BOOK REVIEWED: ON ETHICS AND ECONOMICS BY SEN,A.K. (1987)

Sen, A.K. (1987). On Ethics and Economics. London: Blackwell Publishing Ltd.
ISBN 0-631-16401-4

Reviewed by Prof. Dr. Syed Abdul Hamid Aljunid, Universiti Tun Abdul Razak.
3 May 2005

The book entitled “On Ethics and Economics” by Professor A. K. Sen is now close to 19 years since it’s publication. It was actually an edited version of a series of lectures given by Prof Sen at the University of California at Berkeley, 4th – 6th April 1986. The topic centers around the continued distancing of ethics from Economics, a phenomenon that Sen considers unfortunate to the discipline as a source of knowledge for prescriptive economics.

This book is undoubtedly important reading for those who are interested in connecting business ethics to economics as well as those who are involved in policy studies. The suggestions to enlarge the role of Welfare Economics in understanding the basis for policy decisions involving social achievements have been persuasively advanced by Sen. Yet to date there is a paucity of research that could have followed up on that direction. What we see even in economic textbooks is almost a total eclipse of welfare economics signaling that the discipline has no room for the “Ethical side” of economics other than pragmatic approach promoted by utilitarianism representing wellbeing. The Engineering side coupled with the positivist inclination of scientific discovery has gained dominance using rationality of means rather than being mudded by the relativity of ethical goals. With the advert of positivism and now post modernism, ethics is now regarded as outside the framework of scientific knowledge. To quote Sen on page 7, “if one examines the balance of emphasis in the publication in modern economics, it is hard not to notice the eschewal of deep normative analysis, and the neglect of the influence of ethical considerations in the characterization of human behaviour”. He pointed to the ensuing logical confusion by those in the discipline who even suggested that all meaningless propositions were ethical. This was going beyond the position taken by the positivist who questionably claimed that all normative or ethical propositions are meaningless. Whichever way, the eclipse of the role of ethics in moderating economics as a discipline had been sealed and economic advancement is going full steam without this moderating influence. Thus it is not surprising that “Business ethics” is regarded as oxymoron by those in the business world.

To bring some elements of ‘sanity’ into the discussion, Sen had alluded to the areas that have been neglected by scholars when dealing with the issues of social achievement. They include intrinsic valuation of agency, rights, freedom that cannot be reduced to a single denomination called utility. And by virtue of this irreducibility, Utilitarianism and more so welfarism as an approach to economic analysis is unable to cope with plurality and interdependence that typify the social matrix of societies and their ethos. This was explicated by Sen when he criticized the ‘self interested’ definition of rationality. According to the welfarist notion of rationality, it is unreasonable for one not to be self interested and to choose the state which maximizes his welfare regardless of the goals and choices of others in the group or society. Sen is of the view that interdependence and social achievements require that the ‘agency role’ be seriously considered as a factor in deciding whether or not to maximize one’s utility. The ‘agency role’ somewhat similar to the ‘stewardship role’ in business ethics refer to the importance of considering the goals of others and the consequence on social good, when making choices. This is reinforced by game theory eg. Prisoner’s Dilemma explication of interdependent behaviour whereby dominant strategy at the individual level can lead to non optimal achievement of social wellbeing.

It is in the area of self goal choice that there is vast areas for ethics to contribute to economics according to Sen. Based on the intuitiveness of the Prisoner’s Dilemma model, it is not unreasonable (and hereby rational) to expect that one will not choose to maximize one’s own welfare. Rather it is of instrumental importance to consider oneself as a member of a community of diverse goals, and to be guided by social rules of behaviour which goes against the goals one acknowledge and eventually wish to maximize. And this group rationality framework is sorely lacking in the discipline perhaps due to the overarching role given to individuation in the development of the market society.
The arguments put forth by promoting ethics to economics and business is particularly useful to current economic challenges faced by the global community. For example, the problem of pollution and environmental degradation cannot be solved simply by means of incentives alone. They require a mindset that departs from self-centeredness and one that defines rationality and ethics as incorporating instrumental role of social behaviour which goes against each person’s dominant strategy.
Reading Sen can be a struggle if one is unfamiliar with the problem of morality and ethics other than utilitarian standards of analysis. Utilitarianism has pragmatic import but definitely not complete as a guide to morality and ethics. It has not been able to deal with rights and obligations as intrinsic components of ethics. It cannot give credence to agency other than its instrumental role. Besides it is not based on strong foundation, if utility is to represent such a foundation of what is good or bad. What is desired may not be what is necessarily good in terms of what ultimately lead to a life well lived. Understanding one’s ideals and obligations as well as consequences of one’s choices is more meaningful than just following utility calculations of utilitarianism.
Perhaps the terms ‘wants’ and ‘needs’ ought to be differentiated so that the choice of individuals will be dictated by ‘needs’ rather than ‘wants’. What is wanted and chosen may not only be undesirable for the individual’s wellbeing, but it may also lead to sub optimal social outcome if everyone choice is based on such ‘apparent’ good. In short what is good ought to be desired but what is good may not be what is wanted. If this perspective can be used to moderate on the usefulness of utilitarianism or welfarism, and is incorporated within the matrix of the discipline (especially text books on economics), then there is hope that ethics and economics can contribute to a balanced approach to solving problems of human existence.