When I talk about ethics in this context, I am not considering how businesses can act in an ethical manner but, rather more fundamentally, the necessity of value judgements in economic analysis. One example that I am learning about in a current module concerns the social welfare function.
If we first reduce economics down to its defining characteristics, it is commonly found to deal with how scarce resources should be/are distributed. Studying resource scarcity and distribution through the problem/solution framework so often employed in economics requires that there be a solution to this resource scarcity problem. This is where the social welfare function enters the discussion. This function seeks to order different social states in terms of desirability. There are a number of ways to conceptualise this problem, all followed by fierce debate.
First imagine that the curve on the graph below represents the 'utility possibility frontier' between person 1 and person 2. In other words, each point on this curve represents a sum of the utility of person 1 and the utility of person 2 using all of society's resources. Now lets consider the inclusion of 3 different options for how best to allocate resources in this economy.
Equality: This idea suggests that Person 1 and Person 2 should each get the same amount of utility. This is represented by the red dot. This doesn't necessarily mean that person 1 and person 2 get the same amount of resources, but that each person's sum of resources give them the same utility.
Utilitarian: The next option is the yellow dot. This idea suggests that what society should actually be trying to do is make sure that there is the highest possible amount of utility in the economy. Even if this means that person 1 and person 2 get different amounts of utility, altogether the total utility is higher than the red dot and so this is better.
Rawlsian: Another interesting idea to consider was introduced by Rawls (represented as some point in between the red and the blue dot). Imagine that both person 1 and person 2 do not know what their final position will be in terms of welfare and utility. If person 1 and person 2 were asked how welfare should be allocated in this society, Rawls tells us that these people would only choose something different from equality if the person most worse off in society was better off than they would be under equality. This could lead to a situation where total utility is less than its potential but the option is still preferable because of the risk each person wants to avoid.
So, how do you find the answer to this problem?
There is only so much that modelling and formulaic calculations can do here. At the heart of the problem is a personal ethical judgement. You must decide to justify either that perfect equality is pursued or maybe total utility should be maximised. It is difficult to say that there is a definitive answer here. How should society's resources be allocated? The most fair option? The most equal option? The option with the greatest utility? This problem lies at the heart of economics and yet, it is full of ethical questions and philosophical debate.
So maybe the association between ethics and economics is not so laughable, and there is value in considering a different approach which takes these value judgements just as seriously as the maths which frames the problem.