Robert Skidelsky and Edward Skidelsky Call for New Economic ThinkingJune 19th, 2012 by Kara in News
The quest of this Institute is to generate change in today’s dominant financial paradigm. The change will entail integration of ethics into finance theory.
The foundation of the current paradigm rests on the assumptions that economic agents are rationally self-interested and focused solely on the pursuit of maximum profit. These neo-classical economic assumptions help simplify the world for the purpose of econometric modeling.
Alas, over the last six decades, these economic assumptions metamorphosized into values. In other words, the assumptions became the ethic – we should be self-interested and we should pursue profit maximization. How often do we hear these values espoused by business, financiers, and politicians of certain persuasions? Let us not forget these values transmuted from mere assumptions.
The current paradigm of finance has served humanity well in that it has delivered material growth and prosperity. The paradigm has served humanity ill in that it has promoted an impoverished value system, designating people as “factors of production”. The two values of selfishness and maximizing profit ultimately lead to a commitment to thoughtless growth, for the sake of growth.
The call for a new economic paradigm is spreading as the Great Recession/Contraction rolls on. Robert Skidelsky and Edward Skidelsky write in their recent article, In Praise of Leisure, that the current economic system has two defects:
The first defect is moral. The banking crisis has shown yet again that the present system relies on motives of greed and acquisitiveness, which are morally repugnant…Second, the crisis [has shown that] our financial system is inherently unstable.
The Skidelskys recommend, as does this Institute, to bring together insights from economics and philosophy (moral and political). “Economics for the sake of its practical influence, philosophy for the sake of its ethical imagination. It’s time to revive the old idea of economics as a moral science, a science of human beings in communities, not of interacting robots.”
We must realize this vision of ourselves as robots and factors of production is relatively new, borne from twentieth century economics. Aristotle, Adam Smith, and John Maynard Keynes believed wealth to be a means to an end – the good life – and not an unsatisfiable end in itself.