is economic philosophy a subject worth teaching? 03... · robert heilbroner, gunnar myrdal, j.w....

Australasian Journal of Economics Education Vol. 3. Numbers 1 & 2, 2006

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IS ECONOMIC PHILOSOPHY A SUBJECT WORTH TEACHING?

L.A. Duhs*1

University of Queensland [email protected]

ABSTRACT

Economic philosophy is anything but a part of the mainstream diet in the course of an economics education. Yet there are those – including occasional Nobel prizewinners – who argue that an understanding of economic philosophy is absolutely fundamental to an understanding of economics, of why economists disagree and of why “economic rationalists” are often derided by those from other professional backgrounds. The argument put in this paper is that many social science debates hinge more on the values or social philosophy implicitly involved than on technical matters of economic 'science', and that a nuanced understanding of economics requires that each school of thought be traced back to its foundations in terms of its implicit economic philosophy a prioris.

Keywords: economic philosophy, metaphysics, a priori commitments, teaching economics.

J.E.L. Classification: A12, A13, A23, B15, Y8.

1. INTRODUCTION

In What’s Wrong With Economics (1972:10), Benjamin Ward offered a totem pole of sub-disciplines in order of prestige within the economics profession. Macroeconomics, microeconomics and econometrics were at the top of the totem pole and HET and economic development were at the bottom (where development economics is unlikely to remain today). Economic philosophy did not rate a mention. In the same vein, JEL listings do not explicitly include economic philosophy, although many other sub-disciplines are named. Economic philosophy is merely embraced implicitly within the more general category of “relations with other disciplines” - which more commonly conjures up images of economic psychology. Scott Gordon (1978: 728) likewise concluded that philosophers have a lot to learn from economists, but not vice versa: “That mythical creature, the economist qua economist, need not pay much

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Thanks are due to AJEE referees whose helpful comments led to significant improvements in this paper.

Australasian Journal of Economics Education Vol. 3. Numbers 1 & 2, 2006 9191

attention to philosophy, good or bad, but the philosopher of science had better pay attention to economists, good and bad”. More pointedly, on the level of the functioning of economics departments within Australian universities, departmental reviews have been known to call for the axing of economic philosophy courses, largely on the ground that academic self-indulgence cannot be permitted in an age of constrained university resources when there is so much to be taught in terms of technique.

Adopting a quite different, and sometimes quite opposite, view however, are such eminent economists as Joan Robinson, E.F. Schumacher, Robert Heilbroner, Gunnar Myrdal, J.W. Nevile, Benjamin Higgins, Amatai Etzioni and Amartya Sen. For them, economic philosophy is a matter of importance. Indeed, for some of them it is a matter of the most fundamental possible importance, and one whose pervasive relevance – even if at a level often left implicit – is the stuff on which economic theories are actually founded. For them, there is important truth in the aphorism that “an ideology is what we think in, not of”. And for them, in consequence, there is an undeniable and irremovable element of ideology in economics and its teaching. Hence for Joan Robinson (1964) economics is part science and part ideology. Transposed into Myrdal’s words (1968: 32), “a 'disinterested' social science has never existed and never will exist”, since there is an inevitable a priori and there cannot be a view, except from a viewpoint. And for Heilbroner (1996a) there is an implicit economic philosophy or ideological element in economics – the role of which is to defend the scientific pretensions of the profession - which needs to be recognised as being important to the understanding of economics and its contribution to social welfare. Indeed, nothing is more important in terms of understanding why economists disagree, and why different schools of economic thought part company with each other on a range of both theoretical and practical policy issues. In short, the contentions of this paper are that an understanding of economic philosophy is a prerequisite to a nuanced or rounded understanding of many contemporary controversies in economics, and that a fundamental understanding of economics is impossible without detailed attention to the philosophical premises on which economic theory stands. The theme addressed in this paper therefore reprises the Cropsey (1955) / Ward (1972) / Schumacher (1974) / Etzioni (1988; 1991) / Samuels (1990) / Neville (1998) view that it is not economics that is the imperialist social science, but economics which has itself been colonised by one or another political philosophy.


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2. THREE PERSPECTIVES ON ECONOMICS AND THEIR

PHILOSOPHICAL BASES

It is useful to start with a three way division [Ward 1979; Cole, Cameron and Edwards 1983]. Economists commonly classify themselves as (i) orthodox neoclassical, (ii) institutionalist, or (iii) radical. In pragmatic policy terms this means that they tend to favour increasing amounts of government intervention in economic affairs as we move from a neoclassical to a radical/communist perspective. At a more fundamental level it means that the advocates of these respective schools accept that at the root of their theoretical perspectives lie the influence of certain philosophical a prioris related to their conceptions of the nature of humankind and to questions of ontology and teleology. Much of the debate between these perspectives hinges on the interpretation of such simple, putatively unambiguous words as ‘man’, ‘freedom’, 'equality' and ‘rationality’. A starting point is to examine the orthodox neoclassical position as one underpinned by adherence to the philosophical positions of Adam Smith and John Locke, while examining within the institutionalist perspective the deference commonly shown to the philosophy of John Dewey, or sometimes to Immanuel Kant or J.J. Rousseau (Duhs & Alvey 1989). In the case of the third or radical perspective, Karl Marx provides the most obvious philosophical underpinning, at least as far as communism is concerned, but various mixtures of Aristotle, Kant and gender studies also play a role in underpinning other conceptions which are deemed by some to be radical, albeit they may be considered by others to be merely minor variations on orthodoxy.

Economics sometimes celebrates itself as the queen of the social sciences and proclaims itself to be an imperialist social science carrying other disciplines forward by injecting economics into sociology, psychology, law and such like. What is argued in this paper is more or less opposite i.e. that the continued existence of different schools of economic thought (orthodox neoclassical, Chicago School, Austrian School, institutionalists, evolutionary economists, economic personalists etc) reflects the importation into economics of different philosophical preconceptions. To that extent, the question of why economists - or schools of economic thought - disagree is inseparable from an understanding of the philosophical underpinnings of those theories or schools of thought (Duhs 1982; 1994; 1998; 2005). Again as Myrdal puts it “there is an inevitable a priori”, and much derives from that fact.

Australasian Journal of Economics Education Vol. 3. Numbers 1 & 2, 2006 93 93

TABLE 1: Three Schools of Economic Thought and Their Underlying Economic Philosophies

Neoclassical Orthodoxy Institutionalist Thought Radical Thought

Principal economic

features

the “market works”

small government

individualism (sui generis individualism)

The “market works subject to institutional constraints”

some selective government intervention required

individualism in social or community context

“markets are dangerous and divisive”

big government

individuals define themselves through the collectivity or brotherhood ie Adam Smith m

be inverted and stood on his feet

Underpinning

philosophy

John Locke

Adam Smith

J.S. Mill

John Dewey (see JEI) and the notion of pragmatism in the social evolution

of values;

The Bible (for Schumacher; also for 'economic personalists');

Darwin (for evolutionary economists);

Kant (for Etzioni)

Marx

Aristotle (in a different conception of radicalism eg for Cropsey, and putatively for

Sen)

Philosophical

Conception of the

nature of man

Locke: man is selfish and acquisitive (ie

individualistic and fundamentally

concerned with self preservation, and the

preservation of the extended self in the

form of unlimited acquisition of the

material means for comfortable existence)

Smith: commonly taken to accept that man

is self-interested.

Interpreted by Sen to believe neither of the

two propositions commonly attributed to

him.

Differently interpreted by Cropsey; and by

Hirsch, Alvey, Fitzgibbons, and others.

Ward 1972: both neoclassical and Marxist theories have inherently weak

notions of the nature of man at their cores. Alternatives are available.

Schumacher: adopts a generic or species conception of man characterised

by significant points of commonality, versus sui generis individualism.

Etzioni: “At issue is human nature.”

Dewey: there are no 'fixed ends' and 'growth' itself is the only moral 'end'

Darwin: man has no fixed nature

Kant: man has both a sensory self and a moral self.

Marx: man is selfless and collective; so invert Adam Smith to get to the root of the

nature of man.

(Opposite to the requirements for private property and unlimited acquisitiveness in a

Lockean conception of man, the Marxist conception requires common property and

equality in order to match 'good' social institutions to what Marxists deem natural for

man)

Aristotle/Ancient Greeks: man is a social animal. What is held in common by all

'men' is more important than what distinguishes them severally. 'Man' is therefore

defined by the common senses of reason and speech.


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Teleology Non-teleological No absolute, definitive or timeless teleology, but there is an implied

historically relative crypto-teleology for some institutionalists (eg Myrdal),

if not for all of them.

Marx: nominally a-teleological, but ends up teleological insofar as communism is

said to be the inevitable result of history.

Cropsey: believes in a natural teleology.

Sen: explicitly non –teleological, yet reflects an inner tension with some crypto-

teleological passages

Rationality Partakes of choice of means but not choice

of ends

Sen: in economics “rationality” is understood in several (inadequate) ways

(1977; 1987)

Streeten: “rational behaviour has been equated with selfish behaviour”

(1995: 211).

Myrdal: all knowledge, and all ignorance, tends to be opportunistic

(1968:25)

Lutz & Lux: prior to Hume, rationality also meant choice of ends.

Marx: rationality is inherent in history, via the dialectic, so that rational results

ultimately prevail even if they are not willed by (a majority of) individuals

themselves

Cropsey: human reason partakes of the choice of both means and ends (following

Aristotle)

freedom Endorses individual freedom from external

constraint.

Hence individuals have the freedom to do

whatsoever they choose, and there is no

higher (transcendent) yardstick than the

free choice of any one individual.

In consequence, all values are relative.

Freedom from external restraint is not the same thing as freedom to do those

things which are fulfilling in life (or which are consistent with an implied

teleology).

The understanding of freedom is interconnected with the understanding of

equality of opportunity, which for institutionalists does not mean an

unhandicapped race in a free market, so much as a recognition of the need

to treat unequals unequally.

[Whereas privatising schools is an obvious step forward for Friedman and

orthodox neoclassicists it is more problematic for institutionalists, who see

some intervention as being necessary to achieve meaningful equality of

opportunity and thus to achieve freedom, properly understood.]

Marx: freedom to immerse oneself in the human brotherhood, once communism is

achieved

Sen: removal of “unfreedoms” requires recognition of State and market as

complementary institutions. People need to be free from constraining circumstances

as well as from legal fetters.

Cropsey: ‘freedom to’ do something specific in keeping with the fulfilment of a

given natural teleology is quite different from ‘freedom from’ external constraint,

which may become mere licence. Social science has not disproved the possibility of

absolute values, or of a generic nature of man and a common teleology, despite

historicist claims to the contrary. This view is radically opposed to neoclassical or

libertarian conceptions of economics (and also to Marx). It is radically opposed to

their conceptions of the nature of man and to their conceptions of what constitutes

freedom.

Austrian School Catholic “economic personalism” and Pope John Paul II: affirm that

freedom entails something more than libertarian freedom. The 'economic

personalist' view is compatible with the Cropsey view, but derives from a different

root.

Australasian Journal of Economics Education Vol. 3. Numbers 1 & 2, 2006 95 95Methodological root Positivism; fact/value dichotomy Are facts themselves theory-laden (since they are seen through the lens of

theory) and hence values- laden?

Myrdal: a value neutral social science is a logical impossibility; there is a

methodological bias in modern social science. “The only way in which we

can strive for objectivity in theoretical analysis is is to lift up the valuations

into the full light, make them conscious and explicit...”(1968:33)

Samuels 1990: facts are themselves theory dependent.

Wilber 2004: economic theory is not value free; the fact/value dichotomy is

problematic.

Schumacher: the leading ideas of the nineteenth century (including

positivism and relativism) contain elements of truth, but deny the notion of

hierarchial order and the concept of a human species versus sui generis

individuals. The disease we suffer from today is metaphysical and requires

a metaphysical solution.

Marx: dialectical materialism

Cropsey: Socratic dialectics.

Sen: modern economics has been impoverished by the distance that has grown

between economics and ethics.

Historical

perspective

An historical perspective is inessential Important; for evolutionary economists an historical perspective is essential

e.g. in unravelling the role of path dependence

For Marxists, Economic history is an integral part of an understanding of the

unfolding of dialectical forces, including interdisciplinary forces.

A non-historical approach is thus unscientific for those committed to dialectical

materialism.

utilitarianism Fundamental;

indisputable

J.S. Mill: Better to be Socrates dissatisfied than a fool satisfied.

Myrdal: conservatism within social science methodology has constrained

economists from departing far from the traditional roots of economics in the

philosophies of utilitarianism and hedonism.

Dewey: hostile to utilitarianism

Schumacher; Lutz & Lux: the catch-all category of utility is fallacious;

issues of right and wrong cannot simply be reduced to issues of pleasure

and pain.

Etzioni, Kant: a moderately deontological position in preference to

utilitarianism.

Utilitarian judgements are distorted in the hands of either the deprived or

the depraved.

Utilitarianism is attacked by those who see endogenous (economic) conditioning of

tastes (Marx) or those who subscribe to a teleological view (Aristotle; Cropsey) and

a need to transcend historicist influence.


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In endorsing this theme, Schumacher (1974: 77) emphatically objects that many economists do not know that their theories are based on particular conceptions of the nature of man and that their theories would have to change if that underlying conception of man changed. In effect, that is also what Sen (1987; 2000) has argued more recently, and what Etzioni (1988; 1991) has tried to popularise in the context of social economics. In keeping with that understanding, the case argued here is that for economics to be taught well, what is needed is not only the retention of HET but also its supplementation by the teaching of the history of political philosophy. While Locke and Smith - and J.S. Mill - lie at the root of orthodox economic theories and are relatively well known, Dewey, Kant, Rousseau and the Bible may be found at the base of various institutionalist perspectives, and Marx and Aristotle are both evident in radical perspectives. Darwin's influence is also apparent in evolutionary economics. Thus, the cast of relevant characters from the history of political philosophy is much broader than conventional economics teaching allows.

3. IMPLICIT ECONOMIC PHILOSOPHY IN THE TEACHING

OF ECONOMICS:

3.1 The Roots of Orthodoxy in Adam Smith, John Locke and J.S. Mill

Interpretative issues abound in the interpretation of any significant philosopher. There is certainly no shortage of interpretations of Adam Smith, and indeed there is still something of an Adam Smith industry today with recent interpretations offered by Sen, Alvey, and Fitzgibbons, and shorter interpretative commentaries offered by Wilber, Hirsch and others. These varying interpretations carry different policy implications with them, and underscore the importance of the study of HET. It is simply not true that all economists see Smith as the father of unbridled self-interest, or indeed as the father of the Chicago School perspective associated with Friedman, Becker, Coase, Posner and others.

J.S. Mill is also acknowledged as a foundational influence in liberalism, and here too there are significantly conflicting interpretations. Friedman is emphatic that government intervention is commonly not just ineffective but actually counterproductive, and that – in accordance with his understanding of J.S. Mill - the only legitimate restraint that government may impose upon individual freedom is one designed to prevent us from impeding the freedom of others. In short, government has no legitimate role whatsoever in protecting us from ourselves. Gildin


(1964), however, reads Mill differently. He disputes this common interpretation of J.S. Mill, and its implications for the acceptability of State intervention. While Chicago School economists stress that for Mill individual liberty is the surest source of social progress, Gildin stresses that the question therefore remains as to whether Mill's chief goal is individual liberty (as in Chicago teaching) or social progress (with its teleological implications and consequent receptivity to certain State interventions). Critics therefore give pause as to whether Friedman and Chicago may in fact have misinterpreted both Smith and Mill, thereby institutionalising a conception of metaphysical issues in (imperialist) economics which neither of their putative intellectual fathers would themselves have been willing to accept. Heilbroner too (1996b: 129-157) notes that Mill came to accept that it is the proper end of government to seek to divert human energies “to the legitimate employment of the human faculties, that of compelling the powers of nature to be more and more subservient to physical and moral good”. The Mill who started by saying every departure from the principle of laissez-faire, unless required by some great good, is a certain evil, ends up with a bold vision of government that respects any undertakings by government which are beneficial to the general interests of mankind (such as provision of free or almost free primary education), but which have not been undertaken through private initiative (Heilbroner, 1996b). For Mill, the individual who is so prior to the state may thus be seen as the morally educated individual, not merely the present individual. In accepting that the only unfailing source of progress is liberty, Mill thus intimates that it is social progress that is the real goal.

Friedman (cited in Nevile 1998:173) acknowledges that “As Liberals, we take freedom of the individual...as our ultimate goal”. What is made plain by a study of economic philosophy, however, is that the meaning of that 'freedom' is not unambiguous. In standard presentations little or no question is raised about the interpretation of Smith, or of Mill or of the meaning of 'freedom', yet the case for laissez-faire extracted from these sources can indeed be questioned, as Sen, Wilber, Streeten (1995: 231-233; 344-346; 239; 282) and others contend. Critics of Chicago School economics place more stress on Smith's notions of 'prudence' and 'sympathy', and Sen, Etzioni, Cropsey, Hirsch, Schumacher, Wilber and others object that orthodox received theory omits the original moral roots of Smith's formulation (see Hirsch 1977:137 and Sen 1987:22-28). Accordingly, for them, the notion of economics as science and as imperialist science suffers from the shortcomings of both an excessively narrow self-interest interpretation of Smith's teaching and a determination to view economics in isolation from its broader philosophical bases. As Samuels puts it (1990) neoclassical economics is itself a form of economic


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science instructed by moral discipline – i.e. the moral discipline of utilitarian calculation and of justice as enshrined in the notion of Pareto optimality given extant entitlements. Accordingly, institutionalists and other critics do not accept that the Locke / Smith conception of what is natural to man at the root of orthodox neoclassical economics is a settled issue or that it ushered in rationalism so much as relativism. In a word, Etzioni, Schumacher, Hirsch, Sen and others stop short of accepting that Locke said the last word in defining the nature of man, and stop short of accepting that neoclassical economists have adopted unchallengable definitions of 'man', 'freedom', equality of opportunity, or of rational human behavior.

The Chicago School definition of individual freedom is certainly not the chief desideratum for Sen, Schumacher, Cropsey, Austrian School economic personalists or the Pope. For them, other metaphysical matters impinging on teleology and the conception of the nature of humankind are more fundamental (see Table 1 regarding 'freedom', the philosophical conception of the nature of man, and 'rationality'). For them, the Chicago definition of individual freedom is mere licence, unrestrained or unguided by any recognition of whatever inheres in common in the human species, and by any consequently attendant teleological implications. Accordingly, it is important to recognise that Friedman's a-teleological goal, and definition of freedom, are not necessarily the goal acceptable to, and implicit in, the economic theories adopted by other economists. Indeed, Friedman's statement of what constitutes 'our ultimate goal' is emphatically rejected by various sub-groups, although it is doubtful that many economics students ever confront such issues head-on.

It is to this implicit - and necessarily disputable - economic philosophy that Heilbroner and others draw attention when they protest that there is an ideological element in economics, and one that is commonly concealed in the way economics is taught. In effect, a deep schism separates those who wish to ignore metaphysical issues in order to embrace the art of economic modeling in the name of 'rigorous science' from those who care less about the refinements of mathematical models and who argue instead that what is being taught implicitly about the a priori conceptions of man, freedom, teleology and human rationality is far more important than what is being taught explicitly. Indeed, economic philosophy – which is commonly not listed for definition in Dictionaries of Economics – might be defined as enquiry into the implications of just such a priori commitments. It is noteworthy that “ideology”, for its part, is defined in the Shorter Oxford English Dictionary as "A system of ideas concerning phenomena, especially those of social life; the manner of thinking characteristic of a class or an individual."


3.2 The Philosophical Roots of the Institutionalist Perspective

As Wible puts it (1984: 1049), “The institutional school has philosophical roots in the instrumental philosophy of John Dewey”. He notes (p1051) that Commons, Mitchell, and Ayres all acknowledged a debt to Dewey, and that Dewey offered an evolutionary, instrumentalist approach to thought. Dewey regarded change as Nature's only constant, and thus disbelieved in all kinds of idealism (p1055). For Dewey (quoted in Kanne, 1988: 1213-1216), there are no fixed ends, and “Growth itself is the only moral 'end'.”

Dewey's pragmatism found a sympathetic audience in the USA. He maintained Peirce's hostility to utilitarianism (Mirowski 1987: 1017), and became associated with groups opposed to laissez faire notions. For Dewey, classical liberalism had avoided all the hard questions regarding the definition of order. Mirowski (1987: 1001-1003) consequently argues that institutional economics and neoclassical economics are the offspring of entirely distinct philosophical traditions, and that “These two traditions have a profound conflict over their respective images of a 'science', and therefore profoundly incompatible images of 'economic man' and 'rationality'.” Mirowski accordingly concludes that the claim that economic 'science' has repudiated philosophical preconceptions is nothing but a vain facade, and that the roots of disagreement between contending schools of economic thought thus lie in the divergent a priori definitions of man, freedom, equality, rationality and teleology. Samuels (1990: 275) echoes this position in concluding that metaphysics and science are not mutually exclusive, and that in practice all disciplines are combinations of the two. For Samuels, as for Myrdal, there is no value-free social science, and there are unavoidable a priori.

Insofar as they follow Dewey in the belief that there are no 'fixed ends', institutionalist economists seek to derive useful guidelines as to how to bring the performance of the extant economy more closely into line with evolving societal values. Institutionalists look to “instrumental valuation” or “social value theory” in keeping with their attachment to an understanding of the evolution of social values (Wisman & Rozansky 1991). For them, 'freedom' and equality of opportunity do not mean an unhandicapped race in a free market. On a methodological level, they see a methodological bias in modern social science, and tend to agree with Myrdal that a value-neutral social science is simply impossible. Positivism is attacked from a variety of philosophical perspectives, but commonly because institutionalists view the fact/value dichotomy as problematic, and because of the contention that even in matters of scientific description and


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prediction there is normative significance in the methodological criteria employed. According to Samuels (1990: 303) facts are theory laden and theories are ideology laden, since valuation is inexorably involved at several levels. In consequence, institutionalists don't believe that values can be crushed out of economics by the practice of economic science (as Schumpeter contended), and - that being the case - it is best that the author's values be stated explicitly (Samuels 1990: 297, a la Myrdal). They therefore tend to see the positivistic theory / value distinction as untenable (Wisman & Rozansky 1991).

The institutionalist camp is itself a broad church, however, with ample room for disagreement within it, as well as disagreement with the devotees of Locke and Smith in the orthodox neoclassical camp. Dewey is not alone at the root of the institutionalist position, and Schumacher for one is at least as critical of Dewey as he is of those outside the institutionalist perspective (Duhs & Alvey 1989). Indeed, Schumacher contends that the three political philosophies of Locke, Dewey and Marx which respectively underscore the three recognised perspectives of orthodox, institutionalist and Marxist economics are all deficient. Instead of finding a solution to human problems in the evolutionary philosophies of Dewey and Darwin, and in the supposedly middle way of Dewey-style pragmatic institutionalism, Schumacher finds an unacceptable historicism and relativism there instead. This is inevitable, of course, given that Schumacher seeks to take his bearings from a Biblical conception of the (innate) “nature of man”. This Biblical view necessarily clashes with Dewey's evolutionary perspective, which itself decries the notion of a fixed species and of “fixed ends” and thus the possibility of absolute (Biblical) values. This leaves Schumacher ultimately unable to follow in Dewey's direction, since Schumacher and Dewey sit on opposite sides of the fence in relation to Dewey's objection that traditional political philosophy has been engaged in a misguided search for “fixed species and essences” (see Horwitz: 752-3). For Schumacher it is Dewey who is misguided on the a priori level of the conception of the nature of man, and thus of human teleology and rationality. It may have been Locke's teaching that paved the way for the elevation of the passions over human reason in the choice of individual ends (or freedom of individual consumer sovereignty in the matter of human teleology), but for Schumacher no solution or improvement is to be found in the historical relativism of Dewey.

It follows that while both Dewey and Schumacher are hostile to utilitarianism, the root of that opposition comes from separate sources. The safeguard Dewey finds in pluralism or populism is no safeguard for Schumacher, but merely another concession to historicism and a life-destroying metaphysics of relativism and historicism. An appeal to


evolutionary standards does not equate to an appeal to the teleological standards of Biblical teaching, and while Schumacher and Dewey may agree that much capitalist production 'merely swells the senseless bulk', they remain divided as to what constitutes rational choice and what constitutes mere chance.

Plainly enough, the a priori conceptions of “man”, equality of opportunity, freedom, rationality and teleology within the institutionalist perspective (as adumbrated in Table 1) are distinctly different from those accepted by orthodox neoclassical economists.

3.3 The Philosophical Roots of Radicalism

Marx provides the most obvious philosophical root of radical economics. He objected to the privations of the capitalism of his time, and saw private property as the source of unacceptable inequality. He conceived of man as a social animal, characterised by a radical equality. He understood epistemology in terms of dialectical materialism, and saw capitalism as home to festering contradictions which would inevitably yield its revolutionary overthrow. For Marx, man is ultimately a selfless, collective being, and thus one whose humanity is consummated by elevating his social life into one of a sharing brotherhood. Accordingly, the communist experiment might be seen as an attempt to create the “new Adam in the new communist society”. That experiment has now all but been abandoned, however, as China and other ex-communist countries switch back to systems based on individual incentive and self-interest.

Radical challenges to orthodox neoclassical economics nonetheless continue to exist, however, in the form of conceptions of economics which find their roots in Aristotle, or perhaps in terms of environmentalism or feminism. Consideration of Sen's Aristotelian conception is left to the companion paper “Teaching Economic Philosophy: Economics, Ethics and the Search for the Right Maximand” (Duhs 2006).

3.4 Some Practical Controversies

Rather than consider only the a prioris of different philosophical positions, those with an interest in teaching economic philosophy and political economy sometimes try to excite interest in their more abstract arguments by use of provocative practical examples.

One useful case illustrates problems at the interface of economics and ethics. It is provided by Lawrence Summers' leaked World Bank memo regarding the economic efficiency of alternative ways of disposing


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of dangerous pollutants, including nuclear wastes (cited in Hausman & McPherson, 1996). Summers argues that the dictates of economic efficiency reveal the desirability of relocating the world's dirty industries in poor countries - because those killed by pollutants will then be relatively low paid workers, thus implying efficiency benefits for the world economy. While this conclusion may reflect exemplary economics, it provoked outrage. In fact, the point of Summers memo is to tacitly demand that those who object to this proposal now bother themselves to sift through the principles of neoclassical economics and establish just where it is that ethical implications have entered into the putatively value-neutral scientific analysis of how best to dispose of deadly pollutants. In short, if the neoclassical economic analysis used by Summers is good enough to pass as science in other contexts, why is it that so many are unwilling to see the same principles accepted as science in this context? What implicit assumption has suddenly turned rancid?

A second example is provided by Kenneth Arrow (1997). Arrow considers Margaret Radin's 1996 book on 'contestable commodities' - including such 'commodities' as baby sales, sales of human organs and prostitution – and concedes that he himself encounters difficulty in addressing such issues. Just why is it that many societies are determined to withhold such 'contestable commodities' from the marketplace, when a market for them could no doubt be established? Whereas Radin employs the approach of Dewey's pragmatic tradition, in which the formation of value judgements is a social process and outcomes are the result of widespread (democratic) dialogue, Arrow himself admits to a lifelong difficulty with Dewey's approach. He states that he has always had difficulty understanding pragmatic discussions of broad principles, and that, for him, the a priori principles in Dewey were not clear enough, especially since the opposite of some of Dewey's 'experiential' arguments seemed equally plausible. Arrow always suspected that the conclusions were arrived at first and that the arguments were derived afterwards - which is also what Allan Bloom (1975) says in criticism of Rawls's philosophy.

Why then are baby sales uniformly banned? Arrow finds Radin's explanation in terms of 'personhood' less than compelling, but concedes that he does not himself have a good answer (1997: 765). In short, he recognises that there is a significant problem here, but (like Schumacher) finds it unlikely that a satisfactory solution can be found in Dewey. He thereby implies the need for a broader understanding of economic philosophy. He notes that economics and politics are separate systems and implies that it is the proper role of politics - or philosophy – to determine the proper place of economics. In thus deferring to the notion that politics


is the master of economics, rather than vice versa (as for Posner, for whom economic efficiency becomes the new definition of jurisprudence: see companion paper), he tacitly gives rise, however, to other questions about the political or philosophical values implicit in orthodox economics. He certainly implies a constraint on the Chicago School idea that economics should be accepted as imperialistic social science.

Arrow notes (1997: 760) that Radin's fundamental argument is that the commensurability implied in the use of a common utility function for all human activities should be rejected. This is similar to Sen's objection in “Rational Fools” (1977) to the notion that in economics individuals are allocated one all-purpose preference function, as if they have no need for qualitative distinctions between their interests, preferences and well-being. Indeed, again approximating Sen and his deference to Aristotle, Radin herself appeals to Martha Nussbaum's capabilities approach to the (Aristotelian) question of what it is to be human, and thereby tacitly raises the question as to whether an answer to her question of why some 'commodities' are contested is perhaps to be found in Aristotle, if not in Dewey. At the least, Arrow's unease with what he accepts is a significant question is a reason for re-examining the utilitarianism of orthodox economics and for pondering the importance of the teaching of economic philosophy.

Colander (2004: 36-39) likewise takes up the 'contested commodities' issue in the name of what he calls the failure of market outcomes - as against orthodox market failure - and objects that current Principles texts encourage avoidance of such controversial cases. He objects that if we don't deal with cases of the failure of market outcomes - cases where the market does everything it should, but society still disallows a market result, as in the case of baby sales – we fail our students. We especially fail those students who are thoughtful enough to recognise that there are implicit philosophical difficulties here worthy of confrontation. In a way reminiscent of the Summers lethal pollutants case above, Colander goes on to add that at the economics / ethics interface, economic efficiency might similarly dictate that a cocktail of AIDS drugs not be supplied to Africa because of the realities of demand and supply, yet few would advocate the 'efficient solution' of simply allowing poor Africans to die. In effect, this is a paraphrase of Rousseau's words that private property may be something real, but human need is also something real. In short, the Radin-Arrow-Colander examples amount to a silent criticism of the Locke-Smith understanding of man and of economics, and a claim that well-taught economics students need also to be exposed to Dewey, Rousseau, Aristotle and others, and not be misled into believing that the


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important questions of philosophy have all been solved (in favour of Locke).

A third pragmatic example is provided in the context of the schools debate, which has been so important to Friedman in the last decade or more. Friedman has condemned the schools sector of the US economy as an island of socialism in a sea of capitalism. He condemns it as a backward and unsatisfactory sector in terms of both efficiency and equity and in terms of the literacy and numeracy results it delivers. For him, privatisation of public schools (preceded perhaps by a policy of school vouchers) is an obvious way forward in liberating impecunious parents from unsatisfactory public schools and in restoring equality of opportunity and freedom of school choice to parents. Educational sociologists such as Halsey (1997), however, argue that Friedman misconceives what equality of educational opportunity really entails. For them, the reality is that privatisation of schools may merely cultivate an exclusionary process, such that those who live in the poorest areas will be condemned to use the poorest schools, thereby locking the poor into their poverty. Halsey et al argue that it is not privatisation that provides a solution, but the recognition that one generation's equality of opportunity necessarily creates inequality of outcome, which if uncorrected thus creates inequality of educational opportunity again in the next generation. On this understanding, an interventionist program aimed at promoting equality of opportunity is perennially required. Both Friedman and Halsey believe in equality of opportunity, but what that means for Friedman (privatisation) is quite different from what it means for Halsey (recurrent corrective intervention).

A fourth illustrative example is provided by a recent Paul Krugman column in the New York Times (“Free to Choose Obesity?” 8/7/2005). Given the prevalence of obesity in the United States and in Australia, Krugman parodies Friedman's Free to Choose (1976) by asking if this epidemic of obesity merely represents the free choice of many people to become obese. According to Krugman, only ideologues or economists could believe that. For him, there is therefore some implicit limit on consumer sovereignty and on utilitarianism, and in circumstances in which he judges that consumers have failed to exercise sufficient self-discipline to act in their own best interests, Krugman is willing to call for some corrective government intervention. What are the limits to the acceptability of consumer sovereignty? From where do such limits derive, if they exist? Krugman and Friedman are obviously at odds on this point, yet in principle both could claim to be deriving their positions from J.S. Mill. In Friedman's case that is from the Mill who wrote that every departure from laissez faire is a certain evil, whereas in Krugman's case the implication is that it is from the later Mill who wrote of the need to recognise qualitative


distinctions between the pleasures and who putatively attached more significance to “social progress” than to individual liberty. At least tacitly, Krugman is adopting a set of a prioris about the nature of man and ontology and teleology which sets him at odds with the value-relativism and a-teleological approach of Chicago School economics.

3.5 Pareto Optimality and Metaphysics

The above examples make clear that economic philosophy is important to the teaching of economics not only in a theoretical context. They help explain Hodgson's objection (2001; 2004) that economics students no longer have much prospect of an education in 'big picture' questions and his plea for greater recognition that “Philosophy…encourages a critical frame of mind and can help locate the big questions… In sum, just as the requirement of mathematics is now virtually universal, so too should be some philosophy, and relevant parts of the history of ideas.”

Cropsey, Schumacher, Myrdal, Etzioni, Wilber, Sen and others endorse those sentiments. Minimally, what they would like to see is a teaching broad enough to recognise that what underlies Pareto optimality is not just the three conventionally recognised Pareto value judgements (individuals are the best judges of their own welfare; individuals are independent and additive in a social welfare function; more is better etc) but also three additional metaphyiscal assumptions regarding relativism, positivism and historicism.

Economic philosopher critics accordingly argue that what is taught implicitly in economics is far more important than what is taught explicitly (Cropsey 1955; Schumacher 1974; Duhs 1982; Duhs & Alvey 1989). In Cropsey’s view, when students learn welfare economics they are really being taught a particular, contentious view of political philosophy without either the instructor or the student necessarily being aware of that fact. In Schumacher's words (1974: 77), “Economics is being taught today without any awareness of the view of human nature that underlies present day economic theory. In fact, many economists are themselves unaware of the fact that such a view is implicit in their teaching and that nearly all their theories would have to change if that view changed.” For him, what is at fault is the lack of depth with which subjects are taught and the lack of metaphysical awareness. As he puts it, ideas such as relativism, positivism, evolutionism and historicism are now so firmly lodged in our minds that we are unconscious of their presence. They would not have penetrated so deeply if they did not contain an element of truth. Nonetheless, in his view (1974: 71-76) they are incomplete and dangerous, and are ultimately “a


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bad, vicious, life-destroying type of metaphysics” denying the relevance of all metaphysics including themselves. Hence, Schumacher objects to the silent, self contradictory teaching that all values are relative, except for the putatively incontrovertible value that all values are relative. That singular value itself aspires to the status of absolute truth.

The implicit presence of relativism, positivism and historicism in contemporary social science introduces a strong metaphysical teaching, to which Myrdal, Cropsey, Joan Robinson, Heilbroner, Schumacher, Etzioni and Sen have all attempted to draw critical attention. In one way or another they have their objections to value relativism, and to positivist methodology. They do not accept the relativist doctrine that all human values should necessarily be accepted as being of equal value. It is from this root that they see an ideological element in economic “science”, and for this reason that they see critical importance in the teaching of economic philosophy. It is by the importation of relativism, positivism and historicism that welfare economics has come to celebrate individual psychology over political philosophy. The core point of these philosophical critics of orthodoxy is encapsulated in Cropsey's words that “every logic presupposes a metaphysic”. This sentiment reappears in Myrdal in the more prosaic words “there can't be a view, except from a viewpoint.” Those who see significance in such understandings are naturally compelled to see the teaching of economic philosophy as a matter of primary importance.

4. CONCLUSIONS

Capitalism is essentially a system of free enterprise with some allowance for government interventions in specified conditions. It is essentially a system built on acceptance of John Locke's political philosophy supplemented by Adam Smith's elaboration of the economic policies consistent with that philosophy. In Locke's understanding – as against the understanding of all previous philosophers - man is by nature individualistic (selfish) and acquisitive. It follows that the institutions required for a good society are therefore ones which give free expression to that individualism and acquisitiveness. Accordingly, what is needed is private property and unlimited acquisitiveness or inequality of wealth. Marxists start with an alternative conception of the nature of man and obviously reach different conclusions. If what is natural to man is selflessness and collectiveness (see Table 1 re the philosophical conception of the nature of man in Marxist thought), it follows that private property and unlimited acquisitiveness will be divisive and disruptive, and that the


institutions of a good society are instead to be found in the public property of communism. Likewise it is apparent there will be others in an intermediate position – deriving their conceptions of a good society from Rousseau or Dewey or Kant or Aristotle – whose philosophical a prioris will drive them to seek at least some modification of the institutions favoured by either of the above intellectual camps.

Putatively simple and unambiguous words such as ‘man’, ‘freedom’, 'equality' and ‘rationality’ are in fact ever present bones of contention. It is the conflicting a priori definitions of such terms that underpin dissension between the three broad theoretical perspectives considered in this paper (Table 1) and which constitute the mainsprings of dispute about many practical economic policies. This is apparent in debates within development economics, including the now famous critiques provided by Sen (2000), and in disputes about the economics of law (Posner 1979; Duhs 2005), and in the dispute between Friedman and various institutionalists about schools policies. More detailed consideration is given to selected cases in a companion paper titled “Teaching Economic Philosophy: Economics, Ethics and the Search for the Right Maximand” (Duhs 2006).

For reasons related to the inevitable presence of a prioris, Myrdal regarded economics as a “soft science” requiring explicit revelation of the value premises of its authors. Joan Robinson and Robert Heilbroner similarly called for more explicit attention to ideological elements in the teaching of economics. Such calls of course tend to undermine the scientific pretensions of the economics profession, and are sometimes so unwelcome as to have those who demand attention to the contestability of a priori definitions denounced as the enemies of science. Critics of this view in fact see a fundamentalist shoe as being on the other foot, however, as doors are closed to on-going debate over basic socio-economics questions. As Hodgson (2001; 2004) puts it: today the grand view is more difficult to obtain, and the big questions fall out of favour, while the sub-disciplines specialise in minute technicalities. He looks to the post-autistic economics network to help reverse the narrowing and over-formalisation of economics which proceeded apace in the latter half of the twentieth century, and which he sees as having been intensified by the accelerated movement into business schools. The root cause perhaps remains, however, that increasing specialisation in sub-disciplines impairs wide-ranging reflection and inter-disciplinary dialogue as uni-versities become multi-versities, and questions of integrated social 'knowledge' come to be crowded out. Whereas philosophy once stood as the apex of all enquiry, an induction in philosophy today has become the exception rather than the rule.


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Given the importance to mainstream economics of utilitarianism, Pareto optimality, positivist methodology, and the notions of consumer sovereignty and value relativism, there are obvious reasons to increase awareness of the implications of those concepts by not merely tolerating the teaching of economic philosophy but by recognising that implicit metaphysical concepts are in fact fundamental to an understanding of economics and of why economists disagree. Whether or not there is unanimous agreement that what is presently taught implicitly is more important than what is taught explicitly, the fact that significant question can be raised about the implicit teaching in contemporary economics is a challenge that remains to be met.

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