Day 17: Snow Shovels and Value Systems

In his book The Price of Inequality, the author Joseph Stiglitz discusses an interesting study that points out the ways in which economists think differently than non-economists (ie, most of the rest of us).

A group of random people were asked the following question: “After a severe blizzard has dumped several feet of snow on a city, is it ethical for hardware stores to double or triple the prices of snow shovels that are now in high demand?” The vast majority of people believed it is clearly unethical for a store to do such a thing. When the same question was asked of people who had studied economics, the response was quite different; a large percentage of that group felt that the store owners were well within their rights to seek to maximize profits if circumstances gave them the opportunity to do so.

Stiglitz was seeking to make the point that much of economics training actually causes the student to adopt an alternate value system, where profit maximization and the self-interest of the individual or the firm is preferred over the well-being of the community. Rather than advising a firm to seek reasonable profit and good corporate citizenship, the economists defend as much profit-taking as the law will allow.

What makes this study particularly disturbing is the realization that such alternate value systems have dominated our entire economic system. Business school graduates often lack ethics, and the entire culture pays the price. Corporations value the well-being of shareholders over communities, customers and even their own employees. Banks maximize profits even if doing so harms taxpayers and the bank’s own depositors.

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