The Ethics of Regional Policy

By Pardo, Isabel | International Advances in Economic Research, November 2006 | Go to article overview

The Ethics of Regional Policy


Pardo, Isabel, International Advances in Economic Research


Abstract

In the beginning, the economy was closed to ethics and as a social science had a moral dimension. However, after the marginal revolution and during the twentieth century, ethics was not considered in the economic analysis. Fortunately, this situation changed at the end of the past century. This paper analyzes the ethics of regional policy. Regional policy has an ethics dimension because its main goals are to reduce the differences among regions and to redistribute income. The objective of this paper is to analyze the relationship between regional policy and ethics, considering both targets and instruments. We will consider, mainly, the case of the European Union. (JEL All, A13, R58)

Keywords: ethics, economy, equity, regional policy, economic cohesion, social cohesion

Introduction

As it is well known, economy is a social science, and for this reason, has a moral dimension. The relationship between ethics and economy has shown different stages. In the beginning, economy and ethics were related. In Aristotelian as well as Adam Smith works of economy are developed considering an ethical base. For these authors, economy is a social science and, for this reason, the economic activity cannot be kept out of the society, so it has a moral dimension. However, when economic analysis introduces rationality, the main objectives considered by economists were the maximization of the profits and the efficiency in the assignment of the resources. This new perspective implies that the ethical base of the economy loses importance giving more relevance to the technical aspect of the economy. This view was changed at the end of twentieth century, and the interest on ethical effect or economic behavior was renewed.

This relationship between ethics and economy has also been considered in the case of the regional policy. After the Second World War, the orthodox regional policy did not consider ethics due to the relevant economic growth achieved by the most developed countries. During these years, income distribution (equity) is not relevant. As it is well known, neoclassical theory states that efficiency and equity are different questions. Equity is mainly an ethical-political question related to values. However, the 1970s crisis and its effects on industrialized countries involves a new perspective, considering equality as a relevant question. The goal of this paper is to analyze the ethics of the regional policy. In the next section, we will carry out a brief reference to the relationship between ethics and economy. Then, we will consider the regional policy. In the following section, we will introduce the instruments of the regional policy in our analysis, considering the case of the European Union regional policy. We will finish with the main conclusions.

Preliminary Questions

Economic thought history shows that the moral dimension had not always played an important role in the context of the economic analysis; in this relationship, two main stages can be consider in the economy development: close to ethics in the case of Aristotle and Adam Smith works, among others and separated, the marginal revolution. In Aristotle as well as in the work of the classical economist, ethics is very important in the economic behavior analysis. However, at the end of nineteenth and the beginning of twentieth century, rationality became more and more important in the economic studies. At the end of the past century, this perspective changed, and economist pay more attention to the ethical aspect of the economy, considering that it could improve the analysis of the main economic problems.

One example of this new point of view is the work of the Nobel Prize winner Amartya Sen. On Ethics and Economy [Sen, 1999] is an analysis about the economic impoverishment due to not including ethical components in its analysis. This author also states that there are relevant advantages and improvements in the analysis when economics introduces ethics characteristics in its studies. …

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