Ethical Aspects of Economics I

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Ethical Aspects of EconomicsAuthor(s): W. R. SorleySource: International Journal of Ethics, Vol. 17, No. 1 (Oct., 1906), pp. 1-13Published by: The University of Chicago PressStable URL: http://www.jstor.org/stable/2376095 .

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INTE!RNATIONAL

JOURNAL F ETHICS.OCTOBER, i906.

ETHICAL ASPECTS OF ECONOMICS.I.

The old controversy between the moralists and the econ-omists may be said to have died out. It was due to misunder-standing, and it would hardlybe worth while to ask which sidewas more to blame for the misunderstanding. No one, anylonger, has to fall back upon the language of Ruskin or ofCarlylein discussing economic doctrine. The keener criticismof the socialists also is usually directed to something morevulnerablethan a body of scientific doctrines. It is possiblethatneither Ruskin nor Carlyle nor Marx was ever justified. Butthe reason why their denunciations of political economy arenot repeated now must be sought in the attitude of the econ-omists themselves. Either their pretensions have been reducedfrom those of Ricardo and his followers, for example, or thelimitations which these pretensions always implied have beenmade clearer. These limitations are chiefly the following:

i. It is recognized that, even in matters of industry -andcommerce, a man's motives may be complex and not simplyof the kind conveniently or inconveniently called economic.Desire of wealth and aversion to labor-in other words, greedand laziness-do not altogether determine his action. AsMarshall says: 1 "Ethical forces are among those of whichthe economist has to take account." Ties of kin, custom,and duty, as well as regard for the law of the land, have some

P"'Principlesf Economics,"ed. I, pref.Vol. XVII-No. x.

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2 InternationalJournal of Ethics.effect upon everyone; and besides this each man's conduct iscolored by his own individualpreferencesand ideals. Man isneither so rampantan egoist nor so callous an embodimentofreason, as some of the older economists supposed-or led themoralists to imagine that they supposed. "The older eco-nomic man," as Lord Goschen admits, "was an hypothes;s,"2and, we may add, an hypothesis which was no nearerthe truthbecauseit was so far removedfrom beauty and from goodness.So far as economics involves a study of motives, it has to berecognized that these motives vary in different individuals, indifferent social surroundings, and also in different depart-ments of economic activity. In some departments-in thestockbroker'sbusiness, for example-the "economic"motive ofdesire of wealth may be hampered and modified to a veryslight extent only by conflictwith other motives; though, evenhere, the desire of wealth is effectually restrainedand guidedby respect for the law of the land and for the unwritten lawof the stock exchange. In other departments,especiallythosefurther removed from the centre of business-farming maybe an example-this desire of wealth is more obviouslymnodified y adherence to-the custom of the neighborhood aswell as by other motives not purelyeconomic. We must there-fore give a careful and criticalreceptionto any economicargu-ments which assume an "economic man." They are atbest abstract,and deal with one side or aspect only of humanactivity. They tend to neglect the fact than man'sother interests may mingle with and tend to disturb the evencurrent of his economic activity. Man is a wealth-hunting,wealth-producinganimal; but he is a great deal more. Andalthough we may roughly divide his activities into those ofbusiness and those of leisure, we cannot draw the same line ofseparationwithin the motives which impel or inspire him andsay that in business he is moved by desire of wealth, which isthe end of business, and that in his use of his leisure he ismoved by other motives of a more personaland perhapsmoremoral kind.

2Economic Journal, III., 386.



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Ethical Aspects of Economics. 32. The second limitation concerns the validity of the lawsformulated by the economists as a result of their reasonings.

So far as these reasonings proceeded on the assumption thatmen in their economic activities were guided solely by eco-nomic motives, it is clear that the validity of the conclusionscaif be hypothetical only. So far also as they assumed anenvironmentof free competition-an "economic" state for the"economic"man to inhabit-the conclusionscannothold strictlyof any society in which that free competition is not fullyrealized; and there is no society in which it is fullyrealized, although there are departmentsof social activity inthe industrial and commercial states in which its realizationis very nearly complete. The "economicstate" is as hypotheti-cal and unreal as the "economic man."When the "laws" of the economists are thus recognized asof limited validity-when they are admitted to be hypotheticalonly, or to be not laws but tendencies, or in whatever waythe limitation is expressed-the reason for distrust of thescience on the part of the moralist is removed. When the"economicman" is allowed to be a figment there is no longerany need to cry out against him as a monster. And when"economic laws" are put forward not as statements of whatdoes and must happen,but only of what would happenif cer-tain tendencies were unmodifiedby man's varied motives andby the social order, there is no longer any excuse for dread-ing these laws as if they were relentless forces which mustnullify all efforts towards social improvement.

3. The third point is concerned with an even more vulgarmisunderstanding than the preceding. What ought never tohave been in doubt is now at any rate made clear. Economic"laws" are not imperative; they have no binding force uponconduct and do not profess to have any. So far as they arevalid, they are valid simply as generalized statements of theresults which will follow from the interactionof given forcesin a given medium. These forces are not spoken of as eithermoral or immoral, but only as operative in a certain directionand with a certain measure of efficiency. There is no obliga-tion to refrain from modifying their operation by appropriate



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4 InternationalJournal of Ethics.means. Only, if we think of doing so it is well to understandthem first. Economic facts and reasonings may be import-ant data for enabling us to determinewhat we ought to do incertain circumstances. But economics does not of itself laydown any rules, as ethics professes to do, as to what we are todo and abstain from doing. One does not break any eco-nomic law by buying in the dearest market and selling in thecheapest, as one breaksa moral law by stealing one's neigh-bor's propertyor spending one's life in idleness.

All these points might be admitted without compelling anyfundamentalchange in the view of economicspresentedby Millor even by Ricardo. But, as a matter of fact, their elucida-tion has been accompaniedby a gradual change in the viewsof the economists as to the scope, boundaries,and methods oftheir science. This change has been hastenedby the criticismsof the historical school, by the concrete study of industrialrelationsand their development,and by the systematicapplica-tion of statistical methods to economic questions. As a resultwe find that the contemporary reatment of economicsproducesa markedly different impression upon the reader from thatproduced by the treatment customary amongst the classicalEnglish economists of a generation or two generations ago.It is not merely that deductive reasoning is less prominentandfacts are much more prominent-that the science is morerealistic. Its connections are also emphasizedin a new way.There is an absence of the clear-cut definitions of the olderwriters. Where these drew sharp distinctions, the modernslay stress upon continuity,and not merelycontinuitywithin theeconomic range, but continuity of the economic with largersocial and mentalprocesses.In this way not only does the old controversy of economicsand ethics disappear,but the subject-mattersof the two sciencesare made to approximate and run into one another. Andthis causes a special difficulty in exhibiting the relation ofethics to economics,as that science is now conceived. As longas economicshad a clearly marked region of its own, it wascomparativelyeasy to examine the relations in which it stoodwith some other branch of inquiry. But when its territories



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Ethical Aspects of Economics. 5are less sharply definedand admittedto be continuous with anindefiniteregion which also belongs to some other sciences, thetask becomes much less simple. Of course no one ever pre-tended that the production, distribution, and consumption ofwealth took place in a world by themselves, unaffected bysocial and mentalconditionsother than those which had wealthand nothing but wealth directly for their object. Thus J. S.Mill, in defining the object of political economy as being "toinvestigate the nature of wealth, and the laws of its produc-tion and distribution," adds that this includes, "directly orremotely, the operation of all the causes by which the con-dition of mankind, or of any society of human beings, inrespect to this universal object of human desire, is madeprosperous or the reverse." But the tendency even of Mill,and still more of his immediatepredecessors,was (unless on afew special questions) to disregard the operationof these sur-rounding and connected forces, and to work out an abstracthypothetical science. At present it is usual for economists tolay special stress on these forces both in the definition and inthe elaboration of their science. Thus Schmoller describeseconomicsas having to do with "part of the content of sociallife, with one side of the social organism," and holds that "itcan be understoodonly in connectionwith the remainingsocialphenomena. As an introductionto it we must seek to under-stand social life in general, and in particular,its mental, moral,and legal foundations." And he accordinglybegins his workwith an investigationof "some of the principalquestionswhichlie on the boundarybetween economics on the one hand andpolitics, psychology, ethics, and jurisprudenceon the other."SThat is to say the facts which we. call economic, and whichit is the economist's business to investigate, are not completefacts which can be studied by themselves,but parts of a widergroupof facts without referenceto which they cannotbe under-stood. This same point-that economic facts are simply aportion of the larger group of facts which may be called social-is brought out in the various phrases in which the subject-

"'Gr. d. allg. Volksw." (I9oo), T. 6.



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6 InternationalJournal of Ethics.matter of the science is defined by Marshall. In his open-ing definition,economics is called "a study of mankind in theordinary business of life; it examines that part of individualand social action which is most closely connectedwith the at-tainment and with the use of the material requisites of well-being. Thus it is on the one side a study of wealth, and onthe other and more importantside, a part of the study of man"("Prin." ed. 4, p. I). Again, it is described as "a studyof the economicaspectsand conditionsof man's political, socialand private life; but more especially of his social life. Theaims of the study are to gain knowledge for its own sake, andto obtainguidancein the practical conductof life, and especiallyof social life" (p. II 7). And once again, it is said "economicsis, on the one side, a scieice of wealth; and on the other, thatpart of the social science of man's action in society that dealswith his efforts to satisfy his wants, in so far as the effortsand wants are capableof being measuredin terms of wealth,or its general representative, . e., money" (p. ii8).I quote these various expressions because they all bring outboth the wide range of economic phenomena, and also thespecialreferencewhich distinguishesthem as economicand notmerely, in the wide sense, social phenomena. The "economicaspects" of social life differ from its other aspects althoughthese may have to be taken into account in order that thosemay be fully understood. The "two sides" (as they are herecalled) of economicsitself do not really differ-at least for ourpurposes. On the one side it is said to be the scienceof wealth;but as wealth is something that is being constantly made andexchanged and consumed by man, it is clear that the humanand social activitiesinvolved in theseprocessesmust be includedin the study of wealth. On the other side economics is saidto be "that part of the social science of man's action in societythat deals with his efforts to satisfy his wants ;" but this broadstatementneeds restriction if economics is to be distinguishedfrom social sciencegenerally; and it is at once restrictedby thequalifyingclause, "in so far as the effortsand wants arecapableof being measuredin termsof wealth or its general representa-tive, i. e. money." This gives the differentia of "economic"



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Ethical Aspects of Economics. 7from other objects of human desire. They are "capable ofbeing measured in terms of wealth," or, since "wealth" itselfis a term aboutwhose exact meaning there may be controversy,in terms of the generalrepresentativeof wealth, namely,money.Economics deals with other things than wealth only in sofar as they tend directly or indirectly to promote or impairwealth. Under this generaldescriptionthere are few (if any)factors in social life which might not gain entrance into eco-nomic study. But we must remember he reason why they areallowed to enter and the strict limitations put upon the partthey are allowed to play. They enter only as aids or obstaclesto wealth, and are evaluated only from this point of view. It isonly in so far as they can be measuredby wealth, i. e., by money,that objects of human desire are recognized as economicgoods.Just on this account economic goods are not the only goodthings. There are many others which, as we say, are "with-out price." If examples were wanted, one might point to anenumeration of things worth having: "Whatsoever things aretrue, whatsoever things are honest, whatsoever things are just,whatsoever things are pure, whatsoever things are lovely,whatsoever things are of good report; if there be any virtue,and if there be any praise, think on these things."Now, if we do think on these things with our present ques-tion in view, we see that some of them can hardly be said tohave the slightest money value; others of them may be factorsin economic goods. Justice for instance, may in some degreebe a business asset worth money,as otherpersonalqualitiesmaybe. But its goodness or worth cannot be measured by itswealth-producing effects. None of these things, in fact-andthey are only examples of many others-derive their goodnessfrom any tendency they may have to produce wealth; nor arethose of them which have no causal relation with wealth lessgood than those of them which may have some such relation.The economist has a definite and finely graduated scale uponwhich he measures his values. But there are some values-and amongst these the most important-which cannot bemeasuredon his scale.

This considerationpoints to a relationshipbetweeneconomics



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8 InternationalJournal of Ethics.and ethics which is of an essentially different kind from thatfirst suggested. And it is now possible to distinguish themfrom one another, and to define these two ways in whicheconomics is related to ethics, or, if the phrase be preferred,these two "ethical aspects"of economics.

i. In the first place are to be reckonedall those influenceswhich may be describedas moral, which enter into and modifythe processes of the production,distribution,and consumptionof wealth. The economistcannot content himself by referringto the "desire of wealth" as explaining the whole of man'seconomic activity; nor may he regard the social medium inwhich economic affairs are carried on as planned and main-tained for economicpurposes only. Its purposesembrace butgo beyond economy, and these further purposes react uponeconomicprocesses. To quote Marshall's words again, "ethicalforces are among those of which the economist has to takeaccount." The extra-economicforces of which the economisthas to takeaccountarepartlynatural or physical,partlyhuman;and the humanforces may be said to be ethicalor quasi-ethical.They may be distinguished into three groups-mental, social,and legal-which, however, do not admit of strict separationfrom one another in their operation.(a) There are, first, the mental processes: the impulses,desires, and purposes of men. These are commonly describedas moral powers, since they determineconduct and are amen-able to review by conscience. The idea that a purely economicmotive, called the desire of wealth, can be separated out ofthese and is a sufficientpsychological basis for the study ofeconomics is quite untenable,and has indeed seldom been putforward in this bald form. We may indeedspeak of a "desireof wealth," but it is a factitious desire which either arises afterreflectionon the facility which wealth gives for gratifying otherdesires or else grows upon the man of business through thegradualrestrictionof his interests to business and its immediateresults. That is, the desire of wealth needs to be set a-goingby other desires. In certain cases it succeeds in dominatingthese. But normally it exists only in companywith a multitudeof other desires to the gratification of which wealth may con-



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Ethical Aspects of Economics.tribute, and alongside of still other desires with which wealthhas little or nothing to do. The mere consciousnessof one'spowers and delight in their exercise may lead to engrossingdevotion to business and may result in wealth for which therewas hardly any desire. The desire of amusementmay lead oneto neglect one's business, or it may lead to hard work for atime that the means of amusing oneself later on may beacquired. And in addition to the whole tribe of desires whichfill the life of man, conduct is regulated and modified in vary-ing degrees by the sense of duty or by ideas about good andevil. All these influences affect economic activities, and it isconsequentlyillegitimate for the student of economicprocessesto neglect any of them. Any selection amongst them of"motives to be taken into account by the economist must bemore or less arbitrary. In so far as the economist generalizesfrom facts, he is dealing with results to which all these forceshave contributed. In so far as he argues deductively, he maybe obliged to ignore them, but must admit that their omissionimpairs the validity of his conclusions.(b) There are, secondly, the various forms of the social life,such as the division of classes, the customary standardof com-fort of eachclass, and the like, and the various forms of institu-tion-the family, the church, local governing bodies, and State.Many of these customsand institutionsare primarilyeconomic,for example, the competitive system, and among institutions,trade unions and employers' associations and trusts. Othershave a differentpurposeor one of wider range; but all of theminfluence the industrialand commercial ife of the country. Ifwe were to go into detail a close correspondencemight beshown between these social forms and the mental or moraltendencies of individuals. Individual and society do notmerelyinteract;they are inseparalle in their nature.(c) Thirdly, there may be distinguished from social formsthe system of law declaredand enforced by the State. It alsostands in the closest reciprocalrelation to the moral sense of thecommunity: on the one hand it may be regardedas the expres-sion of the moral obligations which are held to be most essen-tial by the community; on the other hand it in large measure



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Io InternationalJournal of Ethics.modifies and controls this moral sense. In stationary societiesthe two are in equilibrium;in progressivesocieties this equilib-rium is being constantly disturbed.All this is only an outline or indication of what I havecalled the first of the two ways in which economics is relatedto ethics. Economic facts are imbedded in a larger mass offacts, mental, social, and legal; and this larger mass of factswhich surroundsthe economicis of a naturewhich is, to a greatextent, capable of being described as moral or ethical. Wemust bear this side of the relationship in mind, because it isof fundamental importance. But it is not so important, fromour point of view, as the other mode of relationshipwhich Iam about to describe. All the above considerations can betaken into account by the economist without leaving the fieldand method of economics. The other aspect of the relation-ship, to which I now go on, implies a new point of view out-side economics,and necessitates a different method of inquiry.

2. This second way in which economics is related to ethicswill be found to lead to issues very different from those of thefirst. For we have found that economics is able to expanditself and take into its consideration all those ethical forceswhich may in any manner foster or hinder the growth ofwealth or modify its distribution. This broadening of thebasis of economicsuntil every relevantsocial and mental factorhas been taken into account is indeed a salient feature of theeconomic systems of the present day. But the second way oflooking at the relation will lead to a new point of view. Itwill present the economic factor as only one factor in a widerschemewithin which the place and rank of the economicfactorhave to be assigned to it, and an appealhas to be made to otherthan economicstandards.

We have already found that the differentia of economicproductsconsists in this, that they can be measuredin terms ofwealth, or of money as representingwealth. This is an easymeans of identification. It also provides a standard for themeasurementof purely economic values. This conception ofvalue is indeed so fundamental in economics that the wholescience may be said to hinge on it. The value of any article is



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Ethical Aspects of Economics. IIdeterminedby relation to the other things which can be gotin exchange for it; and when we have in money a generalmeasureof the ratio in which things can be exchanged for oneanother, the measurementof value is easy. The term "value"in this use of it means "value in exchange;" and to this usethe term is practically restrictedin modern economic reason-ing. This is a matter of convenience. But if we ex-amine this conception of value, we find that it assumesanother conception. The value of A consists in its rela-tion to the amounts of B, C, and D, or any one or more ofthem which can be got in exchange for it. The value of B,in like manner,consists in its relation to the amounts of A, C,and D, or any one or more of them which can be got in ex-change for it. Similarly of the values of C and D. And if wemeasure the value of all commodities by money, then moneyitself has to be valued in terms of commodities. In attemptingto define the value of any one commodity, therefore, we arereally always landed in a circulusin definiendo; and this circleis only hidden from us because we commonly define the valuein relation to the common measure, money, and overlook forthe moment the fact that the value of money itself must bedefinedin relationto other articles. The economic conceptionof "value" (i. e., exchange value), therefore, can be supportedonly if commodities have, in some sense, a value which isindependent of their relation to other commodities. That isto say, value in exchange rests ultimately upon what AdamSmith called "valuein use," what Jevons and others call simply"utility." This term "utility," again, has been found capableof convenient manipulation in the intricacies of economicreasoning; and as it is found convenient there is no reasonwhyit should not be employed. But it is hardly adequate to ourpresent purpose. It has certain misleading associations of anethical or philosophical kind; and it is besides a relative termwhich assumes as understood a purpose or end in the promo-tion of which the utility consists. The value in exchange ofany thing dependsupon the fact that it has a value independentof exchange, to some person or persons at any rate. Theydesire it for its own sake-to "use," as Adam Smith would



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I2 InternationalJournal of Ethics.say, or perhaps simply to attain or possess. And this value,independentof exchange, which it has for them is shown bythe fact that they would do something or give up somethingto get it. This is the fundamental"value," therefore, and Ishould like to give it that name. But to do so would onlycreate confusion with the economic use so firmly established.I shall therefore use the term "value," as the economists useit, for "value in exchange;" and for the underlying concep-tion, the value which is independentof exchange, I shall makeuse of the term "worth."Now all things which have "value" (in exchange) eitherhave worth themselvesor lead to others which have it. But notall things which have worth have also value (in exchange)."Get wisdom," says the proverb,"and with all thy getting getunderstanding"-not clearly becausethey can be passed on forsomething else or can be measured by-money, but simply fortheir intrinsic worth. The economist has his scale of valuesand can place all economicgoods at their properplaces on thescale. But the whole valuation is extrinsic. The goods arenot valued for themselves, but for what they will bring-inmoney.If we go any further and raise the question not of extrinsicvalues, but of the importanceof economicgoods in human lifeas a whole, we raise a question not of extrinsic but of intrinsicvalue, or of what I have proposedto term worth. In the scaleof worth all economicgoods mustbe re-estimatedwith referenceto a different standard than the economic standard of value;and they must have their place assigned to them in comparisonwith the goods for which the economicscale has no room. Thisis the question,aspectsof which will occupyus in the followingarticles; and it is strictly an ethical question, though it dealswith economic material. It is not an easy question; and inmany of its aspects it will be found not to admit of a fullysatisfactory solution. But it is none the less a legitimate andindeed an essential questionboth for the student of economicsand for everyoneengaged in the business of life. The smallestconsiderationshows that the extrinsic values with which aloneeconomics deals are an insufficient guide to intrinsic worth:



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Positivists and Doctor Coit. I3they shift with every turn of the market, or with a new inven-tion, or with a change in the laws of the land. And it is neces-sary to ask whether there is any other way of determining theworth both of the things which money buys and of those thingswhich it cannot buy.

W. R. SORLEY.UNIVERSITY OF CAMBRIDGE, ENGLAND.

POSITIVISTS AND DOCTOR COIT.I have seldom been more surprisedby any article than I wasby that written by Dr. Stanton Coit in the July numberof this

JOURNAL, and entitled "Humanity and God." I thought thatI knew something about the "English Positivists ;" but as Dr.Coit has discovered such things about them that I have neverheard of, I must ask him to tell us where he found thissingular variety, and whom he has unearthed as addicted to thepracticeshe describes. In all the thirty-six years that I havebeenassociated with the Positivist movement,in the twenty-fiveyears that I was President of the English Positivist Committee,I have never heard or seen anything at all like the ideas Dr.Coit ascribesto our body.

He begins by asserting that the English Positivists are proudof having the words "Humanity" and "God" coupled side byside. And he goes on to declare that they representHumanityas the equal of God. I can only say that I have never knownany such thing, nor has our committee or our body ever usedany such language. We have always taught that Humanityand God represent ideas entirely incommensurate, ncapable ofbeing- compared, having no relation or analogy whatever.Humanity is a visible, localized, limited organism, whollyrelative,and devoid of all the divine attributesnecessarily asso-ciated with the idea of God. Humanity can no more be com-pared with God, or grouped with God, or assimilated to God,than could the idea of one's Fatherland or the Planet we dwellon. It is an idle sneer that Positivists ever pretend to make aGod of Humanity.

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Ethical Aspects of Economics I