The Human Side of Economics

I’m currently reading The Righteous Mind by Jonathan Haidt. Although I am still in the early stages of engaging with the book, I recently read a book review and commentary in The Economist that I found both interesting and closely related to Haidt’s work. The title of the article is “How Should Economists Treat Morality?” It reviews Moral Economics, a new book by Alvin Roth, which explores why some voluntary transactions are accepted by society while others are considered morally objectionable, or “repugnant.”

The article begins with the question, “Why is buying heroin easier than hiring a hitman?” We know that both are illegal in most countries. Roth’s answer is that society reacts differently to different kinds of prohibited exchanges. The article explains that a person seeking heroin will eventually find someone willing to sell it, whereas a person looking for a hitman is far more likely to encounter an undercover police officer than an actual contract killer.

It’s an interesting question, and I’m sure my WordPress community can come up with a variety of answers. You’re welcome to share your perspective and engage in what I hope will be a great dialogue.

My personal opinion is that it’s all about optics. You don’t read many news articles about people getting caught buying heroin, but there are plenty about contract killings. As a matter of fact, I recently read one about a person convicted of hiring a hitman to kill an American in Brazil. Drugs are often a case of “out of sight, out of mind,” whereas contract killings make major headlines and are viewed as particularly heinous crimes.

The article goes on to say that Roth, drawing on his work in market design and organ donation systems, examines markets involving activities such as organ sales, prostitution, surrogacy, drug use, and horse meat consumption. By the way, I wanted to try horse meat in Belgium, but rabbit kept winning me over every time I visited a restaurant. According to the review, Roth argues that policymakers should focus on the practical consequences of allowing or banning these activities rather than assuming a moral consensus exists. I absolutely agree with that point.

According to the article, Moral Economics highlights several key findings:

  • Moral attitudes toward markets vary widely across cultures and countries.
  • Prohibitions rarely eliminate an activity entirely, but they often reduce its frequency.
  • Bans frequently create black markets and unintended consequences.
  • Evidence suggests that some legalized activities, such as regulated prostitution, may reduce harms like sexual assault and sexually transmitted infections.

These findings are interesting, and a person could spend a significant amount of time examining each of them. However, the point about regulated prostitution is one that deserves careful consideration and further explanation. Looking only at the possibility that legalization “may reduce harms like sexual assault and sexually transmitted infections” is problematic.

At face value, it may reduce those harms. But the deeper question is why women and men resort to prostitution in the first place. Is it because of financial hardship? Is someone coercing them into prostitution and using legalization as a tool to advance personal financial interests? Or is it something else entirely? I do not know the answer, but prostitution is not simply a career that most people select from a list of employment opportunities. There are often underlying causes that deserve attention and, where possible, solutions.

The Economist reviewer appreciates Roth’s evidence-based approach but criticizes him for treating moral objections primarily as constraints to be managed rather than engaging seriously with the ethical principles behind them. The reviewer also notes that although Roth demonstrates a strong concern for individual autonomy and reducing suffering, he tends to avoid deeper debates about why people find certain transactions morally offensive.

This particular issue is addressed in The Righteous Mind, so I am looking forward to finishing the book and then returning to this article, hopefully with a better understanding of the question. I may also add Roth’s book to next year’s reading list.

The article ends with this observation:

“One that treats everything as tradable might struggle to sustain the tacit co-operation on which markets, repugnant or otherwise, ultimately rely.”

In other words, markets cannot survive on market principles alone. They require a foundation of trust, shared moral values, and social cooperation. If a society turns absolutely everything into something that can be bought and sold, it may erode the very social bonds that allow markets to function in the first place.

This final point gave me a great deal to think about because it touches on something that appears to be happening in this country today. When everything becomes transactional, we risk weakening the trust, shared values, and civic bonds that hold a society together. In the long run, that may also contribute to a decline in our standing and influence in the world.

86 thoughts on “The Human Side of Economics”

  2. This has got me thinking about the situation in Australia where tobacco and Vapes are so highly taxed that a huge black market has grown up over the last decade or two. Indeed a recent estimate puts it at 80% of sales, 80!!!
    A huge tax is in place to discourage smoking – a public health policy.
    Yet the real outcome seems to be that ordinary, more or less law abiding, citizens have become willing black market customers because of the huge savings, and smoking rates might be increasing again after years of falling. All this because smoking is both more affordable and visible. Worse, inferior and more dangerous products are consumed. The situation has created a career and a career path for criminals and almost open aspirations of becoming a drug Barron. Young teenagers are recruited using encrypted Apps to set fire to shops where owners won’t sell ‘chop-chop’ or pay protection money. Viscous criminal syndicates compete for market share.
    Unfortunately the powerful Health lobby (you could cheekily call them mafia in this context) insists that the government maintain huge excise taxes. They are failing to achieve their objectives and inadvertently contributing to the corruption of society.
    Forgive this long-winded comment, but I couldn’t resist because the issues around ethics and economics are important. There is a real need to develop a better framework for crafting economic public policies.
    Thanks Edward. I really appreciate your thoughtful posts
    DD

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    1. You’re very welcome. It’s probably the same in the U.S. with the legalization of marijuana. It’s available, taxed, and there is still a black market. We definitely need a better framework for these things.

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  3. Given how important what I’ll very loosely call moral indignation is in banning, restricting and shaping markets, you would think the study of everything to do with the causes and management of the unintended costs and benefits of the production and consumption of goods and services would be taken very seriously.  But Gemini AI said the study of ‘externalities’ was only a minor subject, and was subsumed under major subject areas like microeconomics and public policy. 
    I hope this discussion of the human side of economics shapes things up.
    You’ve done a great review, Edward. Thank you.

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    1. Such a great point you are making about moral indignation. My guess is that there are people researching those areas, I’m sure philosophers are, but the findings are likely still hidden in a journal or on someone’s computer somewhere. Also, some people might not want that information to come to light and affect the markets, so that might be another issue. I agree with you that this subject needs to continue to be discussed, and people need to know the consequences of their actions or inactions. Thank you for reading and for the great comment.

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  4. As always, Ed, a compelling discussion. I believe that when everything becomes transactional, being bought or sold, the moral decline of the individual ramps up speed. Someone who might not have thought about it originally may be motivated they otherwise would not. Also, what happens to the standards that govern civil behavior? When restrictions are removed, the conscience declines as well. I know everyone has free will, but I still believe there are still some rules establishing wrong and right. Such a heavy conversation, but necessary.

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    1. Thank you, Sandra. Great points, and I agree with you about the rules. Societies must have some basic rules agreed on by the majority. That’s the only way to ensure justice and fairness.

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  5. Fascinating, Edward! As always, I love the way you bring such interesting and thoughtful topics. I agree with Terry about the difference between heroin and hitmen being doing harm to yourself versus others.

    Your conclusion really rang a bell to me, “When everything becomes transactional, we risk weakening the trust, shared values, and civic bonds that hold a society together.” That feels so true in this country today. The prediction markets come to mind. Do we really want to bet on things like whether Maduro will be captured successfully? And what does it do to our outlook if we are betting against the hopeful side of human nature?

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    1. Thank you, Wynne. What you said about the conclusion is exactly what I was thinking when I wrote it. Betting on taking down country leaders, on wars, or even threatening others so the government and rich people can benefit monetarily, yes, there is something wrong with that picture.

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  6. I believe some people don’t care if an individual buys drugs, even heroin, because they figure the only person getting hurt is the drug user. However, we know that the effects of drugs ripples like a stone thrown in a pond. People don’t want to live in areas with drug dealers and users, so housing value goes down, which leave folks who have less money, meaning less property taxes going to local schools, leaving people poor, making the drug dealer life look glamorous. Also, poorer areas affected by drugs face more crime, and such areas tend to be blocked off — sometimes literally with a gate — to nicer neighborhoods. Factories are more likely to be built in these areas, and the resulting pollution leads to negative health effects. It’s mind-boggling. I’m less worried about someone hiring a hitman, personally.

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    1. I agree with you. I think the problem is that people look at the drug problem from the outside and think, “That drug addict over there—it is his or her issue, not mine.” But like you said, it affects all of us and we should be paying more attention. I think a hitman creates more noise in the news outlets because of the sensationalist aspect of it.

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  7. Hi. Stopping by to let you know I found your blog after searching “book reviews”. I’m trying to build a reading and blogging habit and I find your posts are exceptional! That’s the reason I subscribed to your blog earlier. Have a great day👋

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  8. Living in South Africa which is steeped in corruption and mismanagement in all aspects of government, I can say that rules and regulations only work in a society that is largely compliant with rules and regulations. If no one cares or complies, they simply do not work. With regards to the hierarchy of crimes, I think drug crime all boils down to money. A lot of people make a great deal of money out of selling drugs so it is pushed under the carpet to a large extend. Only lip service is really applied in the fight against the sale of drugs. It seems to me that insider trading is now being ignored too so that a few very rich people can make even more money at the expense of all the workers of the world.

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    1. Excellent points, Robbie. I agree with you that rules only work when people want to follow them. That’s why getting people’s approval before implementing them is important, though that seldom happens. Drugs and now insider trading (including profiting off war predictions) are big problems because, like you said, rich people are getting richer, and it all comes at the expense of the working class. Thank you for your comment, my friend.

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  9. Interesting stuff, Edward. A perpetually important, relevant topic that probably isn’t thought about as much as what we should. Markets exist solely because of people. I guess it’s both the beauty, and the risk, of them.

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  10. This is an interesting post. I was recently watching a video about the psychology that drives a market economy. Capitalism extracts as much as possible, and the psychologists who are contracted and consulted by huge corporations study us to find ways to keep us perpetual consumers.
    Language is so important, and morality factors are considered, just in more subversive ways.
    The laws themselves operate in a contradictory manner, ie, CEO are legally bound to make as much money as possible, while consumer protections are silently being eroded.
    This is gonna send me on a deep dive, but I always enjoy my visits to your site, Edward.

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  11. This is a fascinating post, Edward. Heroin vs a hit man is shocking findings. One thing about being on baby watch is I haven’t turned any news on which is truly refreshing, I have to say.. It just doesn’t go with the maternal vibe.. ya know? … xxox❌🅾️

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  12. I’m a big fan of Dateline, and it always amazes me whenever someone looking for a hitman will just randomly ask a coworker, “Hey, you know any hitmen?” Trips them up every time. No wonder there are so many undercover cops ready to nab them!

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    1. There was a time when people were looking for them in online forums. Crazy! Not related, but I enjoyed watching the sting operations to catch pedophiles. Those “teenagers” who were FBI undercover agents got them every time.

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  14. What a powerful reminder: comfort may soothe us, but it’s effort that shapes us. The connection between the podcast and the article is striking — we don’t need to climb Cotopaxi to regain momentum, just to start doing something that truly matters.

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  15. A thoughtful reading reflection—sharing early impressions of The Righteous Mind by Jonathan Haidt and noting that the reader also encountered a related review and commentary in The Economist, showing an interest in moral psychology and public discourse. 📚✨

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  17. I’m thinking that buying heroin is usually going to harm only you – possibly even be your demise in the case of an overdose. Hiring a hitman is obviously intended to end the life of another person. There’s also a much greater risk of a hitman facing serious consequences if caught, and possibly not so serious for a drug pusher. Those are my guesses, Edward.

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    1. I had the same thoughts, Terry. As I was writing the post, it occurred to me that someone selling heroin should be treated the same as a hitman, both are getting paid to jeopardize other people’s lives.

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  19. I believe trying to make markets operate on a morality basis is much too difficult. It is not a one-to-one comparison to prostitution but sites like OnlyFans challenge this notion of market morality. Let me be clear, I’m not a fan of OnlyFans, but it would seem that a lot of people who make their pages with their own content have made that choice for their own benefit. Some of these content creators make millions of dollars, not all but some do. I point this notion out to say that bans not heavily enforced on markets, the firearm market being another one, leads to massive grey areas that could end up being a larger problem than the one trying to be solved. Who am I to judge someone’s morality when they willingly post provocative photos of themselves on a page that they created? This is where trying to institute moral obligations into economics is tricky possibly leading to less than desirable results. I think the better solution that needs to be considered is raising taxes on these markets or individuals. Content creators on OnlyFans want to post their own content, fine, but, if I were in a position to make this possible, the tax I would levy on that would be absurd, like 60 percent, to deter that kind of market from exploding the way it has. High taxes is one thing, but governments spending that tax revenue properly is a whole different subject. I guess long story short, bans can be effective if enforced properly, but instituting a high tax rate on these content creators can also be of great use to deter black markets from emerging. This also applies to other markets, drugs and guns in particular, but letting markets operate on a hope based morality system has proven to be ineffective even if it can create vast amounts of wealth for a select few.

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    1. Thank you for your great comment. You raised some good points, and I understand your view about OnlyFans. I guess it is the same with gambling sites. These platforms are available and approved for people to create content and interact with other people interested in that kind of content. Increasing taxes is okay, I guess, if the vast majority of a particular country is in support of that. If they agree to higher taxes, then the government better have a good plan, like you said, so the revenue is not wasted. This is a difficult subject, so thank you again for offering your opinion.

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  20. So many good comments on these difficult topics, Edward.

    How do we monitor people moralistically with money? It’s disgusting how much money billionaires have while so many starve, are homeless, and dying. There has to be some way to do this better. I like the idea of having a balance of friendly competition, and deep compassion for each other in our society.

    I think some things like alcohol, marijuana, and other drugs have wonderful medicinal purposes. And people who benefit from them; should be able to easily access them. However, I also grew up around people addicted to those substances, who didn’t use medicine correctly, who chased the ‘drunk’ and the ‘high’ instead of the ‘healing’. How do we keep destructive products out of their hands, protect them, and the lives they disrupt because of improper use? ‘Legalizing everything’ won’t protect people from themselves. Aren’t we honor-bound to protect each other the best we can? How do we know when we’re overstepping those protective duties, and straying into ‘big brother’ territory?

    As one of your other commentors suggested, sometimes the ‘rumors’ are that ‘everyone is doing it’, so people feel pressured to do what everyone is doing. When in reality, not everyone is doing those things. It’d be interesting to know where such rumors start, and why…

    So much gray area to cover… It’s a wonder societies are able to develop and hold together with all the variables and opinions…

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    1. Thank you so much, Rose. It is a very difficult subject for sure, especially in today’s culture where groups are formed based on ideology and are not willing to listen to opposing views. Echo chambers are ruling the day. You brought up so many good points, especially when talking about marijuana, for example. I know it has tremendous benefits for terminally ill patients or those with chronic pain. I’m supportive of doctors prescribing it and pharmacies providing it to patients. I’m not completely sure about the way we are doing things now. It seems like some are only for the “high,” like you said, not for the healing. Rumors turning into fancy and expensive marketing campaigns are pushing people to take on unnecessary risks. How to control that? Hard to say.

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  22. Really insightful reflection. You’re touching on a key idea in both Haidt and Roth: markets need moral boundaries, trust, and shared values to function not everything can or should be traded. Your point about optics is interesting, but deeper moral intuitions (about harm, purity, fairness, etc.) also strongly shape how society reacts to different illegal activities. Looking forward to how The Righteous Mind expands your thinking on this.

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  23. I agree with you, Edward. “It’s all about optics,” and finding the root cause for these specific situations is halfway to solving them. Not by repressing but by caring, realigning, and recreating realities. Awareness, of course, plays a huge role in all of this, and not all who are supposed to help solving them hold it high enough. A lot to consider here, my friend. A profound and relevant post, as ever! Thank you! Much light and many blessings to you, always! ✨🙏🍀🌞

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    1. Thank you, my friend. Your point about those who are supposed to help is true, and that’s part of the problem. Appreciate your comment, and I hope the rest of the week is a blessed one. 🙏🏼

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  24. My state (Gujarat, India) has banned the Alcohol since 1960s.

    As you said, there exists a grey market for that. Size and volume of that Market is debatable. Most people believe that Gujarat has one of the highest alcohol consumption.
    I being a person who is born and brought up in Gujarat don’t believe that. Because if I personally know let say 500 people, 50% of them has never touched alcohol. 30% of them have taken it two or 3 times only during their lifetime.
    Only 5-7% people consume in good frequency. Most likely through grey market.
    But now this perception that Everyone consumes alcohol here is making younger generations explore the grey market despite that is not the case.
    It is still not that easy to get alcohol here. You need to have some strong police level connections.

    My point is Bans can actually reduce frequency of something. It does open a grey market.
    The grey market needs to be regulated and eliminated for making bans effective.
    I don’t believe that states don’t have enough capacity to curb grey markets.
    There is willingness issue here.

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    1. Thank you for your comment and for sharing your experience from India. I think your last point is key. As long as there are people who want something (in this case, alcohol) and are willing to do whatever it takes to get it, a market will always exist to provide it, no matter what. Each country needs to work with its citizens to decide what’s best for society as a whole; gathering feedback from everyone before making a decision is crucial.

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  25. You have a president who takes everything and anything on a transactional basis; got America out of WHO and disbanded USAID and now ebola is affecting all of us, where as hitherto, USAID with its immense manpower and resources, in collaboration with WHO would have provided a quicker response to the outbreak. How do you deal with the dilemma that the US has got itself in as far as quarantine of it’s ebola affected citizens in Kenya is concerned? Not all things are tradable! The English say that you can’t eat and have your cake at the same time.
    And as a marketer I am reawakened by the fact that markets can’t operate on market principles alone.
    Thank you for sharing and God bless you abundantly.

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    1. You’re very welcome, and what you said about this administration is true. My hope is that a new administration will come and restore our standing in the world as a beacon of hope helping those in need. Thank you for reading and commenting. God bless you. 🙏🏼

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  26. A thoughtful and timely reflection. Economics is often reduced to numbers, statistics, and market trends, yet at its heart are real people, families, and communities. Your reminder that morality, trust, and human dignity must remain part of economic thinking is both insightful and necessary. True prosperity is not measured by wealth alone but by the well-being and flourishing of society as a whole. Thank you for highlighting the human side of economics so clearly.

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  27. This is a fascinating discussion. I agree that not every question can be answered by economics alone. Just because something can be bought or sold does not necessarily mean it should be.

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  30. As you know, Edward, Haidt is a research psychologist and will give you quite a different view than all but a few economists. Indeed, Daniel Kahneman won the 2002 Nobel Prize for economic science. He was a psychologist

    What one discovers as a clinical psychologist in practice, is that logic, penalties, punishments, and rewards are not the only factors that determine why people behave the way they do.

    I treated some prostitutes. Their backgrounds often involved poor parenting and sexual abuse, to name a couple of the factors I encountered.

    Human beings are not machines, a good place to start in trying to understand why they behave as they do. Our current political situation provides us of a kind of laboratory, allowing us to understand how and why people choose parties and candidates. History books present more examples.

    Thanks for your review, Edward.

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    1. You’re very welcome, and thank you for your comment. It’s interesting that some economists are looking into the subject of morality and ethics. That’s probably a good thing. I’m enjoying Haidt’s book so far. We are definitely not machines, but there are a lot of people trying to force our behaviors to look like robots. A lot of absolutes—yes and no—are expected of us, with no middle ground for discussion. You’re right, our current political environment, especially since January 2025, provides an excellent research ground for PhD candidates.

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  31. The subject of how money is spent is interesting, Edward. This can be taken in many ways. Is it morally right to pay an athlete millions and a caregiver $25 an hour? What about the wasteful over-consumer. Just because we have the money, is it right to spend $100,000s on a car when our neighbors cannot feed their families? This is a fascinating topic, indeed.

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    1. You are so right, Mary, and I actually thought something along those lines last week while watching a basketball game. Basketball players are earning millions of dollars for a short season, yet today’s players can’t play a whole game without taking a lot of breaks. I was thinking, “With all the money you are earning, you better play the 48 minutes (four 12-minute quarters) without complaining, because there are nurses working 24 hours straight for less than $100K a year in some cases.” Caregivers are another great example. Not only do they need to work for that amount, but they also still need to go home and take care of a family. Some of these basketball players get everything done for them.

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  32. You always get me thinking Edward! Idk how anyone could ever come to an understanding about topics like legalization of prostitution, there’s so much to consider!

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        1. Great review, everything is becoming transactional, even marriage with prenuptial

          I can’t say that I agree or disagree, I understand both sides.

          Probably case by case, very interesting discussion for sure.

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