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Ethics, Economic Advice, and Economic Policy

By Joseph Stiglitz | Initiative for Policy Dialogue | October 24, 2005

Earlier versions of this paper were presented at a meeting in Milan sponsored by the Vatican in connection with the Jubilee, and at a conference at the Interamerican Development Bank in Washington, D.C. in December 2000.
Introduction

Economists have long bought into the importance of self-interest not only in explaining behavior, but also in yielding efficient outcomes. But economists have also long been aware of the limitations of these perspectives. Not only does the self-interest /market paradigm often fail to generate efficient outcomes, but even when it does, these outcomes may not comport with notions of social justice. Still, in the realm of economic policy, governments typically justify foreign aid and other policies aimed at poorer countries in terms of their own self-interest; how such policies increase world incomes, thereby increasing the country’s own exports, or contribute to global political stability, from which all benefit. Such arguments deflect attention from the moral justification for these policies. Ethics in the relationship between developed and less developed countries dictates that the developed countries treat the less developed countries fairly, aware of their disadvantaged economic position, and acknowledging that taking advantage of one’s own economic power inevitably will hurt the poor within developing countries. We have seen several instances where, in global economic relationships, this precept has been grossly violated: an international trade agenda set to advance the interests of the more developed countries, at least partially at the expense of the less developed—so much so that on average the world’s poorest region was actually worse off at the end of the last round of trade negotiations; and an international environmental agreement that provided that those rich countries who today are polluting more be entitled to continue polluting more into the future.

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