Ethical Economics or Economical Ethics? Considerations out of Carl Menger

Abstract

Carl Menger advanced a narrow definition of exact or theoretical economics. Theoretical economics is the study of the self-interested aspect of human efforts made to meet needs. One implication of this definition, Menger argues, is a strict demarcation between ethics and economics. Menger advances this demarcation against what he calls the “ethical orientation” of the German Historical School. A problem with Menger’s demarcation is that one cannot easily define and operationalize the concept of “self-interest” so as to exclude issues reasonably considered “ethical.” Humans are ethical-rule-following beings. Following rules and abiding by social norms is a part of most people’s “interests” as they themselves understand them. From ideas in behavioral and experimental economics, we see that rules can be constitutive of one’s interests, not just constraining. Ethical sensibilities are not only part of the explanadum in economics, but are, in certain instances, an important aspect of the explanation. Insofar as self-interest interrelates with ethical phenomena, economists, even of the theoretical sort, should pay attention (as did a number of early modern political economists and philosophers) to the following: (1) the ways in which contextual norms of propriety and interests interpenetrate; (2) the sociological and psychological mechanisms by which ethical sensibilities and interests are transmitted; and (3) the differences that ethical sensibilities can make for material or economic outcomes.

Keywords: Ethics; economic methodology; institutions; behavioral economics; social norms; Adam Smith

JEL Classification: B13; B20; D01; D91