ACADEMIA Letters

About the morality of economic policies principles

Demetrio Miloslavo Bova

Abstract
Do utilitarianism, Pareto efficiency, and preference neutrality lead to just policies? Through a
sequence of examples as slavery, pandemic, and killing for sale, this letter argues that they do
not. Both utilitarianism and Pareto efficiency defend utility, the first as aggregate, the latter
as individual liberty. Both lead to result as just as the preferences represented: when these
are not acceptable, the market cannot be neutral, and questions about which character must
be promoted arise. Since policies affect preferences, economists cannot avoid debating about
the common good and the consequent characters or virtues to promote.
Keywords: economic justice; economic modelling; utilitarianism, Pareto Efficiency, Pref-
erences neutrality.
JEL Classification: A, D, K, Z.

1. Introduction
In his famous book “what money can’t buy”, Michael Sandel (2012) enquires the risks of a
society more and more allocating goods typically not belonging to the market through mar-
ket reasoning. This letter analyses the same risks from an economist standpoint, focusing on
some of the principles driving our policy design: utilitarianism, Pareto efficiency, and pref-
erence neutrality. It shows that these principles contain clear moral judgment that may lead
to undesirable moral implications and that, therefore, we cannot avoid debating them.

Academia Letters, July 2021 ©2021 by the author — Open Access — Distributed under CC BY 4.0

Corresponding Author: Demetrio Miloslavo Bova, demetriombova@gmail.com

Citation: Bova, D.M. (2021). About the morality of economic policies principles. Academia Letters, Article
2124. https://doi.org/10.20935/AL2124.

1
2. Utilitarianism
Utilitarian mainstream Economics designs policies to maximize aggregate utility: given two
policies A and B, if A generates higher wellbeing than B, then A is preferred to B. It seems
a logical way to develop happier societies by reducing pain and increasing pleasure. More-
over, in a pure Bentham view (1780), this maximization is also the right thing to do, it is a
goal that, by consequentialist reasoning, design the laws and define justice. Hence, utilitarian
mainstream economics is as just as utilitarianism is.

Persons’ rights
In “The ones who walked away” (Le Guin, 2000), Omelas is a city where its population
can enjoy the greatest happiness until a kid in a basement is segregated, malnourished, and
neglected. If the child was freed, then the perfect happiness would disappear. To maximize
aggregate utility, the right thing to do (policy) is to keep the kid segregated. The number of
kids segregated may also increase if the aggregate utility increases. We should justify both the
colosseum games where Romans enjoyed Christians eaten by lions and slavery on the same
reasoning line. We should also accept the repugnant conclusion (Parfit, 1984), where, given
decreasing utility, to divide the cake for more heads lead to a higher overall utility and a spread
of misery in a vicious and endless cycle.

3. Pareto efficiency
Libertarianism
The first and second welfare theorems claim that both the surplus is maximized and everyone
is better off in a free market. Pareto efficiency is an excellent descriptive tool for markets ex-
changes and has a vital moral component. It describes a libertarian situation where exchanges
among two parties are done if and only if they both agree, that is, only if the exchange does
not decrease their utility. As such, it allows for a continuous utility increase respecting the
individual properties and preferences.

Retro and pro correctness

However, Pareto efficiency neglects the past and it does not judge the efficiency or quality
of the actual situation. If we asked the consent of kids, Christians, slaves, or the future pop-
ulation, they would refuse, and we would avoid the related moral paradoxes. However, it is

Academia Letters, July 2021 ©2021 by the author — Open Access — Distributed under CC BY 4.0

Corresponding Author: Demetrio Miloslavo Bova, demetriombova@gmail.com

Citation: Bova, D.M. (2021). About the morality of economic policies principles. Academia Letters, Article
2124. https://doi.org/10.20935/AL2124.

2
neither retro nor pro corrective. Indeed, if the kid, slaves, or Christians were already suffer-
ing, Pareto efficiency would not lead to freeing them since the others would be worst off. If a
pandemic destroys a city, others are legitimated to refuse their help: Pareto efficiency cannot
establish or re-establish a just situation.

Veil of ignorance
Could we include Pareto efficiency not in the actual situation but in an ex-ante context as
Rawl’s veil of ignorance (1971), where individuals would choose their rules together governed
by rationality without knowing their incomes, skills, and contingencies? It would be corrective
as it would define ex-ante how and to which extent correcting each unbalance (as inequality).
However, when the veil disappears, people must respect the principles and the consequences,
as taxes, even if they would be worst off and, therefore, Pareto efficiency would be dismissed.

4. Preferences neutrality and exogeneity

In economics reasoning, a fine does not correct bad behaviour because we do not judge; we
introduce fees or taxes to internalize costs or gain to allow someone to gain only if he does not
damage others. The market is morally neutral and does not preclude or promote any preference
or morality (Sandel, 2012, p. 43-91).

Preferences neutrality and endogeneity

However not everything is or should be comercialised even when it increases individual or
collective surplus. Suppose for instance that a jail is liberalised and is seeking for a way
to reduce its costs and someone proposes to sell the right to kill the prisoners which were
condemned to die. Someone may pay to have the ‘pleasure’ to kill the prisoner. Assume the
higher willingness to pay or the higher bet is used to chose the killer, is the commodification
of death acceptable? It would be pareto efficient, the killer and the jail gain while the prisoner
would anyway die. Probably most people would find the willingness to pay for kill repugnant,
independently from the dignity of the killed that is comodified. It seems that we are forced to
think that some preferences are either inherently wrong, non virtuous, or lack of dignity and
that the market and policies cannot be neutral.
The market and policies’ incentives do affect individual preferences by changing the
meaning of actions, the context, and experience (Bowels, 2016). To pay for kill somehow
dignify the action to kill by recognizing it as a legitimate need to satisfy in the market. If the

Academia Letters, July 2021 ©2021 by the author — Open Access — Distributed under CC BY 4.0

Corresponding Author: Demetrio Miloslavo Bova, demetriombova@gmail.com

Citation: Bova, D.M. (2021). About the morality of economic policies principles. Academia Letters, Article
2124. https://doi.org/10.20935/AL2124.

3
effect of market and policies on preferences is unavoidable, then the question of which pref-
erences should be promoted is unavoidable as well. Let us consider the following example. A
boy walking in the street sees another man dumb, blind, poor, and handicapped that is going
to die: he would need only the boy’s t-shirt to stop bleeding and survive. If the boy reasons as
Berker claimed (1976), that is according to a selfish calculus comparing utilities of different
actions, then he may decide not to give his t-shirt: he would gain nothing since the dying man
has no resources or valuable skills and no one else is there watching him behaving heroically.
Moreover, the dying man has a negative net social utilitarian contribution. Beker’s man would
keep going without remorse under these conditions: he maximizes his and the collective util-
ity. Hardly this can be considered just. Should we design our policies to make this rotten man
better-off, or should we demand or promote certain behaviours and moral standards?

Altruism and community

To Berker’s homo oeconomicus, MacIntyre’s juxtaposes the storytelling man(1981): a man
whose preferences and values depend on his story and roots. His community forges his iden-
tity toward which he develops loyalty that, in turn, leads him to behave for the sake of his
community even if it is costly[1]. He values solidarity and altruism due to his communitar-
ian identity and empathy, and on these, he builds his dignity. Altruism has a crucial role.
The rational individual that embodies altruism in its utility function, which becomes a mere
representation of its decisional process, would save Christians, and the dying man, would be
responsible for future generations and reject outraging inequality. Properly embodied, It can
be reconducted to the golden role or the Christian maxim ‘Love your neighbour as you love
yourself’ and the ‘adequate’ level of altruism can be modelled (Stark, 1989). If there exists
a level of altruism that leads to a just society, it must be promoted or, better, since policies
shape preferences, this effect must somehow be controlled.

Virtues
If there is no neutrality, then we are forced to ask ourselves which preferences and behaviours
promote; we find ourselves inquiring which virtues lead to the common good or a just so-
ciety[2]. Only in this perspective we can make sense of the ‘killing for sale’ case and shift
to a society where the others are recognized as equal members of a community and not as
subjugated by either aggregate utility or egoists of decentralized independent and sovereign
authorities. The debate about the goal, the common good, all that we said considered, high-
lights the direction to which any policy should be directed to make sense and be just (Sandel,
2010, p. 244-269).

Academia Letters, July 2021 ©2021 by the author — Open Access — Distributed under CC BY 4.0

Corresponding Author: Demetrio Miloslavo Bova, demetriombova@gmail.com

Citation: Bova, D.M. (2021). About the morality of economic policies principles. Academia Letters, Article
2124. https://doi.org/10.20935/AL2124.

4
 Altruism is argued to be the first virtue to consider, or at least we should not ignore when
our policies erode it, as it leads to justice. If we promoted it and the extent that we are success-
ful, Pareto efficiency or aggregate utility maximization would lead to just outcomes since they
would be based on utilities containing already altruism. Altruism generates individuals that
care about the aggregate and the aggregate that cares about individuals, persons. Intergenera-
tional equity, where an egoistic generation would have no reason to safeguard the environment
for the future generations, formal and substantial inequalities for income, race, or sex, would
be slowly overcome, and the honour and dignity would matter, leading to value sacrifice for
the sake of both our self and the others.

5. Conclusions
The letter enquired some consequence of utilitarianism, Pareto efficiency, and preference neu-
trality. The first justify the sacrifice of individuals for the majority’s pleasure independently
from the quality or the moral worth of these pleasures. The second has the same limits, but
it defends the person, although it does not necessarily lead to correct unfair situations al-
ready existing as slavery or the Samaritan dilemma. The preference neutrality is may be the
most symptomatic: by allowing anyone to satisfy its needs and treating each need equally,
we should allow, for instance, killing for sale prigioniers condemned to deat or for animals.
Any system or policy affects individuals’ preferences and values, and, as such, it is not neu-
tral. Aware of this non-neutrality, we are forced to individualize which preferences promote
or discourage. By doing so, we implicitly accept the idea to promote some virtues for the sake
of the common good. The main virtue to promote, or at least to not erode, is individualized
in altruism that, if included in the individuals, or persons, utility, then would ultimately lead
utilitarianism and Pareto efficiency to a just outcome. Hence, economics principles for poli-
cies should include the effects on individual’s anthropology as a condition and a result of the
policy, in other words, as an endogenous component. Hence, the selection of the best policies
should depend on both the economic results and the contribution to forge characters.

References
Becke, G. (1976). The economic approach to human behaviour. Chicago: Chicago Press.

Bentham, J. (1780). Principles of Morals and Legislation.

Bowels, S. (2016). Moral economy. London: Yale university press.

Academia Letters, July 2021 ©2021 by the author — Open Access — Distributed under CC BY 4.0

Corresponding Author: Demetrio Miloslavo Bova, demetriombova@gmail.com

Citation: Bova, D.M. (2021). About the morality of economic policies principles. Academia Letters, Article
2124. https://doi.org/10.20935/AL2124.

5
Freeman, D. (1934). R. E. Lee. New York: Charles Scribner’s Sons.

Le Guin, U. (2000). The ones who walked away from Omelas. In R. Bausch, Anthology of
short fiction. New York: W.W. Norton.

MacIntyre, A. (1981). After virtues. Notre Dame: University of Notre Dame Press.

Parfit, D. (1984). Reasons and persons. Oxford: Oxford University Press.

Rawls, J. (1971). A theory of justice. Cambridge: Belknap Press.

Sandel, M. (2010). Justice. London: Penguin books.

Sandel, M. (2012). What money can’t buy: the moral limits of the market. London: Penguin
books.

Stark, O. (1989). Altruism and the quality of life. The American economic review, 79(2),
1989.

[1] See the story of Robert Edward Lee (Freeman, 1934).

[2] That a just society can be defined without starting from the common good is doubtful
(Sandel, 2010, p. 244-269).

Academia Letters, July 2021 ©2021 by the author — Open Access — Distributed under CC BY 4.0

Corresponding Author: Demetrio Miloslavo Bova, demetriombova@gmail.com

Citation: Bova, D.M. (2021). About the morality of economic policies principles. Academia Letters, Article
2124. https://doi.org/10.20935/AL2124.