Posts Tagged ‘ethics’


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I have often argued—in lectures, talks, and publications—that every economic theory has a utopian dimension. Economists don’t explicitly talk about utopia but, my argument goes, they can’t do what they do without some utopian horizon.

The issue of utopia is there, at least in the background, in every area of economics—perhaps especially on the topic of control.

Consider, for example, the theory of the firm (which I have written about many times over the years), which is the focus of University of Chicago finance professor Luigi Zingales’s lecture honoring Oliver Hart, winner of the 2016 Nobel Prize for economics, at this year’s Allied Social Science Association meeting.

One of the many merits of Oliver’s contribution is to have brought back the concept of power inside economics. This is a concept pervasive in political science and sociology, and pervasive in Marxian economics, but completely absent from neoclassical economics. In fact, Oliver’s view of the firm is very reminiscent of the Marxian view, but where Marx sees exploitation, Oliver sees an efficient allocation.

Zingales is right: Hart’s neoclassical treatment of control informs a theory of the firm that stands diametrically opposed to a Marxian theory of the firm. And those contrasting theories of the firm are both conditions and consequences of different utopian horizons. Thus, Hart both envisions and looks to move toward an efficient use of control within the firm such that—through a combination of incentives and monitoring—agents (workers) can be made to work hard to fulfill the goal set by the principal (capitalists). Marxists, on the other hand, see the firm as a site of exploitation—capitalists extracting surplus-value from the workers they hire—and look to create the economic and social conditions whereby exploitation is eliminated.

In my view, those are very different utopias—the efficient allocation of resources versus the absence of exploitation—that both inform and are informed by quite different theories of the firm.

As is turns out, the issue of control—and, with it, utopia—comes up in another, quite different context. As George DeMartino and Deidre McCloskey explain, in their rejoinder to Anne Krueger’s attack on their recent edited volume, The Oxford Handbook of Professional Economic Ethics,

When you have influence over others you take on ethical burdens. Think of your responsibilities to, say, your family or friends. And when you fail to confront those burdens openly, honestly, and courageously you are apt to make mistakes. As professional economists we have influence, and we do develop conversations about how we operate. Yet there is no serious, critical, scholarly conversation about professional economic ethics—never has been. That’s not good.

While the DeMartino and McCloskey volume includes contributions from both mainstream and heterodox economists (a point that Krueger overlooks in her review), it is still the case that the discipline of economics, dominated as it has been by mainstream economics, has never had a serious, sustained conversation about ethics.

Consider this: it is possible to get a degree in economics—at any level, undergraduate, Master’s, or doctorate—without a single reading or lecture, much less an entire course, on ethics. And yet economists do exercise a great deal of power over others: over other economists (through hiring, research funding, and publishing venues), their students (in terms of what can and cannot be said, talked about, and theorized in their courses), and the wider society (through the dissemination of particular theories of the economy as well as the policies they advocate to governments and multilateral institutions). In fact, they also exercise power over themselves, in true panopticon fashion, as they seek to adhere to and reinforce certain disciplinary protocols and procedures.

Economics is saturated with power, and thus replete with ethical moments.

Once again, the issue of control is bound up with different utopian horizons. Most economists—certainly most mainstream economists—are not comfortable with and have no use for discussions of ethics. That’s because, in their view, economists adhere to a code of objectivity and scientificity and an epistemology of absolute truth. So, there’s no room for an ethics associated with “influence over others.” That’s their utopia: a free-market of ideas in which the “truth,” of theory and policy, is revealed.

Other economists have a quite different view. They see a world of unequal power, including within the discipline of economics. And the existence of that unequal power demands a conversation about ethics in order to reveal the conditions and especially the consequences of different ways of doing economics. If there is no single-t, absolute truth—and thus no single standard of objectivity and scientificity—within economics, then the use of one theory instead of another has particular effects on the world within which that theorizing takes place. Here, the utopian horizon is not a free market of ideas, but instead a reimagining of the discipline of economics as an agonistic field of incommensurable discourses.

And, from a specifically Marxian perspective, the utopian moment is to create the conditions whereby the critique of political economy renders itself no longer useful. Marxists recognize that they may not be able to control the path to such an outcome but it is their goal—their ethical stance, their utopian horizon.


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On one hand, Dave Elder-Vass is absolutely right: “we should see our economy not simply as a capitalist market system but as a collection of ‘many distinct but interconnected practices’.”*

As I have explained before, that view of the “iceberg economy”—which has been highlighted in the work of J. K. Gibson-Graham—represents a fundamental challenge to neoclassical economists, for whom

the entire economy is visible and consists of capitalist markets—or unwarranted constraints on capitalist markets, which should be eliminated. According to iceberg economists, capitalist markets are only the tip of the iceberg, and there’s a proliferation of noncapitalist economies below the waterline.

But Elder-Vass also uses it against Marxists who, in his view, see “one central mechanism in the economy: the extraction of surplus from wage labour by capitalists” and leave out ethical issues.

The problem is, while Elder-Vass credits J. K. Gibson-Graham, especially their book The End Of Capitalism (As We Knew It), with the idea that unified, totalizing metaphors of the economy (like a “capitalist market system”) can make it difficult to think outside the box and imagine alternatives, he forgets that Gibson-Graham themselves used the categories of the Marxian tradition—including the idea of class defined in terms of surplus labor—to decenter the economy.**

He also overlooks the fact that Gibson-Graham (as well as others who have worked with and alongside them in the larger Rethinking Marxism tradition) have insisted on the ethical dimensions of the Marxian critique of political economy—which includes, but of course is not limited to, a critique of the social theft associated with capitalist and all other forms of exploitation (that is, areas of the economy—whether capitalist, slave, feudal, and so on—in which those who perform surplus labor are excluded from appropriating their surplus labor).

In fact, according to two of Gibson-Graham’s close associates, Jack Amariglio and Yahya Madra, ethics are central to Marx’s critique of capitalism and mainstream economics.*** But Marx’s commitment to communism is not governed by an actual model or a fixed morality. Rather, they argue,

The ethical is embodied in Marx’s enduring faithfulness to sustaining a critical position toward the existing state of affairs, not in his particular and changing dismissals of capitalism or in his obscure, partial formulations of the shape communism might take. The lesson of Marx is that, facing the abyss of an unknown communism, the ethical is the will to risk a different social organization of surplus.

To put it in terms of the iceberg economy, the ethical is the will both to recognize the noncapitalist forms of economy below the waterline and to risk a different social organization in which capitalist exploitation ceases to be the exclusive or even predominant mode of appropriating and distributing the surplus.

Contrary to Elder-Vass, then, seeing the economy “not simply as a capitalist market system” is consistent with the Marxian critique of political economy, including the ethical stance that is informed by and embodied in that critique.


*I will try to be careful here because I have not yet had a chance to read Elder-Vass’s book,  Profit and Gift in the Digital Economy. I am relying, instead, on Daniel Little’s review of the book and Elder-Vass’s response.

**Gibson-Graham also borrowed from other traditions, such as feminism, queer theory, and poststructuralism to create their iceberg economy.

***See their entry on “Karl Marx” in the Handbook of Economics and Ethics, ed. J. Peil and I. van Staveren, 325-32 (Edward Elgar, 2009).


I have argued many times over the years that mainstream economists, especially mainstream macroeconomists, largely ignore the issue of inequality. And when they do see it, they tend to misunderstand both its causes (often attributing it to exogenous events, such as globalization and technical change) and its consequences (often failing to connect it, other than through “political capture,” to events like the crash of 2007-08).

In my view, mainstream economists overlook or forget about the role inequality plays, especially in macroeconomic events, for two major reasons. First, their theoretical and empirical models—either based on a representative agent or undifferentiated macroeconomic relationships (such as consumption and investment)—can be solved without ever conceptualizing or measuring inequality. The models they use create a theoretical blindspot. But, second, even when it’s clear they could include inequality as a significant factor, they don’t. They literally choose not to see inequality as a relevant issue in making sense of macroeconomic fluctuations. So, as I see it, when it comes to inequality, mainstream economics (especially, as I say, mainstream macroeconomics) is haunted by both a theoretical and an ethical problem.


That’s why recent research by Kurt Mitman, Dirk Krueger, Fabrizio Perri is so interesting. What they show, using a standard macroeconomic model with household heterogeneity to account for an unequal wealth and consumption distribution, is that inequality does in fact matter. In particular, they demonstrate that the aggregate drop in expenditures depends on the distribution of wealth (e.g., it is much larger in an economy with many low-wealth consumers) and that the effects of a given macroeconomic shock are felt very differently in different segments of the wealth distribution (e.g., low-wealth households have little ability to insure themselves against risk, and thus the welfare impact of a recession is significantly larger for them). As a consequence, they make it abundantly clear that ignoring inequality means failing to understand the severity of a macroeconomic downturn and underestimating the welfare costs of a deep recession.

That’s not all the work that needs to be done, of course. Mitman et al. rely on exogenous macroeconomic shocks rather than analyzing how inequality itself plays a role in creating the conditions for an economic downturn. But even their limited attempt to include inequality as a significant factor in an otherwise-mainstream macroeconomic model demonstrates that such work can in fact be done.

In other words, it’s not that mainstream economists can’t make sense of inequality in their models. They simply, for the most part, choose not to.