Contribution of Moral Philosophy in Contemporary Economics
Philosophy is segmented into six major branches out of which Ethics or Moral philosophy is a significant part. Moral philosophy is based on suggesting and systematizing notion of right and wrong conduct.
A chain of command of values that every moral being have, reflected in their decisions. Majorly, people’s value systems contrast. It’s an individualistic idea. One’s value system is formed by one’s rectitude and iniquity. There are nine regular economic qualities that individuals consider while assessing a likely buy: productivity, speed, dependability, usability, adaptability, status, stylish intrigue, feeling, and cost.
Role of Philosophers in Current Economy:
The ideas of philosophers are used for value system of current economics which were presented previously in 18th century and earlier.
Adam Smith is called the founding father of moral economics. He studied Moral Philosophy from University of Glasgow. Later, he became the head of Moral Philosophy as a lecturer in University. His first published book is The Theory of Moral Sentiments. He had ideas of fewer trade barriers, free economies with less government regulation and lower taxes. Physiocrats helped in shaping his economic views. In a period of 10 years, Smith wrote his most renowned work “The Wealth of Nations” which discovered Why some of the countries prosper while others languish in poverty. It is one of the most influential writings of the last millennium. His Two published books together comprised a towering achievement in the history of Western thought.
Smith’s theory is implemented in current economics which is the concept of gross domestic product (GDP) and for his theory of compensating wage differentials. Today, our world became increasingly integrated by trade, finance and commerce.
Economics is the study of wealth only i.e material goods which are tangible and changes in wealth means economic development. Big thinkers like Adam Smith and Karl Marx consider Capitalism and Socialism two strengths and weaknesses of economic systems. Adam Smith brought a brand-new sort of theory about economics to explain people how nations can become rich and powerful. Capitalism is a good economic system and key concept of it is the reason why capitalism is good. Success of capitalism is also called invisible hand which you can’t really point but that is something which balances out people’s and producer’s interests while keeping the reality in mind that competition is out there. The consumer is benefited by having so many choices and low prices of products. This is a huge plus to capitalism.
Invisible hand has a key impact on community like resources or factors of production land labor and capital owners will shift to where society needs them and the second key point which impacted is the recycle of goods for continually moving into the economy. This makes an efficient economic system. Capitalism is self-regulating system so Smith argued for no or very less government involvement. When everything in goods would be settled by competition and morals, then there is no need for government to makes strict rules for it. In his book “Moral Sentiments” Smith called conscience as impartial spectator and observed himself that people interpret our behavior and one is accountable for his actions. He also helped in driving the move from land-based wealth to wealth created from assembly line production methods. His invisible hand theory is applied to free markets and capitalism through supply and demand. His contribution is also though the economic development theory in which economic growth takes place through the principle of division of labor. He led “Laissez faire” (let you do) policy.
Utilitarianism is ethical theory founded by Jeremy Bentham by principle of utility which adheres to believe that an act is virtuous if it provokes happiness or is vice if it tends to cause agony to the greatest number of people. John Stuart Mill developed and publicized this concept. Utilitarianism is something to think about in terms of what is best interest of great amount of people. Bentham introduced the Felicific calculus. It is also called utility calculus or hedonistic calculus. It includes intensity, duration, certainty, propinquity, purity and extent. Felicific calculus formula is formula of balance between Happiness — Pain but John Stuart Mill said that measure of pleasure cannot be calculated. In current economics, we apply utilitarianism by analyzing whether the benefits of an action of outweigh the harm of that action. Some other Utilitarian contributed including:
· Cooper, Anthony Ashley Inquiry Concerning Virtue or Merit, in Characteristics of Men, Manners, Opinions and Times.
· Cumberland, Richard, 1672. De Legibus Naturae Disquisitio Philosophica, London. A Treatise of the Laws of Nature.
· Gay, John, 1731. A Dissertation Concerning the Fundamental Principle and Immediate Criterion of Virtue in Frances King: An Essay on the Origin of Evil.
· Hutcheson, Francis, 1725. An Inquiry into the Original of our Ideas of Beauty and Virtue.
In current economics, we apply utilitarianism by analyzing whether the benefits of an action of outweigh the harm of that action. In decision making in business, After we add up all the positives and negatives for all stakeholders, if the results are positive overall, then decision is ethical.
Auguste Comte is the founder of sociology and positivism which emphasizes empirical observations and says that only real concrete things can be considered which knowledge is gained through five senses. Ambition of Comte’s positive philosophy was to reorganize society along with new scientific principles. In Comte’s law of three fundamental elements of society; first one is intellectual knowledge. Second is, political government of the state and third one is artistic, philosophical and economic civilization that is generated by the first two. His ordering is the reversal of Marx’s ordering as for Marx economic and industrial factors are the roots of other factors while Comte’s concept generates artistic superstructure which provides the justification for the economic status quo. For Marx, The solution is going to be a revolutionary change in the material distribution of the means of production in society whereas, Comte and his positivism has an ambition to change the political order and civilization by providing a deeper intellectual unity to it.
Comte’s positivism had two primary effects. New science of social facts was introduced and named as sociology and principle of unity of science of society was envisaged under one heading.
The “Keynesian Economics” by John Maynard Keynes was used to refer that optimal economic performance and prevention of economic slumps could be achieved by influencing aggregate demand through activist stabilization and economic intervention policies by the government. Scarcity is a major economic problem in which there’s a gap between limited resources and limitless wants. It is the condition in which individuals are forced to make choices among available alternatives. Resources available for production are land, labor and capital. Scarcity and resources allocation put economics at the center of many studies. Making the best decision of choices is efficiency but in this case people not always choose wisely. So, morally if you prefer your need or what you wish to have then it’s productive efficiency. Keynes argued to stimulate economic crisis by two approaches: A reduction in interest rates (monetary policy) and government investment in infrastructure (fiscal policy). During a recession, the government may employ expansionary fiscal policy by lowering tax rates to increase aggregate demand and fuel economic growth.
By the courtesy of Karl Marx, Communism became heated debate which swayed the realization of the stateless society where all are equal. Today the global disparity between rich and poor is startling. He already predicted the global financial crisis by capitalism in which the bourgeoisie, or entrepreneurs who control the industries, and the proletariat, or laborers whose work changes crude products into significant financial merchandise, are only two classes of society among which one is privileged and other is deprived of deserving rewards. He also predicted that capitalism will lead to boom and bust economics. His concept was to morally appreciate the manufacturer by crediting him for the result of his labor instead of just receiving some money in return of one’s work. It makes a human being utterly expendable. He was not in favor of selling one’s credit along with hard work which he had done to make something productive out of raw material. He believed that capitalist shrunk the allowance of workers in order to attain large profit.
Karl Marx believed in the labor theory of value to explain relative differences in market prices. This theory stated that the value of a produced economic good can be measured objectively by the average number of labor-hours required to produce it.
Implicitly, in putting forward as truth, this amounts a belief in economic growth and progress as the path to a stage in future which is more than common quality to an ecstasy. This implicit, economic belief is quietly not paying attention to standard goods/money making methods of analysis of markets and other economic issues. The range of short run costs that financial analysis normally has nothing to do with, is wide. As part of the necessary price of progress, any good citizen having rights in the nation should be ready to take for such costs that are in the way of religion that are kept away from economic calculations. Religion hinders the pace of economic progress which is manipulated by scientific methods, inaugurated by intellectuals and philosophers as it provokes faith over science and rationality.
Many of the economists and environmentalists in the world supports the belief systems and associated values, though often implicitly. Depending on the theory, people often surprising agree that economics and environmentalism are actually religions but this is not a fact as religion is based on utmost faith and mere belief.
Africa Growing While Shrinking
According to National Bureau of Economic Research “One half of African lives below the poverty line. In sub-Saharan Africa, per capita GDP is now less than it was in 1974, having declined over 11 percent.” While the rest of the world’s economy grew at an annual rate of close to 2 percent from 1960 to 2002, growth performance in Africa has been dismal.
Morocco is one of the continents commercial hubs. It was Africa’s leading fish producer in 2014 and hopes to make fishing one of the pillars of its economy. Tourism is another key industry. The Ivory Coasts is the world’s number one producer of cocoa and cashew nuts. It’s also Africa’s largest producers of bananas. Ivory Coast is also the second largest producer of palm oil and third for cotton and coffee. Ghana has seen poverty halved in 20 years with exports of gold, cocoa and oil. Nigeria is Africa’s largest economy and thelargest oil producer on the continent. Agriculture, information technology, commerce and services are also driving the continent’s economic expansion. South Africa remains the most industrialized country in the continent due to exportation of national resources like gold, platinum, diamonds and gold. Johannesburg stock exchange ranges the largest by market capitalization. Kenya is known for its technology hub on the growth base of subsidiaries of firms like Intel, Google and Microsoft.
Conclusion
Contemporary environment of global finance was previously predicted by theories of moral philosophy. Moreover, contributions are made by moral philosophy; scientific techniques and mathematical formulas derived for the solutions for economic problems and is applied on current value system of economics where Smith’s contributions remains some of the most significant. Being called ‘Father of Economics’ perfectly suits an economists like Adam Smith as he advocated for a free market system of economics, introduced:
· Law of self-interest so People work for their own good.
· Law of competition which forces people to make a better product.
· Lowest possible price to meet demand in a market economy.
Smith proposed that a nation’s wealth should be judged by its total production and commerce, today known as the gross domestic product (GDP) where GDP is an accurate indicator of the size of an economy and the GDP growth rate is probably the single best indicator of economic growth while GDP per capita has a close correlation with the trend in living standards over time.
