Economics is well-known for studying the effects of self-interested behavior, but ethical behavior has long proven elusive. It is relatively easy to incorporate consequentialist ethics into economic models of choice, because they both deal with making trade-offs in order to maximize some measure of well-being, either personal or societal. Economists regularly model consumers as trading off more expensive items for cheaper ones in order to maximize the value of an entire purchase within a given budget. Therefore, they can easily model her as sacrificing a little well-being for one party (by giving up one dinner out per week, for instance) to generate a greater amount of well-being for another (by donating it to charity), increasing overall happiness within available means.
However, deontological systems of ethics, in which actions are judged intrinsically rather than according to their consequences, pose a distinct problem for economic modeling. Rather than trading off one source of good for another, and endorsing a certain amount of harm if it allows a greater benefit in return, deontologists consider some actions to be wrong and impermissible even if they lead to an increase in overall well-being. The resulting inflexible restrictions violate the reliance on trade-offs that is found throughout mainstream economics, and may suggest that deontological ethics is incompatible with economic modeling despite its prevalence in popular debates over (for instance) abortion and torture.
While many philosophers have contributed to consequentialist ethics over the years, the one most easily identified with deontology is Immanuel Kant (1724-1804), who developed a system of ethics based on the autonomy of all rational beings-by which they have the ability to make choices without regard to either external influence or internal desire-which in turn endows them with an inherent worth or dignity. From this axiom he derived the categorical imperative, a guide to moral decision-making that results in an array of duties to oneself and others. To the extent that such duties are absolute, they pose the same dilemma for economic modeling as do any deontological ethical factors on choice.
However, these concerns are easily dismissed if one looks deeper into Kant's moral theory. The duties that flow from the categorical imperative fall into two categories: perfect and imperfect. Perfect duties are those which admit of no exceptions regarding circumstances and are usually negative: do not kill, do not lie, and so on. Imperfect duties are those with which the agent has some latitude and are usually positive: they do not prescribe or proscribe specific actions, but rather demand that the agent acts on certain attitudes, such as beneficence and self-improvement.
Understood properly, perfect and imperfect duties correspond to the constraints and preferences in the standard economic model of choice. Constraints are usually regarded as given to the agent: budget constraints, for instance, are determined by income and wealth. But just as people can make choices to change their income or wealth-by legitimate or illegitimate means-they can also choose their moral constraints, and the Kantian agent chooses to follow perfect duties. By the same token, people can include the concerns required by imperfect duties among their preferences, in order to devote resources to things they have to do as well as those they want to do (which may, of course, overlap). So, while perfect duties do not allow any compromise, this method of including imperfect duties among "ordinary" preferences maintains the spirit of trade-offs so integral to mainstream economics over a wide range of ethical behavior.
While this allows us to include Kantian ethics in economic models, it does so on a very superficial level. Kant's moral philosophy is much more than learning the categorical imperative and the duties it implies, although this is what is often emphasized in an introductory ethics survey class. In actuality, general duties must be applied to specific situations-using judgment -and once applied they must be followed despite inclinations to the contrary-using the will . Judgment and will are essential to Kantian ethics, but both are more difficult to include in economic models than duties were. As Kant understood it, judgment cannot be modeled, since it transcends rules or formulae, and relies instead on an intuitive understanding of the moral law. Resolve or willpower can be modeled only probabilistically, since acts of will are psychologically free (that is, not determined by desires, beliefs, or principles). Nonetheless, judgment and will are essential parts of choice, and also make up a person's true identity and character: they are the only truly unique aspects of a person that both distinguish her from other persons and identify her over time.
A key tension that has been highlighted extensively in heterodox economics (as well as the popular media of late) is between individuality and sociality. Modern Western societies are thought to suffer from an excessive focus on the individual to the exclusion of the social. However, the Kantian-economic model described above reveals this as a false dichotomy, because it models people as individual in essence and social in orientation. The essential individualism is implied by Kantian autonomy and its requirement that all decisions be made without regard to external influence (or internal inclination). This does not mean, of course, that one can never take the advice or counsel of others, or take commands from a supervisor, but merely that this should never be done without appropriate reflection and judgment. At the same time, through observing an extensive set of duties toward other people (as well as to oneself), the Kantian individual is inherently social; the process of choice may be individualistic, but its substance is socially inclusive.
As mentioned above, the capacity for autonomous choice-the ability to make independent moral choices despite influences from within and without-endows people with an incalculable and incomparable dignity, which entitles them to respect from others and themselves (and which is perhaps Kant's greatest legacy to Western culture). As Kant famously put it in his second version of the categorical imperative, dignity requires that people not be used merely as means, but always at the same time as ends in themselves. While this is often discussed in terms of personal ethics-providing the most intuitive justification of duties against lying, for instance-the same principle also applies to the state, which is subject to the same moral constraints that individuals are.
This poses a serious problem for the practice of welfare economics, which is classical utilitarianism put into practice: welfare economists devise laws, policies, and regulations which maximize total welfare or well-being, even if this requires making one party worse off to make another party better off (by a larger amount). Such a decision procedure-known in economics as Kaldor-Hicks efficiency -is a clear instance of using some persons simply as means to benefiting others, with no regard to the parties' rights or desert. Even the concept of Pareto improvement, which requires that policy changes are justifiable only if they make no one worse off, are questionable in this regard because the judgment of whether someone is made worse off by a policy change is often made externally, not by the affected parties themselves. This violates the principle of consent, which also treats a person merely as a means to an end, and is therefore an affront to dignity.
The most pernicious example of policymaking that threatens the dignity and autonomy of persons is so-called libertarian paternalism, by which the state subtly manipulates or "nudges" individuals into making decisions which the state judges are in the individuals' best interests. The most common examples are automatic enrollment in retirement programs upon entering a new job and arranging food options in cafeterias so the healthiest options are most visible and easily reached. This framework is based on studies in behavioral psychology and economics that detail biases and dysfunctions in everyday decision-making, which then presumably lead to decisions that the decision-makers themselves would rather not make. However, the state is in no position to know what choices people would have made in the absence of any cognitive defects because they have no way of knowing people's true interests. Instead, they impute certain interests to people-such as, in the examples above, financial prudence or healthy eating-and then nudge them in those directions, regardless of what people's true interests are. As such, this is a violation of the principle of consent and, by implication, dignity.
With its roots in classical utilitarianism, mainstream economics treats individuals merely as contributors to social welfare, with little consideration for persons qua individuals. Advances in psychology and neuroscience reinforce this, painting a picture of human beings as flawed machines that need correcting from those who "know better." These are all symptoms of a declining appreciation of autonomy and dignity which serves to diminish the moral status of the individual as well as ignore the benefits that a strong sense of the individual can bring to society as a whole. Integrating Kant's moral insights into economics can help preserve these ideals and ensure that when the good of society is promoted, it is not at the expense of the individuals that comprise it.