Via Government’s Fiscal Policy and Regulatory Oversight, Ethical Values Shape Monetary Value

Yves here. NC guest writer Doug Smith also dug into these issues in his book Of Value and Values.

By Michael Hoexter, a policy analyst and marketing consultant on green issues, climate change, clean and renewable energy, and energy efficiency. Cross posted from New Economic Perspectives

There is no unified theory in our popular understanding of value: there are the market values of goods and then there are our “values” which we consider to be some of the most personal and even sacred aspects of ourselves. Once people emerge from the realm of necessity or being driven by what seems to them to be compulsions of various kinds, they may feel that they are then making decisions which draw to some degree on their ethical or personal values. People often have the impression that most of their financial dealings have little to do with their personal ethics; the realm of market interaction is viewed for the most part as an area of life controlled by forces outside the self or motivated by our insistent drives for self-preservation and pleasure. There are exceptions: people of often modest means give money to religious organizations, as a way to express something of their ethical values or at least the ethical values that are expected of them by their religious community of reference. And wealthy people will tend to use some of their substantial discretionary income to make an ethical statement directed by some combination of personal commitments and the desire to make a public statement about themselves. Alternatively, if someone controls a business or a portion of a business, they may express personal values by the way they conduct themselves in that business or by strategic decisions they may make, with the important proviso that the business must maintain its solvency.

In civil society, many people attempt to express some of their personal values via politics, in which, often though not always, a clash of different conceptions of “the good” confront each other. There are ethical ideals embedded in political ideas which unfortunate are not discussed openly enough or publicly enough discussed. People donate to political groups and causes as a means to express their personal values, again beyond and above the market value of the goods and services they buy every day.

In the last few decades, when discussions have turned to the relationship of ethics and economics, the focus has been on the influence of individual ethical choice within the realm of microeconomics: producing more ethical forms of consumption and influencing market choices of consumers and businesses by introducing various price signals, making them act as, in appearance, more ethical individuals via policy-driven self-interest. Ethics is thought to operate here on an individualized level: that the summed decisions of individuals or individual businesses will yield a socially “better” outcome, whether via internal compulsion or helped by social policy. The method of action of most climate change policy is exactly this reliance on “market-based” mechanisms which will cause lower carbon products and services to outcompete products and services that emit more carbon emissions, occurring within an assumed all-encompassing market. Business economics and marketing have also noticed the segment of ethically driven purchases or at least those that are sanctioned by a hand-wave to some ethical value: goods and services can be marketed to appeal to some combination of the appetites and desire for ethical probity in various admixtures depending on the product, marketer and market.

These microeconomic approaches to the intersection of ethical values and economics, which agree with the dominant neoliberal paradigm, overlook the role that ethical values play in shaping the budgeting process and law-making of government, which in turn shapes the entire economy. In theory, lawmakers and political leaders are making decisions based on implicit and explicit sets of ethical beliefs that are often embedded in or co-determined by their political ideology as well as their cognitive beliefs about the polity, the economy and government finance. In practice, these beliefs and ideology are filtered through a process by which powerful and wealthy interest groups influence and shape the behavior of lawmakers.

If they are democratically elected, popular hopes about a politician’s potential ethical role are often why they are elected as individuals or as representatives of a political group. The persistent wish for a higher ethical standards occurs in the electorate despite the fact of varying degrees corruption both legal and illegal, which will influence beyond professed beliefs the effective expression of political leaders’ ethics in laws and government actions. Strange as it may seem in our cynical age, leaders are still expected to represent and achieve “the good”, however defined by a cultural or political grouping, as well as represent that group’s better, secular selves, therefore the continued relevance of understanding, exploring and, of course, insisting upon ethics in politics and policymaking. The outrage against legal and illegal corruption is based on frustrated hopes based on an assumption of a potential ethical role for political leaders.

Macroeconomic Accounting and Ethical Principles

In enacting fiscal policy and in what might be called “macroeconomic accounting”, which encompasses the budgeting process of a sovereign government as well as the justifications for budget decisions, politicians make historical compromises with and commitments to their ethical ideals in the form of real initiatives and operations of government. Unlike proclamations of ethical probity and the censures of their competitors that politicians may utter during their campaigns and during their speeches in office, the budgetary and fiscal decisions made by lawmakers are a key component of their effective morality, a morality that has, by design, enormous and differential impact on others.

Whether or not national-level politicians study or are aware of the principles of and data from macroeconomics, lawmakers’ budgeting activities are one of the realizations of macroeconomics in practice, therefore the label “macroeconomic accounting” for the numerical and ethical justification of budgetary decisions. As example, a politician might justify his or her budgeting actions as follows:

“I voted for funding this jobs program (for the good of our people) because of persistent unemployment”


“I voted to fund this defense authorization because our people are threatened by this foreign power”


“I voted to fund this road building project to enhance the competitiveness of our region”

Numerical analyses may be brought to bear on either the rationale or on the budgeted amount for these particular expenditures (or levies) but ethical justification is either prior to or, more cynically, must be applied post-hoc to these fiscal operations. A combination of ethical and monetary valuation intersects both in the qualitative choice of a budget line item as well as in the quantitative amount of that expenditure. These valuations may to a lesser or greater extent be a “front” for non-transparent political dealing and interest group influence, depending on how corrupted the legislative process is.

The neglect within the past three decades of macroeconomics within academic economics is particularly problematic given that without the support of a vibrant macroeconomics, the decisions of government with regard to fiscal and monetary policy are more subject to political fashion and corruption by powerful private interests. Whether they like it or not, national-level politicians are engaged in practical macroeconomics in spite of themselves. The identification by some right-wing politicians of macroeconomic principles with a “left” political tendency and therefore dispensable, is a sign of agnotology, the celebration of and production of ignorance to distract from or obscure knowledge. Through ignorance, chosen or otherwise, politicians have a much greater chance of doing very significant social and economic damage and also of being manipulated by special interests. Political opposition to there being a macroeconomics in the first place, opens the door to more corrupt influence by the wealthy and powerful.

Monetary sovereignty within a non-convertible, floating fiat currency system gives politicians a greater capacity to realize ethical ideals as well as concrete objectives via fiscal policy and also enables them to address and at times remediate specific macroeconomic challenges, such as unemployment, poverty or lagging effective demand. The fiat currency allows politicians to focus budgeting decisions on those decisions’ future impacts on society and the economy, not on the arbitrary relationship between taxes collected and expenditures, which is irrelevant to the mechanics of currency-issuing government finance. Rather than traditional balance sheet accounting, monetarily sovereign governments with a floating non-convertible fiat currency are engaging in the different but related activity of macroeconomic accounting. The previous gold-standard or metal based currencies forced politicians to focus on limitations in financial resources from the side of the government, tending to lead to policies that favored those in society who already had access to either personal or corporate sources of liquidity, from which they gain differential advantage.

A fiat currency system enables government to create and deploy financial resources in anticipation of emerging societal needs. The deployment of these newly created financial resources builds real resources that serve existing and new social or environmental challenges, not addressed or ineffectively served by private market actors. A fiat currency allows political leaders to exercise a relative independence of the wishes of the ruling financial and business elites, which in a hard currency system would possess greater influence. In a metal-standard or, in austerity’s faux metal-standard currency regime, fiscal policy tends to represent the interests of stored “old” money that has already circulated in the private sector and that in larger than average proportion landed in the bank accounts of the already wealthy.

Because of its financial power, the fiat currency system is also an attractive object for powerful private interests to seek to control. The austerity drive, though it holds up an outdated vision of the currency system, might actually be seen as an attempt to sequester the benefits of government’s fiat currency system for the use by the already wealthy and powerful, in particular the financial elite.

The Creation of Value Via Fiscal Policy

The financing of unique public goods like the military, judicial system, schools, infrastructure, and cultural institutions by governments, is the central, patently obvious, way that the ethical orientations of political leaders shape monetary value. This the heart and primary rationale for fiscal policy at all, with the government supplying the infrastructure, broadly construed, for society and for markets. These public institutions are the prerequisites for a complex modern civilization to exist.

As the relentless 35-year attack on government as an institution has called government’s provision of these services in question, it makes sense to rehearse what are the (interrelated) ethical principles from which such a fiscal policy would spring:

1) Ethical commitment to the integrity and continuance of the national community (with international interdependence, increasingly some commitment to the community of nations)

2) Ethical commitment to the future and future generations (not only specific individuals or one’s own family but a generalized commitment)

3) Ethical commitment to truthful data collection and analysis of challenges facing the nation, the economy, and the planet

James Buchanan’s public choice theory, which consciously and unconsciously has been the trend in the philosophy of governance over the last few decades, claims that these ethical commitments are illusory and impossible, as political leaders can only be expected to be individual utility maximizers. The reality of humanity is different than the neoclassical economic theory upon which Buchanan based his political theory: people are both self-interested and community-minded in different measures, the latter of which Buchanan’s theory ignored. Now we are faced with re-establishing the obvious, that a deontological ethical commitment to the common good is both possible and desirable, to create an environment in which politicians can once again have alternatives to institutionalized corruption.

Once a unique public good or project is funded, the goods and services that are required to execute that project immediately acquire a monetary value that previously did not exist. Teachers need to be trained, for instance, or less felicitously, military equipment needs to be invented and manufactured. The government, whether “Big” or smaller, introduces into monetary circulation various “goods” that previously were assigned no or very small value at all. This funding would not have come to pass without political leaders’ ethical commitments to the continuation of civilization in a particular form. The spending then circulates through the private economy via payments to government employees and government contractors, money which in turn “feeds” the private economy more generally, as it is spent again by businesses and individuals. Spending on unique government programs also, shapes the private economy to, in part, serve public purposes by, for instance, inspiring young people to be teachers, soldiers, etc.

Sustaining Ethical Values Via Fiscal Policy

Not only does fiscal policy bring into existence unique institutions, goods and services but it also works as a supplement to sustain and realize ethical values that would otherwise become marginalized or disappear because of a lack of funding for them. Various social support programs like Social Security and Medicare in the US are examples where fiscal policy realizes the ethical value of caring for the elderly and sick in a society where such care is delivered in part via monetary exchanges rather than via the (unpaid) work of extended family members. There are more extensive supports for sustaining traditional and existing values via fiscal policy in some of the European social democracies, in particular in Scandinavia, than there are in the developing world and in the US.

Throughout the history of developed capitalist societies, poverty and vast social and economic inequality have been diminished by government provision of pensions and social insurance. The right-wing has generally scorned these efforts, holding out the ideal that individual households might be able to provide the necessary care for their members via sufficient income and saving. The ideal of household self-sufficiency has been realized only by the lucky few either by fortunate circumstance or by much greater than average accumulation of monetary wealth. The monetary nature of providing care and of self-sustenance has then in many instances required government to supplement private provision or, in some instances, to replace private provision with public provision of care. When faced with the reality, the right wing has tended to cling to the ideal of family autonomy and sufficient private means rather than recognize the role of government in large-scale civilization in realizing ethical values associated with mutual and trans-generational aid.

The Paradoxical Effect of Taxation on Value

Another obvious way that societal ethics shapes monetary value is via differential taxation of various monetary streams and products, social “bads” and “goods”. When “sin” taxes are added to products that are considered socially or environmentally damaging, they reduce consumption of these products on the whole. Paradoxically, the high tax may tend to make people value individual units of the “bads” more, while at the same time reducing use of the “bad”. The effect of the taxation then on subjective “value” may either reduce or increase the attractiveness of the object or activity to which it is applied, even if the desired macroeconomic effect is achieved. If sin taxation is uneven or not shared across multiple jurisdictions, for instance in the case of alcohol, the avoidance behaviors against the higher tax rate can produce their own social “bads” such as cross border forays to consume or purchase that may lead to accidental death or acute alcohol intoxication.

Tax incentives reverse the process and add value by subtracting taxes from an overall tax bill or from a particular good or service. Differential taxation increases the value of “tax-free” or lower tax alternatives to the good or activity that is taxed. In the United States, renewable energy has been incentivized largely by tax credits. Tax incentives also drive charitable giving in the US. Again, ethical values of what is “good” as determined by the political process have shaped tax policy for good or ill, depending on one’s perspective and analysis.

Lawmaking and Law Enforcement Shapes Monetary Value

Laws and regulations can be considered to be a subset of rule-based (deontological) ethics, so in themselves express something of the ethical ideals and strictures of the community. Beyond the obvious fact that the legal-regulatory functions of government employ people and are therefore is an economic activity, the regulatory oversight function of government shapes perceptions of value within the private sector. The US Clean Air Act and Clean Water Acts and their enforcement, for instance, brought into being the business of designing and manufacturing pollution controls as well as various environmental remediation services. Similarly regulatory oversight of businesses, leads those businesses to place value upon compliance with laws, at least to the degree to which they can escape sanction.

Of course regulations, especially if designed or enforced in a way that is cumbersome or contradicting the ethical intent behind the law, can also create a new or re-energized industry for evading or minimizing the impact of the law’s intent to save costs. The success or failure of a regulation might be measured by the proportion to which the regulated spend money to comply with the law rather than how much money they spend in minimizing or escaping the law via legal or illegal means. There are segments of contemporary society where effort expended at circumventing laws is considered to be a mark of being a “real person” and following the law to the letter the sign of a lack of imagination or foolishness.

In Austerity, Lawmakers Commit to a False Ethical Object

The austerity campaign still popular in Washington and in other capitals despite disastrous economic results has developed a political following in part because it seems to promise to politicians the appearance of virtue. If they follow the directives of the leaders of the austerity campaign, they think, they will appear to be virtuous managers of a limited financial resource and, like potential borrowers to a private bank, attract favorable borrowing conditions and loans in the future. They think of themselves, like business owners and heads of households, to be “saving” money, a financial resource, for the future. In other words, lawmakers under the influence of austerity are choosing, as they may have in their private lives, a conception of “saving money” as the ethical object through which they are preserving resources for future generations.

For lawmakers at the national level with a fiat-currency issuing government, choosing saving money as the primary ethical object to which they should commit their efforts leads in most circumstances to an abandonment of economic and ethical duty. The fiat currency issuing government cannot run out of its own currency and the focus on limiting its supply leads to economic disasters wherever it has been tried. The primary ethical commitment of lawmakers should be to mobilize to an optimal degree real resources via the government’s financial technologies: their primary ethical concern should be the welfare and state of the people and the real resources that enable a flourishing of the civilization in which they govern. Choosing to conserve the virtual financial resource of money as the measure of success and failure of government is both economically naïve and a misplacement of ethical focus. The financial role of the national government, serving the public purpose and supplying liquidity with a counterbalancing eye on inflation and relative currency valuation, is entirely misrecognized by those who hold up the ideal of budget-balancing, a critical component of the austerity ideology.

In pursuing austerity, political leaders are following the trend of neoliberalism, which suggests that being a business founder and owner is the highest ethical good, compared to which the role of political leadership is considered to be a lesser calling. Business owners must ultimately be committed to money-making and money saving as a condition of survival, though they must also be committed to other goals if they are to run a business that is ethical in the broader sense of the word. On the other hand, the fiat currency issuing government is the generator and supplier of the currency, as well as the monitor and remediator of the real world macro-economic and social-ecological conditions that are created and/or overlooked by businesses in their pursuit of profit. The managers of that government cannot pretend that they are business managers without doing significant damage to their people and to the future.

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  1. bmeisen

    Hoexter focuses on government policy, e.g. fiscal policy, regulation or taxation, as an agent that facilitates intercourse between ehtical and monetary value systems. His point is well taken. Above all absolute systems of government claim this function for their policies. There’s an element of exclusivity – the absolute authority alone, as the sole expression of popular opinion, transfers ethical preferences via policy to expressions of monetary value, i.e. prices and wages. Alternative actors are compromised, co-opted or eliminated. Typically alternative actors include elites, religious organizations, the judiciary, the political opposition, and more recently NGOs.

    I want to point out that these other agents may also play important roles. In particular some societies were forced to engage with Marxism and organized labor in the 19th century. The result was the establishment of extra-governmental regulatory regimes for wages and subsequently prices. These regimes successfully disarmed attempts to politicize minimum wage discussions and thereby the entry of governemnt into the labor market beyond judicial considerations.

    The oligopoly in the US exhibits absolutist tendencies to the extent that alternative agents are denied participation in this process. For example, in the US elites currently benefit disproportionately, religion and justice have been co-opted, and there is arguably no opposition with influence. Sadly NGOs with relevant ethical claims are substantially disadvantaged by market forces.

  2. kjboro

    Hoexter describes the preconditions of what might be labeled “The Derivative State”. Perhaps this is just one more form of Lambert’s discussion of the transition from ‘nation state’ to ‘market state’ — although a ‘derivative state’ is maybe even worse than a ‘market state’ just as, by analogy, derivative financial markets are worse than plain vanilla financial markets.

    In the ‘derivative state’, elected officials conceive of their ethical duties strictly in terms of what is derived from their conception of ‘govt as a business’ (and, ‘govt as a household’). “Saving money” becomes a virtue — yet, in fact, is merely derivative of the larger, deeper ethical choice of blind, total allegiance to the proposition that businesses are the proper vehicles for ALL social good, and financial businesses are the most proper of ALL businesses because they house the most treasured asset of the entire project: money.

  3. from Mexico

    Outstanding post!

    It seems to me the entire discipline of economics has been an exercise in trying to pass off moral reasoning as scientific reasoning. It does this by doing what James Buchanan did: giving us this grotesquely deformed caricature of human “nature” that perhaps has a bit more basis in reality than the Garden of Eden, but damned little more.

    So I applaud Hoexter for taking the moral and ethical issue by the horns. It’s a treacherous undertaking, because treating of this nexus between science and morality unveils one of the great paradoxes of Modernity, and of science. For as Albert Einstein fully understood, science has demonstrated itself completely incapable of making sound moral judgments. And yet, on the other hand, science cannot exist without morality:

    So if MMT achieves nothing more than interjecting morality back into economics — undoing what the neoclassicals have worked long and hard for the past 35 years to do — it will have achieved a great deal.

    One of the criticisms that has been levelled against MMT is that it is nothing more than the latest wave of moral commisars, cut from the same bureaucratic-technocratic cloth as the Eurocrats and neoliberals, or to reach a little bit farther back in history, the Bolsheviks and their merciless fixation on “scientific planning.”

    It’s a charge I believe the MMTers are going to have to answer.

    Daniel Yankelovich’s Coming to Public Judgment: Making Democracy Work in a Complex World posits a possible solution. Deciding values, ethics, politics, and life philosophies — “setting up goals and passing statements of value” which “transcend” science’s domain, as Einstein put it — should be left to the public. Once these have been delineated, then the experts can use their expert knowledge to follow through on them.

    As Yanelvich goes on to explain, the danger

    lies in the eroding ability of the American public to participate in the political decisions that affect their lives. The fateful decisions are made in Washington, in corporate boardrooms, on Wall Street, in state legislatures, and in city halls. They are shaped by economic experts, military experts, scientific experts, trade experts, PR experts, media experts. Less and less are they shaped by the public…

    When formulating important national policies, it would never even occur to most policy makers to consult average citizens…

    In recent years my work has made me conscious of the enormity of the gap that separates the public from the experts. As an interpreter of public opinion, I serve as a go-between for the two worlds of public opinion and expert policy making. Each year the distance between the two worlds grows greater…

    Often, without realizing it, [the experts] fail to distinguish their own value judgments from their technical expertise…

    If the experts overreach themselves and further usurp the public’s legitimate role, we will have the formal trappings of democracy without the substance, and everyone will suffer. If the public dominates and pushes the experts out of the picture altogether, we will have demagoguery or disaster or both. A better balance of power and influence is needed, with each side performing its function in sympathy and support of the other…

    If the experts grow too bold, the electorate will express itself in populist fury and launch another episode of native know-nothingness. (Anti-intellecutalism runs like a thread through American history.) In political life, abuse breeds abuse, and if the problem is permitted to fester, the backlash is likely to prove worse than the disease…

    To resolve the expert-public gap, two things must happen. The first is that the public’s freedom to contribute to self-governance must be stengthened and built up. Second, expert resistance to having this happen must be reduced. To understand the second, I will need to describe the sources of resistance that are rooted in a phenomenon I call the Culture of Technical Control.

    So do the MMTers subscribe to this “Culture of Technical Control”? My position — regardless of what other people have falsely claimed my position to be — is that I don’t know. I’m a skeptic. The jury is still out. But important questions need to be asked of the MMTers, and honest answers given.

    1. diptherio

      ISTM that the MMTers, especially Kelton, go to some lengths to emphasize that MMT is merely a description of what is possible, but that what the “power” of MMT should be used for is a political decision. Someone has recently suggested that Modern Monetary Operations would be a better sobriquet, to emphasize the (almost) purely descriptive stance the MMT takes wrt monetary and fiscal policy.

      To my mind, the next step will be to incorporate MMT into a comprehensive political-economic framework that offers answers to the questions of both “what should we do” and “how can we do it.” At present, MMT only really answers the latter question.

      For instance, while I like the MMT Job Guarantee suggestion, I don’t like that it would be sending people back out into an undemocratically run private sector. I wouldn’t want JG to turn into, “we’ll give you a job until JP Morgan can find some work for you again,” you know?

      I think a lot of people want MMT to be more than it is. The way I see it, MMT will just be one piece of the emerging economic counter-narrative that will, hopefully, shortly displace neo-classical theory.

  4. jake chase

    I wish someone would tell us in a paragraph or two what Mr. Hoexter is talking about and why we should read this. It may be very good but I gave up after about ten lines.

    1. Jay Goldfarb

      This piece strikes a chord for me. It has always bothered me when someone tries to make a distinction between “business” and “personal” matters; this is simply a means to rationalize removing ethics from a large part of human relations.

    2. Michael Hoexter

      Short summary:

      Ethical values (the operations of people’s consciences/sense of right and wrong) are not luxuries that are only added on to a primarily amoral market economy (as many people imagine it to be): they shape the monetary values of goods and services on the market largely via the activities of government. I list various ways that government creates, sustains and changes values, with at least an ethical motivation if not an ethical outcome (our corrupt political system gets in the way of more direct expression of ethical values). A fiat currency system also allows ethical values to be more directly and more fully expressed in the monetary values of goods and services. Austerity and it’s accompanying “hard-money” ideology misdirects politicians’ ethical concern to the amount of money the government can “save” rather than to its higher or true ethical concern: the conservation and development of the real resources of the economy and the society, its people and the environment that sustains them.

      1. jake chase

        “Ethical values shape the monetary values of goods and services on the market largely via the activities of government?”

        I don’t know how you arrive at this postulate. Most of those directing government seem to be ethically deficient and energized mostly by power. I think it would be more correct to say that power (and the lack of power) shapes the monetary value of goods and services on the market. Thus labor’s market value is constantly degraded and cable television’s market value continually escalates although there is little or nothing worth watching an overwhelming majority of the time.

        Perhaps government’s proper purpose is cutting private power down to size, but in today’s world its effect seems to me to be the obverse. It only makes things easier for corporate predators and more difficult for isolated individuals. This is not a bug; it’s a feature.

        1. Michael Hoexter

          When I refer to “ethics” here it doesn’t necessarily mean my endorsement as in my idea of “good ethics” or “a well-formed argument for his or her conception of the Good”. Ethics can be compromised but will still have influence including communicating certain beliefs about the world: for instance, corrupt politicians or officials can communicate a type of ethics that it is “realistic” to expect a certain “give-and-take” between political patrons and politicians. Some may think that it is “good” that the political elites and the economic elites “cooperate” with each other in a circle of “Very Serious People”.

          So I stand by my statement, whether referring to a corrupted political system or a less corrupt political system that via government action ethical values shape monetary values in the market. Politicians, even corrupt politicians, are supposed to represent the community in their actions, not just a narrow business interest. They may be corrupted by business interests but only in an openly corrupt Somalia-style setting, does government purely and openly represent only the narrow interests of the very few. As much as we think of the US as being a very corrupt society/government, there are much worse (which is no excuse for the US level and type of corruption).

        2. from Mexico

          @ jake

          In Evolution for Everyone, David Sloan Wilson gives a good example of opposing moralities, where both sides believe theirs is “ethical.” It’s the selfishness-is-good crowd vs. the selfishness-is-bad crowd.

          Leading spokespersons for the selfisness-is-bad ethic he identifies as traditional religions. They believe that selfishness is not only bad for the group, but also bad for the individual. As Sloan Wilson oberves, studies have shown that all of the major religous traditions — Hinduism, Buddhism, Judaism, Islam, and Christianity — “portray worlds without trade-offs in which benefiting others results in a shower of material, psychological, and otherworldly benefits for oneself.” Therefore selfishness is a lose-lose proposition: a lose for the individual and a lose for the group.

          Leading spokespersons for the opposing team — the selfishness-is-good ethic — he identifies as David Seabury (The Art of Selfishness, 1937) and Ayn Rand (The Virtue of Selfishness, 1963). They believe that selfishness is not only good for the individual, but good for the group as well. To put it in economic jargon, aggregate utility is maximized if each individual pursues his individual utility. As a result, the conventional virtues are shockingly placed in the lose column with a long list of words and phrases: altruism, collective, faith, incomprehensible duty, moral cannibalism, mysticism, sacrifice, self-denial, self-immolation, self-sacrifice, unselfishness, etc. Selfishness is a win-win proposition: good for the individual and good for the group.

          Notice that the familiar definitions of selfishness (benefitting self at the expense of others) and altruism (benefiting others at the expense of self) are totally absent from both of these ethics.

          It is this latter — intentional action ultimately for the welfare of others that entails at least the possibility of either no benefit or a loss to the actor — that Einstein called “cosmic religious feeling.” It exists in all traditional religions, Einstein asserts, “even though it is rarely found in a pure form.” “The individual feels the futility of human desires and aims and the sublimity and marvelous order which reveal themselves both in nature and in the world of thought,” Einstein explains. “Individual existence impresses him as a sort of prison and he wants to experience the universe as a single significant whole.”

          Einstein argues that scientific materialism cannot engender cosmic religious feeling, but on the other hand science cannot exist without it.

          1. EconCCX

            In Evolution for Everyone, David Sloan Wilson gives a good example of opposing moralities, where both sides believe theirs is “ethical.” … Leading spokespersons for the opposing team — the selfishness-is-good ethic — he identifies as David Seabury (The Art of Selfishness, 1937) and Ayn Rand (The Virtue of Selfishness, 1963). @from Mexico

            Wow, Mex, thanks for that. By astonishing coincidence, I 1) met Sloan Wilson last evening for the first time. Didn’t know his beat, and chewed his skeptical ear off on money reform, the topic of the event. And 2) have been working from Seabury’s great books for more than 30 years.

            Rand’s selfishness is greed. Seabury’s selfishness is self-development. Here’s an excerpt from the extraordinary self-help author whom Sloan Wilson is aligning with Rand:

            Trouble is our greatest adversary, and trouble enters our days under the protection of greed. Ask yourself the question: had cooperation and mutual aid ruled man’s conduct for the last five thousand years, would your life be as hard as it now is? Think of the human assets that greed has destroyed: through war, predatory commercialism, exploitation and carelessness. Think of the cities, the works of art, the literature, the conveniences that have been annihilated. Think of the forests, the mines, the prairies that were ravaged, of the health of mind and body in the lives of toiling humanity that was disregarded.

            Corruption, graft, crime and war threaten man’s very life on earth. They challenge all that mechanics and science have done to strengthen and protect his position.

            The Art of Selfishness (1937, p 94 or 1964, p 110)

            Will have to bring my “A” game to our next parley.

  5. from Mexico

    Michael Hoexter said:

    Throughout the history of developed capitalist societies, poverty and vast social and economic inequality have been diminished by government provision of pensions and social insurance. The right-wing has generally scorned these efforts… When faced with the reality, the right wing has tended to cling to the ideal of family autonomy and sufficient private means rather than recognize the role of government in large-scale civilization in realizing ethical values associated with mutual and trans-generational aid.

    A couple of historical notes might be of interest.

    First, this from David Sloan Wilson’s Darwin’s Cathedral: Evolution, Religion, and the Nature of Society:

    Christian society provided “a miniature welfare state in an empire which for the most part lacked social services” (Johnson 1976). Even the emperor Julian acknowledged this fact in a letter to a pagan priest: “The impious Galileans support not only their poor, but ours as well, everyone can see that our people lack aid from us.” Julian saw the problem and tried to institute pagan charities to rival Christian charities, but the social dilemmas implied by the word “charity” are not solved so easily. Stark invites us to read the following familiar passage from Matthew (25:35-40) and try to imagine how it must have appeared when it was a truly new morality:

    For I was hungry and you gave me food. I was thirsty and you gave me drink, I was a stranger and you welcomed me, I was naked and you clothed me, I was sick and you visited me, I was in prison and you came to me… Truly I tell you, just as you did it to one of the least of these who are emembers of my family, you did it to me.

    According to Stark, written accounts from the period affirm that the Christians put these words into action. A study of tombstone inscriptions also suggests that Christians had a longer life expectancy than pagans (Burn 1953). In a world where survival depended on helping, Christians survived longer than pagans in addition to having more offspring. These basic biological paramaters contributed significantly to the growth of the early Christian Church, in addition to high conversion rates. What enabled Christians to practice this new morality? Stark emphasizes beliefs and social organization… Of course, the central fact and interpretation of Christ’s death makes altruism the defining feature of being Christian.

    Now fast-forward 1000 or 1500 years to this from Jonathan I. Israel’s The Dutch Republic: Its Rise, Greatness, and Fall 1477-1806:

    The later Middle Ages had bequeathed, to all the cities of western Europe, a tangled mass of charitable foundations and endowments set up by individuals, guilds, and clergy, and adminstered by a wide range of bodies, albeit frequently staffed by members of religious orders. Numerous charitable houses and institutions, as well as friaries and monasteries, distributed alms and dispensed sick care, food, and fuel…

    During the first half of the sixteenth century, western Europe, both Protestant and Catholic, was swept by new attitudes, and a new approach, to the problem of poor relief. There were several factors behind this change. Partly, it was a response to humanist criticism of monks and friars and the principle of unrestricted giving of alms, and charity, to beggars. Partly, it was an inherent result of the Reformation which, by sweeping away the Catholic clergy, and confiscating Church property and revenues, left a large gap in urban welfare which civic government had no choice but to fill. But partly also, the change resulted from population growth, the rapid expansion of the largest cities in most of Europe, and burgeoning of the problem of poverty.

    Fundamental reorganization was unavoidable and it was only the city governments which could undertake it. Both the administration and the aims of welfare changed. Late medieval religiosity accorded a sacred value to poverty, begging, and giving alms, which the new humanist philosophy of poor relief was unwilling to share. Priority was now assigned to checking the growth of poverty, vagrancy, and idleness, so the new approach tended to be much more quesitoning, if not outright hostile, to begging and alms-giving. Ambitious programs reorganized civic welfare in many German, Italian, and French cities and also in the cities of the south Netherlands… A key step in bringing ‘discipline and order’ to poor relief was the transfer of existing endowments and funds into a central poor relief chest controlled by the new civic college.

    1. diptherio

      “Truly I tell you, just as you did it to one of the least of these who are emembers of my family, you did it to me.”

      LOL! Best typo ever? I want to be an e-member of Jesus’ family! How do I register? Is there an e-newsletter I can sign up for?

      Thanks for the (inadvertent) giggles.

  6. from Mexico

    Michael Hoexter said:

    In pursuing austerity, political leaders are following the trend of neoliberalism, which suggests that being a business founder and owner is the highest ethical good, compared to which the role of political leadership is considered to be a lesser calling.

    Another historical note that some may find of interest:

    In the entire tradition of philosophical, and particularly of political thought, there has perhaps been no single factor of such overwhelming importance and influence on everything that was to follow than the fact that Plato and Aristotle wrote in the fourth century, under the full impact of a politically decaying society, and under conditions where philosophy quite consciously either deserted the political realm altogether or claimed to rule it like a tyrant…

    Thus our tradition of political philosophy, unhappily and fatefully, and from its very beginning, has deprived political affairs, that is, those activities concerning the common public realm that come into being wherever men live together, of all dignity of their own… [S]ince Socrates no man of action, that is, no one whose original experience was political, as for instance Cicero’s was, could ever hope to be taken seriously by the philosophers; and no speciflcally political deeds, or human greatness as expressed in action, could ever hope to serve as examples in philosophy, in spite of the never forgotten glory of Homer’s praise of the hero. Philosophy is farther removed from praxis even than it is from poiesis

    Very much like the activity of the class of guardians in Plato’s Republic, politics is supposed to watch and manage the livelihood and the base necessities of labor on the one hand, and to take its orders from the apolitical theoria of philosophy on the other…

    Political philosophy never recovered from this blow dealt by philosophy to politics at the very beginning of our tradition. The contempt for politics, the conviction that political activity is a necessary evil, due partly to the necessities of life that force men to live as laborers or rule over slaves who provide for them, and partly to the evils that come from living together itself, that is, to the fact that the multitude, whom the Greeks called hoi polloi, threatens the existence of every single person, runs like a red thread throughout the centuries that separate Plato from the modern age… What is important is that the same notion was taken up, again in secular terms, by post-Christian philosophy, as it were surviving all other changes and radical turnings about.

  7. diptherio

    As a natural, logical corollary to Buchanan’s Public Choice Theory, I offer

    Diptherio’s Economic Policy Choice theory:

    Since economists are utility maximizing individuals, it is illusory to think that the policy prescriptions or economic theorizing performed by economists represents, in any appreciable way, “the public interest” or “reality.” Instead, economists will present the theories and policy prescriptions which will maximize their individual utilities. Therefore, economists cannot not be trusted to truthfully describe economic reality, much less to run the economy (or even make policy suggestions). We should assume that Buchanan promotes his Public Choice Theory not out of some sense of social responsibility or genuine concern, but rather because constructing arguments in favor of weak government oversight paid him better than other arguments he could have made.

    I seriously don’t see how this conclusion can be avoided if one accepts Buchanan’s premises. This seems like a serious logical paradox in neo-classical economics. If economists like Buchanan are right about human nature, then we have no reason to believe that Buchanan is “altruistically” telling us the truth about the economy, but should rather assume that whatever he is telling us is merely that which he expects to fatten his pocketbook the most. That neo-classicals impugn their own motives along with everyone else’s seems to entirely escape most of ’em.

  8. Susan the other

    “Deontological” was a new word for me. The conscious analysis of ethical duties and rights, And Hoexter also uses “agnotology” in a practical context. It is agnotology for politicians to pretend to be ignorant of the consequences of their actions as our representatives. Everything has a price. And I liked the way he created the category of ‘legal corruption’ as opposed to simply illegal corruption. The bottom line for me is that all decisions, including all economic decisions, are political. So they are also all moral. Deontologically speaking ;-) So I like this analysis of our irresponsibility to ourselves and I agree with him that we create ourselves by our political decisions. And I especially like the implications of what he outlines since I assume his heart is green. We have big decisions to make.

  9. rob

    In respect to the paragraphs about the benefit of monetary sovereignty,and a fiat currency.I whole-heartedly agree.
    This is akin to the “NEED ACT” Hr 2990 in the 112th congress, as proposed by dennis kucinich.A modern day version of “the chicago plan” of the thirties.
    If only there was a gov’t of the people ,by the people, for the people.
    WE;the people, could use a monetary system to advance our well being.
    Right now, there could be something that all americans can benefit from;like a universal healthcare system.Or maybe a universal educational sysytem, from pre-school to post retirement…From what I see,we are wasting that kind of money and those oppurtunities right now.Through our reliance on money creation vis a vis a privately controlled banking syndicate/federal reserve.Which in turn fuels the rabid speculation distorting the markets, and the political perversion the neuters the population,that in turn seep into every aspect of anything of any “value”

  10. Chauncey Gardiner

    Thank you for this post. I also appreciate the erudite comments of many other respondents and have asked myself if I should even be commenting on this board.

    Aside from the role of government in the issuance and distribution of money, you provide much to consider as many of us reexamine the dominant paradigm in our country over the past several decades and try to imagine a better future.

    This recent post in the Guardian, a UK online newspaper, touched on many of considerations I consider relevant:

    As the Mr Hoexter points out, not everyone shares the same values. In fact their personal values and their willingness to act to realize objectives consistent with their values, are perhaps the primary reason why those few who have garnered a vastly disproportionate share of the wealth, resources, and personal power and influence in our society have done so.

    Going forward, I feel our collective challenge as a society will be to civilly restore balance in political, monetary and economic systems where clearly not everyone shares the same values. This is why the legitimacy of the electoral process of a democracy, the civil rights under the Constitution, and the attendant rule of law are so terribly important IMO.

  11. McMike

    [Bit of a tangent, but] Dean Baker periodically warns us to be very careful when a politician ascribes a value-based motivation for a particular vote. With extremely rare exceptions the motivations are entirely of personal financial gain (contributions or revolving door) or to a lesser extent, electoral (getting reelected).

    Worse yet is when the media assigns those value-based motivations on behalf of a politician to explain a vote. Which adds the dimension of mind-reading to the analysis.

    1. Michael Hoexter

      You’re right in some circumstances: ethics can operate completely as an ideological operation to cover over corruption. However if we always and only assume corruption, we are left with no way to discuss better solutions with anyone who holds any power whatsoever. Thus we are left with pure cynicism or pure anarchism.

      Discourse that refers to ethical principles can be false or it can have elements of the truth. We cannot hope for and work towards a better government without acknowledging that there is the potential for ethics to motivate leaders as well as citizens to work together on the massive problems of our age. No mind-reading is required in starting with this assumption that people have the potential to act ethically and also that leaders are compelled to justify their actions with reference to ethical values.

      1. McMike

        I agree that for both the possibility of reform and the possibility of enjoying one’s life requires hope, as well as offering the benefit of the doubt from time to time.

        But sometimes, as is the case with our current national politics, the 100% cynicism is entirely deserved (ok, maybe 99.999%).

        Sometimes, there’s no saving the stew. And out the window it goes.

        I do not diagree with your premise of the important role of ethics in government policy and the need to restore it.

        The corporate state has done its work well, and sterilized the idea of ethics out of economics, politics, community, and everything else, except where it suits then (like consumer bankruptcy andindividual tort lawsuits).

        Nevertheless, reform of that system will not be possibe without a serious housecleaning and new faces across the board. I only hope that Jefferson was wrong about the need for blood.

  12. steelhead23

    Michael and Yves, I very much liked this piece, and to be honest, I tend to agree. However, I am not as certain as you two are as regards the efficacy of MMT and I believe that queasiness exists not just in citizens like me, but in our leaders as well. You speak of a “duty to the future” – and I would bet that the 535 members of the U.S. Congress would virtually all agree, publicly at least, that real welfare beats an imaginary ideology. It is just that that ideology affords adherents a wholly different view of the likely outcomes of actions, be it austerity or deficit spending. Inasmuch as you cannot fathom a rational actor choosing austerity, the Austrians believe that a large and growing deficit would lead to high inflation. They may be wrong but in this crisis sparked by runaway leverage (and fraud), citizens and politicians alike are ready audiences for Austrian and austerian rhetoric. And, they may see this view as strongly prospectively “good.” A little sacrifice today so our futures would be better is widely seen as an ethically good choice.

    Consider this, you have both noted that while our political leadership sets U.S. macroeconomic policy, they actually know very little about economics and even less about macroeconomics. Thus, with intense pressure to make the right decision, they do what most of us do when confronted by such a problem – they seek the advice of experts. For financial trouble, they look to financial professionals, the very group of folks least likely to have a strong social and future welfare ethic, the very folks married to the classical model. Hence, our decision-makers may be ethically conflicted (much like an abusive father who spanks his wayward child – so he can learn), but in rather larger measure, they (we) are ignorant and that ignorance forces them to seek “higher authority”. And that authority is always best found in adherents of the status quo. Hence Geithner is our Sec. Treas., not Shiela Bair.

    As regards agnotology, ignorance is not only sold to true believers, it is cultivated by decision-makers. Whocouldaknowed? Ignorance excuses a multitude of sins.

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