The Forum for Partners in Iran's Marketplace

November 2020, No. 95


Ethics in Economics!

In economics and politics, there are two possible ways to do this: Reduce poverty by raising incomes, and keep individual commodity prices low to improve peopleís purchasing power.

In justifying their failures in economics, politicians neither value science, nor economists, the blame goes to science that is not human or economists who are far from the people. And this indicates nothing but the helplessness of politicians. Masoud Nili, an economist, says the problem is not that if a politician listens to the advice of economics, he will definitely achieve the goal; the problem is that if he ignores them, he will most likely fail.

It seems that politicians in our country, for what became the fashion probably since the 1350s (1970s), blame the economists for the failures and disappointments of their wrong policies; sometimes they consider the failed policy as the advice of economists and other times in justifying a wrong policy and not giving in to scientific advice depict the whole of economics and economists away from the human component and the people. Why is this relationship so one-sided?

Economics based on the need that has always existed and is felt today more than ever, has been introduced as a very important science and has drawn attention worldwide; because economics issues are important to both the general public and politicians in particular. Politicians are the main audience for economics and economists; thus, an inevitable connection is formed between those who work and research in the field of economics and are engaged in the promotion of economics and are economists with the politicians as the applicants to examine the consequences of policy options.

Economists without politicians do not have a specific audience. However, politicians can work without economists; because their decisions do not have to be in the context of economics, just as a patient does not have to use medical science to treat himself and, for example, can heal himself, he can use astrolabes and other things. Ultimately, it is the people themselves as applicants for medical science who must heed the prescriptions of physicians, and except in special cases, they cannot be required to pursue science.

On the other hand, it can be seen that the patient may fully follow the instructions of a competent physician who has a great deal of knowledge in medicine and often gives effective prescriptions and recommendations, but eventually the patient dies because adherence to medical requirements does not guarantee treatment. In science, it is not that if the recommendations and prescriptions are followed, we will definitely achieve the desired result, the problem is that if we do not follow, we will most likely achieve the undesirable result.

Thus, just as people choose to use science in their treatment, politicians can establish the same relationship with economics. While economics has no prescription within itself; the characteristic of economics is that it explains the consequences of a decision. The demand for economics comes from outside, for example, the politician states that he wants to take action to improve the situation of the poor and what is possible in this regard. In economics and politics, there are two possible ways to do this: Reduce poverty by raising incomes, and keep individual commodity prices low to improve peopleís purchasing power.

Here the economist says that the second path, which is price control and has inevitable consequences such as quotas, conflicts with producers and distributors, and corruption, does not hit the target, and policies should be pursued in the first way to raise the general level of revenues; however, this method is hard and difficult and can have consequences in the field of politics. Economics says this and advises the politician that the method of stabilizing prices, even with good intentions to reduce poverty, does not achieve the goal and has even more destructive effects. Now, if a politician insists on his incorrect method, he includes his actions under another heading, such as humanity and attention to human issues.

Consider, for example, that in the foreign exchange market, prices are rising due to declining supply as well as increasing liquidity. If people have a vision for the future that the problem of supply shortages will not be solved and inflation is rising, then forex is no longer just a foreign exchange tool for them but becomes an asset and as a result the demand for the foreign currency increases and the price goes up. Normally, no economist sees this as desirable and does not like the exchange rate to rise, but advises the politician that the conditions created for the exchange rate determinants now require a higher rate than what the politician likes.

Here the politician may oppose the acceptance of the new rate and, in his own discretion, set a price with expediency and expect the goods and services to be offered at a lower price at the rate he has set aside to provide them and reach the consumer. In this situation, the politician has to create a large administrative system of supply, allocation and supervision for his demand, which is not fulfilled, but the result is the same that has been experienced many times and the welfare intended for the consumer, despite spending a lot of money is not provided.

Basically, what is the relationship between economics and ethics? Can we say it is an ethical science?

Science is science. Ethics also has a field for itself, and we have moral scholars who are knowledgeable and active in this field. What I can say is a reference to the facts. Between 1393 (2014) and 1395 (2016), suitable greenhouse conditions were formed in our economy. Itís like putting flowers in a greenhouse and enjoy looking at them. The outlook was positive, public confidence and hope for improvement increased, inflation declined, and during that time there was no need for market regulation and pricing sessions and regulatory and control systems. Because inflation was declining and there was no need for such behavior at all.

We experienced these greenhouse or laboratory conditions for a very limited period. Economic corruption also decreased because there was no incentive for corruption and there were no corrupting routes such as two-priced goods. In a society with low inflation and macroeconomic stability, ethics can be genuinely promoted. People are thinking of helping each other, charities are expanding, and the relationship between people is getting healthier. You can compare the scale of corruption in developed economies with our own. In those countries, a politician accused of corruption is usually charged with a low figure of $2,000 to $3,000 and is charged with receiving a gift, while the average per capita income in that community is over $15,000 or $20,000. But what are the figures of economic corruption in our country? How different is it from our average per capita income?

This is because a stable macroeconomic environment with low inflation has enormous moral consequences. People are forgiving more to one another because the cost of the opportunity to forgive is not high. But now that the value of money is falling sharply, all people are worried about the high risk that threatens their assets, so naturally no one thinks of helping others. In other words, in this situation, both the number of people in need is increasing sharply and the donor population is decreasing sharply; because donors are either under financial pressure or fearful of the future.

In such economic conditions, the society gradually loses those moral values ​​to which it previously adhered. At the same time, the great corruptions that have taken place during this period and the court trials being held currently are creating great negative effects in the direction of moral decay in the society. For many years, our society has been filling the gaps of modern institutions that have the duty to supply public goods with their morals and values, such as earning lawful sustenance and respecting the rights of others; but with the rise of corruption and poor economic conditions, these tendencies have gradually disappeared and become very weak. Macroeconomic instability has caused our society to lose many of its valuable moral assets.

Economics can provide the conditions for moral and human values ​​to take their place. We have seen how simple technology such as queuing systems in referral centers improves behavior. For example, when people lined up at bank counters to do banking, those who were taller, more powerful, or more familiar did their job more easily, and older, weaker, or younger people faced many difficulties and failures. Now, with the push of a button and receiving a number queue ethics is observed and developed.

Similar to this micro technology at the macro level is controlling inflation, creating growth, stabilizing the macroeconomic environment and eliminating the multi-price system that ensure ethics to a very good level. Like a patient with shortness of breath who is given pure oxygen. For years, it has been said in our country that the capitalist economy is usury, and developed countries whose economies are based on this system have been formed on the basis of usury.

However, interest rates in large industrialized countries have long been close to zero. With the proper functioning of economics, interest rates have reached zero. But in our country, there is still a dispute over whether the banks are usurious or not. Certainly ethics with full adherence to economics can be promoted in society. If our officials are really interested in a moral society and the development of human standards, they should definitely be much more committed to economics.


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  November 2020
No. 95