This book will be filled with arguments, but examples help bring them down to earth. One good example may do more to clarify how ethics matters to economics than would a hundred pages of argument. Furthermore, ethics is not just logic. Emotion has its part to play, too, and examples help to engage the emotions. In this chapter and the next, our concern is not to argue that ethics matters in economics but instead to exhibit – through examples – how important ethics is.

In this chapter we will focus on two examples, which will enable us to identify all the main moral assumptions that characterize mainstream normative economics. The first example caused an uproar.

A Shocking Memorandum

In December of 1991, Lawrence Summers (now president of Harvard University, but then the World Bank's chief economist) sent the following memorandum to some colleagues.

Just between you and me, shouldn't the World Bank be encouraging more migration of the dirty industries to the LDCs [less developed countries]? I can think of three reasons:

1. (1) The measurement of the costs of health-impairing pollution depends on the foregone earnings from increased morbidity and mortality. From this point of view a given amount of health-impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest-wage country is impeccable and we should face up to that.

2. […]