Ethics and economics: Understanding the relationship

At the second monthly Atlas Meet in Delhi, on 22 Aug 2009, there was a vigorous discussion on whether while discussing Ayn Rand's ideas, we spend too much time on the economic and business aspects of her philosophy, rather than other equally important dimensions such as ethics or aesthetics. That led me to ask what is the relationship between ethics, economics and entrepreneurship?

And today, there is a post from Prof Stephen Hicks, Department of Philosophy, Rockford College, Illinois, USA, on this blog. Prof Hicks is presently the Executive Director of the Centre for Ethics and Entrepreneurship.

Prof Hicks has written the entry on Ayn Rand on the Internet Encyclopedia of Philosophy, where he comments on the ethics of rational self-interest.

Rand’s ethic of self interest is integral to her advocacy of classical liberalism. Classical liberalism, more often called “libertarianism” in the 20^th century, is the view that individuals should be free to pursue their own interests. This implies, politically, that governments should be limited to protecting each individual’s freedom to do so. In other words, the moral legitimacy of self interest implies that individuals have rights to their lives, their liberties, their property, and the pursuit of their own happiness, and that the purpose of government is to protect those rights. Economically, leaving individuals free to pursue their own interests implies in turn that only a capitalist or free market economic system is moral: free individuals will use their time, money, and other property as they see fit, and will interact and trade voluntarily with others to mutual advantage.

Fundamentally, the means by which we live our lives as humans is reason. Our capacity for reason is what enables us to survive and flourish. We are not born knowing what is good for us; that is learned. Nor are we born knowing how to achieve what is good for us; that too is learned. It is by reason that we learn what is food and what is poison, what animals are useful or dangerous to us, how to make tools, what forms of social organization are fruitful, and so on.

Thus Rand advocates rational self interest: one’s interests are not whatever one happens to feel like; rather it is by reason that one identifies what is to one’s interest and what isn’t. By the use of reason one takes into account all of the factors one can identify, projects the consequences of potential courses of action, and adopts principled policies of action.

The principled policies a person should adopt are called virtues. A virtue is an acquired character trait; it results from identifying a policy as good and committing to acting consistently in terms of that policy.

One such virtue is rationality: having identified the use of reason as fundamentally good, being committed to acting in accordance with reason is the virtue of rationality. Another virtue is productiveness: given that the values one needs to survive must be produced, being committed to producing those values is the virtue of productiveness. Another is honesty: given that facts are facts and that one’s life depends on knowing and acting in accordance with the facts, being committed to awareness of the facts is the virtue of honesty.

Prof Hicks has also written a monograph titled, Ayn Rand and Contemporary Business Ethics. He has also published a paper in the Journal of Private Entreprise, titled "What business ethics can learn from entrepreneurship", where he summarises,

"Entrepreneurship is increasingly studied as a fundamental and foundational economic phenomenon. It has, however, received less attention as an ethical phenomenon. Much contemporary business ethics assumes its core application purposes to be (1) to stop predatory business practices and (2) to encourage philanthropy and charity by business. Certainly predation is immoral and charity has a place in ethics, neither should be the first concerns of ethics. Instead, business ethics should make fundamental from the values and virtues of entrepreneurs—i.e., those self-responsible and productive individuals who create value and trade with others to win-win advantage."

Given the presence of a number of entrepreneurs at the Atlas Meet in Delhi last week, and the interest in discussing the ethical basis and implications of the virtue of selfishness, I am looking forward to a more engaging discussions on this topic. We could also use this as an opportunity to share other relevant materials, which will enrich the discussions on the blog, as well as at the future Atlas meets.