Question

The local indigenous communities will be relocated from the area the houses are built upon. The leaders of the communities object, but their combined contribution to the market economy (measured with GDP) is negligible. Using internet research discuss the weaknesses of GDP as a measure of welfare. Describe the three parts to Wight’s taxonomy of ethical action and apply it to the decision whether to go ahead with the project

Answer 1

1. Gross Domestic Product provides an aggregate estimate of income earned within a well defined geographical area in a specified period of time.

However, GDP fails to measure welfare in an economy due to following reasons-

A. It does not explain who gets what i.e. the distribution of the income is not measured. This implies that even if the GDP is growing, the income of the poor and marginalized people may not be growing at all or even declining at the same time.

B. GDP does not consider the non monetised costs of production in to account. For instance, the loss of forest and other natural resources is not deducted while calculating it.

C. It also does not include what is being produced in the economy. Even if the GDP is increasing at a rapid rate but most of the value addition comes from production of sin goods like alcohol and tobacco, the real welfare is not increasing but decreasing.

D. The negative effects such as increased air and water pollution, resource degeneration i.e. externalities are ignored in the calculation of GDP.

2. Jonathan B Wight has provided a comprehensive discussion on of ethics in his book titled as Ethics in Economics:An Introduction to moral frameworks.

The taxonomy of ethical actions provided by Wight is as follows-

1. Judging an action by its outcomes i.e. consequentialism.

2. Sense of duty or established rules i.e. denotologism.

3. Good deeds or virtue ethics.

Viewing the situation from these angles the following insights emerge-

1. The outcome of the building of house would be detrimental to the indigenous communities.

2. Protecting the rights of vulnerable communities is the duty of the state or regulators in the market system.

3. Protecting interests of the poor and vulnerable is also a virtue from the virtue ethics angle.

Hence, considering these approaches, the decision to lay a housing in the lands belonging to indigenous people should be reconsidered to balance the rights and interests of both the builders and indigenous people.