make cannibalism moral for humans? It certainly does not, and anyone who thinks so has committed the fallacy of appeal to nature, a fallacy of relevance.

I will note here too that a very good starting point for why natural law and natural rights are untenable is Kai Nielsen, “The Myth of Natural Law,” in S. Hook (ed.), Law and Philosophy: A Symposium, University Press, New York. 1963.

Also relevant is L. A. Rollins, The Myth of Natural Rights (Loompanics Unlimited, 1983), which is an attack on the natural rights theories of Rothbard and Ayn Rand.

It follows that all modern types of libertarianism or free market economics based simply on a “natural law” or “natural rights” foundation are severely flawed systems (e.g., the systems of Adam Smith or Murray Rothbard). There is no reason to believe that the “natural law” that justifies placing inviolable property rights at the centre of our modern political or economic systems has any validity whatsoever.

In my opinion, Kantian ethics has no real consequences for economics: it can be used to justify numerous economic systems and is fully compatible with social democracy. However, Kantian deontological ethics has severe problems.

A better ethical theory, in my view, is a modern form of utilitarianism called rule utilitarianism (which is quite different from its crude early form as advocated by Jeremy Bentham). Some libertarians or advocates of free market economics actually do use utilitarian arguments to justify their positions and economic systems, e.g., Ludwig von Mises (although Mises’ praxeology was an a priori system of deductive reasoning, independent of his utilitarianism), the earlier Friedrich von Hayek (Gregg 2003: 21–22), and Milton Friedman (Frederick 2002: 23). Thus anyone who uses a utilitarian argument to support ideas about economics will ultimately have to examine the good and bad effects of the policies they advocate.

In these theories, there is no reason in principle why state intervention could not be moral and successful. Any economic argument, then, essentially becomes an argument about empirical reality: the consequences of economic policy today and in the past. The good consequences of state intervention and social democracy fully justify these policies. Of course, philosophical objections have been raised to utilitarianism as well.

One solution may be that we should adopt James Cornman’s Utilitarian Kantian Principle of ethics: this (as I understand it) has caused a great deal of excitement amongst modern philosophers, because it combines the best elements of Kant’s deontological ethics with utilitarianism. It is perfectly compatible with state intervention in economics.


Marx himself, as I understand it, rejected the utilitarianism of his day for some very confused ideas on ethics (Alan Gilbert, Democratic Individuality, Cambridge University Press, 1990, p. 240). And, at the very least, the question of what ethical theory he believed in is debatable (N. Churchich, Marxism and Morality: A Critical Examination of Marxist Ethics, James Clarke & Co., 1994, p. 139).

Since I don’t advocate communism as preached in the Communist Manifesto, it has nothing to do with my moral argument for certain types of state intervention.

Furthermore, the means Marx advocated to achieve communism (i.e., dictatorship, destruction of freedom of speech and civil liberties) can be rejected on utilitarian grounds anyway, since the abolition of freedom of speech and dictatorship have harmful effects on everyone.


Cornman, J. W., Lehrer, K. and G. S. Pappas. 1992. Philosophical Problems and Arguments: An Introduction, Hackett, Indianapolis.

Frederick, R. 2002. A Companion to Business Ethics,, Blackwell, Malden, Mass.

Gregg, S. 2003. On Ordered Liberty: A Treatise on the Free Society, Lexington, Oxford and Lanham, Md.

Nielsen, K. 1963, “The Myth of Natural Law,” in S. Hook (ed.), Law and philosophy: A Symposium, University Press, New York.

Rollins, L. A. 1983. The Myth of Natural Rights, Loompanics Unlimited.

Scruton, R. 1994. Modern Philosophy: An Introduction and Survey, Penguin Books, London.

Tawney, R. H. 1998. Religion and the Rise of Capitalism, Transaction, New Brunswick, N.J. and London.


  1. Part 1 of 2:

    "(I will not address the question whether Ayn Rand’s objectivism is consequentialist or in a category by itself, since this is disputed.)

    It is apparent that you are aware of those who have attempted to refute Rand's ethics and politics, and it would be near impossible to not be aware of the discussions supporting it, yet you shrink from treating her views here probably because you have not yet digested her works yourself. Given that her philosophy stands opposed to the string of false alternatives you have described here, don't you think it is time to familiarize yourself with it so you can make some independent judgments of it on your own?

    "So it turns out the innate sense of right and wrong is not the same thing as an objectivist theory of morality."

    Small wonder, since there is no such thing as an "innate sense of right and wrong." Just because mental deliberations cannot be felt or seen does not mean that they emerge automatically from one's DNA. Like all deterministic fantasies, a belief in innate ideas precludes one from further use of concepts like "valid" and "true" that could not be distinguishable from the "innate.""

    "Nor does appealing to “nature” give us any objective standard of right and wrong. For example, cannibalism is observed in many species: does this make cannibalism moral for humans?"

    First, observing that volitional men practice cannibalism does not make it natural.

    Identifying objectively the fundamental nature of man, on the other hand, does give us an objective standard of right and wrong. Every simple gardener knows that the way to grow a tree to be the best exemplar of its species begins by identifying what its fundamental nature necessitates for it to survive and flourish.

    These are the facts about the nature of man underlying an objective morality and politics:

    1) ... that the most fundamental alternative for all living creatures is life or death.
    2) ... that of all living creatures, only man can choose which alternative to pursue.
    3) ... that the choice (deliberate or implied in all other choices) to act in pursuit of life makes life one's most fundamental goal.
    4).... that one's fundamental goal is implicitly the standard of measure for all values one acts to gain or keep in its pursuit.
    5) ... that the good is then that which contributes to one's life (consistent with one's nature), and the bad is that which detracts from it.
    6) ... that this necessitates a hierarchical code of values in principle (ethics) to guide one's spontaneous choices in any alternative faced to opt for the higher value in lieu of the lower one (egoism).
    7) ... that man's singular means to fulfill these requirements of his nature in the pursuit of life is by applying the product of his reason to his actions for the production and exchange of values needed to survive and flourish.
    8) ... that the only threat to a man's pursuit of his life in this manner in a society of other men would be the initiation or threat of physical force by others to coerce certain choices of action against his will.
    9) ... that the most fundamental political alternative is therefore: freedom vs. force.
    10)...that the sole moral requirement for any government of a society of men is to remove the use or threat of force from human interactions and guarantee thereby that all human interrelationships shall be entered into and conducted voluntarily. (Rand's radical capitalism)

    The time when one could escape with a casual dismissal of Ayn Rand with "I will not address the question ... since this is disputed," has passed.

  2. Part 2 of 2:

    "There is no reason to believe that the “natural law” that justifies placing inviolable property rights at the centre of our modern political or economic systems has any validity whatsoever."

    From the previous list in Part 1, each and every human being who ever was, is, or ever will be, requires by the facts of his human nature that he be unimpeded in applying the product of his mind and body to the service of his life. That necessitates, whenever there is a society of men with a third party institution to manage the use of physical force, that every person have the right to life, liberty, property, and the pursuit of happiness and that he grant the same to all others who do not forfeit their right by violating the rights of others.

    The right to property is no more or less than the right to the product of one's own mind and body. No other person nor group of persons nor State in their name can validate any moral claim on that product.

  3. The is no convincing argument for the right to absolute ownership of property.

    I would urge you to read this critique of Rothbard's central argument:

  4. This line of attack isn't going to get you anywhere. Mises' system shows how things work. Property rights in things and bodies simply place a bright line restriction on what others may do to another. Keynesian money dilution is still going to cause an unsustainable distortion of the capital structure no matter what. If a Keynesian bust has literally caused 1/2 the population to be starving while the other half has tons of extra food that it won't give away, an ethical argument about how to seize that food for the starving does not refute the Misesian economic explanation of how things work.

    Query: Do you break into your neighbors' houses and steal their jewels and/or cd collections? Or to eat their pets? Or their children? If not, why not?

  5. Sorry, LK, you will have to do better than this. That you are unconvinced is, all by its lonely self, a useless piece of knowledge.

    Interjecting Rothbard is also inapplicable, and downright strange. Rand advocates neither axiomatic self-ownership nor a government that never intervenes.

    You have some remedial reading to do.

  6. "Identifying objectively the fundamental nature of man"

    You have first to prove that such thing called "nature of man" exists, and I do not recall any moment where Rand attempted such thing (if you can point me where, feel free). This is a purely idealistic thing! It has no basis on material reality, simply because there is no such thing as "man" to have a nature - there are several individuals which share several common traits, but to speak of "man" is to speak as if there were something universal which is common to all such creatures.

    Rand may make the case of life being "the good" - in a purely descriptive sense, in that people who want to live act towards living -, but she makes no case of *why* people must act as "man qua man" (whatever that means) - if I recall correctly the closest she says is because it will increase one's chance of survival, but I do not recall she offering any further support for this affirmation - or according to "man's nature" (in which she commits a prime example of the naturalistic fallacy).

    There is a fairly thorough criticism of the assumptions made by Rand here: , written by a libertarian, if that helps.

  7. @Lord Keynes

    Your reluctance to recognize a right to "the absolute ownership of property" could be the result of a misconception of the nature of ownership and property:


    Ownership is the moral sanction for the exclusive possession, use, and disposition of any value, and it is due the person or persons whose applications of their reason and action are the cause of that value's existence.

    Consequently, matter cannot be owned by anyone, because it is not the product of anyone's reason and actions.

    The ownership that sanctions the possession of any object made of matter is the ownership of the applied reason/action embodied in the otherwise unowned object.

    The reason/action owned can be that directly applied in an act of creating the object, or it can be that applied in the past to create other values that were exchanged for the values that constitute the wealth with which the object was purchased in a voluntary exchange. It can also be that applied to oneself to become the kind of person who is a value to another person who repays (shows gratitude for) it by a gift of the object or other wealth with which one purchases it.

    In the individual context, assessments of a value are made either objectively—because of an actual contribution to one's life in the long run, or subjectively—in spite of actually detracting from one's life. In the social context, assessments are subjectively made in relationship to differing circumstances.

    Consequently, 1) nothing has any intrinsic value, nor is there such a thing as "fair value," and 2) unregulated voluntary exchanges among men are inherently profitable to both, as each gives up something they value less than that which they are acquiring.

    In every case, moral ownership can only be earned through an exercise of reason and action in acts of production and/or voluntary trade.

    Ownership of intellectual property is likewise earned by being the product of one's reason/actions. [To be protected by a government, however, it must be embodied in a concrete object (a model or product) in order to objectively define it as a particular application.]

    There is no such thing as ownership of oneself or of others. Human beings cannot be owned, because ownership and property are rights necessitated by, derived from, and subsumed under the right to life and are therefore dependent on its prior existence. The right to own a person who has a hierarchically prior right to his life is a self-invalidating contradiction.


    One cannot deny the absolute right to property of any person to the product of his own reason/actions without establishing the absolute right to it for some other person or persons, who would implicitly not even have an absolute right to the product of their own reason and effort. Where are you going to find the code of morality (ethics) that could logically lead you to that conclusion?

    Until you can define such an ethic, denying absolute rights of persons to own the product of their own reason/actions is nothing more than the expedient rationalization endemic to thieves.

  8. Utter nonsense. Any kind of natural rights/law approach is not going to work at all. There are no such thing as a "natural law", and I think that the main reason why some thinkers fall in that trap is because they are trying to use the rational method (rationalism) to the world of experience (ethics, morality and politics).

    And I also think its detrimental to libertarianism as a whole. Rand wanted a justification for the western liberal democracy with limited government, and Rothbard tried to make a consistent philosophical system with an objetive morality, in order to be immune from attacks from more leftish views, which I consider great failures.

    I think that the best approach is contractualism, with its respect for the individual, given the rules "finders are keepers" and "do not kill nor steal". While it may not be as nice and hardcore as Rand's "right to life" and Rothbard's "non-aggresion principle", it's a much more sound and credible idea, and it doesn't fall into the naturalistic fallacy (imposible to avoid when you've fallen into the rationalist trap when justifying an ethical/political system). I think the best proponent of this approach is Anthony de Jasay, maybe you should read some of his stuff.