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Is there any literature that considers the benefits of ethical behaviour or teachings in Economics in terms of its value added to human capital?

If there is no difference in value added, then is there any economic value contributed by humanities faculty in a given university to the labour market? If so, is such an education a waste in terms of the labour market?

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You ask:

Is there any economic value contributed by humanities faculty?

A response from Neo-classical economics:

If there are for-profit companies hiring graduates from these faculties, then yes, they do produce value. The sum of their wages is their contribution in terms of value-added to GDP.

Same applies to economists. If they are hired by companies, then their production is valuable. I see no particular difference between economists and any other degree, and I do not see why you make such an a-priori distinction, other than an implicit view of economists as superior (widespread in the field, btw).

Now, the argument about the value of graduates that is allocated to non-profit organisations, including the state, universities, NGOs, and etc, goes exactly in the same way. Consider Greenpeace. If donors of Greenpeace consider it's activity as valuable, and Greenpeace wants to hire economists and artists, then their production has value, because some people benefit from Greenpeace activities. As such, there is no reason why you would not value the contribution of all these careers. Again, the argument applies to both economists and non-economists.

The only situation where you could argue that there is no value produced is when a degree is producing graduates which are then hired to run those same degrees, in a perpetual circle. I am afraid that economics is just as likely to suffer from this than any other discipline.

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  • $\begingroup$ "If they are hired by companies, then their production is valuable" .It seems that my idea of productivity was ill defined. Thank you! $\endgroup$ – EconJohn Jan 29 '17 at 21:36
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You may want to start out with the more general question of what the benefit of education are.

Here are some early papers on this.

Plant, Mark, and Finis Welch. "Measuring the impact of education on productivity." Education and Economic Productivity (1984): 163-193.

Pencavel, John. "Higher education, productivity, and earnings: A review." The Journal of Economic Education 22.4 (1991): 331-359.

I do not know of any studies about economics education in particular.

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  • $\begingroup$ I've read some literature on the returns from education, and job training. ie.Jess Benhabib, Mark M. Spiegel. “The role of human capital in economic development Evidence from aggregate cross country data”. Journal of Monetary Economics 34 (1994) 143-173. Print. Sandra E. Black and Lisa M Lynch. “Human-Capital Investments and Productivity”. American Economic Review May 1996. VOL. 86 NO. 2. Print. however im asking what economic value does ethics provide. maybe it can influence a firms hiring decision. I.e they prefer workers with ethical behaviour over those who dont. $\endgroup$ – EconJohn Jul 28 '16 at 18:58
  • $\begingroup$ economic value meaning productive value. $\endgroup$ – EconJohn Jul 28 '16 at 19:00
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The payoff from ethics education is difficult to measure, but let's consider notable failures of ethics and suppose some of these were preventable - the prevented damages would be gains from teaching ethics. For example, a certain car company knew that one of its parts were defective in many of its cars, but determined that it would be cheaper to let people die and pay off the insurance claims than to recall the cars and have the parts fixed. We suppose an ethically educated person would see that solving the unconstrained profit maximization (ie without regard to human life) is absurd, and so a number of people's lives are saved.

Do the lives saved outweigh the costs to shareholders? Who can really answer such a question? Economic value is not really a great framework to discuss such topics, since the values of some quantities are undefined or arbitrary.

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If a manufacturer/retailer is unethical then there is a disturbance in the market. Let's assume he tax evades by excluding VAT for his best customers. If he does so he can increase his profit more than the rate of VAT because the state observes he sells less, so he will contribute less in taxes (assuming progressive tax rates). Also, he is able to have prices under the market equilibrium. Having an illegal comparative advantage like this over his competitors, the opportunity cost of being more competitive reduces over let's say finding an even better accountant to hide the fact he tax evades.

The long story short, this assymetry redistributes wealth from healthy investors/retailers to malinvestors.

Back to your question, my suggestions may seem a bit awkward. Read utilitirianism by Stuart Mill and Bentham and psychological egoism. Under this concept you will find out that a state ought to regulate in a way to minimize the utility of being unethical (or max the utility of being ethical), because let's face it: Economic agents tend to be unethical in order to max their personal utility and there's not such a thing as collective utility notion in western civilization.

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