Neuroeconomist’s Recent Comments

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  Ethics are not derived from the marketplace

  Many economists obviate their ethical responsibility by making the marketplace the arbiter of the discount rate.  Their job is simply to crunch the numbers, and accordingly, they can speak a "common language."  They suggest that the choices that the masses make in the market reflect their ethics, and therefore it is arrogant for the economist to come up with an alternative discount term.  This is a charge leveled at the Stern report.  Avent states that economists discount future outcomes because that reflects how humans make decisions.  Hence, he boils it all down to the assertion that there is no alternative to using a cost-benefit analysis.  This is hardly a compelling argument to continue with business as usual.  Moreover, in defending economists, he states that some have "speculated" that other things besides the numbers may be "worth taking into consideration."  Their "speculation" does not reassure me that the needs of my children and grandchildren are being considered in an ethical manner.  

  The new science of neureconomics shows that the midbrain and prefrontal cortex often collude to produce irrational choices.  Individuals and their collective actions in the market frequently move resources in ways that severely damage our future.  A case in point is the present mortgage crisis.  Moreover, this irrationality can also result in outcomes that are patently reprehensible to the majority of observers. Few would argue that market forces resulting in child labor are ethical.  

  One might try to fix the cost-benefit approach by exercising due diligence to include hidden costs, such as ecosystem services.  To date, this has been exceedingly hard to accomplish, and our current system is inherently unstable because such externalities are not included in the cost accounting.  Even if all such externalities were appropriately embraced by the economic system, this would not insure that the market will operate in an ethical manner.

  I agree strongly with Heinzerling and Ackerman, and I am not starry-eyed or reverential when it comes to my children's future.  A cost-benefit analysis should never provide the most important criteria for action or inaction.  Unfortunately, law makers seem to be enamored of such analysis.  Ethical formalism is the basis of law, and it transcends the marketplace.  I would suggest that any market requires rules and constraints that are dictated by ethical constraints.  In places, Avent sounds to me like he is straining to rescue the failed paradigm of market dominance.  I sincerely hope that it is such thinking that is eventually marginalized, rather than the thinking of environmentalists.  On The climate crisis cannot be solved without cost-benefit analysis posted 1 year, 6 months ago 12 Responses