Integrity and Agreement: Economics When Principles Also Matter

Chapter 1. Why Integrity?

Chapter 1 Why Integrity? Consider the proposition “lying is wrong.” True or false? My experience has shown that most people quickly answer “true.” Not surprisingly, the question tends to be a little more problematic for economists. The ‹rst time I asked someone whether lying is wrong, it was of a job candidate.When she dutifully asked what I was working on I innocently asked the question above to help explain. The look on her face was a mixture of confusion and terror. I wasn’t trying to trick her, but I could sense her apprehension in weighing her options. If she answered “true,” she might have thought I would not think her a good economist, while if she answered “false,” I might spring some fancy ethical trap. Had she answered “false” it likely would have been because she realized that economists don’t deal much with ethics. We deal with preferences and rationality, and thus verbal claims against preferences are just noncredible “cheap talk.” Her hesitancy signaled she was not a certain type of naturalist, for whom ethical questions like the one posed are nonsense, in which case she could have immediately blurted out “false.” On the other hand, she may have had some faint recollection about the notions of right and wrong from before her graduate training and thought that somehow she should answer “true.”1 Her dilemma was apparent. She decided against either response, and after some awkward mumbling we talked instead about New England’s strange weather. Since the question refers to a moral principle, it asks about one’s understanding of the world. Were one to thoroughly embrace the principle, so much so that it formed part of one’s identity, we might be able to say that the person was a person of integrity. In that case, to violate a moral principle the person takes to be true (by lying) would be to act contrary to her own under1 1. She might also have objected to the categorical nature of the question. Many I have asked wanted to say “true,” but could think of exceptions like lying to prevent harm or “white lies.” I will discuss those quali‹cations in detail later, but when I modify the proposition to “lying is wrong in normal circumstances,” it really doesn’t seem to change the number of “true” and “false” answers. standing of the world and thus her understanding of her own self as well, which would be incoherent. Even in a weaker case, one more consistent with current economic theory, if the person did not identify with the moral principle but instead had a strong preference over it, she would still have reason not to lie. In this book I will develop the notion of two different kinds of integrity. One focuses on identity-conferring commitments to principles, the other on preferences for principles. But while they differ in their particulars, most fundamentally , both refer to honest behavior. The possibility of integrity and honest behavior is important any time there are economic agreements.2 That covers a lot of economics. This book will cover informal interactions that characterize social dilemmas, formal legal agreements between buyers and sellers, political agreements, employment agreements, religious agreements, and the social contract. In each of these cases, the possibility of integrity changes the answers given by neoclassical economics and instrumental rationality (rational decision making in one’s own self-interest) because to make an agreement that one has no intention of honoring is to lie. This simple but powerful fact seems to have eluded most economic analyses. The analysis here will not require heroic assumptions. We will not focus on the few individuals who might embrace myriad moral principles and possess the kind of strength of will that, like Don Quixote, leads them to try to right every wrong. But neither will we con‹ne ourselves to the kind of lead character presented in Ben Jonson’s play Volpone. While nothing prevents a rational economic man from also being moral, when it comes to economic agreements, he is most often characterized as opportunistic.3 More beautifully articulated, Volpone is ruthlessly sel‹sh and engages in . . . sanctimonious speeches, lust and possessiveness poorly disguised as love and marriage, cynical legalism passing itself off as pure justice, boastful name-dropping that pretends cultural sophistication, snobbery congratulating itself that it is decorum, and greed deluding itself that it is really prudence, responsibility, even religion.4 INTEGRITY AND AGREEMENT 2 • 2. Earlier works that touch on...