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We also allow it to be baked in, which can seem like overlooking it.
Part of demand can be ethical considerations, as can willingness to produce certain goods.
Should we do more morality based examples?
I actually had a convo with a student about it at lecture just yesterday.
He was asking about how realistic is a utility function where only consumption of the good enters into it.
I had to explain how the beauty of the framework is we can expand the utility function to account for many other priorities of the decision maker, including ethical commitments.
But you're right that I don't have any good examples. I did tell them that the simple model is hard enough to solve without adding all the complexity, so we have to learn how to solve the most basic version first.
The best example I can think of off the top of my head is about how prevalent racism has to be among employers before it can actually have a large impact on wages.
I do think it's fair to criticize our profession in the sense that: yes, it's possible to model ethical concerns; and yes, we acknowledge their legitimacy; but how often do we really try to take ethics seriously in our models? Almost never in practice. I didn't learn any such models in grad school... although I did have one prof whose research was on identity. But, even in her class, it was just classical information economics models.
I can’t remember where I was doing this, but we were doing some agentic modeling where each agent had a different morality.
Those were pre-ai agents, just coding behavior and running simulations.
Probably starts in the classroom... to repeatedly emphasize the moral perspective behind economic welfare analysis. Remind the students why we're leaving everything but economic efficiency out--not because we don't care, but because we want to approach it from a minimalist mindset)