Ethical decision making, its theoretical

background and usefulness of ethical

principles.
Nowadays there is common disbelief among economists that economics and ethics are separated. It can be
argued by the opinion of Broome (2008, p,1) that economics cannot be separated from ethics because ethics is
a vital part of economics. The lack of awareness about ethical principles in economics causes many problems in
application of theoretical concepts to the real life. Many economists think that decisions must be rational, but
they also need to be ethical in considering the detrimental consequences (Stephan et al., 2021, pp. 984-985).
In this essay main moral issues and the usefulness of ethical principles will be discussed.

There are many ethical issues in economics and a few of them are highlighted below. Firstly, it is known that
“economics necessarily relies on techniques of mathematical modelling" (Lawson, 2003, p xvii). Mathematical
models are based only on numbers, and they do not consider other conditions such as people`s wellbeing and
this is the first ethical issue of economics. To take one example, the model shows the rise in national income,
but the real picture is that some people`s income falls and others` income rises (Broome, 2008, p.2) which
causes the financial disparity between poor and rich people. Secondly, another ethical issue is that many
economists think that they can support their decisions only by theoretical findings, but this statement is false
(Birks, 2012, p.4). Minsky (2008, p. 109) defines the theory`s role as “lens and blinder”, as the lens it focuses
our attention on the exact problem, but the blinder function narrows our field of vision so we cannot see other
issues. One more moral issue is that any economic decision cannot be beneficial for every member of society,
there are always people who suffer from changes (Broome, 2008, p.2). A notable example is a case when the
company experiences diseconomies of scale (when we add more workers to production at some point the
efficiency will fall, because a firm has more workers than it needs), the best decision for the firm is to cut the
number of workers, but employees will lose their jobs. Finally, the most immoral issue of economics is as
Broome (2008, p.2) writes: “the value of life should be determined by people’s willingness to pay”. It means
that the life of a poor person is less valuable and important than the life of a rich person from the point of view
of economics.

In economics, we need ethical principles as well as in any other discipline (Birks, 2012, p. 4). These principles
mostly affect the decision-making process of economic agents in various situations. They are applicable in
situations when agents face a choice, when different ethical commitments and interests make it controversial
(Smith & Dubbink, 2015, p. 217). People might have the same understanding of a problem, but they won`t
have the same way of solving that issue (O`Neil 1996). Accordingly, the vital role of ethical principles is in
generalising the way of solving a problem (Smith & Dubbink, 2015, p. 218) and providing agents with a sample
solution.

Ethical principles are inherent in making choices by economic agents, but, nevertheless, there is always space
for latitude. If we consider other disciplines, such as law, the code of conduct is the major reference to base
decision on. However, it is not the case for economics where many other variables to be taken into account
(Dworkin, 1978). Ethical principles do not provide us with the exact answers, they show us the way, not the
destination (Kant, 1991; Moore, 2008). However, there is an exception, according to Kant (1991) there are
duties of wider and narrow requirements. Unlike duties of the wider requirement which are general principles
that contain a space for latitude, duties of narrow requirement demand the exact actions in particular
situations, for instance, do not kill etc. (Smith & Dubbink, 2015, p. 222). To sum up, in economics agents can
always find various ways of making decisions without violating any ethical principles (Smith & Dubbink, 2015,
p. 223).

On the other hand, ethical principles are ambivalent in application to real-life situations. The main issue
defined by Smith & Dubbink (2015, p.207) is ‘generalism’ – principles are not precise and abstract; therefore,
they can`t determine the exact actions in given circumstances. In addition, in some cases general principles can
be overweighted by particular factors (Smith & Dubbink, 2015, pp. 213-214). For instance, a person steals
food, it is unethical, but the person has starving children. The next drawback of moral principles` application is
an issue of ‘incompleteness’ – economists adjust the data by making a lot of assumptions to simplify it and
then analyse. These simplified assumptions lead to a diverse outcome from the real world resulting in
erroneous decisions (Birks, 2012, p. 2). Another issue of the application is ‘rhetoric and roles’ – controversial
situations where different ethical principles are confronted. As an example, a lawyer defends his client who is
accused of murder and the lawyer must defend him under the professional code of conduct despite of
evidence (Birks, 2012, p. 6).

Economists analyse much data and draw inferences from the analysis. This process is abstract from ethics and
can possibly cause harm to people and environment. This means that decision-making process must use
ethical principles (Broome, 2008, p.4). In the real life the economists face difficulties in the principles`
application in every case, but still, the economists` choices should be in compliance of the ethic requirements
(Smith & Dubbink, 2015; O`Neill, 2002). In my future studies, in the ‘environmental economics’ and ‘business
economics’ modules ethical principles will play a crucial role due to their direct connections to environment
and people. Environmental economics studies resources that we possess, their scarcity and allocation,
whereas business economics applies economic theory to the business cases. Therefore, studying ethical
principles in economics is essential for me as well as for other economic agents.

In conclusion, all economists must study ethics and know basic ethical principles. Despite the ethical part of
economics is not emphasized as other parts, its significance is undisputable. Whilst pursuing ethical principles`
requirements all agents must consider many other factors such as risks, aims etc. in order to make the best
decision (Herman, 2008). Ethics provide agents with the boundaries not to be crossed, but what to do inside
them is fully up to economists (Smith & Dubbink, 2015, p. 224). In a nutshell, ethics are compulsory to know,
but the application must consider ethics` compliance with other factors.

REFERENCE LIST:
Birks, S. (2012). No ethical issues in economics? SSRN Electronic Journal.
Broome, J. (2008). Why economics needs ethical theory. In K. Basu, & R. Kanbur (Eds.), Arguments for a Better
World: Essays in Honor of Amartya Sen: Volume I: Ethics, Welfare, and Measurement. Oxford
University Press.

Dworkin, R. (1978). Taking rights seriously. Cambridge: Harvard University Press.

Herman, B. (2008). Moral literacy. Cambridge: Harvard University Press.

Kant, I. (1991 ). Metaphysics of morals. (M. Gregor, Trans.) Cambridge: Cambridge University Press.

Lawson, T. (2003). Reorienting Economics. London: Routledge.

Minsky, P. (2008 ). Stabilyzing an Unstable Economy. London, New York: McGraw-Hill.

Moore, G. (2008). Virtue ethics and business organizations. In J. Smith (Ed.), Normative theory and business
ethics (pp. 35–60). Lanham: Rowman and Littlefield Publishers.

O’Neill, O. (2002). Instituting principles: between duty and action. In M. Timmons (Ed.), Kant’s Metaphysics of
Morals: Interpretive essays. New York: Oxford University Press.

O'Neill, O. (1996). Towards Justice and Virtue: A Constructive Account of Practical Reasoning. Cambridge:
Cambridge University Press.

Smith, J., & Dubbink, W. (2015). Understanding the Role of Moral Principles in Business Ethics: A Kantian
Perspective. In F. d. Hond, & M. Painter (Eds.), Business Ethics Quarterly (pp. 205-231). Cambridge
University Press.

Stephan, M., Register, J., Reinke, L., Pugalee, D., Crabtree, L., Robinson, C., & Pugalenthi, P. (2021). Ethical
mathematics awareness in students' big data decision making. In D. Kollosche (Ed.), Exploring new
ways to connect Proceedings of the Eleventh International Mathematics (pp. 977-985). Hamburg:
Tredition.