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Articles
Editor: Valentin Cojanu
The independence of central banks: a reductio ad absurdum
This paper testifies to the fact that the proclaimed independence of central banks, as conceived by its founders, is nothing more than a chimera. We demonstrate that the hypothesis ‘inflation is a purely monetary phenomenon’ does not substantiate the case for independence. Further, the portrayal of the conservative central banker, the imaginary principal-agent contract, the alleged financial autonomy, along with the ban on budgetary financing, amount to flawed logic in arguing for the independence of the central bank. We also highlight that the idea of independence is not convincing due to the absence of well-defined outlines in its operational toolbox and the system of rules it relies upon.
Agency, functionalism, and all that. A Sraffian view
Former contributions examined the approach to institutions and economic history that can be derived from the classical and Marxian 'surplus approach' as particularly recovered by Piero Sraffa (1951) and Pierangelo Garegnani (1960). The present paper deals with the allegation levelled against historical materialism-and consequently against the surplus approach to institutions-of organicism or functionalism. Organicism is said to look at individuals as passive vectors functionally serving in various capabilities the reproduction and destiny of society as a whole. In this way human agency in the operation and change of society is excluded or at least restrained. Methodological individualism is the traditional alternative supported both by neoclassical and by (some) Marxist schools. The literature over the 'agency versus structure' determination of human behaviour in social and human sciences is immense. I will therefore limit myself to some episodes that may however provide enough food for thought on this field. I shall defend a functionalist view of society while giving space to individual intentional action and aspirations, albeit informed by historical conditioning circumstances. Historical reconstruction of the objective and subjective features of the economic formations under examination, rather than the empty and a-historical study of individual choices, unrelated to the social context, looks like the way to go. Agency must be historically contextualised.
Plato, Aristotle, and Locke on the accumulation of wealth and natural law
The possibility of a growing accumulation of wealth, what we now refer to as economic growth, was something already considered by Plato, Aristotle and Locke, under the concept of chrematistics. In this paper we show how the economic thinking of these authors cannot be fully understood without considering the intimate relationship they establish between politics and property accumulation. In addition to continuities and ruptures in the arguments, there can be seen a growing understanding of the phenomenon of economic growth in such a way that, when we arrive at Locke, an evident paradigm shift can be appreciated. This change is rooted in the contributions of scholastic thinking for which the acquisition of property through human labour or industry enjoys legitimacy according to natural law.
Perspectives on interpersonal utility comparisons: an analysis of selected models
Recently, new models for comparing the strength of individual preferences have been proposed. This perspective article discusses these models within the context of different accounts of how people attribute mental states to others. The paper highlights that the new models share a common shortcoming with Harsanyi’s Equiprobability Model of Moral Value Judgments, which is the inability to facilitate interpersonal comparisons of preference strengths.
Reading and interpreting Ibn Khaldun's economic philosophy
This work aims to present key concepts, ideas, and events that can be derived mainly from Ibn Khaldun’s chapter on economic life, which he captures with the heading, Chapter on Making a Living (ma`āsh). Justifying this undertaking is the significance of Ibn Khaldun’s contributions, the scarcity of translations of his work, and the dependency of secondary interpretive works on a single English translation. While a reading of Ibn Khaldun’s economic philosophy through a textual analysis of the primary sources remains the focus of this work, a sampling of the interpretive and translation works is also presented here in order to understand the level of engagement of non-Arabic scholars with Ibn Khaldun’s work and as a frame of mind with which economic philosophers and social historians might engage.
Scarcity Concept in the contemporary mainstream economic science: an analysis of its ontological and epistemological ambiguity
Different economic schools have studied the scarcity concept, reaching otherexplanations. Accordingly, the discussion underlines that for the Classical School ofPolitical Economy (CSPE), scarcity is considered an empirical fact in contrast to theMarginalist School, which instead finds it as a theoretical consequence derived from itsaxioms. Following both schools, the Marshallian theorists introduce an ontological andepistemological ambiguity about scarcity. With this background, the article will try toclarify the concept and characteristics of scarcity. It examines the concept from differentschools of economic thought, considering a new ontological and epistemological path.The article concludes by highlighting that the scarcity characteristics of mainstreameconomics neglect the sociocultural, historical, and political dimensions, making theconsideration to abolish them through social, political, and economic changes aproblematic and, at times, vain option.
Ways of Knowing Agency and Development: notes on the philosophy of science and the conduct and use of inquiry
Development is a value-laden concept and, as such, an essentially contested issue. To different extents, different ideas of development entail different assumptions about human agency. Although economics has been the most influential discipline, increasingly different accounts highlight distinct features of human beings and the contexts they inhabit, which lead to different implications. This article seeks to delineate the boundaries of the discussion and map out what are arguably the main alternatives within the field. Since such discussion deals with the question of what human action is, the argument is elaborated from the philosophy of science. Contra convention, the discussion uses a philosophical ontology, which is concerned with out connection to the world. Jackson’s heuristic is adopted to generate four philosophies of science and four notions of agency, regarded as ideal typical. Neopositivism advances a rational agent, reflexivity suggests a patient, critical realism furthers an interagent, and analyticism proposes a transagent. This article invites scholars and practitioners interested in this increasingly interdisciplinary area to raise their awareness regarding the foundations on which their ideas about human agency build and note the implications they have for the production and consumption of knowledge.
Can a Catholic be Liberal? Roman Catholicism and Liberalism in a Political Economy Perspective (1800–1970)
The philosophy of the Enlightenment and political thought of modernity found tough opposition in the Roman Catholic Church. Liberalism was associated with Free Masons and revolutionary intent. Nonetheless, liberalism and political economy stimulated some theoretical analysis and specific theoretical positions in terms of social philosophy and social economics by the Church. This paper presents an analysis of encyclical letters and other papal documents, as well as the writings of other Catholic scholars, to elaborate on the theoretical points used to contrast liberalism. Compromises, as well as turning points in the evolution of the Catholic position, are investigated. Lastly, the epistemological and historical reasons for the affinity of Roman Catholicism with ethical liberalism and the limits of this similarity are discussed. 1. Liberal and Catholic, an Italian drama
The apodictic method and the dialogue between theology and science (II)
Many present day scientists think that religion can never come to terms with science. In sharp contrast with this widespread opinion, the authors of this paper consider that, historically, scientific reasoning and religious belief joined hands in their effort to investigate and understand reality. In fact, the present-day divorce between science and religion is nothing else than the final outcome of a gradual, long-term, and deliberately assumed process of the secularization of science. However, especially during the last decades, we have all been equally confronted with the advance of a new concern that some contemporary scientists have, namely reviewing the sphere of problems specific to the domains of investigation in which they are involved while now facing themes that are usually addressed by theological thought. It can be said that this recent development is being captured by an emerging new field of investigation within the modern scientific epistemology, Science and Religion. Against this background, the purpose of this paper is threefold: firstly, to briefly emphasize that one of the defining dimensions of the science and religion dialogue is given by the discontinuity relationship in which the knowledge acquired through scientific reason is placed in relation to the divinely revealed one; secondly, to argue that another defining dimension of the dialogue consists in the hierarchical harmony relationship that mediates the encounter between the two, thus transgressing […]
Understanding how systemic change happens -marketisation and de-marketisation
This paper discusses possible conceptual foundations of formal models of endogenous change processes, understood here as movements between market and non-market transactions at the level of the national economy. It links but does not merge movements of resources with shifts in the pattern of transaction types. In focussing on transaction types, it deploys insights from Commons, Coase, and Godelier, to discuss how framing transaction types as the fundamental 'thing to be explained' points to the value of choices about how activity may best be organised, which requires a general concept, which can be found in Commons' 'going concern', applicable to transactions focussing on markets or not. It entails the possibility of institutional change and shifts in the location of economic resources without formal policy change. It suggests that the main requirement for such change processes are dualistic incentive patterns that operate upon institutional choice and/or development, which derive at root from experienced contrasts between the realities of existing and normatively privileged systems, and others, normatively initially deemed inferior, that offer key actors greater economic efficiency. Moves of institutional activity from one to the other are thus conceptually processes of endogenous systemic change. System in this sense is thus viewed as a coexistence of alternatives. The motivation comes directly from consideration of two very different historical moments: endogenously driven […]
Kenneth Boulding: A Friends' Economist
This paper examines Kenneth Boulding's (1910-1993) religious beliefs and argues he was one of the most prolific religious economists in the 20 th century. He was an enigmatic economist whose career spanned over six decades. He helped to establish the field of general systems and furthered peace studies and conflict and defense. His early work earned him the John Bates Clark medal in 1949. But behind Boulding's theoretical economics was a deep religious ideology. Strongly affected by World War I while growing up in Liverpool, England, Boulding became a lifelong pacifist. Raised Methodist, Boulding discovered Quakerism in high school. While Boulding published widely in the field of economics, he also published almost 100 articles in Quaker journals. Boulding's body of work in economics and Quakerism led to interesting crosspollination. His work on peace and conflict and defense were a direct result of his pacifism. Boulding's work shows deep concern for human betterment and prosperity that is seeped in his religious principles.
Pragmatic behaviour: pragmatism as a philosophy for behavioural economics
Behavioral economics offers an account of actual human behavior. Contrasting with the conventional normative approach to rationality, rational choice theory, describes the deviations from optimal decision making. These are attributed to failures in two systems, one in charge of automatic behavior (System 1) and the other responsible for reflective one (System 2). As important as this is, an elaboration of the interaction between them seems to be lacking. Philosophical pragmatism can contribute to address this want. It provides an evolutionary explanation of how people act accounting for the continuity of behavior including habitual and reflective action. The former is captured by habits and the latter directed towards objects. Additionally, it proposes a dialogical self, consisting of an interaction between the 'I', denoting impulse, and the 'me', referring to reflective action. As such, pragmatism can provide fertile ground on which to cultivate behavioral insights.
Justice and just price in Francisco de Vitoria's Commentary on Summa Theologica II-II q77
Following Thomas Aquinas, Francisco de Vitoria's analysis of justice in exchanges takes place by commenting on the corresponding questions of the Summa Theologica. The identification of the just price with that of common estimation occurs under a sufficient concurrence of sellers and buyers. A high level of concurrence limits the ability to take advantage of the need on the other side of the market. This fact guaranties a full consent of the parties involved in trading. Under conditions of market power or when some authority fixes a legal price, just price should also be taken as a normative ideal.
Neoliberal governmentality, knowledge work, and thumos
Research has shown that the knowledge worker, the decisive driver of the knowledge economy, works increasingly longer hours. In fact, it would appear that instead of working to live, they live to work. There appears to be three reasons for this living-to-work development. First, the knowledge worker ‘has to’ on account of the pressure to become ever more efficient. Such pressure translates into internalized coercion in the case of the self-responsible knowledge worker. Secondly, working is constant, because the Internet and smart technologies and mobile devices have made it ‘possible’. It gives the worker the capacity and management omnipotent control. In the final instance, the neoliberal knowledge worker works all the time because s/he paradoxically ‘wants to’. It is a curious phenomenon, because this compulsive working is concomitant with a rise of a host of physical, emotional, and psychological disorders as well as the erosion of social bonds. The paradox is exacerbated by the fact that the knowledge worker does not derive any of the usual utilities or satisfactions associated with hard work. Elsewhere I have ascribed this apparent contradiction at the heart of the living-to-work phenomenon to the invisible thumotic satisfaction generated by knowledge work. In the present article, I argue that neoliberal governmentality has found a way to tether thumos directly to the profit incentive. I draw on Foucault’s 1978-1979 Collége de France lecture course in […]
Method and scope in Joseph A. Schumpeter's economics: a pluralist perspective
This study aims to evaluate the ideas on the scope and method of economics of Joseph Schumpeter who is one of the important economists of the 20th century. The study consists of four sections: In the first section we underline the interesting points of his life to understand the roots, background, or 'vision' of his thought system. In the second section, we will examine his methodological views that he asserted in his first (but translated into English only in 2010) book. Third section will be concerned with his 'analysis of economics' which refers to his critics of Leon Walras's general equilibrium analysis (as static) and his own alternative (dynamics analysis of capitalist economies) about the central subject matter of economics. In the fourth section we will treat his approach about the development/evolution process of economic thought in time. The study concludes with a brief assessment: Schumpeter is one of the rare economists who can build his own thought system in the history of economics, and he embraced a pluralist perspective in the field of the methodology of economics.
A critical note on the scientific conception of economics: claiming for a methodological pluralism
Opponents of mainstream economics have not yet called attention to the lack of in-depth examination of the general scientific conception of modern economics. However, economic science cannot consistently fulfil the epistemological and ontological requirements of the scientific standards underlying this conception. What can be scientifically recognized as true cannot be answered, neither through the actual ontological structure of the object of observation nor through a methodological demarcation. These limitations necessarily lead to the claim for both a pragmatic and a radical methodological pluralism.
The apodictic method and the dialogue between theology and science (I)
Many today’s scientists think that religion can never come to terms with science. In sharp contrast to the widespread opinion, the authors of this paper consider that historically scientific reasoning and religious belief joined hands in their effort to investigate and understand reality. In fact, the current divorce between science and religion is nothing else than the final outcome of a gradual long-term, and deliberately assumed process of science secularization of science. However, especially during the last decades, we have all been equally confronted with the advance of a new concern over the fact that contemporary scientists have been approaching an area of investigation that had been usually addressed by the theological thought. This recent development has generated an emerging new field of investigation of Science and Religion within modern scientific epistemology.Against this background, the purpose of this paper is three-fold: firstly, to briefly emphasize that one of the defining dimensions of the dialogue between science and religion is given by the discontinuity, in which, the knowledge acquired through scientific reasoning is placed in relation to the divinely revealed knowledge; secondly, to argue that another defining dimension of the dialogue consists in the hierarchical harmony mediating the encounter between the two, thus transgressing the discontinuity and making the dialogue between theology and science possible and viable; and thirdly, to advocate the […]
Economic essays (part two): toward a realistic concept of choice
The previous three essays (Jennings 2019) and the first in this second series were originally drafted 30 years ago in 1988-1990. They aimed to present a more realistic concept of choice in economics. These four essays serve as a precursor to my subsequent work. The first three essays (Jennings 2019) addressed these issues. Essay One started with the notion of ‘opportunity cost’ and the ‘problem of invisibility’ as a case for open discourse. The second essay introduced two metaphors for economic behavior: the ‘neighborhood store’ and the ‘chessboard’, to raise issues of incomplete knowledge, time and social process. The third essay focused on interdependence: a ‘transport’ metaphor shows a balance of substitution and complementarity, opening institutional questions of competition and cooperation. These three essays set up an ethical theory of planning horizons. The fourth essay outlines a theory of ethics based on rational bounds. The endless interdependence of choice makes rational limits essential; surprises show the border of prior awareness of radiant outcomes. Our ethics align private with social incentives; wherever relations show affinity, competition is self-defeating: cooperation is more efficient, especially in education. Learning extends horizons, suggesting the failure of rivalrous systems. How incentives shape planning horizons is central to social well-being. The fifth essay develops this view with regard to institutions. Where substitution is […]
The rationality principle as a universal grammar of economic explanations
A universal grammar of economic explanations is characterized by the meansend rationality principle, which can be understood by drawing a conceptual distinction between its two facets: theoretical abstraction and empirical content. The former serves as a pure form of economic way of thinking and thus delimits the capacities of economists to perceive and understand the manifold human behaviour. The latter provides economists with objects of thought and renders the discipline empirically relevant. Given the implications of the two facets of rationality, the main task of economics as a descriptive science is to incorporate appropriate empirical content into the pure rational framework with the aim of better explaining and predicting human behaviour. As a prescriptive science, economic inquiry should draw on the persuasion and communication skills of its practitioners, thereby influencing the state of the economy through changing the means and ends of the decision makers in question.
Nordhaus on philosophy in climate change economics
Nordhaus' contribution to climate change economics is well-known and, for many, praiseworthy. But his refusal to acknowledge his normative stances is philosophically problematic. This article explores his arguments about philosophy in the economics of climate change found in his review of the Stern's Review (2007). It concludes that Nordhaus nonetheless relies on normative, ethical assumptions, whose oversight hinders the finding of a solution to the problems he tries himself to solve.
Nietzsche, Deleuze and Guattari: performative Nietzsche, Deleuze and Guattari: performative constitution of unpayable debt in finance constitution of unpayable debt in finance capitalism capitalism
Drawing upon the philosophies of Friedrich Nietzsche and Gilles Deleuze and Félix Guattari this essay puts forth the argument that in finance capitalism debt resolution performs as an elusive promise and an appearance that reconstitutes unpayable debt. A close elaboration on Nietzsche's conceptual cartographies of the relation between the flows of Apollo and Dionysus and on the contextualization of this relation within capitalist frames that, as this essay demonstrates, Deleuze and Guattari explore in both Anti-Oedipus and A Thousand Plateaus contributes to the argument that in finance capitalism unpayable debt is performatively constituted through illusions of debt resolution. To date little work offers a performative approach of Deleuze and Guattari's conceptualization of the differential relation between the two flows of capital that constitute unpayable debt, including the ties between these flows and Nietzsche's grasp of the differential relation between Apollo and Dionysus. As a result the performative strategies that constitute, justify, and reproduce unpayable debt in finance capitalism remain relatively unexplored. This essay draws upon the works of Nietzsche and Deleuze and Guattari and adds a performative methodology on the ongoing discussions on debt in order to address the practices that infinitize debt under the gaze of financial capital.
Marx’s Law of value and the ontology of labour: a Castoriadian critical point of view
In Marx’s thought, is ‘law of value’ a particular law of capitalism (historicism) or a general law of the economy (naturalism)? To clarify this ambiguity, this article proposes to employ the social ontology of Cornélius Castoriadis. For it, ‘labour’ is not a substance, but a recent historical creation through which, finally, the capitalist mode of production expresses a fundamental truth about all society’s way of being. From this perspective, we explore some consequences of this deconstruction for the theory of value as current neo-Marxist approaches may employ it today in their economic analyses.
Towards a theory of ignorance
The paper develops an argument for the criteria that a theory of ignorance should meet. It starts from the distinction between instrumental and non-instrumental action. Usually, the latter is considered irrational and the former rational as being based upon known cause-effect relations whilst the latter is not. I argue that the former requires a reasoned basis in predictive knowledge of cause and effect, without which good council is either for inaction or noninstrumental action. The argument proceeds by exploiting mainstream statistical methods to explore an example of a 'metric of advised ignorance' to guide explicit reasoned choice allowing rejection of instrumental action in favour of inaction or non-instrumental action. The argument then explores a case study of how such rejection is disallowed by official requirements in International Development Assistance (aid) that contexts must always be believed predictive and so action organised as instrumental. This shows the basic irrationality of mainstream policy rationality. The paper then discusses wider social epistemological issues of this irrationality and concludes with a list of criteria a theory of ignorance should meet.
Comparing economic theories or: pluralism in economics and the need for a comparative approach to scientific research programmes
Pluralism in economics appears to be a double-edged sword: we need more than one theory to grasp and explain the entire economic world, yet a plurality of possible explanations undermines the aspiration of the economic discipline to provide ‘objective knowledge’ in the singular of the ‘one world one truth’ conception. Therefore, pluralism is often equated with relativism and obscurantism. In this article, I will explore both the demand for pluralism and the fear of relativism and obscurantism, scrutinising each position in order to evaluate their respective justification and devising a methodological proposal that may appease both the defender and the sceptic of economic pluralism.
Rejoinder on animal spirits in Descartes and Keynes: a response to Kurt Smith
This essay serves as a response to Kurt Smith, who wrote a philosophical and historical commentary on my 2018 essay entitled ‘Crises, confidence and animal spirits: exploring subjectivity in the dualism of Descartes and Keynes’ in The Journal of Philosophical Economics. It also provides a rejoinder to my original commentary on the role of animal spirits in relation to dualism in the work of Descartes and Keynes. I address Smith’s historical-philosophical response to my work in three ways. First, I revisit Gilbert Ryle’s concept of the intellectualist legend with respect to understanding the Cartesian tradition of thought and expand upon my own exegetical approach in order to clear up the thorny issue of determining and asserting authorial intention. Second, I address the problem of establishing analogies between texts and disciplines. In order to do so I will revisit my earlier critique of the concept of ‘the Economy’ and show that, contra to Smith’s reading, it is not in fact analogous to Descartes’ ‘human being.’ Finally, I open up a fresh exploration of the nature of the relationship between economic rationality and economic system, looking at the broader economic vision of Keynes and some of his notorious opponents – Ludwig von Mises and Friedrich Hayek.
Why is economics not part of a system of scientific ethics? A review essay on Wilfred Dolfsma and Ioana Negru’s The Ethical Formation of Economists
Until the 1990s, the most used research and teaching materials for economists were print journal articles and print books. Since the Internet was commercialized in the 1990s, economists have used digital technologies in research and teaching. Journal articles and books are now more easily accessed. Online subscription systems allow economists to acquire electronic study and research materials in real time. Researchers can access a wealth of teaching and research materials freely and openly. In this essay [1], I focus on Wilfred Dolfsma and Ioana Negru’s The Ethical Formation of Economists (Dolfsma and Negru 2019) and claim that digital economics research requires a global understanding of ethics consistent with the values of scholarly practices. In the absence of scientific ethics, digital tools and software can harm the members of scholarly communities internationally and become a source of scientific misconduct. Economics should be taught as part of a system of scientific ethics.
The resilience of modern neoclassical economics -a case study in the light of Ludwik Fleck's 'harmony of deception'
In this paper, Ludwick Fleck’s philosophy and sociology of science will be briefly outlined in order to establish a ‘theory of the resilience of scientific misapprehension’. This theory will be use in order to gain insights into the modes of operation of defence and resilience of modern neoclassical economics in the face of recent harsh critique by singling out a case of extreme deviation of theoretical prediction from empirical evidence: minimum wages’ impact on employment.
Reconsidering economics in relation to sustainable development and democracy
The challenge of sustainable development can be approached from different angles. In this essay it is argued that one also needs to examine the present close to monopoly position of neoclassical economic theory at university departments of economics in many parts of the world. An open debate is needed about paradigms in economics as well as ideological orientations.An alternative to neoclassical theory is outlined where individuals and organizations are regarded as political actors, each guided by an ideological orientation or mission. Reference is made to the 17 UN sustainable development goals suggesting that impacts need to be seen in multidimensional terms and an alternative definition of economics as “multidimensional management of limited resources in a democratic society” is proposed. It is argued that economics need to move away from its technocracy-oriented tendencies to democracy-oriented approaches. This is exemplified by a move away from neoclassical Cost-Benefit Analysis (CBA) to Positional Analysis as approach to decision-making and sustainability assessment.
The unrealistic realist philosophy. The ontology of econometrics revisited
The argument put forth in this article shows that the hitherto scientific-realist approaches to econometrics are incongruent with the realistically reconstructed empirical macroeconomics. The SR approaches share in common being realist about the relations depicted by (successful) models. The economic models of data are sensitive to minor changes in sample and estimating methods what creates the 'emerging contrary result' phenomenon: the community of econometricians accept models that are inconsistent. Being SR about econometrics equals committing oneself to the following trilemma: (1) it is feasible to indicate the successful models that rightly isolate/idealize the regularities of the economy (the knowledge thesis); (2) econometric models are about the economic world (the independence thesis); and, at least in some areas of application, (3) successful econometric models contradict each other.
Economic essays (part one): toward a realistic concept of choice
These essays were originally drafted 30 years ago between 1988 and 1990, and then they were filed away and rediscovered just this year. They represented an attempt to offer a simple and unadorned version of fundamental issues in economics pertaining to our urgent need for a realistic concept of choice on which to found our constructions. The first essay introduces the notion of ‘opportunity cost’ and our use of caeteris paribus in the process of partial analysis. The second essay offers two metaphors for economic behavior: the ‘neighborhood store’ where virtually all neoclassical choice occurs; and the ‘chessboard’ that opens three issues simply ignored in orthodox settings. The third essay addresses the problem of interdependence, since choice in this setting confronts our range of awareness as bounded where outcomes spread forever with externalities everywhere, ruling out additivity.
Economic experiments versus physical science experiments: an ontology-based approach
This article applies an ontology-based approach to economic experiments, emphasizing their differences with respect to physical science experiments. To contextualize our discussion, a conciliatory Weberian view of the similarities and differences between natural and social sciences is provided. After that, some ontological features of the social sciences' domain are highlighted, together with their problematic effect on experimental economics. Specifically, we focus on human beings' representational capacities and intentionality, their cultural and conventionally mediated forms of social interaction, and the holistic openness, instability and uncertainty of the social world. Finally, we emphasize the severe under-determination of theory by evidence affecting social science, as well as the related problems of empirical ambiguity, confirmatory biases and propensity to pseudoscientific practices in experimental economics.
Friedman's instrumentalism in F53. A Weberian reading
In this paper, Weber’s methodology of ideal types is applied as a framework to argue for the instrumentalist interpretation of Friedman’s methodology of positive economics. Weber’s ideal-typical methodology is characterized as a mix of descriptive inaccuracy and causal adequacy. Based on some recent structuralist results in the philosophy of science it is highlighted how intimately causal understanding and the properties of entities are related. The main contrast between Weber and Friedman consists in the emphases they placed on the causal properties of agents. It is argued that Friedman’s instrumentalism results from his neglect of entity properties for no causal understanding can be placed upon neglected characteristics. By identifying some channels through which methodological Weberianism could spread, the possibility of a real albeit indirect connection between Weber and Friedman is suggested, with Frank H. Knight as the most probable diffuser.
On Amartya Sen's concept of sympathy
This paper examines Amartya Sen's concept of sympathy and the oversimplified, ambiguous and sometimes erroneous interpretations of this concept by Sen's interpreters. In the first section, two types of sympathy can be found in Sen's 'Rational fools' essay-a contemplative and an active type of which the former has conceptual primacy. Following this, active sympathy is examined to ascertain what Sen means by 'actions based on sympathy' and why he deems these to be 'egoistic'. Sen's understanding of egoism means that sympathy is not straightforwardly assimilable to the orthodox theory of rational choice. The section after that analyses the place of altruism in Sen's work and ascertains that altruism can be aligned both with sympathy and commitment, depending on the definition one uses. The final section compares sympathy and commitment and establishes that they are to be distinguished, not according to the welfare a person expects to obtain from making choices, but according to the reason which motivates that person to make a choice.
The Theory of Moral Sentiments and The Wealth of Nations. Ethics, jurisprudence and political economy throughout the intellectual history of Adam Smith
This paper aims to address two research questions that have not been sufficiently examined by specialized studies of the intellectual history of Adam Smith. The first question asks why Smith, after developing his theory of sympathy in the first editions of The Theory of Moral Sentiments, started working on a theory of jurisprudence and ended up writing The Wealth of Nations. The second question asks why Smith, after writing and republishing The Wealth of Nations, asserted that he could not complete his theory of jurisprudence and incorporated a new part dedicated to virtue ethics in the last edition of The Theory of Moral Sentiments in 1790. The paper shows that: 1) after developing his theory of sympathy in the first edition of The Theory of Moral Sentiments, Smith stated that a theory of jurisprudence was necessary to form rules of justice that guarantee social order, and in the search for that theory he ended up writing The Wealth of Nations; 2) in The Wealth of Nations, Adam Smith was devoted to studying the development of commerce in modern society and the conduct of the mercantile individual who pursued his own interest, and was incapable of elaborating on those general principles of justice that would ensure social harmony. Smith then delved into virtue ethics in order to recommend virtuous conduct that encourages mercantile individuals to become good citizens. The paper concludes by contending that economics would benefit from a better understanding of the […]
Morality and value neutrality in economics: a dualist view
This paper proposes a dualist view that economics exhibits the properties of both moral science and value-neutral approach, regardless of the normative-positive distinction. Our argumentation is derived from the understanding that, analytically, economics is a broadly-defined rational choice theory. As implied by this claim, on the one hand, economics behaves as a moral science for two main reasons: all economic theories and policy discussions are necessarily based on moral premises about means-end considerations; economics as an analytical approach can be and has been applied to explanations of a wide range of moral phenomena. On the other hand, since economists — without being informed of some ethical presuppositions of higher order — cannot deal with the comparisons among different value criteria, their approach remains neutral regarding judgmental positions, which should be given a priori to make economic enquiries possible. Ultimately, by this view we reconcile morality with value neutrality in economics, without slicing the discipline into two distinctive branches.
Financial bubbles and their magic: asset price as a heroic journey in the financial markets
Why do financial crises appear unprecedented in spite of being a rather regular occurrence across countries and time? There are many answers from various schools of finance and economics, including Minsky's financial instability hypothesis in which systemic stability endogenously results in instability. We explore the inclusion of observed human behavior in an endogenous framework by engaging with anthropological concepts such as myth, ritual and magic that structure and explain our behaviour, and by extending the concept of agency from human to non-human. We also point to the possibility of better understanding our position in the mythological cycle using the new social media data. The aim of the article is to offer a holistic framework of interpretation of causes and circumstances of economic crises, using the tools of economy, semiotics, and economic anthropology that would account for both the universality of these crises and for their particular occurrences that always seem unique.
Negative and positive liberty and the freedom to choose in Isaiah Berlin and Jean-Jacques Rousseau
Berlin has made the famous distinction between negative and positive liberty. For many liberals, negative liberty is modern individual liberty manifested in markets, while interference by the State is a form of positive liberty. Berlin was also repelled by Rousseau's concept of the general will, which he considered as a form of collectivist holism. The paper argues that this philosophy is a mistaken interpretation of Berlin's two concepts of liberty and of Rousseau's general will. In a simple model of individual and collective choice under conditions of bounded rationality, it is shown that positive and negative liberty are interdependent. The collective choices made under positive liberty can be modeled as the stochastic version of Rousseau's general will, provided that liberal democracy enables the conditions of free public deliberation. In that case, the individual freedom cherished by Berlin is compatible with positive liberty.
Classical economics must not become history
This paper is meant as a clear statement that things can no longer continue the way they have gone so far. If analyzed critically, the classical heritage, enshrined in fundamental rules and theories, the result of a massive abstraction effort, has not always been consolidated and developed properly in modern times. Therefore, compared to other sciences, economics has been losing ground, exactly where it should have been reinforced by those who serve it-, the economists. Its main core, the classical heritage, has been enriched, but the additions, knowingly or not, have in fact weakened and transformed it into a loose collection of feeble causalities and verbosity. It is imperative that such deviations be stopped. We suggest a two-step solution: a) an inventory of the elements that define the hard core of Economics; b) a review of the circumstances that show what happened with said hard core. The conclusions point to a necessary return to classical ideas.
Ecce Homo-Economicus? The Dr. Jekyll & Mr. Hide syndrome of the economic man in the context of natural resources scarcity and environmental externalities
Indeed, the artificial entity ‘Homo-Economicus’ plays a central role in modern neoclassical economic theory. Maybe an illegitimate child of markets’ self-regulation doctrine and the emerging rationalism - professed by the post-modern realms of neoliberalism and the ongoing globalization process - this theoretical abstraction is promoted as a potential prototype of human behavior. It is firmly believed, that this individualistic, self-motivated, and above all, perfectly informed ‘entity’ could, theoretically, lead the economic system into profound balance between supply and demand, consumption and production, utility maximization, and so on. The present paper consists of a criticism to the mainstream prototype of Homo-Economicus, with further extensions to the neoclassical paradigm. Placing this criticism in the context of ecological economics, the paper argues that the notorious rationality of Homo-Economicus seems to be vanished in the deadlock of a futile race towards non-renewable natural resources depletion and increasing environmental externalities. Finally, a brief review of alternative theoretical frameworks and evidence from institutional and behavioral economics, delineates an emerging pressing request for a paradigm change.
Critical comments on the philosophical context of Ludwig von Mises's 'Human action'
Mises’s work of ‘Human action’ is analyzed in relation to the methodological conceptions of his predecessor C. Menger and of his successor F. von Hayek. Also, it is placed in the continuation of one of his previous works and in contrast to one that followed it. Some of his ideas can be better understood in such a way, while others show themselves as contradictory. It results that his attempt to combine apriorism with scientific realism explains some of major difficulties of Mises’s argumentation.
Crises, confidence, and animal spirits: exploring subjectivity in the dualism of Descartes and Keynes
This paper will explore the nuanced epistemological status of the economic subject in Keynes' work, alongside the physiology of the human subject in Descartes' Passions of the Soul and Treatise on Man. In both instances 'animal spirits' serve as an indicator of dualism within the subject. In Descartes, the spirits mediate between the soul and the body, between the rational and non-rational, by their effect on the pineal gland. In Keynes, animal spirits push up against a certain form of economic rationality and represent a non-rational impulse inherent to human nature that is often opposed to economic reason. While Keynes' conception of economic subjectivity extends well beyond the rationalism of many of his predecessors, the dualism presented in his work by means of the animal spirits is worth considering in philosophical terms. Ultimately this paper will conclude that Keynes' work contains an element of what Gilbert Ryle (1949) has termed the 'intellectualist legend,' that is, the philosophical assumption that we must think first, and then act, relegating spontaneous action to the realm of the 'animal' or the 'non-rational.'
Descartes and the notion of animal spirits: a brief historico-philosophical remark on Sonya Marie Scott's 'Crises, confidence, and animal spirits: exploring subjectivity in the dualism of Descartes and Keynes'
In ‘Crises, confidence, and animals spirits: exploring subjectivity in the dualism of Descartes and Keynes,’ Sonya Marie Scott sets out to deepen our understanding of Keynes’ use of animal spirits in his influential work in economics, by exploring one of the sources from which he appears to have acquired the notion—in the work of Seventeenth-Century philosopher René Descartes. The examination to follow will focus almost exclusively on Descartes’s view, where I hope to bring to light, for future discussion, both historical and philosophical troubles lurking in the account of Descartes as found in Scott’s article. I shall focus on two issues: first, I shall say a few critical words about the analogy offered by Scott, the analogy between Descartes’s and Keynes’ respective ‘dualisms;’ secondly, I shall look briefly at Scott’s reading of Descartes on animal spirits. As a quick bit of preliminary stage-setting, let me preface my remarks with a brief account of Descartes’s dualism and his account of the human being.
Reclaiming the University: transforming economics as a discipline
Economics as a discipline is currently in disarray. In the aftermath of the global financial crisis, academic experts, students, commentators, practitioners and politicians all questioned the status of academic economics and many called for a 'new economic thinking'. Nearly a decade later, however, there is little evidence of a transformation in research and teaching. The present study first clarifies what is meant by a transformation of economics as a discipline, since this remains an ill-defined term and may be interpreted in very different ways. It then establishes the conditions of a successful transformation of the discipline in terms of intra-disciplinary and extra-disciplinary factors. The paper argues that economics as a discipline cannot be expected to trigger this transformation by itself (i.e. via self-regulation), since the 'market for economic ideas' is prone to market failure. In addition, the influence of external factors and actors on the market may serve to distort the congruence between the individual researcher's utility and societal welfare. External incentives are therefore required to establish constitutional guardrails that ensure fair competition between ideas.
A comment on the law of supply and demand
Graduate economics departments have largely abandoned the law of supply and demand (henceforth, The Law). Nevertheless, The Law continues to be taught in all undergraduate economics programs, and it is accepted as the fundamental law of price throughout the world. This paper explains how the modern conceptions of demand and supply as schedules have driven The Law from graduate economics. A reinterpretation of the meaning of supply and demand is suggested as the basis for bringing The Law back into the corpus of economic theory, that is, supply and demand should be conceived of the same way Adam Smith and the whole classical school conceived of them—as simple quantities.
A comment on 'Comment on the law of supply and demand'
The paper briefly discusses some issues approached in the study ‘A comment on the law of supply and demand’ by M. Northrup Buechner, published in this issue of J Phil Econ. The way of discussing is logical-theoretical, without bringing into attention empirical data. Even less than that, only a few of the issues debated in the original study are examined, namely those issues which appeared to this author as both the most problematic and susceptible to drive the future discussion in the matter.
How to transform economics? A philosophical appraisal
Ten years after the global financial crisis there is hardly any evidence that the theories, teaching and policies of mainstream economics have changed. This paper is an attempt to contribute to the greater understanding of this persistence, but also to the discussion on what the requirements are to materialise a transformation in economics, given the dismal outcomes in the world economy. The analytical approach of the paper is to utilise relevant philosophical accounts that point out attributes of dominant discourses, and methodological requirements to supersede an already dominant discourse. The objective is to contribute to an improved understanding of factors that obstruct or construct transformations in a knowledge field such as economics; and thereby contribute to transformation efforts, preferably for a more pluralist and emancipatory economics. Given the complexities and the tensions between different philosophical positions, the conclusions of this appraisal are summarised into five criteria that appear essential to realise a successful transformation in economics: critical juncture; dissimilarity; scholar validation; sensibility; and external power. It is suggested to revise efforts to fulfil these criteria as much, and as soon as possible, given the importance and urgency of changing the trajectory of our economies and societies.
The order of social sciences: sociology in dialogue with neighbouring disciplines
Comparing sociology with economics, psychology or history shows that borderlines between disciplines have become fluent and always newly oscillating. Economists, especially prominent positions awarded with Nobel prizes, are increasingly discussing items as motivation, rationality, norms or culture which belong to the domain of sociology. Sociology should acknowledge this kind of ‘imperialism’ and claim own competencies.
Smith's invisible hand: controversy is needed
Smith's metaphor of the invisible hand, commonly attributed to The Wealth of Nations, is described in the Theory of Moral Sentiments. It is a ‘deception’ fed to the lower classes. Private initiative depends upon the presence of privileged classes in a conservative rather than liberal state. Only thus can the ‘invisible hand’ improve the nation's ‘wealth.’ Hence, the economic mainstream cannot easily claim Adam Smith as their ancestor. Nor can the Marxists associate him to the misdeeds of the mainstream. A Smithian ancestry is more plausible for Neoliberals.
Some thoughts on ancient civilizations' trinity of philosophy, religion and economics
Here are some loud thoughts that reflect upon the relationship that had long existed amidst philosophy, religion and economics in the so-called ‘grand’ civilizations (that had existed during 3100 BC to the beginning of Christian era). Historically, the visions of intellectuals, rulers, men of faiths, and business people have helped drive these civilizations to their zenith. The philosophies, religions, and economics of the time were deeply involved in this process of development, and seem to have acted in unison. Here is an attempt to provoke some fresh thinking on the subject by re-examining this triad relationship of the fundamental spheres of human life. The logic of this paper attempts to raise doubts, if the relationship was ideal and was based on ethical and moral values, as it was proclaimed by the philosophers, pontiffs, politicians and the business leaders of the time.
A multidisciplinary-economic framework of analysis
Human motivation offers energy, and circumstances offer possibilities. Only in combination, human motivation and circumstance yield action. Over time, desires and opportunities, to satisfy them closely, interact with one another. Orthodox economics analyzes economic motivation in interaction with scarce natural resources. It assumes that perfect rationality and non-sociality create a so-called economic world and analyzes the economic mechanism of allocation of scarce resources. Neoclassical economists use this world as a theoretical foundation for their empirical research. Heterodox economics rejects this strategy of isolating one motivation, a strategy that ignores the psychic and the social problem. However, the heterodox idea of human motivation, being variable and endogenous, is badly analyzed. This leads the author to construct a psychic and a social world that is completely comparable with the agent-structure model of the economic world. The three isolated worlds are integrated by analyzing the interactions between the three worlds. In the integrated world, the economic structure, the psychic structure and the social structure are one another's foundations. This human world gives familiar economic concepts such as utility, efficiency, rationality, price, value, cost and benefit, a different meaning. Similarly, psychic concepts such as Self, willpower and personality and social concepts such as status, power, culture and morality, are given different meanings. To make […]
Economics, chrematistics, oikos and polis in Aristotle and St. Thomas Aquinas
In Aristotle’s thought, economic activity refers to a kind of praxis consisting in allocating the human and material means that constitute the oikos –the domestic community- to fulfil its natural ends: ensure both life and the means of life. By means of natural chrematistics -acquisitive art- families acquire the necessary means for this, which come from production and exchange. Families group together in the political community (polis) whose end is living well, according to virtues, among which justice is highlighted as the ‘complete virtue’. For its part, the Christian êthos regards every human act, internal and external, of this complete system (polis, oikos and chrematistics) as tending towards its ultimate purpose (beatitudo). In St. Thomas’s view, eternal law harmonizes necessity of irrational beings, loving God’s action (divine law), natural law, and the contingency of ‘human things’ where the economy is included. Trading activity is lawful if it is at the service of the oikos or polis and according to how is exercised, by following commutative justice. The family, political and religious character of human nature establishes what the natural-necessary consists of, embracing, apart from bodily goods, others derived from considering social status and the life chosen (civil, religious, active or contemplative). Economic activity based on this anthropological root has a specific place as a part of an ordered natural-legal totality that provides the […]
'Growth in a Time of Debt' as an example of the logical-positivist science
The paper addresses the question whether the now- infamous piece of econometric research conducted by Reinhart and Rogoff (2010) that set the threshold hypothesis in the relation between public debt and economic growth was conducted in accordance with the neopositivist doctrine. The article consists of two parts. First, the epistemic advice given by logical positivism is reconstructed and operationalized. Second, the cliometric method employed by Reinhart and Rogoff (2010) is analyzed. The answer to the research question is affirmative. ‘Growth in a Time of Debt’ is a piece of logical-positivist science because (1) the research is data-based and aimed at confirming the results, (2) its authors are committed to the neopositivist theory-observation distinction, (3) its goal is describing an empirical generalization and the result’s interpretations suggest that (4) Reinhart and Rogoff (2010) understand causality in a reductionist way, as a constant conjunction.
The dominion of means over ends. Modern bank credit and Max Weber's irrational rationalization
The institutions which grant credit today can be considered to be an example of what Max Weber describes as the typical rationalization of modern age. Such a rationalization would bring a lack of reflection on what should be the ultimate significance of certain technical means, which are confused with a value-in-itself of a social context. The paper highlight the fact that the function of credit consistent with individuals’ ‘ultimate ends’ seems to be that of a temporal coordination between the ‘bargaining wills’ of different individuals who aim at obtaining the highest benefit by means of the utility of their products and the products of their peers. But the current epoch has favored the elevation of historically determined features of credit-issuing to ultimate ends. Referring, among other sources, to a report by the Bank of England and to studies by Neo-Keynesian authors such as Stiglitz, this essay establishes that the consequence of the current private structure of credit-issuing is that the ultimate end of credit does not coincide with maximization and economic reciprocity but with the assessment of a risk which is distinctly private. Also, since in this structure Central Bank acts as the bank of all commercial banks, credit granting can be read as being in function of the availability – within a circumscribed economic web – of a specific credit ‘raw material’ which has a price: central bank’s liquidity. This situation puts a deep […]
Economic theory in historical perspective
On the methodological plain this paper outlines the conditions that contribute to the development of economic theories and it continues with an examination of the concrete circumstances that gave rise to modern neoclassical macroeconomic theories. The paper further claims that the current impasse in macroeconomics is indicative of the need for new directions in economic theory which becomes imperative in the long economic downturn that started in 2007 and concludes by suggesting the need for a synthesis between the classical analysis and the theory of effective demand.
Aristotle on justice in exchange: commensurability by fiat
This essay offers an interpretation of Aristotle's remarks on the commensurability of goods in Book V of the Nicomachean Ethics. It explores the term ‘by hypothesis’ (ἐξ ὑποθέσεως) which Aristotle uses to describe the institution of currency through which commensurability is established. The term implies that Aristotle conceives the origins of currency to lie in a conscious act of stipulation rather than through a spontaneous process in which currency is established via the unintended consequences of individual action. In conclusion, contemporary theories of money are considered and it is asked with which Aristotle’s conception of money aligns most closely.
Economic crisis, economic methodology and the scientific ideal of physics
The methodological foundations of mainstream economics have been cited as one of the main reasons for its failure to account for the economic crisis of 2008. In spite of this, the status of economic methodology has not been elevated. This is due to the persistent aversion towards methodological discourse by most mainstream economists. The anti-methodology stance has a long presence as exemplified in Frank Hahn’s (1992) work. After focusing on the debate originating after the publication of Hahn’s arguments, the paper offers a categorization of the main explanations for mainstream methodological aversion. Subsequently, it suggests an explanation based on the role of the physics scientific ideal, arguing that the endeavor to achieve the high scientific status of physics by following the methods of physics, contributed to the negative mainstream attitude towards economic methodology. The relevant writings of the extremely influential mainstream economists Irving Fisher and Milton Friedman, reinforce the assertion that the alleged hard science status of economics renders methodological discussions and especially methodological criticism, rather pointless. The paper also calls for a more systematic discussion of this issue, especially in the wake of the line of argument that links the recent failings of mainstream economics to its methodological basis.
Planning horizons as an ordinal entropic measure of organization
Nicholas Georgescu-Roegen (1971) educated economists on the notion of entropy laws in economics and ecological process. An earlier paper by Kenneth E. Boulding (1962) asked what we might do with a measure of organizational entropy, were one ever devised. The aim of this paper is to propose the notion of planning horizons as a candidate for this role. First, the concept of organizational entropy is discussed and defined within the interdependent domain of ecological economics. Next, the character and contributions of an entropic measure of organization are reviewed, as described in Boulding’s work. Third, the concept of planning horizons – and their relation to economic cohesion, efficiency and well-being – is introduced to show how ‘horizon effects’ (shifts in planning horizons) serve as an ordinal entropic measure of organization in dynamic complex settings of interdependent effects. Last, the promise of planning horizons as a new social research program in ecological economics shall be discussed.
'Why has economics turned out this way?' A socio-economic note on the explanation of monism in economics
Economic science has – lamented by some, applauded by others – turned into a monistic discipline. In this short research note, a socio-economic answer to the question of why this has happened is provided by combining an economic approach to the market for economic ideas with a sociological approach to a scientific (power) field.
The case for increasing returns (2): the methods of planning horizons
In neoclassical economics, substitution assumptions support equilibrium models in closed systems shunning interdependence. On these grounds an array of frames show outcomes as stable, efficient, unique and determinate. Heterodox economists say equilibrium models sidestep practical knowledge and the rich reality of economic behavior. Rigor or realism, mainstream or radical, ecological, institutional, socio-cultural: economics invites a wide diversity of assumptions, once short-term models of substitution are opened to question. The answers are blurred by applications; there is clarity in a simplicity shielded from mundane detail. This paper addresses the methodological impact of planning horizons, increasing returns and complementarity, and their proper representation in economic constructions. Horizonal economics can be construed as extending orthodox standards into a realm of time, but for its subtler ramifications. Increasing returns make our relations complementary and not substitutional, loosening the tight deductions from mainstream models of choice. The horizonal extension of our received theory of price applies time to cost and demand curves, showing Marshallian scissors (supply and demand) cut outward and downward with expanded horizons. Static conceptions appear in horizonal groups, suggesting complete theories of price should specify agents’ horizons, with no further radical impact: the trouble emerges with increasing returns and complementarity. Horizons stem […]
Poor countries and development: a critique of Nicole Hassoun and a defense of the argument for good institutional quality
If we agree that ‘institutions are the kinds of structures that matter most in the social realm: they make up the stuff of social life’ (Hodgson, 2006, p.2), and we also agree that they largely influence, either positively or negatively, even many of the decisions relative to our personal lives, then we should conclude that emphasis on quality institutions to a people should not be wished away. Drawing on the earlier stated, the present work critically responds to the position of Hassoun (2014) that making aid conditional on good institutional quality is not good for the poor. It may be true that giving aid to the poor without consideration of the quality status of their social institutions may serve their immediate purposes, but if the poor are not to be consigned and confined to the margins of perpetual dependence, then due attention should rather be shown to ensure better reforms for their institutions, given that quality institutions largely and positively influence and sustain, in spite of other considerations, human development in the final analysis.
Rawls and Piketty: the philosophical aspects of economic inequality
This paper discusses a key contemporary problem, that of inequality. Certainly, the most visible inequality today is economic inequality, which is not only a characteristic found today, but is also the result of a long historical development. The problem arises when inequality becomes artificial (produces itself) and thus becomes a matter of social sciences and humanities. At this point, the question of economic inequality becomes a non-economic issue and thus opens the possibility of formulating such principles that will be able to reduce the issue to a minimum. This paper discusses this possibility, while referring to Thomas Piketty's book on capital in relation to John Rawls's principles of justice to which Piketty refers to.
Slow living and the green economy
The current paper explores the relationship between some relatively new concepts in the field of economics-slow living, slow food, slow writing and the green economy. The goal of the paper is twofolddiscussing the possibilities opened by these exciting new concepts, in terms of an increase in the quality of life combined with an environmentally sustainable lifestyle, as well as ascertaining what the concepts may entail in the context in which the effects of the recent economic crisis may make green and slow living seem like a distant dream. It is this holistic view that we shall attempt to enlarge upon in the paper, with the avowed purpose of weighing out the possibilities presented in the complicated, crisis-fraught global context.
The case for increasing returns I: ‘The Hicksian Getaway’ and ‘The Hirshleifer Rescue’
The case for increasing returns is accepted by most heterodox economists. Yet allegiance to decreasing returns in orthodox circles still endures directly and in the form of substitution assumptions. In forty short years from 1928 to 1968, beliefs shifted from Pigou calling rising cost ‘inadmissible’ to Alchian deeming decreasing returns ‘a universally valid law’ until Kaldor revived the case for increasing returns in the 1970s. How did these shifts of view occur? After dapham opened the door and Pigou defined the orthodox stand, the 1930s debates swept through imperfect competition and many other issues into Keynesian disequilibrium theory. In 1939, ‘The Hicksian Getaway’ opened an Age of Denial leading to equilibrium theories based on substitution; then during the 1960s a second challenge to rising cost based on learning and technical change was defeated by ‘The Hirshleifer Bescue’ of decreasing returns and thus substitution in neoclassical theory. Why economists' substitution assumptions still hold sway is the focus of this study. First, the paper reviews ‘The Hicksian Getaway’ in its context and with respect to equilibrium models. Second, the paper analyzes and disproves ‘The Hirshleifer Bescue’ as an invalid argument based on a non-sequitur and thus simply asserted. Third, the case for increasing returns is developed into a theory of planning horizons supporting a generalized complementarity in economics. Some methodological implications are […]
Economics in times of crisis. In search of a new paradigm in economic sciences
The relationship between the development of economics and economic performance is not reducible to any set of simple rules. Among the historians of economic thought there is even a handful of those who perceive the progress in economics mostly as an outcome of the attempts to solve the problems, inconsistencies and paradoxes within economic theory itself. Seen from this perspective, economic reality has minor (or no) importance. On the other hand, the endeavours to modify a mainstream approach are significantly greater in times of economic downturns. Seeing that economics is in such a state of ‘intellectual ferment’ nowadays, it is worth reconsidering the connection between economics and the economy. Thus the main aim of the paper is to analyse the current state of economic science in relation to the last economic slump. Although it is of course not possible to predict the future trajectories of economic theorising, taking into consideration the nature of the crisis the most feasible and potentially most fruitful areas are indicated.
The welfare costs of rent-seeking: a methodologically individualist and subjectivist revision
Gordon Tullock is acknowledged for being the first to recognize the true costs of rent-seeking as including not only the Harberger triangle but also the Tullock rectangle. This rectangle does not constitute merely a lossless transfer of wealth, but it causes a misallocation of resources as rent-seekers invest resources in lobbying. However, a close reading of Tullock’s writings shows that his arguments are formulated in a holistic fashion, speaking of what is efficient or inefficient for society. Rent-seeking is inefficient because it reduces societal welfare. But according to a methodologically individualist and subjectivist economics, such a claim is invalid. We must distinguish between positive economic fact and normative moral philosophy. We call for a reconstruction of utility and welfare economics based on methodological individualism and subjectivism with implications for the theories of monopoly and competition: practices which Neoclassical perfect-competition theory considers to be evidence of rent-seeking should instead be deemed as indications of genuine competition Political economy should be concerned with ascertaining which institutions will best enable individuals to pursue their individually subjective ends – or else economists should be explicit about their normative preferences and political philosophies.
Economics of paternalism: the hidden costs of self-commanding strategies
The paper proposes an economic assessment of paternalism by comparing different alternative responses to dynamically inconsistent behaviors consecutive to hyperbolic discounting. Two main types of action are possible, self-commanding strategies and paternalism The first category includes personal rules and pre-commitment The second can be subcategorized between coercive and non-coercive forms of paternalism, which are respectively associated (although it is debatable) with legal paternalism and with ‘nudges’. Despite being self-inflicted, self-commanding strategies are actually not cost free and can result in a dramatic cutback of people’s freedom of choice. Likewise, legal paternalism can, on occasion, be less harmful than personal rules or pre-commitment; similarly, nudges can be more invasive and less effective than their proponents want us to believe. The aim of this paper is not to propose any standardized form of response to irrational behavior (whatever that may mean) but to argue, on the contrary, that every case should be individually appraised. Individual situations can be remedied by self-commanding strategies or by paternalistic policies, either in isolation or in combination.
A criterion for realism, with an application to behavioral economic models
Many economists working within the framework of behavioral economics (BE) label the conventional way of modeling as unrealistic, and consider their own approach as more realistic than the standard practice. However, a criterion for realism is lacking in behavioral economics literature. This paper offers a simple criterion for predicating realism to economic models, and provides an illustration of such criterion at work on a particular BE model.
Collective beliefs and horizontal interactions between groups: the case of political parties
Groups matter in our ordinary folk psychology because a part of our social interactions is done with collective entities. In our everyday life, we indeed sometimes ascribe mental states to social groups as a whole or to individuals as members of groups in order to understand and predict their behavior. The aim of this paper is to explore this aspect of social interactions by focusing on the concept of ‘collective belief’ in a non-summative sense and, more precisely, on collective belief of a specific kind of group: the political party. How can the concept of ‘collective belief’ help to understand the interactions which involve these kinds of collective entities? After providing an epistemic description of political parties, this paper focuses on the collective belief in a non-summative sense. As Gilbert says, a group believes that p, if its members are jointly committed to believe that p as a body. It is argued, with the help of an example from the political history of France, that this view can enable us to understand the interaction between political parties. More precisely, it can help clarify the way in which a political party uses the rational constraints on the party as a whole and/or the social and epistemic constraints on the behavior of the group's members in order to destabilize or weaken other political parties.
Work, recognition and subjectivization: some remarks about the modernity of Kojève's interpretation of Hegel
From the analytical point of view of Hegel's philosophical anthropology, in Kojève's interpretation, work is an existential structure through which the dual process of subjectification and socialization unfolds. For Hegel, however, this process is not taken for granted: its possibility is understood in terms of the culmination of man's conquest of humanity, taking as a point of departure the relation of mastery to servitude and the undertaking to transform this relation precisely from within the perspective of servitude. The goal of this article is to reconstruct the conceptual framework of this philosophical moment, to our mind an indispensible precondition for the apperception of our modern societies' functioning at the most fundamental level, to the extent that they consider themselves to be ‘work based societies.’
Expiration of private property rights: a note
According to libertarian law, upon what occasions may a person's private property rights in goods, commodities, in himself, be alienated from him? The present paper is an attempt to wrestle with this question. We consider abandonment, punishment, salvage, misplacement, liberation of property.
‘Ups’ and ‘downs’ in metaphor use: the case of increase / decrease metaphors in Spanish economic discourse
The purpose of the present article is to analyze the use of evaluative metaphors in two economic discourse genres displaying different degrees of specialization: business media and the central bank report. The article points out the differences in terms of metaphor use between the two types of discourses ranging from lexical choices to the way evaluation is assumed. Metaphor use is also a result of specific textual goals. The research is intended to provide a detailed insight into matters related to hidden subjective content present in metaphors. The extended use of the lexical items in focus both in the media as well as in specialized discourse tends to generate readers’ over familiarization with them and consequently the possibility of value neutralization. That is why people are usually not aware of the opinion forming effects metaphors have in communication.
A review of the Granger-causality fallacy
Methods used to infer causal relations from data rather than knowledge of mechanisms are most helpful and exploited only if the theoretical background is insufficient or experimentation impossible. The review of literature shows that when an investigator has no prior knowledge of the researched phenomenon, no result of the Grangercausality test has any epistemic utility due to different possible interpretations. (1) Rejecting the null in one of the tests can be interpreted as either a true causal relation, opposite direction of the true causation, instant causality, time series cointegration, not frequent enough sampling, etc. (2) Bi-directional Granger causality can be read either as instant causality or common cause fallacy. (3) Non-rejection of both nulls possibly means either indirect or nonlinear causality, or no causal relation.
A brief history of international trade thought: from pre-doctrinal contributions to the 21st century heterodox international economics
The present paper outlines the development of international trade thought, from the pre-doctrinal contributions of Greek philosophers and scholastic theologians, through the theories of the first schools of economic thought, and up to modern and contemporary trade theories. I follow filiations of ideas in a chronological order, and show how theoretical investigation into the causes and effects of international trade—and the rationale for government intervention—has evolved over the last two centuries.
Social mechanisms and social causation
The aim of this paper is to examine the notion of social mechanisms by comparison with the notions of evolutionary and physical mechanisms. It is argued that social mechanisms are based on trends, and not lawlike regularities, so that social mechanisms are different from mechanisms in the natural sciences. Taking as an example of social causation the abolition of the slave trade, this paper argues that social mechanisms should be incorporated in Weber's wider notion of adequate causation in order to achieve their explanatory purpose.
Modeling exogenous moral norms
This paper considers the possibility of a robust and general formulation of a model of choice for the representation of a variety of moral norms. It starts by reviewing several recent models of deontological (or rule-based) norms that retain the basic elements of the economic model of choice. It briefly examines the achievements and drawbacks of each model, and while no model is identified as the most accurate or robust, the most appealing aspects of each model contribute to the construction of a tout-ensemble utility function proposed in the final section. This representation of preferences aims to incorporate the most common qualities of both consequentialist and deontological moral norms in order to represent decision making under their influence.
Shifting economics: fundamental questions and Amartya K. Sen's pragmatic humanism
Amartya K. Sen's body of work is an unrelenting project that consistently and coherently re-focuses the attention of economists and economics towards foundational questions. His capabilities framework has offered an expanded space of evaluation to directly judge the well-being of people and society. Through a detailed survey of Sen's intellectual development, his readdressing fundamental rigidities in economic methodology, and his new framework for evaluation, this paper argues that Sen has inculcated new habits of mind, and engendered a social momentum in economic thought that takes human complexity and the richness of societal diversity into account. Creating a social momentum in economic thought through refocused habits of mind can have a sustainable impact in economics only if its scope is not sub-discipline specific, if it provides an inclusive framework, and if it builds bridges within and outside the discipline chiefly between economics and moral philosophy. Sen's approach is pragmatic, courteous, and persuasive, but not divisive. It is expansive, yet contextual; it is humanistic. In Sen, economics is an inquiry into the nature and causes of human development.
A comment on scarcity
Modern economics is based on the idea that every good and service is scarce, but the standard defenses of this premise by reference to zero prices and infinite resources are invalid. The concept of scarcity is defined and used to show that ordinary scarcities are not economic scarcities. The errors regarding scarcity are traced to the methodology of modern economics, and an alternative method is suggested for a science whose subject matter is real human beings. The concept of relative scarcity is explained, and used to illuminate some important aspects of the functioning of a market economy. Some of the consequences are identified for economics if economists recognized that universal scarcity is not a fact.
Commentary on secrets of economics editors: an unintended ethnography of economics
Unusual Humean issues in materialistic political economy
Capitalism as we know it presents typical dialectical features that isolate it from nature, in which real oppositions make evolution revolutionary: A dialectical metaphysics replaces the free flow of events allowing capitalist relationships but preventing the practice of materialism. Some radically sceptical issues in Hume's Enquiry Concerning Human Understanding, Dialogues Concerning Natural Religion and A Treatise of Human Nature come useful here. A materialistic approach with complete (i.e., non-dialectical) ruptures in fact dovetails with Hume's argument on the unpredictability of nature and the predictability of human social activities. As a consequence, a thus renewed materialistic political economy concerned with the concrete must work out its own categories dynamically, to discard them once they have been proved metaphysical.
Growth theory after Keynes, part II: 75 years of obstruction by the mainstream economics culture
Part I of this essay explained the sequence of events that enabled the neoclassical paradigm to regain its dominant position in mainstream economics following serious challenges by ‘Keynesian’ economists. This second essay seeks to answer the question of why the economics profession was so willing to sustain the neoclassical paradigm in the face of the reality-based challenges by ‘Keynesian’ economists like Harrod and Domar. The answer is sought in the culture of economics, the history of science in general, and the study of power in the field of political economy. This article draws heavily on the work of the French sociologist Pierre Bourdieu, who divides culture into habitus (procedures and dispositions) and doxa (more abstract beliefs and philosophies), in order to provide insight into how culture affects economic thinking. Bourdieu’s concept of symbolic violence helps to explain how a narrower neoclassical growth model was enthusiastically accepted as a replacement for the ‘Keynesian’ Harrod-Domar growth model. Financial and business interests clearly understood the power of culture and they used their accumulated wealth to support the neoliberal doxa and neoclassical habitus that would induce economists to willingly provide intellectual cover for policies that benefitted those financial and business interests. We conclude with a discussion on how the history of thought on economic development might have evolved if the Keynesian paradigm, and its dynamic […]
Behavioural controversy concerning homo economicus: a Humean perspective
In his monumental masterpiece, A Treatise on Human Nature, which explains the methodology of human reasoning concerning matters of fact and describes the roles that passions and morals play in it, Hume arrives at an enormously interesting maxim: An academic controversy cannot continue for long unless the disputants assign different meanings to the major terms employed in the debate. This theory has been applied in this paper to examine the behavioural criticisms about Homo Economicus (HE), the pivotal perception in the neoclassical microeconomic model.To achieve this objective, the paper discusses the origin and evolution of the concept, reviews behavioural criticisms, summarises the main tenets of Hume's philosophy of human knowledge and finally examines the behavioural opinions from Hume's perspective. The paper concludes that Hume's theory convincingly explains the reason why the HE controversy is continuing for over half century-a fact that both the mainstream and behavioural economists are ignoring.
Dividing a cake (or) Distributional values in the measurement of economic inequality: an expository note
Distributional judgments'-judgments on the extent of inequality in the distribution of income and wealth-are routinely made by economists in exercises aimed at comparing inequalities in alternative situations. Yet the measurement of inequality is informed by certain nuances, which it would do well to be attentive to. In particular, the values underlying measurement protocols are not always made explicit, which tends to lend a somewhat misleading semblance of 'value-neutrality' to the activity of measurement. It is argued, with specific reference to the problem of inequality measurement, that such an orientation can compromise the possibility of accurate diagnosis and appropriate policy prescription. There is little that is original in this article, and much that is owed to the pioneering contributions of Serge-Chritophe Kolm. The emphasis throughout is on explicating an important issue through a deliberate effort at achieving simplicity in both argument and expression.
Growth theory after Keynes, part I: the unfortunate suppression of the Harrod-Domar model
After Harrod and Domar independently developed a dynamic Keynesian circular flow model to illustrate the instability of a growing economy, mainstream economists quickly reduced their model to a supply side-only growth model, which they subsequently rejected as too simplistic and replaced with Solow's neoclassical growth model. The rejection process of first diminishing the model and then replaced it with a neoclassical alternative was similar to how the full Keynesian macroeconomic paradigm was diminished into IS-LM analysis and then replaced by a simplistic neoclassical framework that largely ignored the demand side of the economy. Furthermore, subsequent work by mainstream economists has resulted in a logically inconsistent framework for analyzing economic growth; the popular endogenous growth models, which use Schumpeter's concept of profit-driven creative destruction to explain the technological change that Solow left as exogenous, are not logically compatible with the Solow model.
Fairness through regulation? Reflections on a cosmopolitan approach to global finance
In the aftermath of the last financial crisis a strong message prevails that 'something' has to be changed in the manner global finance is governed. What exactly this 'something' entails and what could constitute the 'common ground' of anticipated change is more difficult to determine. Many envisage future improvements of global financial governance by evoking deliberative democracy, political equality and cosmopolitanism. As financial regulation is the main instrument through which global finance is shaped and governed nowadays, these principles should then be transmitted to regulatory arrangements. This paper focuses on a new conceptual approach to regulatory and governance issues in global finance, by employing the philosophical idea of cosmopolitanism. It argues that although as a concept, cosmopolitanism cannot mitigate all the flaws attributed to contemporary finance, its development and extension to international financial regulation that is promulgated by institutions of the global financial system, would represent a worthwhile endeavour in making global finance more accountable and just in the eyes of many.
On the problem of scale: Spinozistic sovereignty as the logical foundation of constitutional economics
This paper argues that sovereignty, as envisaged by Spinoza, is the logical foundation of constitutional economics. Constitutional constructs such as sovereignty weave an evolutionary dialectic between different organizational scales (the local, national, and global). This dialectic continues to wreak havoc at the local scale, and can be interrupted only through explicit constitutional constraints on the size of jurisdictions. The paper argues for more emphasis on constitutional orders in the spirit of Spinoza’s understanding of sovereignty. This entails preference for federal polities in which sovereignty is shared between different cities rather states where once capital cities dominate.
The ethics of New Development Economics: is the Experimental Approach to Development Economics morally wrong?
The 2000s have witnessed the arrival and growing popularity of randomized controlled experiments (RCTs) in Development Economics. Whilst this new way of conducting research on development has unfolded important insights, the ethical challenge it provokes has not yet been systematically examined. The present article aims at filling this gap by providing the first ad hoc discussion of the moral issues that accompany the use of RCTs in Development Economics. Claiming that this new research agenda needs its own, specific set of ethical guidelines, we expose the six ethical problems that these experiments potentially provoke and that should therefore be carefully assessed by ethics committees before an RCT is launched and by scholarly journals before its results are published.
Research note on an experimental approach to the intrinsic motivations of corruption
Even though most of the causes of corruption are easily identifiable at the macro level, there is considerable disagreement when it comes to the intrinsic motivations leading people to engage in this activity. The present paper tries to shed light on the aspect concerning the correlation between corruption and individual performance. This is useful for understanding the dynamics of common events like medical students attempting to bribe their way towards becoming a doctor, or companies bribing public officials to obtain licenses to build public highways, buildings, or provide electricity and water. However, corruption's secretive nature makes it difficult to obtain trustworthy qualitative data on this subject. Hence, the study addresses the issue in the lab, through an experiment based on a bribery game. The results show that there is a significant correlation between performance and propensity to engage in a corrupt activity, opening the way for an improvement in the allocation of resources to reduce this negative phenomenon.
The ‘desire for money:’ Aristotelian blind spot in the field of economics? A French heterodox point of view
If the field of economics has today become the archetype for determinism in the social sciences, it comes at the price of a form of objectivity founded on the complex process of the reduction and naturalization of a certain type of social relation, a process best described via the real approach or the ‘approach by value.’ A radical critique of this process requires the deconstruction of this dominant approach, characterized by the articulation of neoclassical theory and economic liberalism. It is only once the repression of the desire for money, a repression constitutive of false economic objectivity, has been denounced that the standard model can then be subject to such a critique. This will in turn open the possibility of an economic theory which is radically anti-naturalist.
Subjective preferences and alternative costs
The present paper is an exploration of the economics of subjectivism and opportunity or alternative costs. Most contemporary economists pay lip service to these concepts, but when push comes to shove, all too often they jettison them. We shall illustrate this lapse from basic economics with a challenge that has been perplexing several modern economists: why do people always walk on staircases, but only sometimes on escalators. Landsburg (2002) misunderstood the reason people only sometimes walk on escalators, whereas they always walk on stairs. Garrison (2009) tackled the same problem, with somewhat different results. Both of them, however, are guilty of a failure to use what is perhaps the most fundamental concept in the economist’s toolkit – opportunity cost, known to an immense number of non-economists by the aphorism ‘There’s no such thing as a free lunch.’ This oversight resulted in his (their) failure to explain why people only sometimes walk on escalators, in contradistinction to the fact that they always walk on staircases.
Money and value: a synthesis of the state theory of money and original institutional economics
The paper proposes a synthesis of original institutional economics and in particular of the work of John R. Commons with the state theory of money, constructing a theoretical framework for the analysis of economic value in relation to money. The argument developed resists the naturalistic, individualistic, neoclassical analysis of value, proposing an account based on antagonism and negotiation framed by social institutions and more specifically by the institution of money. Money plays an active role in the process of the constitution of the system of prices, creating possibilities of mediation in the conflicts around the distribution of social production and contributing towards the establishment of 'reasonable value' in economic transactions.
The missing link: From Kautilya's The Arthashastra to modern economics
The aim of this paper is twofold: first, to provide evidence supporting the thesis that Kautilya was the first political economist; second, to verify that a systematic study of political economy has begun long before the ideas and works of Adam Smith. It was in the works of Kautilya (around 375 B.C.). In order to validate the aims of our study, we look for evidence in his Arthashatra of rational behaviour, self-interest motivation, and market elements of a traditional commercial society. Providing a sound interpretation of Kautilya's main arguments, we demonstrate that his is no less a systematic study in political economy than Smith's The Wealth of Nations. Economics is a science that tries to offer policies and practices for creating and enriching a nation's wealth, and in that sense, the Arthashastra (literal translation being The Science of Wealth) represents the first systematic manual of political economy. The development of economics as a science must take cognition of the economic principles and ideas presented in The Arthashastra so as to reveal the true origins of economic thought and its evolution. It is only by understanding methodological problems in a historical perspective we can understand the modern methodological and conceptual issues.
The economic consequences of homo economicus: neoclassical economic theory and the fallacy of market optimality
This essay presents a critique of the standard ascension from the rational agent to the optimal market in economic theory. Critiques of homo economicus are found unsatisfactory on grounds that its employment allows for the prediction of essential features of actual markets. Using this same criterion we introduce Gary Becker’s essay, ‘Irrational Behavior and Economic Theory,’ which demonstrated that the same features of markets could be derived from non-rational behaviour. Thus, non-rationality is equally predictive but is less restrictive than rationality. Once the assumption of rationality is relaxed, the concept of market optimality (though not market order) must also be sacrificed.
Deep History: a rejoinder
Between a rock and a hard place: second thoughts on Laibman's Deep History and the theory of punctuated equilibrium with regard to intellectual evolution
In this article I reconsider Laibman’s Deep History (2007) in the light of Niles Eldredge and Stephan Jay Gould’s theory of punctuated equilibrium. I argue that the theory of punctuated equilibrium explains (1) why conceptions of inevitability and directionality in intellectual evolution may not be as useful as Laibman thinks they are in the context of social evolution and (2) why stasis (that is, intellectual path dependence) in intellectual evolution does not allow different pathways of thought to converge.
A theory of planning horizons (2): the foundation for an ethical economics
The concept of planning horizons serves as a measure of many unsettled aspects of economic analysis. First and foremost, the notion is ordinal: we speak of ‘horizon effects’ as directional shifts in planning horizons without tallying ‘wits’ or calibrating horizonal axes of change. Second, the derivation of horizon effects is inductive; we simply assert their inherence in the range of factors subsumed within the imagined projections behind all choice. The planning horizon is set wherever surprise supplants expectation; the horizon occurs at the outer range of accurate anticipation, to which we lack clear epistemological access. Planning horizons – horizon effects – suggest a new foundation for an ethical economics of conscience, social maturation and growth.The idea of planning horizons invites a distinction of foresight from myopia in economic constructions. But time horizons are only one aspect of our planning horizons: to see ahead in time we must embrace all relevant causal effects. Foresight depends on knowledge of how reality actually works, which is a matter more of degree than ‘truth’; the planning horizon offers an index of our ‘rational bounds.’ Our range of anticipation is also related to our internalization of social and ecological externalities in our decisions, so to the scope of our ethical conscience and to our sense of human community. Indeed, the organizational health and integrity of our society is horizonal in this sense.The aim of this […]
The Hegelian dialectics of global imbalances
Traditional narratives of external imbalances have focused on the analysis of national accounts, trade flows, and financial flows. They have generated two opposing views of the current situation of the world economy: on one side, a prudent, if not pessimistic view considers large imbalances as evidence of problems with the international monetary and financial system, and symptoms of domestic distortions (mainly in the United States and China). On the other side, a relaxed, if not optimistic view suggests that global imbalances are not anomalies but simply the predictable outcome of a world with increasingly globalized financial flows in search of the right mix of risks and returns. This paper offers a critical analysis of these competing explanations of the United States-China imbalances and suggests a way of reconciling them. The paper uses Hegel’s parable of the development of self-consciousness to explain the dynamics between the two countries. Hegel may not have been a great philosopher of history but his study of lordship and bondage provides a good framework for analyzing the dialectics of recognition and acknowledgement that currently characterizes the macroeconomic relationships between the United States and China.
Competitive markets, collective action, and the Big Box Retailer problem
I use a stylized scenario - the Big Box Retailer Problem - to demonstrate that the presence of behavioural interdependence in economic markets may result in deficient outcomes that are both stable and supported by ongoing participant behaviour. I present a theoretical discussion of social dilemmas and use the Big Box Retailer Problem to illustrate that these characteristics - stability and ongoing support - cannot be reliably employed as indicators of outcome efficiency. Equally important is the conclusion that upfront costs and the ongoing necessity of monitoring and encouraging contributory behaviour are not reliable indicators of the relative inefficiency of outcomes associated with collective action. Questions are raised regarding the ethical responsibilities of business educators and the implications of social dilemmas for corporate social responsibility research.
Observing productivity: what it might mean to be productive when viewed through the lens of Complexity Theory
The paper tries to explore options and preconditions for a theoretically thoroughly grounded conception of productivity that is able to account for its observer-dependency and thereby meets the needs of a dynamic and highly differentiated modern society. It does so in respect to insights from Cybernetics and Complexity theory, thereby taking up charges about the contradiction of economic productivity and the Second Law of Thermodynamics. In respect to epistemological consequences of contemporary levels of productivity, a seemingly paradoxical constraint is put forward: the constraint that productivity is conditioned on being observed as such, with the observer in its turn being conditioned on productivity. The assumption is that this paradoxical constitution helps to keep productivity adaptive to the changes it itself incites in economy.
A theory of planning horizons (1): market design in a post-neoclassical world
The neoclassical case supporting competitive frames and market solutions has failed to promote stable world-wide economic development. Other approaches in economics incorporate social culture, increasing returns, market power, ecological limits and complementarity, yielding broader applications for development theory. In this paper a theory of planning horizons is introduced to raise some meaningful questions about the traditional view with respect to its substitution, decreasing returns and independence assumptions. Suppositions of complementarity, increasing returns and interdependence suggest that competition is inefficient by upholding a myopic culture resistant to learning. Growth – though long believed to rise from markets and competitive values – may not derive from these sources. Instead, as civilizations advance, shifting from material wants to higher-order intangible output, they evolve from market tradeoffs (substitution and scarcity) into realms of common need (complementarity and abundance). The policy implications of horizonal theory are explored, with respect to regulatory aims and economic concerns. Such an approach emphasizes strict constraints against entry barriers, ecological harm, market power abuse and ethical lapses. Social cohesion – not competition – is sought as a means to extend horizons and thereby increase efficiency, equity and ecological health. The overriding importance of horizon effects for regulatory assessment dominates other […]
Complexity and the culture of economics: a sociological and inter-disciplinary analysis
This paper offers a sociological explanation for why the field of economics has so severely restricted the scope of its analysis to the point where it failed to foresee the financial crises, economic recessions, and other large shifts in economic activity that have characterized the global economy in recent decades. This paper's analysis of the culture of economics draws heavily on the work of Pierre Bourdieu, the French sociologist who developed a useful framework with which to analyze the culture of an intellectual field like economics. Specifically, the paper describes how the neo-liberal doxa supports the restrictive neoclassical (marginalist) modeling approach that is a central element of the habitus of mainstream economics. Bourdieu's concept of symbolic violence shows how the orthodox economics culture perpetuates itself even in the face of the complete failure of the culture's favored neoclassical and rational expectations models to anticipate recent macroeconomic crises. The paper concludes with some thoughts on how this understanding of the culture of economics can enable economists to free themselves from the oppressive culture of mainstream economics.
The economist as shaman: revisioning our role for a sustainable, provisioning economy
In view of the problems heterodox economists have faced in predicting, explaining and finding solutions to the financial and ecological crises facing humanity, the paper takes a wide-angle view of the question of what the role of an economist might be in a sustainable society. I argue that the role of an economist is one of an intermediary between people and the resources they need for survival, a role that in less rationalist societies might have been performed by a priest or shaman. I propose three central responsibilities for an economist in a sustainable society: supporting a process of re-embedding the economy in the environment; negotiating a respectful—even reverential—relationship between humans and non-human species; ensuring a means of acquiring resources that minimises the entropic impact of the human community.
Behavioural Procedural Models - a multipurpose mechanistic account
In this paper we outline an epistemological defence of what we call Behavioural Procedural Models (BPMs), which represent the processes of individual decisions that lead to relevant economic patterns as psychologically (rather than rationally) driven. Their general structure, and the way in which they may be incorporated to a multipurpose view of models, where the representational and interventionist goals are combined, is shown. It is argued that BPMs may provide “mechanistic-based explanations” in the sense defended by Hedström and Ylikoski (2010), which involve invariant regularities in Woodward’s sense. Such mechanisms provide a causal sort of explanation of anomalous economic patterns, which allow for extra market intervention and manipulability in order to correct and improve some key individual decisions. This capability sets the basis for the so called libertarian paternalism (Sunstein and Thaler 2003).
The evolution of merchant moral thought in Tokugawa Japan
The Tokugawa Era of Japan is known for its domination by the shogunate, or warrior bureaucracy. While samurai capture the popular imagination, the merchant class of this era was changing their cultural narrative as well. The regime, officially Neo-Confucian, considered trade a vulgar and corrupting activity, but among commoners, especially in Osaka, a culture arose celebrating the virtue of commerce. Merchant scholars and commoners assailed the orthodoxy by putting forth alternate interpretations of Confucianism, and later by abandoning the entire Confucian framework. Their primary goal was to explore the nature of virtue and commerce, and justify their own place in the world. As a side effect, the marriage of virtue to commerce allowed a nexus of long-term relationships to arise, based in Osaka.
Ethics and economics, today and in the past
Economics was traditionally viewed as part of a wider study of human things, including ethics. It has drifted away from ethics despite the fact that ethical considerations inevitably form part of economics. After a brief introduction, the second section outlines the state of play in the economics discipline. The third section deals with the ethical crisis of economics today. The fourth section presents two grand narratives of ethics and economics. The fifth section sketches Amartya Sen's critique of the mainstream and his alternative approach to economics. The sixth section provides some concluding comments.
From the search for natural laws to the discovery of contingent rules in economics
In this article, the author defends the idea that one of the positive results of modern economic analysis is the conviction that there is no natural law in economics. Thus, the most thorough scientific research which has tried to provide an analytical foundation for the mythical invisible hand, the "general equilibrium paradigm," has finally shown that such an equilibration process cannot be formally demonstrated. Hence, we can say that economists cannot demonstrate the existence of a law of "supply and demand" but, more simply, can assert that some causal but contingent relations may exist between price, supply and demand. According to this result, the critical approach of Kenneth John Arrow concludes with the necessity of social and moral rule (for the good functioning of the market). It is, thus, necessary to assume the contingent nature of economic rules, and the absence of natural law, and consequently, to modify economists' theoretical model.
Finance contemporaine et postmodernisme: l’expression d’un capitalisme tardif
This paper shows that the evolution of financial markets implies some features of the postmodernism, as for example, the emergence of a hyperreality or an over-exaggeration of the exchange. Computerization contributed to the development of what Baudrillard called a hyper-reality in which financial quotations are self-referent, i.e. they do not refer to an economic reality. Finance is now in post-modernity and this essay offers an analysis of this financial post-modernity.
The Christian ethics of socioeconomic development promoted by the Catholic Social Teaching
This paper highlights the relationship between economic science and Christian moral in order to analyze the idea of socioeconomic development promoted by the Catholic Social Teaching (CST). In the first period leading up to the Second Vatican Council (1891-1962), from Pope Leo XIII to Pope John XXIII, the idea of development was connected both to technical and industrial progress, and to the universal values of justice, charity, and truth, which national communities were asked to follow. During the Conciliar period (1962-1979), the concept of development assumes a social and economic dimension, and so it becomes one of the main pillars of Catholic Social Teaching, which introduces the earliest definition of integral human development. Ultimately, in the post-Conciliar phase (1979-2009) including Benedict XVI's pontificate, the idea of integral human development reaches its maturity by incorporating the complexity of real-world economic interactions. Finally, this paper shows how the ethics bolstered by the Catholic Social Teaching is characterized by two distinct but complementary lines of thought: moral rules for both political action, and for socioeconomic issues.
An inquiry into the explanatory virtues of transaction cost economics
The aim of this paper is twofold. First, we offer a methodological reflection on how the explanatory virtues of economic theories can be assessed in a systematic way. Second, we use that theoretical apparatus to study the explanatory virtues of Transaction Cost Economics (TCE, henceforth). Precisely, we are primarily interested in assessing the progress within TCE with respect to its explanatory power rather than directly comparing TCE's explanatory virtues to alternative theories. The paper offers also some general insights into the way we compare economic theories.
Implications of the Foucauldian decentralization of economics
This essay aims to explore Foucault's project of decentralizing economics and to hint on some implications. It also makes a comparative analysis between Foucault's project and the projects similar to his design and aim. I argue that Foucault's critique of the idea of economics as a science is stronger than that of the critiques which challenge the status of economics as a science by exposing its deep fictional, literary or narrative content and style. I argue that the strength of Foucault's decentralization project lies in the fact that he does not refer to the discursive content of economics in order to demonstrate that it is not a science. Instead, he unveils its epistemological conditions the character of which deeply haunts the sketch of economics as a science. Foucault undertakes decentralization both at the formal and historical level. At the formal level he shows that there are underlying epistemological conditions that govern the formation of discourses including economics in the West. At the historical level he demonstrates that there is no trace of economics up to the eighteenth century in the West. This fact, that economics is governed by modern Western epistemological conditions, encourages me to question the aim of teaching economics in societies such as Pakistan which are not part of the Western civilization.
There are no such things as ‘commodities’: a research note
This short paper is a note offering provisional results of my current research in philosophical economics and the philosophy of economics. It is offered in the spirit of promoting discussion of an interesting topic worthy of further investigation.
Are egalitarians really vulnerable to the Levelling-Down Objection and the Divided World Example?
This essay is a quick critique of one aspect of Derek Parfit's criticism of Egalitarianism in his larger consideration of the claims of, and distinction between, Prioritarianism and Egalitarianism. It reviews issues relating to the 'Levelling Down Objection' and the 'Divided World Example'. More specifically, it is argued that the Levelling Down Objection is a serious problem only for Pure Telic Egalitarianism, not for Pluralist Telic Egalitarianism; and that even in a Divided World, one can have an egalitarian justification for preferring an equal distribution of a smaller sum of wellbeing to an unequal distribution of a larger sum. By these means, it is contended that Parfit's claim of the vulnerability of Egalitarianism to the Levelling Down Objection and the Divided World Example is not sustainable.
The capacity to choose: reformulating the concept of choice in economic theory
Despite being conceived as a 'theory of rational choice', orthodox economics fails to ascribe to human beings the ability to choose in a meaningful sense, something philosophical approaches to economics have long noted and tried to remedy. Tony Lawson's critical realism is one attempt at a remedy. If, following Lawson, one conceives of choice as a 'capacity' of human beings, critical realist analysis suggests a distinction between humans' possession and their exercise of this capacity. If one can sustain this distinction, one should be able to distinguish cases in which agents actually exercise their capacity to choose from those in which they do not. Investigation of this distinction does not, however, lead to the desired distinction between such cases. Consequently, a reformulation of the notion of choice is required. An implication for economic theory - namely, the possibility of conceptualizing 'exploitation' - is discussed.
Critical Realism versus Social Constructivism in International Relations
This article discusses the methodological differences between the British school and the American school of international relations. It attempts to demonstrate that Susan Strange, representative of the British school, could be considered a critical realist. The aim of the article is to show that her vision of international political economy fulfills the methodological reorientation initiated in economics by Tony Lawson at the end of the 90s. Strange's radical ontology claims that structural power determines human actions. The paper contrasts Strange's approach with that of John Ruggie, from the American school, who identifies himself as a social constructivist. Ruggie emphasizes the role of ideational factors in international relations and the constructed nature of social reality.
More than a sum of its parts: A Keynesian epistemology of statistics
The major theoretical insight of Keynes' General Theory is that aggregate quantities describing the state of an economy as a whole are irreducible to arithmetic summations of individual decisions. This breaks with the logic of classical political economy and establishes macroeconomics as the study of economy-wide dynamics, logically independent from any underlying theory of individual rationality. However, Keynes does have a theory of individual psychology that links expectations back up to aggregate quantities with robust statistical methods, which account for the fundamental uncertainty one faces in predicting the future. By comparing the theoretical structure of macroeconomics to that of thermodynamics and statistical mechanics, this essay proposes a novel reading of Keynes' epistemology of statistical laws. On this view, statistical methods allow theoreticians to connect the mechanics of vast numbers of micro-scale entities to a macroscale dynamics, even in the absence of a fully determinate causal story. Keynes' belief that organic wholes emerge from the interactions of complex systems is a product of his early work on the development of statistical mechanics from kinetic theory. In light of this epistemological foundation, this essay shows how the neoclassical idea of supplying macroeconomics with microfoundations is inherently contradictory.
Critiques and developments in world-systems analysis: an introduction to the special collection
From its inception, the world-systems perspective was not only enormously influential in long-term, large-scale social research; it also attracted a set of serious critiques. These fell into the general areas of the emergence of the capitalist world-economy; reductionism in the mode of argument; surplus appropriation and accumulation, including the question of class; and the general exclusion of an analysis of any role for "culture." It is concrete developments in world-systems analysis over the past three decades, although not to the exclusion of explicit responses to critiques, that have gone a long way in addressing these concerns. They fall most notably into the areas of commodity chains, households, world-ecology, and the structures of knowledge.
Nonwaged peasants in the modern world-system: African households as dialectical units of capitalist exploitation and indigenous resistance, 1890-1930
Colonialism did not transform African peasants into waged labor. A majority of peasants worked as forced laborers, often unpaid, and they returned to their agricultural household labor as soon as they completed work assignments mandated by the colonizers. Colonial Africans resided in mixed livelihood households in which nonwaged labor forms (both free and unfree) predominated, and very few became dependent on wages. For a majority of colonial Africans, informal sector activities, tenancy, sharecropping, and subsistence production on communal plots were not temporary nonwaged forms on an inevitable path toward proletarianization. Wage earning was not the primary mechanism through which these households were integrated into the modern world-system. Instead, these households primarily provided nonwaged labors to capitalist commodity chains that, in turn, extracted surpluses from them and externalized costs of production to them.
"This lofty mountain of silver could conquer the whole world": Potosí and the political ecology of underdevelopment, 1545-1800
By the 1570's, Potosí, and its silver, had become the hub of a commodity revolution that reorganized Peru's peoples and landscapes to serve capital and empire. This was a decisive moment in the world ecological revolution of the long seventeenth century. Primitive accumulation in Peru was particularly successful: the mita's spatial program enabled the colonial state to marshal a huge supply of low-cost and tractable labor in the midst of sustained demographic contraction. The relatively centralized character of Peru's mining frontier facilitated imperial control in a way the more dispersed silver frontiers of New Spain did not. Historical capitalism has sustained itself on the basis of exploiting, and thereby undermining, a vast web of socio-ecological relations. As may be observed in colonial Peru, the commodity frontier strategy effected both the destruction and creation of premodern socio-ecological arrangements.
The rise, maturity and geographic diffusion of the cotton industry, 1760-1900
This article examines the trajectory of the cotton industry, including calico printing, over the period 1760-1900. From its beginnings in England as a leading industry of the capitalist world-economy, it spread geographically on a major scale to finally reach the United States and Japan. Over the long term, it is argued that as it expanded and competition increased, profit rates tended to fall, although unevenly.
"The dangerous classes": Hugo Grotius and seventeenth-century piracy as a primitive anti-systemic movement
This essay discusses the historical and textual representations of piracy in the writings of Hugo Grotius, primarily De Indis/De iure praedae (1603-1608) and the Commentarius in Theses XI (c. 1600). Contrary to popular belief, Grotius, in stark contrast to Jean Bodin, was not an advocate of the constitutionally homogenous Nation-State. Rather, his central concept of divisible sovereignty, the lynchpin of the constitutional theory of his early writings, unambiguously presents us with the object of the heterogeneous State. In Grotian theory, the State may be "read" as a composite construction, with a residual degree of inalienable sovereignty accruing at each unit-level. Even if only unconsciously, Grotius describes a concurrent para-political subdivision of the state between institutional Government (the "magistrates") and civil society, one that constitutes an operational system of governance within the Nation-State. Like his contemporary Johannes Althusius, Grotius' theory allows for the emergence of a wholly "private," albeit lawful, mode of authority. This is most apparent in Grotius' treatment of the mercantile trading Company and its Privateering operations. The corporatist theory of sovereignty permits the Company's private agents of violence, the legally ambivalent Privateer/Pirate, to be invested with a requisite degree of sovereignty. The Grotian theory of divisible sovereignty, investing the seventeenth-century Pirate band with legal personality, serves as a vital […]
Structures of knowledge in the Ottoman Empire and Turkish Republic, 1731-1980
It is argued that the historiographical approaches prevalent in the Ottoman Empire and then in the Turkish Republic, observable in both academic and cultural production and implemented in the education system, were closely related to material transformations in politics and economics. It is further shown, however, that these relations were not of a one-way causality in either direction, but rather part of a singular whole. Debates over the construction of the past and the modernization project survive today in discussions arising from Turkey's possible candidacy for membership in the European Union.
Malthus's idea of a moral and political science
This paper discusses, first, the kind of Newtonian methodology Malthus had been exposed to at Cambridge; secondly, the views on algebra and the doctrine of proportions he inherited from MacLaurin and the contribution of his colleague Bewick Bewin in devising a special role for this doctrine in the moral sciences; thirdly, Malthus's ideas on language and the reasons for rejection of an artificial language for political economy. Then it discusses his idea of political economy as a moral science and his claims to be Adam Smith's true heir. The conclusion is that Hollander is right when he contends that Malthus's and Ricardo's methods, as contrasted with their methodologies, were just two opposite poles within one spectrum, but also that the Cantabrigian and Scottish tradition provided staple for a design of a moral and political science alternative to the Unitarian and the Benthamite programs.
Financial stability requires macroeconomic foundations of macroeconomics
Financial stability features prominently among the goals of several post-crisis macroeconomic policies around the world. Being a systemic characteristic, financial stability requires a systemic analysis, which only macroeconomics can offer logically. Yet, the current way of doing macroeconomics is not up to the task, as it is grounded on so-called microfoundations. Considering macroeconomics as the science of aggregating data obtained at microeconomic level can lead indeed to conclusions that are either misleading or wrong. This paper points out that the true foundations of macroeconomics are macroeconomic, and that understanding the working of monetary economies of production and exchange requires a conceptual rather than a mathematical treatment of economic issues at a systemic level.
Towards a critical realist-inspired economic methodology
This paper argues that critical realism conceived as a meta-theory for scientific activities offers a consistent set of helpful philosophical resources from which a potentially fruitful position of economic methodology may be developed. When fully developed, a critical realist-inspired economic methodology may in turn underlabour for more concrete scientific undertakings, economic theorising and applied analyses. Adopting such a strategy for further advancement of the critical realist project would prove a much needed supplement to, or perhaps even substitute for, the currently dominating strategy of grand scale philosophical underlabouring aimed at reorienting more or less the whole discipline of economics. The main trust of the argument made then, is that critical realism comes with a constructive and practical potential that goes beyond critiques of mainstream economics and philosophical underlabouring for already existing schools of thought within economics and that it is time for this potential to be actualised.
Because I said so: the persistence of mainstream policy advice
The current global crisis has shown the limitations of the mainstream approach. We trace the origins of the limitations of the dominant neoclassical views to the capital debates and to the rise to dominance of intertemporal general equilibrium. The limited use of the Arrow-Debreu model, which became dominant after the capital debates, in terms of policymaking, is central to understand the persistence of policy guided by the aggregative model. We use the International Monetary Fund (IMF) as a case study of this perplexing continuity of policy advice. Given our survey, we conclude that even though the economy is in the midst of the worst capitalist crisis since the Great Depression, a significant paradigmatic shift in economics is extraordinarily unlikely.
Schumpeter's theory of leadership: a brief sketch
So far, it has hardly been recognized that the great Austrian thinker Joseph Alois Schumpeter had developed a general theory of leadership. In this paper, we analyze how leaders promote change by building on Schumpeter's understanding of entrepreneurial leadership which fuses the concepts of entrepreneurship and leadership. Also, we analyze Schumpeter's shift in emphasis regarding his leadership theory. Specifically, Schumpeter in his early works defined entrepreneurs as individuals whose acts have significant effects on firms. However, in his late works he seems to have realized the need to extend further the boundaries of his early approach, to account for social forces.
The internal consistency of perfect competition
This article surveys some arguments brought forward in defense of the theory of perfect competition. While some critics propose that the theory of perfect competition, and thus also the theory of the firm, are logically flawed, (mainstream) economists defend their most popular textbook model by a series of apparently different arguments. Here it is examined whether these arguments are comparable, consistent and convincing from the point of view of philosophy of science.
On technological change and stage evolution in the works of Seneca and Adam Smith
The present paper investigates the links that connect Seneca and Adam Smith in relation to the concept of the technological change and the evolution of society. The Roman philosopher and jurist discusses extensively the technical achievements in various factors of production which are an outcome of the division of labour. The main question concerning the fact, if all inventions stem originally from the cogitations of philosophers, or, the common workman is exposed to the manufacturing process in his daily tasks appears also in Adam Smith's thought. The analysis shows Smith's classical roots and the significance of the Roman literature.
Commentary on black political economy
The task of this essay is to introduce a comprehensible study of the economic condition of a black sub-altern population in the United States. The framework is informed by the monumental contribution to the field of political economy as developed by Lloyd Hogan in his 1984, Principles of Black Political Economy. Specifically, Hogan presents political economy as: "The study of a human population under going the act of social reproduction, over a protracted period of time, under a set of rules promulgated and enforced by a political state, within a bounded geographical domain." (Hogan, p.12)
The social organisation of epistemology in macroeconomic policy work: the case of the IMF
This paper reports an ethnographic study of work practices in the IMF, and IMF mission activity in particular. It will show how this work combines arithmetic, econometric and meeting skills with the adroit management of social processes that transform 'incomplete' or 'ambiguous numbers' into socially validated and hence 'objective for practical purposes' data. These data form the basis of epistemic certainty in the analytical work undertaken, and though this certainty is socially framed, it is treated as sufficient for substantive, robust and 'real world' macroeconomic policy making.
The foundation of Marx's concept of value in the Manuscripts of 1844
The aim of this paper is to show how Marx's Economic and Philosophic Manuscripts of 1844, which stand as his first systematic study of classical economists, transform the concept of labour as it had been developed by political economy against mercantilism and physiocracy. The current interpretations of the Marxian theory of value are first reviewed. The analysis of the Manuscripts then shows that the contribution of Hegelian philosophy lies in the definition of social labour in total opposition to the orthodox conception. This issue leads to a reexamination of the significance of these Manuscripts for the Marxian concept of value and its source, general and abstract labour.
Institutionalism as the way of unification of the heterodox theories
In this article we seek to show that there is a common framework to the various approaches known as heterodox. This framework is the "institutionalism", which take into account the concrete institutions in which the economic process proceeds. To argue our thesis we deploy two types of justification. We begin with an historical justification which borrows from the history of the thought and will find in emblematic authors (Ricardo, Marx, Keynes, Polanyi) (1) the definition of a common object for an institutionalist political economy (the study of a "Monetary economy of capitalistic production"); (2) a common general standard of the economy like "an institutionalized process between men and environment" (against the definition of Robbins). Our second justification is a more epistemological one. We develop the way in which the institutionalist approach mobilizes the concepts of action and of institution. The goal of this article is to contribute to the emergence of a positive paradigm, common to the heterodox, which is not defined any more in hollow or negative in opposition to the neoclassic "main stream".
Loanable funds, liquidity preference: structure, past and present
We appraise the canonical RobertsonKeynes discussion from the structural axis of exogeneity/endogeneity of the interest rate. The interest rate is shown to be an exogenous variable. It is only with Keynes' contribution of liquidity preference and, specifically, the introduction of the liquidity preference of banks that no more than the possibility of endogenising the interest rate arises. Given the tenuousness of the resolution, we pose the ethical question: should the rate of interest be endogenised? On the other hand, Keynes' theorem that the rate of interest is a monetary variable is validated. Both money and the rate of interest are codetermined in a capitalist economy.
A new framework for the analysis of contemporary financial markets: the need for pluralistic approaches
Interdisciplinary approaches are essential to properly evaluate an economic and financial system that is increasingly complex and globally interrelated. With reference to the work of the philosopher Peter Godfrey-Smith, it is argued that a more pronounced interdisciplinarity in the social sciences would enable a flourishing of pluralism in economics. By adopting clearly defined research strategies and objectives, scholars with different academic backgrounds can successfully work on common projects. A better integration of economic, social and behavioural sciences will favour the establishment of new frames of thinking and new analytical tools which are much needed in contemporary financial regulation. Financial markets, defined as competitive markets in financial instruments such as stocks, bonds, loans and derivatives, represent a research subject that may be analysed from a plurality of angles and frames, including a sociological one. In practice, such a plurality of perspectives could favour sustainable wealth creation and contribute to maximizing the benefits from economic globalization.
Economics and religion - a personalist perspective
Traditionally, the reaction of many mainstream economists to the effort to integrate theology and economics demonstrated the difficulty of doing so in a way that could be broadly recognized as legitimate. This state of things is simply an indication of a broad consensus within the field of economics that methods, norms, and even concerns construed to be related to religious belief have no place in the scientific study of economics.Recently, the situation seems to be changing, however. A decade ago, a group of Christian Catholic social thinkers engaged in dialogue with free-market economists concerning the morality of market activity. As a result, this interdisciplinary exchange inspired the conception of a new subdiscipline that sought to synthesize central aspects of theology and economics, thereby giving rise to a new body of scholarship termed economic personalism. The general idea is to promote a humane economic order that benefits from market activity but does not reduce the human person to just another element in economic phenomena.This paper suggests that, under such circumstances, the Christian-Orthodox contribution to further development of this new field of investigation could consist in bringing forward the teaching of the Holy Fathers of Eastern Tradition. It is argued that, in this way, the moral dimension which dominantly defines the Catholic vision of the human person could be surpassed and even transfigured by the spiritual dimension which fully inform the […]
Six choice metaphors and their social implications
The six metaphors analyzed in this paper unfold stepwise into an interdisciplinary systems framework based on planning horizons. The notion of planning horizons serves as an ordinal measure of rationality and organization, in a social systemic context of ecological interdependence. Each metaphor opens into the next to extend our understanding. The neighborhood store is where almost all neoclassical choices are made, with visible options spread on shelves and a budget allocated among them, maximizing its worth. The chessboard demands strategic contingency planning in an evolving context of incompletely projectable outcomes. A transportation network combines substitutes and complements into a static complex system, intertwined and non-decomposable, leaving economists with a problem of institutional choice. Love is a complementary good-virtually costless to produce and distribute, always in demand-that should be abundant, though it is scarce. The educational system brings inter-horizonal complementarities into our field of view, where contagion effects of longer horizons enhance complementarity at the expense of substitution, shifting the mix of interdependence away from conflicts to concerts of interest. Human ecology is a dynamic complex system of interactive phenomena opening into time, evolving constantly in its structure, relationships and diversity and demanding ethics in our relations. These six metaphors raise some pressing questions on the invisible limits of models […]
The inheritance of heterodox economic thought: an examination of history of economic thought textbooks
The inheritance of heterodox economics hinges upon the degree to which the next generation is exposed to the history of the discipline's thought. The potential to include heterodox thought into the curriculum presents itself most easily through history of economic thought classes. The potential is limited by the professor, but it is also circumscribed by the material presented or withheld in history of economic thought textbooks. If included, the presentation of heterodox methodologies and philosophies impresses upon students the relevance and importance of pluralism and dissenting views and by consequence, the future course of the discipline. This research seeks to examine the presentation of heterodox economics in history of economic thought textbooks and to assess the amount of space dedicated to its study and further, to explore how textbook adoption impacts the inheritance and heritage of heterodox thought and philosophy.
The epistemology of modern finance
Modern finance is a social science where the complexity of mathematical models compares to that of physics. The aim of this paper is to provide a conceptual framework for the interpretation of mathematical models in finance, in order to determine the epistemological standards according to which financial theory must be assessed. The analysis enlightens the contrast between highly objective results and the radical uncertainty that governs the markets. The main contribution of the paper is to show that the reasons why finance models are relative and non-causal are deeply rooted in the nature of finance theory itself. An important consequence is that arbitrage-free model prices are reference prices and indicators of the economical features underlying mathematical models. As such, they can be used to structure and support final pricing and hedging decisions, but not to predict future market prices.
Commentary on Teaching Economics with Podcasts, Literature and Movies
For sure, economics is a technical subject, with an impressive vocabulary and an imposing methodology. At the same time, quite literally, it’s about bread and butter issues. And so, one of the challenges of teaching economics is to connect these two dimensions of the subject. In particular, the trick is to make meaningful connections that aren’t trivial. And so, it’s about enriching reliable textbooks with material that’s on this website and in these books.
Incentives and reflective equilibrium in distributive justice debates
For the last thirty years one of the dominant economic policies has been the cutting of the top marginal tax rates. While this policy has been partly motivated by the self-interest of high income earners, it also has had considerable theoretical support from a wide range of distributive justice theorists starting with John Rawls’ A Theory of Justice in 1971. Rawls argued that if the incentives created by inequality maximized the position of the least advantaged then they were morally justified. There have been many variants of this position since. The most common theme of them is that incentives to work harder and innovate, although creating inequality, are morally justified because of the greater good generated by the resultant increase in GDP. The main policy instrument available to governments to create such incentive has been the cutting of the top marginal income rates and this has been done systematically across all industrialized nations.The method of wide reflective equilibrium requires us to use the best consensus from economics in our reasoning about distributive justice. The systematic cutting of tax rates over thirty years has provided a reasonable experiment on the thesis that such cutting provides an overall increased labor supply and resultant increase in GDP. The suggestion of this paper is that a reasonable consensus can now be reached that, over the ranges of inequality and GDP that we have had over the last 50 years and are likely to have over the next 50 […]
The knowledge economy/society: the latest example of "Measurement without theory"?
The world has embraced a set of concepts (knowledge driven growth) which are seen as the 'core of future growth and wellbeing' without any commonly agreed notion of what they are, how they might be measured, and crucially therefore, how they actually do (or might) affect economic growth and social wellbeing. The theory of how the mechanism works lacks important detail.
Methodology and the practice of economists - a philosophical approach
Practicing academic economists are reported to pay little attention to work being done by economic methodologists. This is an unfortunate situation for the sub-field of economic methodology as well as for the discipline of economics at large. If the sub-field of economic methodology does not succeed in communicating with practitioners of the larger discipline of which it is a part, its rationale is seriously brought into question. And when practitioners of a scientific discipline do not pay heed to methodological questions, the discipline is destined to stagnation and possible degeneration. In order to contribute to an amelioration of the noted unfortunate state of affairs, this paper argues the case for purposeful philosophically informed approaches through which economic methodologists may prove themselves helpful and valuable to the practitioners of the discipline. A scheme of descriptive-critical analyses of economic texts is set forth as a means of enhancing academic economists' awareness of, and interest in, philosophical questions embedded in, and vital to, their practices. Moreover, it is argued, and exemplified, how philosophically minded methodologists may contribute constructively to processes directed towards establishing and developing economic theories and analyses.
"Social embeddedness": how new economic sociology goes into the offensive and meets the own roots
The argument of social embeddedness has become one of the most celebrated metaphors in economic sociology. The attempt connected to that term is the elaboration of a solid basis for economic sociology as discipline within the concert of economics and further social sciences. The paper argues that the embeddedness argument is strategically on a necessary way to highlight the academic importance of institutional and sociological thought for debating phenomena of economic life since, as it is argued within the paper, such ambitions meet also very clearly with recent tendencies within economics which are commonly considered to be tendencies towards heterodox economics. Aim of the paper is to embed such discussion within a broader history of economic and sociological thought in order to demonstrate that recent developments meet with elements of discussion which were already used by classical authors at the beginning of the 20 th century. In this respect a lot of the recent offensive of economic sociology meets with classical bases of its own academic development which seems to have become hidden or partly forgotten.
Not anything goes: a case for a restricted pluralism
The current discussion on theoretical and methodological pluralism is plagued with confusions and misunderstandings. Some problems arise because an appropriate framework for conducting a fruitful discussion about these issues is still lacking. Many other problems derive from the fact that a rational pluralist should be both tolerant with the many different points of view and able to discriminate among them. In the first and second sections we use some of Mäki's ideas for developing a general framework for discussing pluralism and apply it to the ongoing debate on theoretical and methodological pluralism, showing its strong compromise with demarcationism. In the third section a looser framework for approaching pluralism is outlined, and a detailed discussion of Caldwell's critical pluralism is conducted, pointing out its achievements and some of its shortcomings. The fourth section provides an outline of what a sound notion of restricted pluralism should encompass for avoiding "anything goes".
Economics, the Structures of Knowledge, and the Quest for a More Substantively Rational World
The "structures of knowledge" designates the long-term intellectual and institutional division in knowledge production, the arena of cognition and intentionality (the "socio-cultural") that we recognize as the relational hierarchy between the sciences and the humanities, or the "two cultures", and it is just as integral to the development of the modern world as the realms of material production and distribution (the "economic") or of decision making and coercion (the "political"). The modern discipline of economics emerged from a medium-term restructuring of the structures of knowledge in the late nineteenth century along with the other, multiple, social sciences between the sciences and the humanities each with proprietary subject matters, theoretical frameworks and methodological approaches. The contemporary crisis in the field of knowledge production is part of the overall exhaustion of the processes reproducing the structures of the modern world-system. Contemporary economics in this "far-from-equilibrium" world should be well placed to contribute to an understanding of the alternative futures available today. But this would entail a reexamination of its inherited theoretical approaches and methodological practices.
European Historical Economics and Globalisation
Globalisation is here considered as the increasing specialisation or complexity that accompanies extension of spatially limited markets to include larger and larger sections of the world. To the extent that the enlargement of one market brings contact with others, the process is one of market integration. This paper focuses on two millennia of globalisation so defined, from the perspective of the European economies. It shows that there have been several waves of globalisation linked with rising productivity and prosperity, followed by long economic contractions. Expansions took place within new frameworks for internal and external security and the disintegration of these regimes typically reversed the process. Higher incomes were the reward for accepting the greater vulnerability of stronger interdependency.
On Ethics and the Economics of Development
This paper examines the implications of some of the growing literature at the borderline of ethics and economics for development debates. It argues that this literature has already had considerable impact on development economics, particularly as a result of work on well-being and capabilities. Other areas where there has been considerable growth include population ethics and the area which explores the link between the contractarian tradition in moral philosophy and game theory. Work here has had less impact on development economics, and there is considerable scope for more work. Finally, both ethics and economics have been criticised for taking too abstract a view of human beings. Each has begun to take on this line of criticism and work which responds to it in various ways - such as by taking account of issues relating to identity, allowing for hard choices and fuzziness - is relevant to development.
Globalisation, the state and economic justice
This paper explores the potential for states to act as agents of economic justice in an era of 'globalisation'. After providing a critical review of debates about both economic justice and globalisation, the paper suggests that states retain an important degree of policy-making autonomy-should they care to exercise it. Following this I make a rather unfashionable argument which claims that, if economic justice is actually to be achieved in the contemporary era, it may be up to states to provide it. For the current structures of global governance are not only often ineffective, but they may actually entrench inequality and injustice. In the absence of a just global order, individual states may have to rely on their own efforts to achieve what economic equality they can.
From a 'Moral Philosopher' to a 'Poor' Economist
The roots of modern 'Economics' are deeply buried in the moral and political philosophy of the ancient philosophers. The journey of an economist from the pedestal of a 'moral philosopher' to a state of 'poor economist' is rather long. Through the Middle Ages the 'natural law' approach to economics and sociology held firm. The 'socio-economic rationalism' of the Stoics helped this approach to develop into a 'social science' that later took the form of 'moral philosophy' of the 18 th century philosophers. Since then Economics has been enriched by scientific thought of many. While Marshall and his Principles made the study of Economics popular at universities, Keynes provided a theoretical platform to the governments for their full employment policies ensuring an unprecedented economic growth for a quarter century during the postwar years. For more than a century now Economics has witnessed tremendous progress in methods and contents. Unfortunately, over the last two decades it has come under fire. Is there a new transformation underway or Economics has lost its lustre? This short essay tries to address some of such issues.
Developmental Freedom and Social Order: Rethinking the Relation between Work and Equality
This essay points to an institutional account of our existential interest in work as a missing piece in welfare analysis. In contrast with social liberals in the postwar era, both liberal economic and egalitarian discourses today espouse a narrowly atomistic account of human nature and the modern economy. Therefore they are unable to take account of the institutional bases of economic development, individual autonomy and social order, and the way these connect. The essay shows that a patterning of distributional outcomes is a reality in both deregulated and densely governed capitalist economies, but that only the latter offers real scope for social and individual choice. The influence of the atomistic account on liberal egalitarian thought however has produced an unambitious, imprecise, and in the case of welfare contractualism, a coercive, account of both individual freedom and social community. What is needed is a more explicit inclusion of a temporal dimension in welfare and economic analysis and a more differentiated framework of pluralist governance.
Pluralism and Heterodoxy: Introduction to the Special Issue
This paper introduces a special issue of the journal devoted to work presented at two recent conferences of the Association for Heterodox Economics (AHE). The AHE is an organisation which advocates and provides a forum for non-mainstream approaches to economics. Recent conferences have focused on pluralism. Pluralism is a variegated concept with multiple motivations and arguments in its favour. Such arguments tend to be ontological and epistemological, but may also be pedagogical. Pluralism has been advocated as a moniker preferable to heterodoxy which might be adopted by non-mainstream economists. However, it is problematic. The papers which comprise the remainder of this issue illustrate that point. The papers are discussed in turn and contrasted.
Methodological Monism in Economics
The aim of the paper is to give an outline of the relation between general epistemology and the epistemology of economics. The epistemology of economics can be treated starting from the 'general epistemology of science' and from the subject of the investigation, namely the problems of economics itself. Starting from the general or subject-independent epistemology one can make an attempt to adapt to economics various methodological approaches which were practically created to take only the subject of physics or mathematics into consideration. The characteristic feature of this mentality is often methodological monism, a doctrine which implicitly or explicitly states the unity of epistemology in all disciplines. In methodological writings of economics, beside the supporters of some general epistemological viewpoints, there are serious critics of them on behalf of methodologists who start their researches based on economics. Methodological pluralism does not reject the importation of methodological ideas from other branches of knowledge in an aprioristic way. However, the uncritical adoption of the methodology of physical sciences or 'general' methodology leads to the realm of inadequacy and dogmatism. According to methodological pluralism, every research has to choose its methods and methodology conforming to the nature of its own problems. The theoretical consequences of methodological monism are not always obvious. Inappropriate methodology can lead to inappropriate theories […]
Pluralism versus Heterodoxy in Economics and the Social Sciences
Pluralism is the concept that there is no single methodology that is always the correct one for discovering scientific truths, so multiple approaches and methodologies are required for a complete scientific understanding of a subject. Heterodoxy refers to those approaches to a subject that are outside of the generally accepted mainstream. While pluralism and heterodoxy are not necessarily inconsistent, heterodox economists tend to follow one particular methodology or school of thought rather than taking an eclectic approach to economic understanding, and heterodox economists often criticize approaches other than their own. Thus, in most cases, heterodox economists, by defending their own schools of thought and critiquing other approaches, are not pluralistic. The paper advocates a pluralistic approach to the social sciences over the more narrow approaches typically promoted by heterodox schools of thought.
Plurality in Orthodox and Heterodox Economics
Several observers have noted signs of a growing plurality in mainstream economics. At the same time there has been a growing emphasis in heterodox economics on commonality. The purpose of this paper is to explore the nature of plurality in economics in order to make sense of these characterisations, and to consider the issues raised by this plurality. The critical factor is to distinguish between plurality at the level of theory and evidence, at the level of methodological approach (plurality of methods), and at the meta-methodological level (a plurality of methodologies). First it is argued that, while there is plurality at the level of theory and even of type of evidence in orthodox economics, there continues to be monism in terms of methodological approach, and in attitude to methodological alternatives. In heterodox economics, the commonality of methodological approach does not go far before emerging pluralistically into a variety of approaches. Indeed there is, at the meta-methodological level, a range of arguments in heterodox economics for a plurality of methodologies, that is, a recognition that it is legitimate (if not inevitable) that there is more than one approach to economics.
Classifying Heterodoxy
This paper draws upon the scholarship of interdisciplinarity to argue that Economics, like all disciplines, should be open to a wide range of theories and methods, and the study of all relevant phenomena. A classification of the different methods and theory types used by scholars identifies key strengths and weaknesses of each. Different schools of heterodox [that is, non-neoclassical] economics, as well as neoclassical economics itself, emphasize different sets of theory and method. Each thus has a unique contribution to make to a holistic understanding of the economy. At present, different heterodox schools, like neoclassical economics itself, tend to act as if it were thought that their theory and method were superior. This paper urges a quite different attitude: different heterodox schools, as well as neoclassical economics, should be seen as complements rather than substitutes. That is, the insights of different schools of thought within Economics can and should be integrated just as disciplinary insights are integrated within interdisciplinary scholarship. The classification also identifies valuable theory types not presently embraced by any heterodox approach. Heterodoxy needs also to embrace the causal linkages between economic and diverse non-economic phenomena; the paper outlines a strategy for organizing the complex understandings that emerge from such a project. Some might recoil at the complexity of an academic enterprise that embraces such a wide range of […]
From Fragmentation to Ontologically Reflexive Pluralism
Considerable attention has recently been directed towards the analysis of pluralism in social science, not least in economics. Plurality is often taken as a mark of pluralism. But it is not the same thing, and often indicates little more than a disconnected fragmentation of contributions to a topic. We believe, in fact, that such fragmentation is rife in modern social theorising, and identify numerous causes. We subsequently examine the possibility of using an ontologically reflexive form of pluralism to achieve a greater degree of theoretical integration between various strands of thought than has hitherto been the case. We conclude by stressing the need to be aware of ontological presuppositions in social theorising. Our motivation is a concern with advancing a 'the pluralist project' in which, where feasible, an integration of ideas takes centre stage.
Dialectics and the Austrian School: A Surprising Commonality in the Methodology of Heterodox Economics?
This paper is prompted by the concluding comments to a recent paper (Denis "Hypostatisation"), which suggests that the neoclassical use of the concept of equilibrium expresses a formal mode of thought. Heterodox tendencies from Marxian to Austrian and Post Keynesian economics, that paper continues, exemplify a dialectical mode of thought in their common rejection of neoclassical equilibrium theorising. Heterodox currents in economics are-particularly in terms of their analysis and policy prescription-often as divided amongst themselves as they are from the orthodoxy. Nevertheless, the present paper suggests, there may be something profound uniting these disparate heterodox trends: the adoption of a dialectical method. The paper draws on the work of Sciabarra ("Marx", "Total"), who argues that Marxian and Austrian economics are intellectual cousins sharing a methodological approach. He suggests that making process primary, which we might expect of Austrian economists, is the essence of dialectics, which we might identify with Marxism. If that is the case, then perhaps (a) we can only understand the method of neoclassical economics by contrasting it with a dialectical approach, and (b) we can explore methodological common ground between the various heterodox currents by examining their attitude, both implicit and explicit, to dialectics. Pluralism in economics requires, not merely toleration-though indeed it does require that-but mutual engagement, a conversation. For that to […]