## Adding Ethics to Public Finance ## Source details **Canonical URL:** [Adding Ethics to Public Finance](https://www.imf.org/en/publications/fandd/issues/2022/03/adding-ethics-to-public-finance-mauro) ## Other formats - [Markdown version](/en/publications/fandd/issues/2022/03/adding-ethics-to-public-finance-mauro/index.md) - [Structured JSON version](/en/publications/fandd/issues/2022/03/adding-ethics-to-public-finance-mauro/index.json) - [Bundle manifest](/en/publications/fandd/issues/2022/03/adding-ethics-to-public-finance-mauro/bundle-manifest.json) ## Bibliographic details - Authors: PAOLO MAURO - Published: March 1, 2022 --- ### Overview and central thesis - Policy decisions on taxation and public expenditures intrinsically reflect moral choices. - Economists and public finance practitioners have traditionally emphasized economic efficiency and often avoided moral considerations. - Recent work by evolutionary moral psychologists suggests policies can be better designed and muster broader support if policymakers consider a full range of moral perspectives on public finance. - A few pioneering empirical applications of this approach in economics have shown promise. ### Limitations of the traditional economic approach - Traditional analysis: individuals as the unit of analysis, with relevant characteristics being income, wealth, or spending potential. - Two reasons for the traditional approach: - Economists’ desire to be viewed as objective social scientists. - Dominance of WEIRD (Western, Educated, Industrialized, Rich, and Democratic) values in public finance scholarship, emphasizing the golden rule. - Evolutionary moral psychology challenges the sufficiency of the golden rule by showing moral judgments often arise from instinctive reactions later justified by reasoning (Greene 2013). ### Moral Foundations Theory — six foundations (Haidt 2012) - (1) Care/harm: sensitivity to suffering; predisposition to care for those in need. - (2) Fairness/cheating: valuing collaboration and reciprocal altruism; shunning or punishing cheaters. - (3) Loyalty/betrayal: rewarding team players and punishing betrayal; focused on group membership. - (4) Authority/subversion: respect for rank and status; sensitivity to proper behavior in hierarchies. - (5) Sanctity/degradation: disgust at perceived pollution; longing for purity in nature, feelings, and relationships. - (6) Liberty/oppression: cooperation in hierarchies but readiness to rebel against tyrannical leaders. - Note: The first two foundations align with WEIRD traditions and the golden rule; the other four can justify treating people differently depending on group membership and other factors. ### Applications to public finance debates - Two highlighted debates where moral perspectives matter: - Policy responses to job losses from automation and globalization: - Traditional economist focus: liberalize labor and housing markets to facilitate individual mobility. - Moral-perspective insight: supporting communities left behind may better address people’s identification with place and community. - Immigration and access to publicly funded services: - Traditional analysis: costs and benefits to citizens/residents. - Moral-perspective insight: cultural identity and communitarian concerns affect views on immigrant access to services. - Globalists (universalists) versus nationalists (communitarians): - Universalists: altruism/trust unaffected by social distance. - Communitarians: altruism/trust decline with social distance. ### Empirical findings and examples - Enke, Rodríguez-Padilla, and Zimmermann (2020): - Suggest the traditional left-right divide is explained by whether individuals’ moral values are primarily universalist or communitarian. - NBER Working Paper 27511. - Klemm and Mauro (2021): - Found communitarians’ opposition to progressive taxation declined among individuals directly hurt by the pandemic through job loss or illness. - International Tax and Public Finance 28 (Supplement). - Stantcheva (2021): - Using US surveys, shows notions of fairness are more important than views regarding efficiency in shaping attitudes toward progressivity in the taxation of income or inherited wealth. - Quarterly Journal of Economics 136 (4): 2309–69. - Behavioral experiments (Greene 2013): - Participants asked to explain controversial policies (single-payer health care, cap and trade) then reassessed their views; confronting lack of understanding led to more moderate positions. ### Design and communication implications for policy - Policy design: - Consider a broader palette of moral perspectives (care, fairness, loyalty, authority, sanctity, liberty) to craft measures that can muster wider consensus. - Leverage specific moral foundations for policy framing: - Purity/sanctity: present a carbon tax as safeguarding the purity of the earth; emphasize local environmental purity for communitarians. - Loyalty: promote national competitiveness in science, technology, or productivity using patriotic sentiments. - Authority: use respected figures (context-dependent: police, military, teachers, doctors, the elderly, religious leaders) to deliver messages that resonate with conservative audiences. - Analogy examples: balancing the budget likened to putting one’s house in order invokes purity sentiments. - Role of information: - Persuasion presupposes some openness to information; providing factual explanations of how policies work can moderate extreme positions. - Survey-based experiments that provide facts and measure opinion changes suggest information can be the beginning of persuasion (Stantcheva 2021). - Practical recommendation: - When considering tax or spending policies, enrich fairness-focused analysis with additional moral perspectives and tailor presentation to citizens with differing moral values to increase acceptability. ### Key takeaways - Moral perspectives beyond the golden rule (community, authority, divinity/purity, loyalty, sanctity, liberty) are influential in shaping public finance preferences. - Understanding these perspectives can explain observed political divides and improve policy design and communication. - Providing factual information about policy mechanics often leads to more moderate public positions and can facilitate persuasion. - Large-scale empirical studies applying moral psychology to public finance are nascent but promising; incorporating these insights is a practical starting point for policymakers. *Paolo Mauro, F&D Magazine, March 2022. Opinions expressed are those of the author and do not necessarily reflect IMF policy.* --- ## Content in this bundle - **إضافة البعد الأخلاقي إلى المالية العامة** - [إضافة البعد الأخلاقي إلى المالية العامة (Markdown version)](/-/media/files/publications/fandd/article/2022/march/ar/mauro.pdf.md){rel="alternate" type="text/markdown"} - [إضافة البعد الأخلاقي إلى المالية العامة (PDF)](/-/media/files/publications/fandd/article/2022/march/ar/mauro.pdf){rel="external" type="application/pdf"} - **Donner une dimension éthique aux finances publiques** - [Donner une dimension éthique aux finances publiques (Markdown version)](/-/media/files/publications/fandd/article/2022/march/fr/mauro.pdf.md){rel="alternate" type="text/markdown"} - [Donner une dimension éthique aux finances publiques (PDF)](/-/media/files/publications/fandd/article/2022/march/fr/mauro.pdf){rel="external" type="application/pdf"} - **Adding Ethics to Public Finance** - [Adding Ethics to Public Finance (Markdown version)](/-/media/files/publications/fandd/article/2022/march/mauro.pdf.md){rel="alternate" type="text/markdown"} - [Adding Ethics to Public Finance (PDF)](/-/media/files/publications/fandd/article/2022/march/mauro.pdf){rel="external" type="application/pdf"} - **Включить этику** - [Включить этику (Markdown version)](/-/media/files/publications/fandd/article/2022/march/ru/mauro.pdf.md){rel="alternate" type="text/markdown"} - [Включить этику (PDF)](/-/media/files/publications/fandd/article/2022/march/ru/mauro.pdf){rel="external" type="application/pdf"} - **Aplicar la ética a las finanzas públicas ● Finanzas y Desarrollo ● Marzo de 2022** - [Aplicar la ética a las finanzas públicas ● Finanzas y Desarrollo ● Marzo de 2022 (Markdown version)](/-/media/files/publications/fandd/article/2022/march/sp/mauro.pdf.md){rel="alternate" type="text/markdown"} - [Aplicar la ética a las finanzas públicas ● Finanzas y Desarrollo ● Marzo de 2022 (PDF)](/-/media/files/publications/fandd/article/2022/march/sp/mauro.pdf){rel="external" type="application/pdf"} - **对于公共财政 - 增加道德规范** - [对于公共财政 - 增加道德规范 (Markdown version)](/-/media/files/publications/fandd/article/2022/march/zh/mauro.pdf.md){rel="alternate" type="text/markdown"} - [对于公共财政 - 增加道德规范 (PDF)](/-/media/files/publications/fandd/article/2022/march/zh/mauro.pdf){rel="external" type="application/pdf"} --- _Source: https://www.imf.org/en/publications/fandd/issues/2022/03/adding-ethics-to-public-finance-mauro_