Ethical consequences sometimes seem to result from business or economic policies and practices; and when those consequences seem to be most egregious, business leaders, boards of trade, politicians, governments, and economists may look for ways to remedy them and prevent their reoccurrence. It is my suspicion that this generally involves merely tinkering with those proximal causes most closely related to the undesirable symptoms, rather than understanding the ethical and philosophical foundations and ultimate causes in any economic system or policy. 

Economic systems are or tend to become formal or formalized⁽¹⁾ systems. That is, they become procedural - governed by rules and regulations, rather than by general principles which may also take into account results or important outcomes. Games, sports, legal systems, organizational policies, and other areas of life are very similar in this regard. They all face the same problem: formal systems can yield results that are greatly at odds with what informal rational judgment outside the system knows to be right. When the results achieved within the formal system are most egregious according to outside informal judgment, judgment will often prevail and the formal system will be amended or it will be overridden in some way. When the results do not seem quite so bad, they are often let stand, with the argument given that one has to accept certain anomalies in order to have rules that prescribe everyone's behavior, because living within a rule-governed system is best for everyone overall.

That argument is itself open to question, however, for at least four reasons. (1) If egregious results can be overridden, less egregious results, particularly if they severely affect a (small) group of people are not necessarily more sacrosanct. (2) There is no a priori reason to believe that a formal system which permits bad results is better than no formal system at all; and there are some cases where informal systems work better, particularly one based more on general principles rather than specific rules, and which include principles that permit remedy for arbitrary or capricious judgments interpreting them. (3) It is perhaps always possible that a formal system with different particular rules will be better than the current system, and so rules may need to be added, deleted, or amended to minimize the number of anomalies. And (4) a system might have a way of, at least to some extent, incorporating informal rational judgment into it -- as in allowing something like ombudsmen to override formal rules under circumstances they can justify with good reasons.

What happens in any formal system is that rules and regulations are utilized or developed which seem to be fair, which seem to be necessary and useful, and which seem to capture the spirit and purpose of the endeavor being established. Unfortunately not all circumstances or applications of the rules can be anticipated, and three different kinds of problems will typically arise in any formal, procedural system. (1) The loophole problem -- instances will arise that meet the letter of the rules but which will appear at least to some people to violate their spirit or the purpose of the enterprise. (2) Instances will arise where even sincere and faithful adherence to the letter and the spirit of the rules leads to an unanticipated, undesirable result because the rules will be incomplete, contradictory, or because one or more of them will not have accurately captured what was intended or what was unconsciously understood. (3) Unanticipated circumstances will arise for which the rules are inadequate or antiquated, yielding undesirable results. An example of the this last case arose in American football when kickers became so strong that kicking the ball off from the 40 yard line virtually eliminated "kick-off returns" and their potential excitement because kick-offs routinely went beyond the field of play for a touchback. 

The American collegiate and professional football experience with "instant replay" checking of disputed referee calls is a good example of the last part of the second kind of flaw. Instant video replay analysis of the accuracy of on-field officials' calls was instituted because from time to time during football games officials made mistaken calls that were obvious and important. But the procedures instituted to detect and correct the errors did not address the real problem. This is true of the collegiate experience with rules governing instant replay official review and with both of the, so far two, NFL attempts. Coaches were allowed to request replay reviews, and play was held up while the video was analyzed. This slowed down the game so much and did not make sufficient difference most of the time to warrant the time and trouble, so "instant replay" officiating review was dropped. But, of course, this left the original problem that "instant replay" analysis was intended to prevent. It is my view that the way the original instant replay was conceived and formalized is where they went wrong. The original, and current problem, is that some calls in football are not only wrong and not only important about the outcome of the game, but they are also seen that way by all the fans watching the game on tv, and those who see the replay in the stadium on a large screen. Those calls are the only ones that need to be reversed -- the obvious and egregiously wrong calls that everyone watching tv sees. A referee who could stop the game and reverse such calls could simply be stationed in a booth with a tv, acting when, and only when, an obviously wrong call was made. That would not slow the game beyond what is both necessary and acceptable to fans. Fans do not expect perfect referee judgment about every difficult or close call; what they do not want is for really terrible calls to be made that are obvious to everyone but the referees. Understanding that would help football administrators develop better policies for instant replay review than they have so far. Instead the current instant replay rule in professional football requires that coaches make a challenge, and give up a time-out if the challenged call is upheld. Plus, play has to be stopped and the referee who made the call has to do the review -- sometimes allowing him to repeat the error if it involves misinterpretation or misunderstanding of a rule. And coaches only get two challenges a period, so if there are four bad calls during a period, at least two of them will be ignored. "Instant replay challenges" then, as they are formally instantiated, do not reflect the intention and point of allowing all and only obviously egregious calls to be overridden more or less automatically whenever they occur.

This book is intended to explain the underlying philosophical and ethical foundations and repercussions of economic principles and of economic systems by examining them within the context of five puzzling questions about economics. There are three general approaches throughout: (1) exposure of conflicts between formal economic rules or systems and rational judgment where such conflicts exist, (2) translation of statements about money and financial wealth into statements about their actual meaning and consequences for human actions and values, particularly in regard to changes in benefits and burdens, such as labor and products, since statements about money do not necessarily logically imply the statements about quality of life that they tend to psychologically imply, and (3) presentation of perspectives that relate ethical concepts, principles, and values on the one hand to economic concepts, ideas, and practices on the other, because many economic concepts, ideas, and practices, perhaps particularly ones thought to be "natural" or "obvious", seem to stem from moral values and ideas, even if only subconsciously or unconsciously.

1. By "formalized" I mean being formal to a great extent, even if not designed that way and even if not fully prescriptive of all behavior. "Formal" systems in social enterprises, such as law are not fully governed by formal rules that prescribe every behavior, since they tend to permit what is not expressly prohibited. This in itself, however, indirectly governs all behavior because it leaves no remedy for actions that, rationally, obviously should have been prohibited in hindsight, but which were not prohibited in the system. And it does not leave remedy for sanctions against those behaviors which are proscribed but which, from a strictly rational point of view, should be or should have been permitted. (Return to text.)