# Economics and determinism

**URL:** <http://discourse.iapct.org/t/economics-and-determinism/3831>\
**Category:** CSG2005\
**Created:** [December 9, 2005, 8:59pm UTC](http://discourse.iapct.org/t/economics-and-determinism/3831 "2005-12-09T20:59:06Z")\
**Posts on this page:** 1\
**Page:** 1

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**Author:** ![Fred\_Nickols1](http://discourse.iapct.org/letter_avatar_proxy/v4/letter/f/ad7895/32.png) [@Fred\_Nickols1](http://discourse.iapct.org/u/Fred_Nickols1)\
**Post date:** [December 9, 2005, 8:59pm UTC](http://discourse.iapct.org/t/economics-and-determinism/3831/1 "2005-12-09T20:59:06Z")

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From:

[http://www.freemarketnews.com/Analysis/117/3142/2005-12-09.asp?wid=117&nid=3142](http://www.freemarketnews.com/Analysis/117/3142/2005-12-09.asp?wid=117&nid=3142)

Tibor R. Machan

PREDICTABILITY AND FREE WILL IN ECONOMICS

Free Market News Network

Friday, December 09, 2005

At the beginning of each term I mention an apparent problem for  
students taking my business ethics course in our school of business and  
economics: While economists tend to approach their discipline with the  
understanding that human beings are relentless utility maximizers, in business  
ethics that idea would be very odd. The reason is that business ethics assume  
economic agents to be free to choose what they will do and holds them  
responsible to do the right thing.

The late  
Nobel Laureate George Stigler of the University  
of Chicago put the widely  
embraced economists’ stance quite succinctly when he said, “. . .  
Man is eternally a utility-maximizer—in his home, in his office (be it  
public or private), in his church, in his scientific work—in short,  
everywhere.” In contrast, the position of business ethics teachers could  
best be expressed as Professor M. van Swaay of Kansas State  
University puts it:  
“Because ethical behavior implies free choice, it cannot be captured in  
rule. The standard of reference for what is ethical has to exist ‘outside human  
definition’, and therefore cannot be open to human negotiation. Some may know  
that standard as Human Rights, some may know it as the Seven Virtues, some may  
know it as the Ten Commandments, and some may know it by yet another name. It  
is impossible to force adherence to that standard: the notion of coercion  
itself is foreign to it. But individually we can make a promise to abide by  
it…” Ethics and, in particular, business ethics assumes that human  
beings can choose what they will do, what they will pursue in life, how they  
will conduct themselves.

So there  
appears to be a conflict of assumptions about human life under the same roof in  
most business schools: Economics seems to be deterministic, business ethics  
rejects determinism. But there is a way out.

Although  
human beings have free will and thus can choose between different courses of  
conduct, they are also able to—and often do—commit themselves to  
engage in long-term behavior. Just think, when people marry, they promise to do  
what (as a result) be can be expected of them (remain loyal, help raise the  
kids, provide for the family, etc.). When the enroll in school or take up a  
job, they intend, most of the time, to embark on a planned course of conduct.

Taking  
this into the realm of economics, people also commit to seek economic security  
and prosperity. They are, in other words, prudent. Because of this, economists,  
in turn, can expect them to follow through with their commitment. The general  
idea is that when people commit to go into the market, they will ordinarily  
seek to make good deals. This is why economists can expect us all, often, to be  
economic agents, or to use Stigler’s words, utility maximizers. They can,  
as a result, also and often enough, make predictions about what we all will do,  
and their predictions are likely to be confirmed. From this way of  
understanding people, the discipline or science of economics can emerge, with  
all its (probabilistic) laws and theorems.

On the  
other hand, the above doesn’t assume that people cannot make free  
choices. Indeed, they not only often choose some plan of conduct but also often  
enough choose to abandon their plans or commitments, change course. Even when  
they commit to go to market, sometimes they get sidetracked and stop being in  
the economic mode (say, if in the course of business they meet a friend and  
instead of making deals, they focus on indulging in the pleasantries of  
friendship). When this is multiplied throughout an economic system, it  
introduces much uncertainty and unpredictability in the midst of the opposite,  
reasonable certainty and predictability.

As  
regards ethics, because they are able to choose, people can also choose well or  
badly, including in the course of doing business. In terms of this  
understanding of people, they can be viewed as having the responsibility to act  
ethically in all realms of their lives, including commerce and business. Accordingly,  
both the economist and the business ethics specialist can continue to work with  
similar but slightly different assumptions about human behavior: people commit  
to market activities enough so as to forget the social science of economics.  
Yet they are also free to make choices for which they are responsible, thus  
giving rise to ethics and business ethics.

This is  
important because as the world goes, contradictory theories cannot both be  
correct—that would violate the law of non-contradiction. It cannot be  
true both that people are determined to act as they do and also not so  
determined but free to make choices (despite some torturous efforts to defend  
this possibility). But with the above proposed resolution, there need be no  
contradiction between the economic and the business ethics understanding of  
human nature.