Journal of Socio-Economics 33 (2004) 89106

Can homo economicus follow Kants categorical imperative?

Mark D. White
Department of Political Science, Economics, and Philosophy, College of Staten Island/CUNY, 2800 Victory Boulevard, Staten Island, NY 10314, USA Received 26 November 2003

Abstract This paper incorporates Immanuel Kants duty-based system of ethics into the neoclassical model of rational choice. We briey summarize the most relevant aspects of Kants ethics, focusing on his distinction between perfect and imperfect duties. We then explain how each one can t easily into economists conception of decision-making, which will allow economic models of choice to include a wider variety of ethical motivations beyond the typical egoism or utilitarianism implicitly assumed. 2003 Elsevier Inc. All rights reserved.
JEL classication: A12; B40; D11 Keywords: Rational choice; Kant; Categorical imperative; Duty; Commitment

1. Introduction Economists have developed a very rich and effective model of human decision-making, often personied in the metaphor of economic man or homo economicus. While certainly not without its share of criticism, from both mainstream and heterodox economists as well as philosophers and other social scientists, this model has proven extremely useful in helping us understand countless aspects and examples of human behavior, from common business decisions to government policy-making, as well as from choosing a life of crime to selecting a mate. Despite all of their successes in other elds of inquiry, one area in which economists have had signicant difculty is in the modeling of ethical behavior. One way the economist can explain such behavior is to nd some way in which it actually benets the actor, perhaps due

Tel.: +1-718-982-3193; fax: +1-718-982-2888. E-mail address: profmdwhite@hotmail.com (M.D. White).

1053-5357/$ see front matter 2003 Elsevier Inc. All rights reserved. doi:10.1016/j.socec.2003.12.002

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to expectations of reciprocity (such as Beckers rotten kid theorem). But such an approach cannot account for such famous dilemmas as voting (when ones vote cannot possibly affect the result of the election), tipping while on vacation (in which case the diner will probably never encounter her server again), and the various choice anomalies uncovered in the eld in experimental economics (such as deviant behavior in Prisoners Dilemma, dictator, and ultimatum games). Another way to explain ethical behavior, which could help account for these problematic cases, is to assume that agents have a taste for it, no different from tastes for ice cream or leisure. By this reasoning, voters and tippers are simply indulging one preference out of many. This approach either extends the usual assumption of the self-interested agent to include other-regarding preferences, or it simply subsumes them within the very concept of self-interest, which stretches and thereby weakens the term itself. However, such explanations have an ad hoc nature to them: one can simply postulate a new taste to explain any behavior that resists traditional analysis based on changes in prices and income. The one thing that both of these explanations have in common is that they assume the utility-maximizing agent seeks to achieve the best outcome out of all the possible outcomes over which she has inuence. If we translate this into the language of philosophical ethics, this implies that the agent is a hedonist or egoist if narrowly self-interested, an altruist if she takes into account the welfare of select others (such as family or friends), or a utilitarian if she considers the well-being of all. In all of these cases, the agent can be described as consequentialist, regarding the result of choices and actions as determining their moral worth. This is the implicit assumption made in most economic models, manifesting itself most clearly in welfare economics and policy analysis, but also in economic analysis of the law, crime, and the family, as well as more traditional analysis of market transactions.1 But there are serious problems with this pervasive reliance on consequentialism in economics. As mentioned before, attempts to force a consequentialist explanation on puzzling behavior, such as voting, results in unsatisfactory ad hoc assumptions of new preferences. Assuming that people only behave altruistically out of explanation of future reciprocity is extremely cynical, and cheapens the actions of true altruists, whose behavior deserves to be explained in other ways. If economics strives, among other things, to explain human behavior, it must recognize there are other ways to behave other than according to consequentialist logic. Walsh writes: It has always been thought that some actions were wrong despite their consequences. These claims must have a place in any serious moral theory, and economic theory and decision theory should not be allowed to foreclose what is properly an issue for moral philosophy, simply by adopting particular formal structures as constitutive of rational choice without explicit dialogue on the philosophical issues raised by doing so. (1996, pp. 2930) Several attempts along these lines have been made, including explaining behavior with commitment (Sen, 1977; van Staveren, 2001), social norms (Elster, 1989; Koford and Miller, 1991), and multiple utility frameworks incorporating moral imperatives (Etzioni, 1986). In this paper we suggest another approach to constructing an economics based on nonconsequentialist ethics. The ethical system that we use to do this is that of Immanuel Kant
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See also Roth (1999) for a critique of consequentialist social welfare theory.

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(17241804), the renowned German philosopher. As an ethicist, Kant is best known for the categorical imperative, a rule for judging ones proposed plans of action, or maxims, in order to assess their moral status. Kant wrote that applying the categorical imperative to decision-making reveals duties that (in the strictest cases) must be followed, no matter what the cost to the agent or others, in order to act morally. Furthermore, one is acting morally only if these actions are performed out of duty, not merely according to duty. If Bill donates to charity for a tax benet, to improve his social standing, or simply to feel good about himself, he is not acting out of moral motivation or duty, but out of self-interest (inclination or prudence, to use Kants terminology), though it is still an admirable act. If he does it purely from recognition of his duty to help others, then his is also a moral act. As mentioned earlier, economists would be very comfortable modeling ethical behavior, such as Bills charity, with any of the prudential motives given above (tax deduction, prestige, or self-satisfaction), for they all involve consequences of his action. But duty presents a problem to the standard economic approach, primarily because with strict, unavoidable duty, there are no trade-offs. If we adhere strictly to Kants ideal, this implies that agents cannot make marginal decisions between matters of duty and self-interest, whereas consequentialist, utilitarian agents do exactly that.2 This may explain why economists have resigned to modeling only utilitarian decision-makers, but it does not justify it. Kants stance is often characterized as excessively harsh, a judgment which many Kant scholars feel is an exaggeration. This conception often results from a familiarity with just the rst of his three books on ethics, the Groundwork for the Metaphysics of Morals (Kant, 1785).3 This short book serves as an excellent introduction to the concept of duty and the categorical imperative, but leaves out much of the richness of Kants system. The Groundwork alone leaves the reader with the impression that Kant was solely concerned with duty and morality, and not at all with happiness, pleasure, or well-being. His second book, the Critique of Practical Reason (Kant, 1788), primarily justies the theory presented in the Groundwork, but in the third book, The Metaphysics of Morals (Kant, 1797), Kant makes clear that he cares intensely for happiness, if only secondarily to duty; people are worthy of happiness in proportion to their virtue. Furthermore, some duties, such as helping others, are even exible in their execution, and may be moderated to pursue ones own interest. Why have economists shied away from using Kants ethics when modeling individual behavior? The popular perception of Kant as being completely uninterested in matters of happiness, or ends in general, may be one reason; homo economicus is assumed to maximize his utility or satisfy his preferences, and Kant seems to reject this process, at least as his ethics are usually understood. Another reason may be that utilitarian decision-making processes are more easily put into mathematical form, enabling the use of differential calculus, and lending the model a more scientic avor. Finally, there seems to be a perception that utilitarianism is somehow less value-laden and more scientic than more
2 This is similar to the problem of lexicographic preferences, which violate the continuity of utility functions and complicate the mathematics and graphical analysis of rational choice. (We thank David George for pointing this out.) 3 The rst term in the title of this book, Grundlegung in the original German, is translated variously as groundwork, grounding, or foundation. We choose the rst, though the translation on which we rely uses the second.

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moralistic theories, such as Kants, but utilitarianism generates just as many normative (and controversial) implications as any other ethical system. In this paper, we investigate the possibility of modeling Kantian agents within the standard model of rational choice. We begin by briey explaining the key aspects of Kants moral theory, focusing on those most important for economics, including the nature of duties and the role of ends in Kants system. We then show how Kants ideas can be included in the economic optimization framework, focusing on the nature of preferences and constraints, and proposing an example of how our new model would compare and contrast with the standard one. We conclude with some implications of this approach and suggest future extensions and applications of this work.

2. Summary of Kants views Immanuel Kant developed an ethical system based on the moral status of actions themselves, rather than their consequences, outcomes, or results. This type of ethics is often called deontological, as opposed to conquentialist or teleological, but these terms are oft debated among philosophers.4 To avoid this contentious terminology, we will simply refer to Kants system as duty-based, since that term captures the aspect of Kants thought in which we are most interested.5 We will summarize Kants ethical system in three parts, concentrating on those aspects which are most important for our purposes. First, we will discuss the nature of Kantian duty and the moral rule, the categorical imperative, from which duty stems. Second, we explain Kants understanding of autonomy or freedom, and the motivation behind moral behavior and action. Finally, we will explore the importance of ends in Kants ethics, an often misunderstood aspect of his thought. 2.1. Duties and the categorical imperative In Kants moral theory, certain actions are prescribed (or forbidden) as matters of duty, regardless of the consequences of the action (or inaction). These duties are based on the categorical imperative, a rule that is used to judge maxims, or plans of actions, and is probably the best known aspect of his moral thought. Kant spelled out three formulations of the categorical imperative, which he claimed are equivalent ways of stating the moral law from difcult angles.6
See Gaus (2001a,b) for an exposition of the term deontology. Indeed, while Kants moral theory is usually put forth as the archetype of deontological ethics, there are scholars who instead call it teleological (Ward, 1971), or at least compatible with consequentialism (Cummiskey, 1996); see Guyer (2002) for a thorough treatment of the role of teleology in Kants ethics. Our view is that while Kants system on its whole is based on teleology (the ultimate goal of the kingdom of ends), his recommendations for individual morality are deontological (having no concern for specic consequences). 6 Scholars disagree on just how equivalent they are, as well as the number of formulations Kant gave. For instance, Paton (1947, Chapter 13) lists ve formulations of the categorical imperative, two of them variations on the three standard ones. Also, as Kant gave no ofcial names to his formulae, we use those given in Sullivan (1989, pp. 149150).
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The Formula of Autonomy or of Universal Law is the most commonly known version of the categorical imperative: act only according to that maxim whereby you can at the same time will that it should become a universal law (1785, p. 421).7 This form is based on consistency; for instance, if everyone adopted a maxim of lying, no one would believe anything that anyone said, and lying would lose its effectiveness. The second version is the Formula of Respect for the Dignity of Persons: act in such a way that you treat humanity, whether in your own person or in the person of another, always at the same time as an end and never simply as a means (1785, p. 429). This form is based on respect for the dignity of humanity; when a person lies, he is using his humanity (and the rationality it implies), as well as that of whomever he is deceiving, as merely a means to an end. This formula is not just a negative principle that says to refrain from using persons simply as means; it also instructs us to take other peoples ends as our own, and thereby generates positive duties such as benecence.8 The third version, the Formula of Legislation for a Moral Community, is often judged to be very similar to the rst: so act as if your maxims were to serve at the same time as a universal law (for all rational beings) (1785, p. 438). This version has the same general point of universalization as the rst, but emphasizes the legislative nature of the will. It is the third form that leads us toward the kingdom of ends, an ideal state of the world in which every persons individual ends coexist in a harmonious, moral community.9 To Kant, the categorical imperative derives purely from the use of reason alone, without recourse to any experience or outside inuence. Kant derives his three formulations of the categorical imperative from pure deduction based on consistency and respect for the rational nature of humanity. Personal consequences of actions play no role in determining their moral status as duties; as we saw, lying is immoral regardless of any favorable consequences to the liar or even the one lied to. Of course, judgment is necessary in deriving specic moral laws from the categorical imperative, and empirical facts are often needed in this deliberative process (for instance, one needs to know what lying means to deduce that it is immoral), but the categorical imperative itself is wholly formal.10 Most importantly for our integration of his ethics with the economic model, Kant makes a critical distinction between two types of duties, perfect and imperfect. A perfect, or narrow, duty is one that must be followed, or one which permits no exception in the interest of inclination (1785, p. 421). Such duties are mostly negative duties, such as duties not to lie or not to steal. Perfect duties are most easily derived from the Formula of Autonomy or of Universal Law, and are based on the logical inconsistency of the forbidden act. Imperfect, or wide, duties are those that the agent has some latitude in executing: the law cannot specify precisely in what way one is to act and how much one is to do (1797, p. 390); such duties
All references without an author will be to Kants works, and the page numbers given will be the standard Academy pagination, provided in most translations. 8 It is not enough that he is not authorized to use either himself or others merely as means (since he could then still be indifferent to them); it is in itself his duty to make man as such his end (1797, p. 395). 9 Naturally, much scholarly attention has been given to analyzing the categorical imperative. See Sullivan (1994, Chapters 26) for an excellent introduction, Sullivan (1989, Part III) for a detailed summary, and Paton (1947) for an in-depth analysis. 10 If Kant had said merely that we must not allow our desires for particular consequences to determine our judgment of what our duty is, he would have avoided a great deal of misunderstanding (Paton, 1947, p. 76). For more on this oft-misunderstood point, see Sullivan (1989, pp. 159160).
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are mostly positive duties, such as benecence and cultivation of ones talents. Imperfect duties are most easily derived from the Formula of Respect for the Dignity of Persons, which instructs us to consider the ends of others as our own (though some imperfect duties are to ourselves, based on respect for our own humanity).11 Another understanding of this distinction is that perfect duties are duties of action, while imperfect duties are duties of ends: the distinction which Kant has in mind is that between a law commanding (or prohibiting) an action and a law prescribing the pursuit of an end (Gregor, 1963, p. 98). Perfect duties require precise actions, or rather, abstinence from actions: do not lie, do not kill, etc. Perfect duties, insofar as they are negative duties (as most are), constrain the agent from using certain actions to achieve their ends based on inclination. Imperfect duties, being less precise, merely suggest ends, such as benecence, that should be adopted. Kant leaves the rational agent some discretion regarding how heavily to weigh these dutiful ends against ones self-interested ends, and he suggests that they should be pursued when it would not lead to excessive hardship or sacrice on the part of the agent: How far should one expend ones resources in practicing benecence? Surely not to the extent that he himself would nally come to need the benecence of others (1797, p. 454).12 2.2. Autonomy and motivation Breaking with the philosophical tradition of the times, Kant postulated the autonomy, or freedom, of rational agents. There are two senses in which persons are autonomous according to Kants meaning of the term. First, as mentioned in the last section, persons determine their duties through the use of their own reason, not out of obedience to external sources, such as a higher authority or societal norms. Second, persons are not bound by their internal desires, but can rise above their pull and respond to the call of duty as prescribed by the moral law. Note that this meaning of autonomy differs somewhat from that normally used in economics, which incorporates the rst sense, but not the second; indeed, Humes view that reason serves the passions, heteronomy in Kants language, forms the basis of economic choice theory. But autonomy also implies responsibility, namely, the responsibility to follow the dictates of ones own rationality, which is the moral law as formalized in the categorical imperative. Since we are free to follow our own reason, and the categorical imperative presents itself as a moral fact, being derived from logic alone, our freedom implies our morality, and we are bound to follow the moral law: a rational agent as such has direct insight into the principle of autonomy as a principle on which a rational agent, with full control over his passions, would necessarily act (Paton, 1947, p. 247). Kants arguments in support of this contention are complicated, and involve many of his most abstract and controversial notions, such as the distinction between the noumenal (intellectual) and phenomenal (physical) worlds, as
See Gregor (1963, Chapter 7) for an in-depth discussion of perfect and imperfect duty. This contrasts signicantly with caricatures of Kant in which he is supposed to advocate an extreme version of altruism, where others interests take absolute precedence over ones own, and extreme self-sacrice is mandated (Ayn Rand, for one, espoused this view of Kant). Instead, when I say that I take an interest in this human beings well-being only out of my love for all human beings, the interest I take is as slight as an interest can be. I am only not indifferent with regard to him (1797, p. 451).
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well as transcendental arguments for freedom.13 For our purposes, it is enough to know that morality is not based in any way on prudential feelings of happiness, altruism, or even the satisfaction of having done the right thing, but on the simple recognition of our duty to be moral, which is imposed by our own reason. This view also implies that moral actions must be performed for the proper reason. Kant famously distinguishes between acts performed out of duty, or motivated by duty, and those done merely according to duty, but out of another motivation altogether. Duties must be followed for their own sake in order for the action to be considered moral: There are many persons who are so sympathetically constituted that, without any further motive of vanity or self-interest, they nd an inner pleasure in spreading joy around them . . . . In such a case an action of this kind, however dutiful and amiable it may be, has nevertheless no true moral worth. (1785, p. 398) Kant even says that although we have a duty to preserve our own lives, most of us do not do so out of duty, but out of an obvious inclination which happens to be in accordance with duty (1785, pp. 397398). Only those who refrain from committing suicide because they believe it to be wrong are behaving morally. Of course, this does not imply that following ones inclination to live is immoral, just amoral, and this judgment is merely in terms of motivation, not outcome. 2.3. The importance of ends in Kants ethics It is easy to see how some have interpreted Kant as being completely unconcerned with ends, especially ends such as happiness or human ourishing. After all, Kant derives his categorical imperative from a priori reasoning, with no reference to the specic consequences of action, and duties must be followed out of duty itself, not out of expectation of favorable outcomes for ourselves or others. Furthermore, merely willing to perform a duty is all that is necessary to be moral; whether the end of the action is ever achieved is irrelevant to the moral worth of the maxim.14 While this characterization of Kants ethics, which is what one can get from reading only the Groundwork, may be correct, it is certainly not complete. Far from ignoring ends, Kant believed that every action must have a material end: no free action is possible unless the agent also intends an end (1797, p. 389). But this material end can never motivate a moral act; such an act requires an end grounded in the moral law. Imperfect duties are often called duties of ends, meaning that they are duties to adopt certain maxims or ends as our own, such as benecence toward others. Also, as we saw above, Kant envisions his ideal world as a kingdom of ends, in which every persons goals are compatible with those of everybody else, and the categorical imperative (particularly the third formula) ensures this harmony of interests. Furthermore, Kant valued happiness as an end, even as a duty, albeit an imperfect one: to secure ones own happiness is a duty (at least indirectly); for discontent with ones
See Sullivan (1994, Chapter 10) for a relatively clear discussion of Kants defense of morality. The moral worth [of an action] depends . . . not on the realization of the object of the action, but merely on the principle of volition according to which . . . the action has been done (1785, pp. 399400).
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condition under many pressing cares and amid unsatised wants might easily become a great temptation to transgress ones duties (1785, p. 399). To summarize the main points of Kants system of ethics, in particular those which will be most important for reconciling it with the economic model of choice: rational agents impose upon themselves duties which are derived from applying the categorical imperative to their plans of action. These duties are not based on any personal circumstance or consequence, but instead are universal and always binding. Furthermore, these duties are either perfect, in which cases they must be followed precisely and without exception, or imperfect, in which case the agent has some discretion in fullling them.

3. Incorporating the categorical imperative into the economic model of rational choice Having reviewed Kants ethical system, focusing on his distinction between perfect and imperfect duties, as well as his concern for ends (including happiness), we are now ready to incorporate these ideas into the neoclassical economic model of rational choice. First, we will summarize this economic model, emphasizing the role and nature of preferences and constraints. Next, we will see how Kants two types of duties can t into this model, and how our model compares to similar attempts by other scholars. We then discuss contingent rationality, Kants representation of moral imperfection, and compare a Kantian agents decision-making process with that of homo economicus as normally conceived. We conclude the section by confronting the question, why would homo economicus behave in a Kantian fashion? 3.1. Homo economicus, preferences, and constraints The standard theory of economic decision-making assumes that the agent has xed, stable preferences, which she maximally satises within given constraints. If the agents preferences are complete and transitive, they can be represented by an ordinal utility function, which assigns higher numbers to more preferred options. In this sense, utility does not refer to a mental state, such as pleasure or happiness, but simply a numerical index or ranking of options.15 Furthermore, an agents preference ranking is not assumed to be based on any psychological sense of preferring or desiring one option over another; instead, the ranking can be based on what one thinks someone else wants (such as a loved one), a religion-based way of life (such as dietary restrictions), or any other source, whether based or not on self-interest, however widely or narrowly understood. By denying a mental-state conception of utility, economists are freed from having to place substantive restrictions on preferences, allowing agents to be self-interested or altruistic, narrowly hedonist or broadly utilitarian, all-loving or misanthropic.16
15 Interestingly, this is the view also taken by most modern utilitarian philosophers, with the prominent exception of Brandt (1979, Chapter 13). For a defense of the desire-based account of utility, see Grifn (1986, Chapter 1). 16 The common assumption of the self-interested economic agent is usually not recognized as an essential part of the rational choice model, but is undeniably useful in showing that some socially benecial outcomes can arise

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Whatever their orientation, an agents preferences are usually assumed to be given a priori and are stable as far as the economist is concerned, leaving the explanation of preference formation or change to philosophers, psychologists, and sociologists. This is usually a heuristic assumption, providing a stable foundation for generating predictions about responses to various changes, and prevents the analyst from succumbing to the temptation of simply postulating the required shift in preferences to explain all apparent contradictions to his predictions (Becker, 1976, p. 3). In recent years, some economists have challenged the assumption of given, stable preferences in interesting ways. In his classic paper Rational Fools (1977), Amartya Sen suggested that agents may have various preference orderings, some reecting self-interest and others moral concerns, from which they choose appropriately in a given situation. For example, when choosing a avor of ice cream, an agent can follow his self-interested ranking, but if he then receives an urgent call for help from his sister, he shifts to another, more altruistic ordering, where helping his sister takes precedence over choosing an ice cream avor. The underlying preferences in each ranking may still be given and xed, but the possibility of conict between the orderings arises. An agent can also have preferences over her preferences, or metapreferences; she may have a desire to smoke, but at the same time she wishes that didnt want to smoke. Along similar lines, Frank (1987) asks the question, If Homo Economicus Could Choose His Own Utility Function, Would He Want One With a Conscience? Franks idea is that agents may like to choose their operational objective function or preferences to maximize some higher objective (their true preferences): it will sometimes be in a selsh persons interest to have a utility function that predisposes him not to cheat, even when he is certain he would not be caught (1987, p. 593).17 A self-interested agent may nd it benecial to her long-run interests to develop a habit of honesty, since this may foster trustworthiness and enable her to obtain protable deals. Again, though her underlying preferences are still given and xed, this still suggests that the agent can choose the preferences she will actually act on. Even Becker (1996) has tackled the subject of preference change, though in a unique way that preserves the stability of core preferences while allowing modication of their impact on choice through various types of personal and social capital. Less attention has been paid to the role of constraints in the standard model of choice. Usually of a nancial, physical, or temporal nature, constraints are usually assumed to be given, as preferences are, but this assumption seems to have generated much less controversy than that of xed preferences. One area of study which comes close to discussing endogenous constraints is the literature in economics and philosophy on strategic precommitment and weakness of will. The classic case of this phenomenon, proposed by Elster (1979), is Homers tale of Ulysses and the Sirens, wherein Ulysses commands his shipmates to tie
out of the interaction of narrowly self-interested actors (e.g., captured in Adam Smiths famous invisible hand metaphor and modern general equilibrium theory). See Walsh (1996, Chapter 5) for an interesting discussion and history of the self-interest assumption in economics. 17 Franks actual model in his 1987 paper, and expanded on in his book Passions Within Reasons (Frank, 1988), concentrates on the natural evolution of such preferences, and the expression of those dispositions in unconscious emotional displays that cannot be mimicked easily. (I thank an anonymous referee for reminding me of this.) But as the quotes provided show, Frank also considered (however, briey) the possibility of deliberate choice of such preferences and constraints.

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him to the mast and not to release him no matter how much he pleads, knowing that soon they will sail past the hypnotic Sirens, whose song will sway them from the journey and to their deaths. More contemporary examples include forced savings plans, weight-loss clubs, and simply asking a friend to help one quit smoking by taking ones cigarettes away. In each of these cases, an agent imposes a constraint on herself (often with outside help), so her higher preferences (e.g., to stop smoking) serve to constrain her lower preferences (to smoke); this eld has come to be known as constraint theory. Franks concept of self-serving honesty can also be interpreted along these lines: rather than develop a preference for honesty, an agent could recognize a constraint against lying, a strategic precommitment to serve ones self-interest in the long run. The common feature of [commitment] problems is that their solution requires people to make ex ante commitments to behave in ways that will not be self-serving ex post (Frank, 1987, pp. 593594).18 3.2. Preferences, constraints, and duties If we want to incorporate Kantian ethics into our economic agents decision-making processes, we must address (at least) two issues: what are the agents preferences, and from whence do they derive? Clearly, a Kantian agent will have self-interested preferences, and she may also have other-regarding preferences, towards family, friends, or perhaps humanity in general. Kant certainly recognized that such preferences or inclinations exist, but he did not consider them to be truly moral (nor immoral). But we need to add something to these standard types of preferences in order to incorporate Kants ethics fully into the economic model of choice. The most apparent dilemma with this project is that there seems to be no room in neoclassical choice theory for duties, especially duties that cannot be performed (morally) simply because an agent wants to (for any reason, selsh or altruistic). But recall that the term preference in modern economic theory does not imply any mental state, such as happiness and pleasure, but merely an ordering or ranking. Agents can base their preference ordering on self-interest, altruism, misanthropy, or any other goal that the agent may have. So understood, preferences can also be based on duty, and a duty will be moral if it results from application of the categorical imperative. If the agent can rank some duties higher than other duties as well as inclination-based preferences, and can do so completely and transitively, then these duty-based preferences can be included in an ordinal utility function just as can any other set of preferences. The resulting utility function can then be maximized according to the agents constraints, involving marginal substitutions according to changes in prices and income just as in standard choice theory.19 But can all duties be represented in terms of preferences in this way? No; perfect duties, which take precedence over all inclinations and all imperfect duties, cannot be included among preferences. But as Kant often said, perfect duties constrain inclination, as they are
18 The very concept of choosing a constraint may seem problematic, if constraints are considered solely to be exogenous. But from a broader vantage point, many of the constraints encountered in economics are endogenous: a rms short-run production constraints are a product of the long-run choice of technology, and a consumers budget constraint is a function of her educational and occupational choices. 19 Indeed, Broome (1992) holds that any teleological ethics can be incorporated into a preference-based theory of choice; of course, in our case, this only applies to the teleological elements (if there are any) of Kants theory.

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often negative duties. Therefore, it is appropriate to include them as constraints, in the same way that budget constraints limit a consumers spending. A Kantian agent is free to pursue her own ends (including the ends imposed by imperfect duties, to be discussed next), as long as she acts within the constraints given by perfect duty: do not lie, do not steal, do not kill, etc.20 This notion should not seem that strange, for economists often assume these constraints in the background, but rarely make them explicit in their models. In ordinary models of trade and commerce, we assume that buyers and sellers make voluntary transactions, free from fraud and deceit, and with no threat of theft from either side. While such factors have certainly been modeled (in the economics of crime literature, for instance), they are represented as a modication of the basic situation, which assumes these factors away.21 Since the agents in these models are not free to resort to such immoral means to achieve their ends, we could say they are behaving according to perfect duty in a very Kantian fashion, provided they are imposing these duties on themselves, not accepting them from a higher authority.22 (Ironically, the nature of perfect duty seems to be the tallest hurdle to be overcome in integrating Kants ethics into the economic model of choice, but in a way, it has been there all along!) While perfect duties cannot be represented by preferences, imperfect duties can. Unlike perfect duties, imperfect duties do not demand specic performance of action (or inaction), but instead only mandate general ends that should be adopted, ends that are derived from the categorical imperative. As we said before, there seems to be no reason why an agent cannot order the ends imposed by imperfect duty, such as benecence, amongst their prudential preference ranking, keeping in mind that in the modern economic sense of the term, preference does not necessarily imply true desire in the psychological sense, allowing the inclusion of duty-based preferences in ones ranking.23 Thus, we can model homo economicus as following the categorical imperative by incorporating perfect and imperfect duties into his choice framework as constraints and preferences, respectively. Once these have been chosen with respect to the agents duty, and an ordinal utility function is constructed from them, he will maximize as usual; therefore, Kantian economic agents differ from consequentialist ones not so much in how they optimize, but amongst what they optimize and how they choose what to optimize. This approach, while unorthodox, does have several precedents in economics. Sen (1977) draws a distinction, similar to ours, between what agents want to do out of sympathy and
20 Minkler (1999) models general duties of this sort as constraints in his model of non-consequentialist choice, and briey mentions the applicability to Kants ethics. 21 Many other areas and topics studied by economists, such as principal-agent theory, corruption, and marital indelity, deal with breaches of perfect duties, but they are all considered modications of a more basic model, supporting our point. 22 Note that these are merely normative constraints, and are less binding in a physical or logical sense than the typical budget or production constraints in economics. But even those constraints may not be binding unless reinforced by normative constraints; a consumer is not held to his budget constraint if he admits the possibility of shoplifting. 23 A complication arises, even for Kant himself, if one holds a duty and an identical inclination; for instance, one may feel a duty to help others, and also an inclination toward the same end. Kant admitted that it is very difcult in such situations to tell if such a maxim of benecence is morally motivated or not, but in either case, it is an good act.

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what they feel they have to do out of commitment, and Etzioni (1987) proposes a Kantian socio-economics along similar lines. More recently, Minkler (1999) has considered how to model perfect duties in the standard model of utility-maximization. In a norm-based framework, Goldfarb and Grifth (1991) consider the possibility of modeling moral values as either constraints or preferences, explaining the pros and cons of each, but not explicitly considering using both. Elsters (1979) work on strategic precommitment and weakness of will relates closely to our model: a Kantian agent, recognizing both the moral law but also his own moral imperfection, consciously adopts the duties implied by the categorical imperative in order to achieve the higher goal of being moral. Rabin (1995) models morality in a similar preference/constraint framework, as does Schmidtz (1995, pp. 9899). Finally, Kuran (1998) eschews this particular dichotomy, and instead models morals as setting targets for behavior that preferences may not achieve, resulting in possible moral overload or moral dissonance. 3.3. Contingent rationality Despite the strict ethical demands of his duties (especially the perfect ones), Kant understood that human beings are not perfectly rational and moral, which is why the moral law presents itself as an imperative, not merely a description of normal behavior. Only God can be perfectly moral, and for Kant, this denes His holiness (not the other way around).24 Because duty must constantly battle with inclination, human beings will not always behave dutifully. A Kantian term for human agents moral fallibility is contingent rationality, and Kant uses the term character to denote ones strength of will or steadfastness to the moral law in the face of such potential lapses. In our revised economic choice model, this concept can be added to our Kantian agents utility function with a probability weighting, in which agents will follow their inclinations with a certain probability and their duty with another. This probability would be a function of the agents character: the stronger ones will or character, the more likely one is to follow the dictates of duty. This seems more relevant in the case of perfect duties, which directly contrast with and constrain inclinations, while imperfect duties can coexist with them. By the same token, character would also inuence the weighting of inclination versus imperfect duties, which could be different from the weighting of perfect duties; for instance, one could take his perfect duties very seriously, but assume no obligation in terms of his imperfect duties, being a moral isolationist of sorts, not hurting nor helping anyone. And one may also have different weights regarding imperfect duties to himself and imperfect duties to others, according to Kants concept of the wideness of duties: the wider the duty . . . the more imperfect is a mans obligation to action (1797, p. 390).25 The resulting complexity of the probability-weighted utility function26 reects the complexity of our characters and
24 Even the Holy One of the gospel must rst be compared with our ideal of moral perfection before he is recognized as such (1785, p. 408). 25 See Gregor (1963, pp. 104106) on the controversy over just how much latitude Kant grants with respect to wide duties. 26 We hesitate to use the term expected utility function, since the primary uncertainty here arises not from states of the world, but rather the preferences and constraints one will use when making a moral decision.

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how we balance the demands of morality and inclination, as well as the various ends we adopt that represent our self-interest, altruism, and imperfect duty. A similar approach, taken by scholars such as Amitai Etzioni, is to assume that persons have multiple utility functions; an agents prudential and moral preferences are represented by separate rankings, from which she chooses the appropriate ranking according to the circumstances of the choice situation. This could apply to contingent rationality, wherein character would represent the faculty that decides between the alternative rankings or utilities. Multiple utility theorists usually assume one ranking is based on self-interest and another on altruism or morality, but in our model, one would be the moral ranking, including both duty- and inclination-based ends, and the other would be the amoral ranking, representing inclination alone. In the multiple utility framework, the strength of ones character would determine how often the moral ranking was chosen over the amoral one, which is modeled with a probability function in our model.27 3.4. An example At this point, an application of our Kantian choice framework, in contrast to the standard economic model, may be useful. Suppose a person, a man named Bill, with a wife and two children, becomes unemployed, and his savings begin to dwindle as he must continue to pay bills and purchase food and clothing for his family. Let us further assume that Bill has information that would allow him to gain entrance to his old workplace and embezzle enough money to sustain his family until he can nd a new job. Would he do so, and what factors would inuence his decision? If he were a standard utility-maximizer (with other-regarding preferences toward his family), he would weigh the costs and benets of the embezzlement. If the embezzlement is successful, the benets would include, at the very least, his familys increased material well-being, and the costs would stem primarily from possible detection of his illegal activity (or the attempt thereof), including imprisonment (implying prolonged loss of income to his family), trial costs, bail money, and perhaps even civil damages. Bill would then weigh the benets against the costs in his mind, and choose the action that maximizes his expected utility. An increase in any of the benets by itself would increase the chance that he would commit the crime, and an increase in any of the costs would do the opposite; this is how the rational criminal makes vocational decisions in the economics of crime literature (Becker, 1968). A more expansive view of the utility-maximizing framework may have Bill experiencing feelings of moral guilt based on breaking the law, betraying his familys faith in him, violating his religious principles, or putting his former coworkers in peril by weakening their company. On the other hand, he may get a vengeful satisfaction at having exacted revenge on his former employer or beating the system. If strong enough, these considerations may
27 We thank an anonymous referee for suggesting this interpretation. There is a substantial literature on multiple preference rankings, with scholars on both sides of this issue; along with Etzioni (1986, 1987, 1988) and Sen (1977), see also Brennan (1989, 1993) and Lutz (1993). George (2001, Chapter 2) makes a convincing case for the superiority of metapreferences over multiple preference orderings as a modeling tool, and it may also be an alternative way of dealing with contingent rationality and strength of character. But these topics must await a future paper for the complete discussion they deserve.

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sway the calculation of pecuniary costs and benets, resulting in an irrational decision to some, but if these feelings are included among Bills preferences, there is nothing irrational about it in the strict sense. How would Bills decision-making differ if he were a Kantian with perfect moral character? His preferences would be little changed, except his altruistic feelings toward his family would now be based on imperfect duty (as well as inclination). These may take precedence against his self-interested preferences (and his wide duty of self-love), but we could have assumed the same above; we have never doubted Bills devotion toward his family. If he were to fulll this duty legally, for instance by getting a new job, his act would have moral worth only if he did this out of duty, not just according to duty, though in either case the action is the same. Where the main difference lies is in his consideration of the crime itself, which would violate a perfect duty not to steal. A perfect Kantian would not consider embezzling the money, regardless of the impact on his familys well-being. Bill would put his maxim of embezzling from his company (even to help his family) to the test of the categorical imperative, and nd that it is in violation: stealing others property contradicts the very meaning of ownership, and uses the companys owners as simply means to his ends. Bill would instead nd some way of satisfying his preferences (based on both duties and inclination) without violating the constraint imposed by the moral law: nding a new job, applying for government benets, borrowing from family or friends, selling some assets, etc. There would be no trade-off at the margin between following and not following duty in this case, which is the essential difference between the Kantians decision-making process and that of homo economicus. Such trade-offs would still be permissible between ones preferences, including imperfect duties, but not with respect to perfect duties. But what if Bills character is less than perfect, and he is susceptible to lapses in his rationality or morality? We would then invoke the probability weighting, corresponding to his character, to determine his choice. If he has ne character (but not perfect), there would be a very high weight placed on duty, and he would be very unlikely to embezzle the money. The less weight on this duty, of course, would increase the chances that he would violate it. This seems very similar to the standard economic model given above, but there is a critical difference: in this case, Bill does not balance duty against his inclinations, for that would ultimately be a prudential (and immoral) decision. Whether he would obey duty or not would be truly random in this context, based on his character as represented by the probability weighting, and would not be swayed by marginal changes in circumstances, as it would in our standard model of economic decision-making.28 3.5. Why would homo economicus be a Kantian? The reader may be left with the question: why would homo economicus behave in such a fashion as we have described here? It was not our goal to tackle this question in this paper, which is meant only to look at how such behavior can be modeled should we encounter it in real-world agents. The further question of motivation is akin to a larger question in philosophy, why be moral? which has plagued all moral philosophers, especially Kant,
28

For further application of this concept to the economics of crime, see White (Forthcoming).

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since his moral system seems so demanding (particularly the narrow duties). As mentioned before, Kants answer is complicated in its logic but simple in its conclusion: one should behave morally because its right, and no further motivation is necessary. If we accept the convention that economics agents must be self-interested, it seems impossible that such a person could be moral in the Kantian sense. Kant does not allow moral intention to be motivated by anything except duty itself. Therefore, a moral agent cannot be motivated by Franks argument that becoming honest, truly and sincerely, will benet her in the long run, through securing her better deals and transactions due to a good reputation. Even if one derives satisfaction from being a moral person, or moral feeling in Kants terms, action solely done out of desire for such feeling is not moral.29 One way that a self-interested agent could possibly become moral in Kants sense is suggested by Schmidtz (1994; 1995, Chapter 3), wherein he discusses the choice of ends. Schmidtz devises a framework in which ends can be chosen initially as a means to an another end, but subsequently becoming an end in itself. An example is having as an end nding a job, and one nds a job to satisfy that end; that higher end then disappears, leaving the job itself as the nal end. Applying this concept to Kantian ethics, in this framework, a person who saw it in his long-term interest to obey the categorical imperative (for whatever reason) could attempt to develop such a disposition. If the agent stopped there, maintaining this moral rule-following behavior instrumentally towards his nal end, he would not be moral in Kants view. But if, as Schmidtz suggests, our agent comes to regard the duties he has adopted as ends in themselves, allowing the once-higher end of long-term self-interest to fall by the wayside, then he could possibly become moral in Kantian sense.30 But we have not assumed in this paper that homo economicus is self-interested in any sense, only that he has a well-ordered preference ranking and constraints. The question of why homo economicus would be moral is only relevant if we assume that he would not be to begin with. Since the source of the preference ranking is kept open, our hypothetical agent could be moral by nature: if he develops Kantian morality as he grows up, then his preference ranking should already incorporate imperfect duties, and he will recognize perfect duties as constraints. For him, there is no question of why be moral, because it is a part of who he is, part of his very identity. Of course, this does not imply that he will be perfectly moral, since he is only human, but neither does he have to nd reason to adopt morality as opposed to some other pattern of behavior.

4. Conclusion This paper has demonstrated one way to incorporate Kants duty-based ethics into the standard economic model of rational choice, creating an alternative to the egoism or util29 However, Kant does consider moral feeling, and the cultivation thereof, to be helpful, especially in the face of contingent rationality, to help one behave ethically in difcult circumstances. See Kant (1797, pp. 399400) and Sullivan (1989, pp. 132137). 30 See Schmidtz (1995, pp. 6066) for the argument that the motivation to adopt an end is distinct from the motivation to maintain that end.

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itarianism pervasive in economics. By treating perfect, narrow duties as constraints, and imperfect, wide duties as preferences, we have interpreted Kants ethics in terms of homo economicus decision-making process, enabling economists to model Kantian agents without having to modify their basic tools of analysis. There are many extensions to, and applications of, this new model to be explored. One such extension of the model would be to consider interaction between Kantians and non-Kantians (in various combinations), which could be modeled using game theory to see how each type fares in each situation. It may be that a Kantian will benet materially from limiting the pursuit of her self-interest out of respect for duty (though this could never be a proper motivation for moral behavior). As a further extension, incomplete information could be added to this game-theoretic model, so a person will be forced to form expectations about the morality of other people he deals with (just as one has to judge a salesperson when considering a major purchase such as an appliance, automobile, or house). A person will behave differently when confronting people of differing character, and this could have interesting implications about such social and economic interaction. Many areas of economics could be reinterpreted used our Kantian approach. As our example above may suggest, the economics of crime, which explicitly deals with illegal behavior, could be enriched tremendously by integrating notions of morality (Kantian or otherwise), whether from the criminals point of view or that of the authorities.31 Besides the economics of crime, any area of economics in which ethical behavior plays a role could benet from explicit modeling of such aspects: for instance, the economics of the family (marital indelity), government and public choice (corruption and bribery), and labor economics (discrimination, shirking). As mentioned before, even ordinary market transactions are based on honesty and trust, but are often plagued by deceit and fraud, moral issues both, which could be included explicitly using a framework such as ours. More broadly, we hope that this paper will be just one of many exploring integration of various systems of ethics into economics. There are obvious advantages to relying on utilitarianism in economic modeling, but it places strict limits on the agents we can model, in terms of both explanation and prediction.32 For instance, a duty-based ethics can help explain behavior such as tipping and voting, both of which have bafed economists who try to explain them while relying on self-interest alone. Without resorting to ad hoc preferences for such action, we may be able to use some sense of duty or virtue to account for it.33 This would be similar to norm-based explanations, but be grounded in a different normative system, a duty-based ethics. If this can help us explain and predict such puzzling behavior, the breadth of economics would be expanded. Therefore, if we as economists can start to explore other systems of ethics, even other variations of utilitarianism, and include them in our models of rational decision-making, that can only make economic theory richer.
For Kants rich work on the law, see his Doctrine of Right, the rst part of The Metaphysics of Morals (1797), as well as Murphy (1970). 32 Hicks wrote, If one is a utilitarian in philosophy, one has a perfect right to be a utilitarian in ones economics. But if one is not (and few people are utilitarians nowadays), one also has the right to an economics free from utilitarian assumptions (1939, p. 18; quoted in Walsh, 1996, p. 36). 33 See van Staveren (2001) for an integration of Aristotelian virtue ethics into economics.
31

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Acknowledgements I thank David George, Rosalind Seneca, Keya Maitra, Peter Boettke, Morris Altman, two anonymous referees, and participants at the Philosophy Forum at the College of Staten Island, the Economics and Moral Philosophy Session at the 2002 Eastern Economic Association Meetings, and the Kaplan Workshop at George Mason University for insightful comments, criticism, and discussion. I also thank Amartya Sen for inspiration and encouragement. All remaining errors are my own.

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