Market Ethics with Trade in an Edgeworth Box

Abstract

This paper offers a method for introducing the ethics of markets to economics students, an emphasis that is missing in standard economics texts. The approach uses a pure exchange model to demonstrate how certain ethical principles, such as respecting property, fulfilling promises, and avoiding deception and violence against others, are inherent in all neoclassical models and help to assure the win-win outcome that arises with trade. These lessons are needed to counter false popular impressions that economics and business activities are amoral and to emphasize the importance of social, religious and government institutions that have evolved to inhibit unethical behavior.