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Australasian Journal of Economics Education
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TEACHING ECONOMIC PHILOSOPHY: ECONOMICS,
ETHICS AND THE SEARCH FOR THE RIGHT
MAXIMAND
L.A. Duhs1
University of Queensland
[email protected]
ABSTRACT
Economic philosophy is not often taught, and is not necessarily easily
taught. It involves enquiry into implicit assumptions within orthodox
economics and within alternatives to it. It seeks to highlight why it is that
some critics object that neoclassical economics is too atomistic, hedonistic,
and rationalistic, or why others lament that there is much hidden
metaphysics in Friedman and his Chicago School colleagues. It addresses
the issue of whether - in a reversal of the view that economics is the
imperialistic social science - significant philosophical assumptions have
been silently but inescapably imported into orthodox economics. This paper
seeks to facilitate the presentation of such material with illustrations selected
from social economics, development economics, and critiques of
utilitarianism.
Keywords: teaching economics; economic philosophy; implicit assumptions.
J.E.L. Classifications: A12, A13, A23, B15, Y8.
1. INTRODUCTION
Many regard economics as synonomous with utilitarianism. That is
not necessarily so, however, and critiques of utilitarianism in the
professional literature are accompanied by a series of specifications of
alternative maximands, putatively superior to the maximisation of
aggregate utility. Posner, Rawls and Sen are the three to have achieved
greatest recognition in the economics literature for their challenges to the
utility maximand, but others to have broached the subject include
Schumacher, Higgins, Myrdal, Etzioni, Cropsey, Austrian School
'economic personalists' and Harsanyi. These challenges have commonly
been ignored in mainstream courses, but in recent years Sen's status as a
Nobel Prize winner who may legitimately be regarded as an economic
philosopher has increased the readiness to take such matters seriously.
1
Thanks are due to AJEE referees whose helpful comments led to significant improvements in this paper.
126Australasian Journal of Economics Education
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In this setting, three themes are addressed in this paper. First,
consideration is given to the issue of ethics in economics. This includes an
appreciation of issues basic to Paretian welfare economics, and requires an
understanding of what Sen (1977) calls 'rational fools' in the orthodox
economics literature. Secondly, the development economics literature is
used as a vehicle for illustrating some issues in economic philosophy. This
involves issues related to the fact/value dichotomy in positivistic method,
and raises questions about the distinction between chance and choice. It
also involves questions about the definition of just what it is that is being
developed. Thirdly, consideration is given to social welfare functions,
which are commonly conceived in terms of utility maximisation, but which
admit of the alternative specifications advocated by Posner, Rawls, Sen,
Cropsey and others. Posner finds social utility maximisation to be deficient
largely because of utility distortions attributable to the depraved, whereas
Rawls finds utility maximisation to be deficient because of utility
distortions attributable to the deprived. Whereas Rawls argues the need for
some form of economic floor or safeguard for the worst-off, even if what
he provides is no more than utilitarianism made contemporary, Sen
similarly seeks to assist the deprived by removing 'unfreedoms' in order to
facilitate the development of their human capabilities. He therefore
commends his 'capabilities approach', which does more to undermine the
acceptability of a utilitarian calculus, and which argues instead for
something closer to the maximisation of the development of human
capabilities as understood in Aristotelian terms. He too has his critics, and
fundamental questions remain unresolved in the literature.
If nothing else, that does at least have the advantage of providing
meat for economic philosophy students to chew. While the literature related
to economic philosophy is diverse and somewhat abstruse, one submission
made here is that there is much advantage in the teaching of economic
philosophy in focussing on the various meanings imparted to six key words
in that literature: the nature of 'man'; 'freedom'; 'rationality'; 'equality';
'science' and teleology. Five of those words seem deceptively simple.
2.
SOME
PROMINENT
ECONOMICS
AND
CONTROVERSIES
THEIR
ROOTS
IN
IN
SOCIAL
ECONOMIC
PHILOSOPHY
2.1 Sen and the Link Between Economics and Ethics
Sen's is one of the few eminent voices raised in recognition of the
need to take economic philosophy more seriously. He contends that
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modern economics has allowed too large a gap to grow between economics
and ethics. He considers that all the propositions underlying the general
consensus on traditional welfare economics are eminently contestable, and
duly dismisses Pareto optimality as “a very limited kind of success”
(1987:32). Indeed, as he sees it, Pareto optimality may come “hot from
Hell” (1987:32), and is a condition which remains entirely compatible with
leaving some people in extreme misery while others roll in decadence and
luxury. This leaves it “an extremely limited way of assessing social
achievement” (1987:35) which (merely) captures the efficiency
implications of utility accounting. Accordingly, a utilitarian/Paretian
approach can yield results at odds with our basic intuitions, and Sen objects
at least tacitly that an ethical framework must be rejected if it is
inconsistent with those basic intuitions. Significantly, in developing his
critique of utilitarianism he further objects that “to identify advantage with
utility is far from obvious” (1987:38), and if some interpretation of
advantage other than utility is accepted, then Pareto optimality would cease
to be even a necessary condition, let alone a sufficient one, for overall
social optimality (1987:35-39; also 1979a, 1979b). For him, welfarism - in
which social welfare is a function of personal utility levels alone - is
therefore potentially disastrous. It follows that Sen's position on values and
ethics in economics will be well removed from that of Chicago School
economists, for whom utilitarianism and value relativism remain
sacrosanct. Policy differences between them are obviously of little
relevance until one first addresses what separates them in terms of the a
prioris of their respective economic philosophies. There can be few better
places to start a course on economic philosophy.
Sen emphasises (1987; 2000) that economists should pay more
attention to the implications of libertarianism and utilitarianism in
apprehending issues of value relativism, historicism and political
philosophy within orthodox economics. He concludes (1987:51) that “it
cannot be doubted that the issue of rights and freedom places an important
question mark on the general approach of welfarism (including inter alia
utilitarianism and Pareto optimality).” He offers various grounds for
departing from welfarism (just as Cropsey emphatically did in 1955) which
“may all provide grounds for rejecting self-interested behaviour”
(1987:54). One such ground arises when importance is attached to the
“agency aspect” of a person - meaning that a person may have reasons for
pursuing goals other than individual self-interest. Another arises if a notion
of well-being is adopted that differs from utility. Given a view of wellbeing based upon some “objective” circumstance (eg a person’s
functioning achievements or capability development) – and not primarily
on preference – the simplicity of the underpinnings of the fundamental
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theorem of welfare economics (which links competition to efficiency) will
be undermined. On such an “ethics related view of social achievement”
(1987:4) evaluation cannot be stopped short at some arbitrary point like
satisfying “efficiency”. A third ground arises insofar as Sen accepts that
self-interested behaviour can also be a seriously inadequate yardstick in
ethical approaches that emphasise rights and freedoms. The “moral
acceptance of rights may call for systematic departures from self interested
behavior. Even a partial and limited move in that direction in actual
conduct can shake the behavioural foundations of standard economic
theory (including the fundamental theorem). At least tacitly, Sen is
objecting that the economics-as-imperialist-science doctrine has affirmed
important ethical positions by silently rejecting not only the agency aspect
of a person and the notion of human rights but also the possibility that
human well-being can reflect anything other than subjective personal
preference. There is food for thought here, and experience does indeed
show that economic philosophy students appreciate the opportunity and
obligation to confront such issues. For Sen - in the institutionalist tradition
as against the libertarian tradition - it follows that human beings must be
free from serious external constraints (provided by adverse circumstances
including poverty) before they can meaningfully be said to be free in the
sense of being free to do as they please. Beyond that, his criticisms of the
limited ways in which 'rationality' is defined in economics - merely as
deductive consistency or as self-interest maximisation - give rise to
questions as to whether human rationality can be applied only to the choice
of policy means or can also be applied to the choice of human ends or
goals. He thereby implicitly questions the orthodox conception of matters
of teleology in economics and social science.
In such a context it follows that for Sen (2000: 280), “the role of
values cannot but be crucial”. It also follows that orthodoxy has a lot to
answer for. The metric of exchange value assigns zero value to everything
except commodity holdings (e.g. rights, morbidity, education), and there is
at least a crypto-teleogical theme in Sen that sets him apart from the
neoclassical orthodoxy. Economics is not the all-powerful imperialist
social science for him, but one which needs to be supplemented by careful
thought about matters exogenous to economics, including the
understanding of human capabilities and thus the understanding of the
nature of humankind, human well-being, human development, and human
teleology. Sen's concern is to show that the standard propositions of
modern welfare economics depend on (merely) combining self-seeking
behaviour with willingness to judge social achievement by some utility
based criterion. This is the root position of the way in which values, ethics
and issues of social optimality are apprehended in orthodox economics, but
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as Sen depicts it, it is no more than a representation of the way the world
would look if those underpinning assumptions held true. For Sen (as also
for Schumacher, Myrdal, Cropsey, Etzioni, Higgins and Nevile) it is
apparent that significant political or philosophical assumptions have been
silently imported into orthodox economics.
In short, there is an Aristotlelian element in Sen – one that carries the
implication that the judgement of social achievement relates to the goal of
achieving “the good for man” (Sen, 1987:4; 2000:14, 24, 285-289). This is
at least a crypto-teleological view, and one that is poles apart from the ateleological view of values, ethics and social optimality embedded in
Chicago School utilitarianism, libertarianism and economic imperialism.
This Aristotelian element in Sen is enlarged by Cropsey, and is further
considered in section 4.4.
Those interested in the roots of ethical controversies in economics
therefore do well to pay some homage to Sen for his success in again
'legitimising' debate about such questions within economics. There is no
more accessible, or more significant, place from which to start in the
teaching of economic philosophy.
2.2 Economics and Ethics in Social Economics: Etzioni, Lutz & Lux,
E.F. Schumacher, C.K. Wilber and the International Journal of Social
Economics
A sub-group of economists, broadly known as social economists,
respond to questions similar to those raised above by Sen. They find reason
to object to the conception of the nature of man implicitly embedded in
orthodox teaching, and seek to construct a superior understanding of social
economics rested on more acceptable philosophical premises as to what is
'man', and consequently what are human needs and 'rational' human
behaviour. In Etzioni's words (1988: xii), “At issue is the nature of man”.
Similarly, Lutz and Lux complain (1988: 104) that “something important”
is missing from the conception of man in orthodox economics, just as
Schumacher objects (1974: 77-83) that “Economics is being taught without
any awareness of the the view of human nature that underlies present-day
economic theory”. In discussing 'what's wrong with economics', Benjamin
Ward (1972) objects that neoclassical economics is too atomistic,
hedonistic, and rationalistic, and in discussing 'the moral dimension' of
economics, Etzioni uses almost identical words in criticising it as
“individualistic, hedonistic and rationalistic”.
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Etzioni finds the missing ingredient in the neoclassical conception of
'man' in Kant. E.F. Schumacher, J.C. O'Brien (1996; 1992), C.K. Wilber
(2004) and 'economic personalists' (Gronbacher 1998) find it in the Bible.
Cropsey finds it in Aristotle. Indeed, Cropsey anticipates much that is in
Sen, as well as Schumacher's view that there is a virulent 'metaphysical
disease' rampant within the teaching of orthodox economics. More
pointedly - mirroring the above objections of both Ward and Etzioni Cropsey's view may be paraphrased as an objection to the inappropriate
foundations of neoclassical economics in atomism (or sui generis
individualism), hedonism (or utility equals advantage and is thus the root of
The Good Life), and rationalism (or the implicit metaphysical teaching that
human reason is but the handmaiden of the passions, such that reason
partakes of the choice of human means but not the choice of human ends
themselves). The common teaching of Etzioni, Schumacher, Cropsey and
Sen is that there is much misconception in the present (implicit) teaching of
the relationship between economics and ethics.
Etzioni's conception of man (1991) requires recognition that people
are not just self-interested, are not interested solely in efficiency, are not
isolated in their existences as individuals but are reflective of groups, and
generally prefer a mix of work and leisure over leisure alone. He rejects the
utilitarianism and individualism of orthodox economics. He objects that
consumption is not the sole end of economic activity. The practical
consequence of this for socio-economists of his stripe is that there is need
to recognise the role of social justice along with efficiency, and need to
recognise the importance of protecting institutional integrity. Furthermore,
there is a need to accept the significance of moral foundations for social
interaction – not only for the family and community – but also for the
efficacy of the market itself, which ultimately rests on trust and integrity.
There is significance in 'psychological income' for a productive labour
force, and a need to recognise that the harmfulness of unemployment has
commonly been underemphasised. Socio-economists recognise a hierarchy
of universal human needs and recognise concomitant human rights. They
object to the reduction of differentiated human needs to undifferentiated
'utility'.
C.K. Wilber (2004:148) reflects the Catholic social economics
tradition. He castigates the unwarrantedly narrow interpretation of Adam
Smith commonly delivered to economics students (as Sen also does) and
argues that what Smith teaches in his Theory of Moral Sentiments is that
what is required for success in creating a liberal society is adherence to a
common social ethics. On Wilber's interpretation, the hero for Smith is not
self-interest, but ethical prerequisites. Moreover, in terms of 'scientific'
methodology, he further objects that while positivists assert that failure to
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maintain the fact/value dichotomy will result in “a disastrous slide into
relativism” (p148), anti-positivists contend that it is precisely the pretense
of value neutrality in positivistic social science that is itself the real
harbinger of just such a disastrous slide into relativism. For Wilber and
Catholic social economics the implicit positivistic teaching of the equality
of all values is in fact a dangerous metaphysical teaching, and one that
ultimately inclines towards nihilism and social decline. In this they have
something significant in common with both Cropsey and Schumacher.
Kristol (1973) and Samuels (1976:409) express similar concerns. Wilber
observes that a certain shared 'world view' shapes the analysis offered by
neoclassical economists, and this view reflects a set of (contestable) value
judgements, primarily including (a) that people are rational and selfinterested; (b) that the goal of life is to pursue happiness as understood in
utilitarian, relativistic terms; and (c) that competition and market forces
lead to efficiency and optimal outcomes. Wilber's list might therefore be reworded as an objection to rationalism, hedonism and welfarism, which
plainly bears close resemblance to the above tripartite objections of both
Ward and Etzioni. Social economists stress that such value judgements as
underpin the 'world view' of neoclassical economics need to be openly
debated, rather than tacitly assumed. Accordingly, J.C. O'Brien (1992)
directs attention to teleological questions in asking 'what is the end of it all'.
Social economists have no doubt that the implications for social advance of
value relativism and value-neutral positivist methodology are of
transcendent importance, but complain that the issue is rarely deemed
relevant to the teaching of economics. For them, what is taught implicitly
in welfare economics is potentially more important than what is taught
explicitly, and there is again obvious material for provocative courses in
economic philosophy.
2.3 Austrian School 'Economic Personalists'
Also confronting the need to close the distance between economics
and ethics is a sub-division of the Austrian School of economics. From its
inception in 1998 The Journal Of Markets and Morality has set out to
establish a fully Christian social science. Founded by Austrian School
Catholics who call themselves 'economic personalists' this group seeks to
combine Catholic moral philosophy and Austrian School respect for
individual freedom. Its advocates therefore seek to remove what they see as
the skewed conception of human nature in economics and social science –
a conception which tends to be overly rationalistic, utilitarian and/or weak
regarding the metaphysical dimensions of human life. For economic
personalists (Gronbacher 1998; Woehrling 2001) the policy consequence of
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this philosophical position is that support should be given neither to
unfettered markets nor to government regulated markets, but to morally
constrained markets. What economic personalists support therefore is not
Statist intervention but the constraints of natural law as promoted by a
moral code conveyed through voluntary associations including family and
church. In effect, personalists pursue a morally healthy market place which
not only distinguishes between freedom and mere licence but which also
facilitates reduced transaction costs via a morally healthy society.
Economic personalists – who also seek the consummation of one's
humanity via entering into community with others – thus see themselves as
offering a new contribution to the search for a synthesis of market and
moral principles. Given their attachment to both Austrian School
economics and to Catholicism, the economic personalist position is similar
to, but not identical with, the social economics associated with Etzioni,
Wilber or the International Journal of Social Economics.
Personalists contest the implicit conception of the nature of man
embedded within orthodox economics. For their own part they tend to
define man in terms of the capacity for love, however, rather than in terms
of the common capacity for reason and speech, as Cropsey (and Straussian
philosophers) do. There is no coincidence of views here. Nor is their view
coincidental with what Etzioni has in mind, with its origins in Kant, rather
than in the Bible. Personalists recognise individuality, but their view is not
synonomous with sui generis individualism.
They resile from
individualism as atomism (c.f. Ward; Etzioni), which they see as the
opposite of solidarity or brotherhood, and hence seek to reflect some
generic features of humankind. In consequence too, economic personalists
understand 'freedom' in the way outlined in various Papal Encyclicals and
that makes their understanding of 'freedom' quite distinct from the
understanding provided by Chicago School libertarians. For them,
“freedom” is not mere licence to do whatsoever, but freedom to pursue a
teleologically superior human end.
While Austrian School Catholics assert the superiority of their
conception over earlier Catholic and protestant attempts to provide a
synthesis of markets and morality, critics will of course object that family
and church have been with us for a long time and presently seem to show
an inclination to decline, rather than regenerate into viable moral regulation
of economic activity. Such critics will therefore be inclined to say that the
economic personalist position – which essentially combines free market
dogma with Papal teaching that people should love their neighbours – is
little different from hoping or praying that the world could be made a nicer
place. Supporters, on the other hand, will argue that Adam Smith wrote the
Theory of Moral Sentiments as well as the Wealth of Nations, and that
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contemporary economics teaching is at fault for losing sight of the
importance for the market mechanism itself of an underpinning set of moral
sentiments.
It should be apparent from section 2 of this paper that much suitable
material for economic philosophy courses arises in the context of social
economics in terms of the metaphysics underlying various economic
perspectives and in terms of the definitions adopted of such commonly
used and seemingly non-controversial terms as 'freedom' and 'rationality'.
3. DEVELOPMENT ECONOMICS
3.1 THE MYRDAL VERSUS BAUER RIFT OF THE 1970S
In the context of third world development, Myrdal was a prominent
voice of the 1960s and 1970s. He argued the case for challenging and
confronting extant social and cultural practices, for various forms of state
intervention, and for foreign aid from rich countries.
He saw
institutionalised inequality as a significant barrier to development. P.T.
Bauer (1971) on the other hand took exception to interventionist stances in
general and to Myrdal's advocacy in particular. Whereas Myrdal argued
that value-neutral positivistic social science was literally an impossibility,
Bauer was dismissive of the presumptuousness of those who contended that
they could identify a higher standard than the extant values of the
individuals in a given community group. For Bauer, Myrdal's insistence
that it was necessary to challenge some traditional values and beliefs
smacked of an arrogant, socialistic anti-scientific willingness to judge some
values to be better than others. Myrdal and Bauer were plainly poles apart
in terms of their underlying a priori positions. Their respective
interpretations of the fact/value dichotomy left Chicago writers such as P.T.
Bauer and H.G. Johnson lamenting that Myrdal would not accept facts as
facts - since in Johnson's words (1972) some people may in fact prefer
Buddhism to Bendixes and the inner vision to television. People do not
necessarily wish to pursue the modernisation ideals that Myrdal took for
granted as desideratum. In turn, Myrdal lamented that Bauer and Chicago
failed to distinguish chance from choice, insofar as some socially
institutionalised value systems (including religious customs) merely
reflected historical chance, rather than any meaningful choice by the
individuals who now live within them. For Myrdal, to base economics and
social science on a sterile statement of extant 'facts' – e.g. of
environmentally constrained 'choice' of religion - was thus in fact to rest
social science on the unsubstantial foundation of 'chance'. Accordingly,
Myrdal endorses 'tough states', and thus reveals a crypto-teleological
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element in recognising a need to promote a social development which
transcends particular cultural idiosyncrasies (e.g. widow burning or the
caste system) even when they are widely accepted. Nonetheless, the notion
of absolute values is as unacceptable for Myrdal as is the opposite notion of
a complete value relativism. For him, there cannot be a view except from a
viewpoint (1968:32), and viewpoints are the product of living in a
particular time and place. It followed for him that there cannot be any
absolute or timeless values, but only historically relative values. It also
followed for him (as it does for Sen), however, that individual subjectivism
was limited by life experience, education and the like, so that individual
valuations were not automatically sacrosanct, as they are for Bauer and
other Chicago School economists. Consumer sovereignty is thus a notion
limited by experience - which it remains too for Todaro (1994:87).
Accordingly, in the interests of development, Myrdal sees it as both
possible and necessary to confront and transcend even some popularly
supported value systems. Myrdal was therefore unsympathetic to “soft
states” which perpetuated or tolerated customs and values which impeded
what he (or history) considered to be progress, and unsympathetic to those
whose 'scientific method' was in fact based on a confusion of chance with
choice.
Myrdal simply does not accept the Chicago School definitions of
consumer sovereignty, freedom, rationality, teleology, value relativism, or
value-neutral scientific method (Duhs:1982). His view remains dependent
on recognising the prior importance of some form of political philosophy
which places severe limitations on the doctrines of utilitarianism and
libertarianism. Within the more contemporary development literature, it
should be noted that just as a tension remains in Myrdal's rejection of both
unbridled value relativism and value absolutism, so a similar tension
remains within Sen, as will be seen below, insofar as he lauds Bauer's
scientific merit and celebration of individual freedom (Bauer 2000,
Introduction by Sen) while nonetheless retaining some Myrdalian notions
of what constitute 'unfreedoms' that need to be removed.
The Myrdal / Bauer rift might be dated in one sense, but the issues
that spawned it remain capable of enlivening debate in contemporary
economic philosophy classes.
3.2 Sen's Capabilities Approach to Development
For Sen, poverty entails more than mere income deprivation. He
directs attention instead to the development of human capabilities and
rights, and away from the metric of exchange value and the maximisation
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of income (Sen 2000). For him, poverty should be measured in terms of
any shortfall in the fulfilment of a range of 'human capabilities', and the
pursuit of 'the good life' therefore requires some understanding of what is
natural to mankind. This entails at least some attempt to ponder matters of
human teleology - or just what it is that constitutes 'development'.
Economic philosophy issues thus again rise to the fore in this contemporary
development literature. Sen's message is that human “unfreedoms” are
decreased as human capabilities are increased, and his concept of fairness
or justice requires an equalisation of “capability shortfalls”, rather than a
maximisation of subjective utility. To a greater extent than is ever apparent
in Bauer he accordingly stresses the need to recognise that State and market
are complements, not substitutes, and for him there is an obvious case in
poor countries for State provision of universal primary education and basic
health facilities. Sen criticises a utilitarian approach to development as
inadequate because poverty and deprivation distort the way individuals
perceive their utility prospects. He criticises a libertarian approach as
inadequate because it fails to appreciate the distinction between positive
and negative freedoms i.e. between freedom from external constraints and
freedom to do whatsoever one chooses. He criticises a Rawlsian approach
because it mis-specifies the 'primary goods' which should be made
available to all citizens at a floor level. He therefore looks to Aristotle for a
justification of a 'human capabilities' approach, which calls for conscious
effort to develop the human capabilities with which all of us are endowed
in some measure. In short, his approach requires a specification of what is
natural to man, and what is therefore necessary for the development of such
'man'. This leaves Sen well removed from the neoclassical orthodoxy.
For Sen (who reflects elements of both institutionalist and
neoclassical traditions, but not the libertarian tradition), it follows that
human beings must be free not only from legal restrictions but also free
from adverse conditions before they can meaningfully be said to be free to
do as they please. Despite Sen's willingness to praise Bauer, his own a
priori conceptions of man, freedom, rationality, equality, utilitarianism,
justice and teleology are by no means identical with Bauer's, and he
recognises that ethical approaches that emphasise rights and freedoms
require more than mere self-interested market-based behaviour. In
significant part, Sen's influence in the development literature of the last
decade or two derives from his ability to cause the profession as a whole to
become more receptive to the breadth of understandings possible for these
terms.
Given the status of Joseph Stiglitz in the development economics
profession, a related point worth noting is that he, like Sen, stresses that
State and market should be viewed as complements. There are thus some
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commonalities between Sen and Stiglitz in their respective critiques of
orthodox development economics and in terms of the policies they
advocate, but it remains the case that Sen's objections to accepting Pareto
optimality as maximand are quite distinct from Stiglitz's critique (1994) of
theoretical sloppiness in the way in which Pareto optimality has commonly
been pursued by orthodox economists. Stiglitz is more concerned to stress
that in the presence of missing or incomplete markets, laissez-faire policies
may not achieve Pareto optimality, whereas Sen is more concerned to
dispute that Pareto optimality is itself a goal worth aiming for. Nonetheless,
the Post Autistic Economics group (www.paecon.net) quotes Stiglitz to the
effect that “[Economics as taught] in America's graduate schools ... bears
testimony to a triumph of ideology over science”.
3.3 Higgins on economics and ethics in the new approach to
development
Higgins (1978) argued that there was much wrong with the orthodox
approach to development economics, and with the notion that what must be
maximised is an additive social welfare function. In Higgins' view, it is in
development economics that the philosophical disarray of orthodox
economics is most apparent, and, accordingly, it is from that seedbed that
he expects the next revolution in economics to emerge. On the strength of
the foregoing, Sen's supporters will credit Higgins with prescience, and
contend that Sen's case for changing the maximand from that of
conventional welfare economics to one of capability development and
equalisation of 'capability shortfalls' is the start of just that revolution. In
keeping with Sen's analysis, it follows that any such revolution will have its
roots in Aristotle, as well as in Smith.
All in all, it is apparent that development economics presents those
wishing to teach economic philosophy with provocative material, ranging
from the implicit conception of the nature of man to challenges to the
cultural relativity of values, and critiques of positivistic scientific method.
4.
UTILITARIANISM AND WELFARE ECONOMICS: THE
SEARCH FOR THE RIGHT MAXIMAND
Social optimisation means little if the wrong objective function is
being maximised. Posner, Sen, Myrdal, Cropsey, Etzioni, Schumacher,
Rawls and others have all argued that orthodox economics is troubled by
exactly that problem, and that the glib and unchallenged presentation of a
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utility based social welfare function as maximand is far from adequate in
the teaching of economics. In fact, a range of alternatives to utility
maximisation is available in the literature, although it is doubtful that many
economics students presently confront them.
4.1 Posner and a wealth maximisation objective
Posner (1979) argues that utility maximisation is not the best
available social maximand, largely because utility calculations can be
distorted by the presence of 'utility monsters'. While such utility monsters
may perversely derive utility by doing things to other people, wealth
maximisation presupposes voluntary transactions, which in turn require that
people do things for other people. Accordingly, Posner argues that utility
maximisation should be replaced as social maximand by wealth
maximisation.
Posner's notion has clear policy implications for the literature on law
and economics and indeed for the law courts. He recognises that wealth
maximisation as social maximand has its shortcomings – e.g. insofar as the
poor will not fare well under his approach, and those without money will
figure in the results only insofar as they matter to those with money in the
marketplace – but nonetheless contends that his maximand is less
rejectable than available alternatives. He sees significant deficiencies in
any of the recognised ethical theories – including both utilitarianism and
Kantianism. Utilitarianism is too exposed to the excesses of the depraved
(as against the demeaned perceptions of the deprived, which was the
problem for Sen), while Kantianism is too squeamish in view of its
endorsement of categorical imperatives. On Posner's logic, babies available
for adoption should be auctioned off in a baby market, rather than allocated
by a process administered by a Government department. As Posner sees it,
an auction would have both efficiency and equity advantages, insofar as it
would not only add to national wealth via efficiency-inducing transactions,
but would also ensure that available babies went to those who value them
most (i.e. to those with the greatest willingness to pay). For him, wealth
creation is the superior maximand, and in the context of the economics of
law the courts should therefore seek to mimic market results. In terms of
human rights, critics object that under Posner's system the only constraint
on human behavior is the budget constraint and one has a right to do
anything at all, subject only to the ability to pay. This is exactly what
Austrian School personalists object to. A consequence of Posner's wealth
maximand is that economic efficiency metamorphoses into a de facto
definition of jurisprudence. The concept of economics-as-imperialistsocial-science can scarcely be taken further than that.
138Australasian Journal of Economics Education
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4.2 Rawls and constrained utility maximization
Rawls (1972) is another to object to maximisation of aggregate
utility. His objection is that utility maximisation sacrifices too willingly the
interests of the poor, in the interests of the overall total. Accordingly he
sees social progress as occurring only when the absolute position of the
poor is itself improved. To that end, he therefore advocates acceptance of a
'maximin' criterion, on the ground that he argues that most people share a
risk aversion when forced to judge social arrangements and inequalities
from behind a 'veil of ignorance'. For him, what is needed is overall social
progress, subject to provision of a guaranteed floor level of welfare. For
Bloom, this is a mere party game, however. The 'veil of ignorance' so
important to the derivation of Rawls' position is not part of Nature and
never actually existed. Bloom therefore dismisses Rawls as an irrelevance
– notwithstanding that Rawls has attracted significant attention from
several luminaries in economics, including Arrow, Harsanyi and Sen (all
Nobel laureates) – since what people would do in a hypothetical situation
has no practical relevance for what actually guides people in reality or in
nature. For Bloom, Rawls therefore represents no more than utilitarianism
made contemporary, with a particular twist to give it appeal in the welfare
state climate of its times.
4.3 Sen's conception of freedom as maximand
As is apparent from sections 2.1 and 3.2 above, Sen is critical of the
idea that income is a suitable maximand for social policy, more especially
since poverty involves more than just income deprivation. Following a
more Aristotelian path, his concern in specifying an appropriate maximand
is to argue that what is first necessary is a careful stipulation of what
constitutes human 'development'. For him that means the development of
human capabilities, for which purpose the removal of various
“unfreedoms” is a necessity. In acceptance of the fact that the freedom of
agency that we individually have is inescapably constrained by
circumstance, he stresses that there is a complementarity between
individual agency and social arrangements, leaving Sen (2000:xii) to
expound the view that “Expansion of freedom is viewed, in this approach,
both as the principal end and as the principal means of development”. He
sees the idea of 'development as freedom' as radical (2000:5), with an
obvious policy reach and the potential to recall some of the lost ethical
heritage of professional economics. A fuller understanding of the
development process requires us to accept, so Sen tells us (2000:14), that
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139
“it is simply not adequate to take as our basic objective just the
maximisation of income or wealth, which is, as Aristotle noted, 'merely
useful for the sake of something else'. For the same reason, economic
growth cannot sensibly be treated as an end in itself. Development has to
be more concerned with enhancing the lives we lead and the freedoms we
enjoy.”
Whether freedom, like wealth, is merely useful for something else
remains a good question, however, and one which preserves a wedge
between the positions of Sen and such explicit or implicit critics as
Cropsey.
4.4 Cropsey's critique of welfare economics: an alternative conception
of capability maximization
Cropsey's 1955 critique is a hard-hitting attack on the neglect of the
metaphysical propositions embedded in orthodox welfare economics. In
essence, he objects to the sui generis individualism (or 'atomism' as some
others call it) and value relativism he sees as the silently assumed core of
welfare economics teaching. As far as he is concerned, what is taught
implicitly is far more important than what is taught explicitly.
140Australasian Journal of Economics Education
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Table 1: Social Maximands etc: Comparative Table
Utilitarianism
Posner
Rawls
Sen
Bentham: nature has placed man under two
Posner 1979 “Utilitarianism, Economics and
Rawls: A Theory of Justice 1971
Sen: Nobel Prize 1998
sovereign masters: pain and pleasure.
Legal Theory”: Wealth is a surer guide than
Utilitarianism is accepted today but it does
Defers both to Adam Smith and to Aristotle.
James Mill
utility to social advantage.
not suffice.
There is much to criticise in orthodox welfare
Utilitarianism fails insofar as it gives scant
economics.
treatment to the poor/disadvantaged.
Pareto optimality may come hot from hell.
J.S. Mill: modified Bentham's original
teaching: “better to be Socrates dissatisfied
There is a difference between doing things for
than a fool satisfied”.
others, and doing things to others.
To identify utility with advantage is far from
obvious.
Goal: Seek the greatest happiness of the
Goal: Seek wealth maximisation, not utility
Goal: Rawls contends that a prerequisite to
Goal: Adopts freedom as chief desideratum:
greatest number.
maximization.
meaningful social progress is that the floor
development as freedom and freedom as
must be lifted ie the poorest section of a
development.
community must be made better off before
an improvement in average welfare can be
Advocates equalizing capability deprivation as
said to be indicative of social progress.
a means of removing ‘unfreedoms’ and as an
element of a preferable maximand.
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141
Utilitarianism
Posner
Rawls
Sen
Criticisms:
Criticisms:
Criticisms:
Criticisms:
Rawls: utilitarianism gives too little regard to
There are problems with the wealth
Harsanyi: Rawls raises useful questions and Sen argues that there are deficiences in
the poor or deprived.
maximisation maximand, but Posner contends
deserves two cheers if not three – but is
utilitarianism, Rawlsianism and libertariansim.
Posner: utility is distorted by the depraved
that the problems with utilitarianism - and other
ultimately unpersuasive. Rawls introduces
Sen has won many accolades in recent years,
('utility monsters').
alternatives to it - are even greater.
arbitrary and unacceptable discriminations
but his interpretation of Aristotle is very
between the rich and the poor, the healthy
contestable (see Bloom 1975).
Sen: subjective utility is not necessarily the
same thing as personal advantage. There is
Problems with wealth maximisation include:
and the sick etc.
Duhs 2004: If, as Sen says, wealth cannot be
much to criticise in orthodox welfare
(i) those without money count only insofar as
Bloom 1975: Rawls is an irrelevance, since
the maximand since it is merely useful for
economics.
they matter to someone with money
he takes his bearings not from Nature but
something else, cannot the same be said of
Heilbroner: utilitarianism is tautological and
(ii) wealth maximisation grants the right to do
from an imaginary state. Rawls is merely
Sen's choice of 'freedom' as a maximand?
irrefutable, and essentially unhelpful.
anything at all, subject only to the budget
utilitarianism made contemporary to suit the
Cropsey: objects to the way utilitarianism and
constraint
welfare state of his day.
welfare economics treat distinctly
Cropsey would endorse Bloom's position.
differentiated goods merely as sources of
Problems with utilitarianism include
undifferentiated utility.
(i) recognising the domain (e.g. are foreigners
Etzioni: respects a hierarchy of higher and
and the unborn relevant?)
lower human needs and so objects to
(ii) 'utility monsters'.
undifferentiated 'utility' as a catchall category
(similar to Cropsey).
Cropsey would object that Posner has not
Nietzsche: hostile to utilitarianism, since
improved upon utilitarianism so much as merely
pleasure is not necessarily good for us and pain transposed it, by introducing an inappropriate
is not necessarily bad for us. Creativity
constraint – the budget constraint – as the one
commonly requires persistence through pain.
limitation on human rights.
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Whatever else welfare economics is, it is an implicit covert teaching
of one particular, contentious conception of man and of teleology, and thus
of the determinants of man's welfare. That, at least, is Cropsey's message.
For him, what is being taught implicitly in welfare economics is what is
central to an understanding of man and society – i.e. a view of man as an
atomistic being for whom human reason is but the handmaiden of his
passions. His objection is that modern economics puts economy before
polity, and then presumes to analyse human welfare without first
establishing just what welfare is. In its utilitarian teaching, modern welfare
economics renders similar goods that are dissimilar, and renders dissimilar
individuals who are essentially similar insofar as they are members of a
common human species. Cropsey objects that the implicit teaching of such
sui generis welfarism is a value relativism which is itself unavoidably a
precursor of nihilism. At least in the long term then, Cropsey's
understanding is that the methodological short cuts we have taken have not
taken us where we wanted to go, but have instead undercut the foundations
of the very society we sought to make strong. He thereby anticipates
Samuels' observation (1976: 409) that paradoxically the Chicago School
may be far more revolutionary than Karl Marx, although this was no part of
their intention. He likewise anticipates Sen's observation (1987:79) that
sticking to the narrow and implausible assumption of purely self-interested
behaviour has taken us on a short-cut to some place other than where we
meant to go. In limited measure Cropsey concurs with Sen in seeking to
derive an understanding of a social maximand from Aristotle - albeit
having objected to utilitarianism, libertarianism and Rawlsianism - Sen
nonetheless ends up endorsing a melange of all three. On the other hand,
Cropsey's deference to Aristotle is more fundamental and therefore
incompatible with Sen's view (2000) of development as freedom and
freedom as development. For both Sen and Cropsey, to identify utility with
advantage is far from obvious, and Pareto optimality may indeed come 'hot
from hell' (Sen 1987:32). They both argue against Chicago School
imperialist understandings of the role of values in economics, but they
nonetheless remain poles apart in terms of their final conclusions as to the
mainsprings of ethical understanding in economics. Following Aristotle,
the one - Cropsey - endorses a generic conception of humankind and
acceptance of a natural teleology with an attendant ends-oriented
conception of human rationality, while the other - Sen - is unwilling to
move that far from sui generis individualism despite raising questions
about the limiting ways in which 'rationality' is defined in economics
(1987: 10-16; 2000: 272). Sen may be right that wealth cannot be the
maximand because wealth is merely useful for something else, but Cropsey
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would argue on the same Aristotelian ground that nor can freedom be the
maximand (as it is for Sen) since freedom too is merely necessary for the
cultivation of something else. Sen is institutionalist enough to seek to
remove constraints on the opportunities individuals have to develop their
capabilities in such directions as they see fit, but not Aristotelian enough to
share Cropsey's acceptance that freedom cannot itself be the ultimate
arbiter of 'the Good Life'. Even after 2000 years, debate about values and
ethics in economics still turns on the question of whether at least in
principle there may be a natural teleology for humankind as such, whether
all values are necessarily individual-relative or whether some values may
be absolute in keeping with the notion of a species conception of man.
(Indeed, on another level, some see this as the root of the present tension
between the Moslem world and the West.)
Cropsey's critique is not well known within the economics literature,
but critiques offered by others often recur partially to his position. As
noted in section 2.1 above, Sen observes that all the propositions
underlying the general consensus on traditional welfare economics are
eminently contestable. Myrdal (1974: 149) notes that “Hundreds of books
and articles are produced each year on 'welfare economics'; even though the
whole approach was proved to be misdirected four decades ago.” Myrdal
adds an endorsement of Boulding's denunciation of welfare economics as 'a
monumentally unsuccessful exercise', which has preoccupied a whole
generation of economists with a dead end “to the almost total neglect of the
major problems of our age”. He adds (1974:149) that if welfare economics
is not entirely meaningless it is meaningful “only in terms of forlorn
associational hedonistic psychology and utilitarian moral philosophy”.
These sentiments certainly echo Cropsey, albeit Cropsey's barbs go further
and contend that this exercise may not merely be futile but also selfdefeating for liberal capitalist society. While Myrdal laments that
philosophers seem content to leave economists undisturbed in this futile
exercise - Cropsey is an evident exception to that rule. In similar vein, Lutz
and Lux (1988) conclude that their humanistic economics is really a
welfare economics radically different from standard welfare economics.
Higgins (1978: 27) joins the choir of complaint and objects that “The socalled 'scientific objectivity' of contemporary welfare economics and the
'positivism' of the latter day Saints of Laissez-faire is another matter. To
insist that economists ought not to make value judgements about what
constitutes improvements in economics and social welfare is in itself a
value judgement of colossal proportions. To argue that a society based on
the principle of 'one dollar, one vote' is 'good' is another matter. The
economists who support the free market system on 'scientific grounds' are
144 Australasian Journal of Economics Education
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in fact being highly unscientific.” That conclusion too is a resounding echo
of Cropsey's case.
Cropsey's argument is abstract and abstruse. But it is penetrating and
provocative. It provides traction in the teaching of economic philosophy to
many who have not previously confronted such argument or questions. In
effect he seeks to secure agreement that no satisfactory social maximand is
provided by utilitarianism or by Posner's wealth maximisation criterion or
by Rawls's maximin 'correction' of utilitarianism or indeed by Sen's
putatively Aristotelian 'capabilities' criterion in its pursuit of development
as freedom. He invites enquiring minds to look elsewhere.
5.
ECONOMICS AS IMPERIALIST SCIENCE AS AGAINST
ECONOMICS AS A MANIFESTATION OF THE A PRIORIS
OF ECONOMIC PHILOSOPHY
Chicago School economics celebrates individualism and thus the
notion of consumer sovereignty. Utility maximisation thus presents itself
as the obvious goal or maximand, and self-interest is taken for granted in
decision-making. There is no 'higher' standard which transcends the
market place, and individual values are therefore merely different, rather
than better or worse. On this view, human rationality partakes of the
choice of means but not ends, and it is therefore essentially just a matter of
benefit/cost calculation which sees some people 'rationally' choose to
engage in criminal activity, for example, while others do not. Under the
influence of Gary Becker, Richard Posner and others, this Chicago
approach has come to infiltrate the psychology, sociology and law
literatures in what we know as 'economics as imperialist social science'.
Thus 'mob psychology' is revealed to be not a distinctive psychological
state so much as a set of circumstances in which the benefit/cost ratio
attached to certain individual actions alters simply because in a mob
context it is harder to detect which individual did what. Likewise, applying
the 'rationality' assumption universally and regarding housebreakers as
rational utility maximisers - rather than as sociological victims who need to
be understood, not punished - leads to clear legal implications in the
imperialist economics approach to crime and punishment. On this
imperialist economics view, it follows that sociologists who advocate
'understanding' of criminals rather than punishment serve to reduce the
costs of crime to criminals and are therefore themselves part of the social
problem.
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Needless to say the above conception of economics as imperialist
social science has its critics.
Socio-economists and economic
psychologists want to inject psychology into economics rather than
economics into psychology, in order to provide a better fit to how people
actually make decisions in the real world, as against in idealised theoretical
models. Moreover, there is much hidden metaphysics in this Chicago
School view (Kristol 1973), and Chicago definitions of 'freedom',
'rationality', and 'equality of opportunity' are certainly not Sen's, Cropsey's,
Etzioni's or Schumacher's. The basis of the Chicago position (as of others)
inevitably is an initial axiom or a priori which is itself an undemonstrable
article of faith. At the root of Chicago economic imperialism therefore is a
particular and contentious a-teleological understanding of the nature of
humankind, rationality, freedom, and the relativistic root of human values.
Veneration of individual liberty, defined Chicago style, results in value
relativism, and ultimately endogenises ethics (in a way to which Samuels
(1976:409), Wilber (2004:147-149) and others emphatically object). In
consequence, Chicago is necessarily antipathetic to government
intervention – that is, to the claim that government knows “better” - since
there is no “better” to know.
As Sen notes, such an approach results in a means-oriented
conception of human 'rationality' which confines itself to deductive
consistency or self-interest maximisation, neither of which Sen finds
compelling as a definition of human rationality. Since 'freedom' is a term
no more unambiguous than rationality – and there is not only freedom to
act as one pleases but also freedom from constraint (including freedom
from want) - Sen and institutionalist economists take the alternative view
that freedom from constraint is a prerequisite of whether people are in fact
free to do as they want in any sense worthy of the term, whereas Chicago
economic imperialists (libertarians or economic rationalists) focus on
extant material circumstances and a presumptive freedom to do as one
pleases. Sen's freedom from constraint includes freedom from adverse
circumstance, not just freedom from restrictive man-made laws. It follows
that economic rationalists, libertarians or economic imperialists who place
great value on individual liberty to do as they please, given extant
opportunities, are dismissive of government intervention, which they see as
limiting personal freedom, while – on the other hand – institutionalist
economists who recognise that various institutional constraints prevent
individuals from attaining a higher level of freedom see some forms of
government intervention as necessary for the enhancement of personal
freedoms. For Sen and others, suitable interventions thus enhance personal
liberty, rather than restrict it, and the Chicago School credo is flawed at its
foundation. It reveres freedom but lacks an adequate understanding of
146 Australasian Journal of Economics Education
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what that freedom is. Furthermore, for Sen (1987: 15) it is itself irrational
“to argue that anything other than maximising self-interest must be
irrational”, and it is unacceptably limiting to adopt a conception of human
rationality which involves no more than logical consistency or self-interest
maximization. The turning points in matters of policy choice in fact arise
not from technicalities in economic theory so much as from metaphysical a
prioris underpinning the various definitions given to such keywords as
rationality, freedom and man.
What must be accepted is that the values reflected in the policies
recommended by one or another economist reflects the prior acceptance of
one or the other definition of freedom, rationality, equality of opportunity,
justice, teleology and the nature of humankind. The utilitarianism and
libertarianism at the root of Chicago School economics-as-imperialistscience are therefore unacceptable for Cropsey or Sen. For such reasons,
neither Cropsey, Etzioni, Sen nor institutionalists more generally would
rush to accept Posner's view that there is nothing wrong in principle with
legitimising a market for such 'services' as torture. Aside from the fact that
most people would lack the wealth to be able to afford the price that would
presumably be demanded, critics of the Chicago School would also object
on the less pragmatic ground that there is simply something wrong with a
value system that accepts torture as merely one more good or service to be
traded in the market place. They wish to reaffirm a qualitative distinction
between the pleasures. Whereas Lazear (2000: 99) notes that the pervasive
march of economic rationalism into every aspect of human society rests
squarely on its claim to be value-neutral science, for Chicago School critics
(O’Brien 1992; 1996; Schumacher 1974; Samuels 1976) the Chicago
attempt to transcend metaphysics in value-neutral 'imperialist economic
science' becomes what Schumacher calls a 'life destroying metaphysics'.
J.W. Nevile properly objects that a rhetorical trick commonly used
by Chicago School economic imperialists – or economic rationalists - is to
present their policy recommendations as if they are no more than the
logical consequences of orthodox economics, despite the fact that that is far
from the case. As Nevile emphasises (1998:170), the policy prescriptions
of economic rationalists in fact depend more on the values they hold than
on the theorems of economics, and the underpinning of their value system
lies in the social philosophy called libertarianism. For such reasons Etzioni
(1988, 1991) explicitly sees reason to turn economic imperialism upside
down. He pointedly rejects the utilitarianism and individualism of
orthodox economics. He objects that people are not just self-interested and
endorses instead what he calls an individualist-cum-collectivist position
(1991: 4; 1988: 1-12). He sees human beings as social animals, and ones
with a Kantian disposition to reflect both material selves and moral selves.
Australasian Journal of Economics Education
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Socio-economists object to the way economics reduces all things to
undiscriminating utility, and to the fact that complete relativism justifies all
choices, no matter how distorted. In re-asserting the need to discriminate
between the qualitatively different attributes of different types of
consumption they accordingly seek to inject psychology into economics,
rather than vice versa. In endorsing the idea of a hierarchy of human
needs, they dismiss imperialistic economics as a vehicle for
undiscriminating 'rational fools' (Lutz & Lux, 1988: 181-182) who
incorrectly presume that people act morally only so long as it makes
economic sense (Etzioni, 1988: 63). They therefore see socio-economics
as a necessary reaction to economic imperialism. Nonetheless, they too
have their critics and they do not themselves say the last word on the way
in which philosophy percolates through economics.
The fundamental point is to recognize the hidden metaphysics in the
Friedman / Becker / Posner / Chicago position and to recognize the
dependence of the policy conclusions of that imperialist economics
perspective on the particular definitions of rationality, freedom, equality of
opportunity, teleology, and the nature of humankind which have silently
been adopted – and taught - within that position. That school of economic
thought, like all others, is permeated by a particular implicit political
philosophy. In short, it is not economics that is the all conquering
imperialist social science, but one or another economic philosophy which
has colonised each contending school of economic thought (Duhs 1982;
1994; 1998; 2005).
6.
ECONOMIC PHILOSOPHY AND THE MEASUREMENT OF
SUCCESS IN ECONOMICS SCHOOLS
Lee (2005; 2006) objects that a recent European Economic
Association project to rank economics departments throughout Europe
employs as the grounds for its rankings publications in neoclassical core
journals. Publications in heterodox journals don't count at all. Since
European funding officials use these rankings when making funding
decisions - because these are the only rankings they have - not publishing
in core neoclassical journals is detrimental both to heterodox European
economists and to their departments. Such rankings in Europe - and
elsewhere – obviously constitute a real threat to heterodox economics and
have been used to cleanse economic departments of heterodox economists.
Conspicuously enough, these core neoclassical journals celebrate technique
and mathematical models and do not commonly roll out a welcome mat for
papers on economic philosophy. Whether or not economic philosophy is a
148 Australasian Journal of Economics Education
Vol. 2. Numbers 1 & 2, 2005
route to enhanced understanding of economic policy and social life, it is
unlikely to be a route to rapid career advancement.
This UK situation is not new and has already been seen in Australia
in the form of Economics School Review Committees which have
advocated the elimination from the teaching curriculum of economic
philosophy subjects. Increased contemporary pressure to publish in 'top 20'
Journals effectively tightens the screws on heterodox efforts in Australia,
insofar as failure to comply again disadvantages both individual academics
and their Schools.
What Fred Lee describes amounts to an act of academic legislation
that it is unnecessary and improper to critique the assumptions and
metaphysical teachings which in fact stand at the very foundation of
economics as a perspective on social life. For orthodoxy, these issues are
settled. They need not be debated again, and indeed need not even be
presented to the next generation of economics students, who instead will be
deemed to be well able to stand on the shoulders of a few giants of the past.
For orthodoxy, this remains so notwithstanding that at least some
contemporary heterodox economists see good reason to wonder whether
Adam Smith, for example, would be willing to recognise as his intellectual
progeny many who claim him as their intellectual father. As Lee suggests,
a 'top 10' list of heterodox Journals might be a counter measure of some
use.
7.
CONCLUSIONS
Economics styles itself as the queen of the social sciences. This
conception of economics as science implies the need for rigor and
precision, and the strongly felt need to be scientific inclines economists to
search for tractability in model building. Economic philosophy, on the
other hand, does not readily admit of tractability, precision or
definitiveness, and hence, as Heilbroner (1996) notes, is not altogether
compatible with this image of economics as science.
There are those, however, who see things differently, and who
believe that much of the appeal of economics comes from the vitality of
debate and disagreement within the profession. For economists of this
persuasion, addressing such issues of disagreement is therefore not an
embarrassing failure to meet scientific pretensions, but an exciting
additional dimension to the practice of economics and social science.
Those who see things this way have no doubt that there is an honourable
place within the economics curriculum for perspectives courses (Duhs,
1993), and for economic philosophy in particular. Even in more specific
Australasian Journal of Economics Education
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contexts such as welfare economics there is much to be gained by careful
examination of the competitive market assumptions which underlie
orthodox teaching, as in the case of Stiglitz’s 1994 critique of the
understanding and teaching of the First Fundamental Theorem of Welfare
Economics. There is therefore even greater importance in thoroughly
examining the full set of assumptions, including those of any implicit
political philosophy, which underpin the whole corpus of economic theory.
That, at least, is the case made here for the importance of teaching
economic philosophy.
In the development economics context, it is this difference between
the recognised assumptions of economics and the full set of explicit and
implicit assumptions that explains the continuing differences between
Stiglitz and Sen, despite significant points of commonality. Whereas
Stiglitz is primarily concerned to argue that welfare economics wrongly
understood leads to mis-directed policy in pursuit of Pareto optimality, Sen
is more concerned to question whether a pursuit of Pareto optimality is
itself misdirected.
Yet at present many who graduate in economics do so without ever
confronting the pros and cons of utilitarianism or of positivism, historicism,
the philosophy of science or matters of teleology. They do so without
addressing the conception of the nature of humankind embedded within
economics, or the way in which alternative conceptions of that nature - and
of political philosophy more generally - reside implicitly in competing
economic theories, and give content to them. They do so without more
than a superficial confrontation of the fact/value dichotomy, and without
addressing the question of whether there really are implicit philosophical
axioms embedded in the policy positions they endorse. Instead of
terminating the teaching of HET, what is needed is the opposite – i.e. the
supplementation of HET by the teaching of the history of political
philosophy (HPP) and its impact on contending schools of economic
thought.
The argument advanced in this paper is that without a basis in such
foundational questions, it is not possible to have a fully meaningful
perspective on economics or the social sciences. This position is not
without pedigree and is certainly the general position of Joseph Cropsey,
Amatai Etzioni, Amartya Sen, Gunnar Myrdal, E.F. Schumacher, Joan
Robinson, J.W. Nevile, Benjamin Ward, and Benjamin Higgins amongst
others. Encouragingly, there are signs of increasing interest in the broad
questions of economic philosophy, as indicated by the birth of such
Journals as The Journal Of Markets and Morality and the Cambridge
journal Economics and Philosophy. The trick remains to have such interest
integrated into mainstream economics training, however.
150 Australasian Journal of Economics Education
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Moreover, this is not merely an academic issue. Metaphysical issues
may not be fast moving and may not always be of much bite in the short
run in relation to the immediate outcome of some specific policy debates,
but their long run impact is potentially devastating. Many societies have
fallen on their own swords. As Kristol argued in 1973 the real enemy of
capitalism is not communism, but nihilism. At least in the opinion of a
select minority of economists – including some of the pre-eminent –
economics taught in the absence of an appreciation of its implicit
philosophical assumptions is incomplete, inadequately understood,
productive of “rational fools” and a Pareto optimality which may have been
bred in Hell, and is capable of silently contributing to long run social and
political problems to which it did not intend itself to contribute. As
mentioned above, Samuels (1976: 409) thus concluded that paradoxically
the Chicago School may be even more revolutionary than Karl Marx,
although that is no part of their intention. Cropsey, Schumacher, Etzioni,
Sen and others have all expressed similar concerns about the prospect that
value-neutral 'scientific economics' will ultimately lead us towards nihilism
and not take us where we meant to go.
Economics may commonly style itself as the imperialistic queen of
the social sciences, but it is apparent (Duhs 1982; 1989; 1994; 1998; 2006)
that the several schools of economic thought have themselves been
colonised by one or another political philosophy, and that without an
understanding of such implicit philosophical foundations economics has
been poorly taught. The conceptual foundations of the discipline cannot
logically be less important than econometric practice, and as should be
apparent from the above, abundant material is to be found in the literatures
of social economics, development economics, economics as imperialist
social science and the search for a suitable welfare maximand to fuel many
a worthwhile course in economic philosophy.
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