History of Economics

This article recovers mid-century proposals for sciences of concord and contextualizes them as part of a broader politics of commercial knowledge in eighteenth-century Britain. It begins by showing how merchants gained authority as formulators of commercial policy during the Commerce Treaty debates of 1713–1714. This authority held fast during the Walpolean oligarchy, but collapsed by the 1740s, when lobbying and patronage were increasingly maligned as corrupt by a ferment of popular republicanism. The article then explores how the Anglican cleric Josiah (...) Tucker and country pamphleteer Joseph Massie made use of this vacuum in authority to formulate a novel basis for the production of commercial knowledge. In pamphlets written between 1749 and 1760, they argued that the competing interests comprising the nation’s increasingly complex commercial system could only be reconciled and geared to the national interest through the establishment of a science which harnessed an impartial and systematizing epistemology, developing highly idealized accounts of the abstract market as a realm of concord which operated according to regular, rationally deducible principles. The conclusion suggests that their arguments introduced the foundational conceptual bases for later sciences of political economy and legitimated a new form of expertise in statecraft. (shrink)

I argue that the word mercantilism, born in the beginning from a nasty rhetorical move by Adam Smith, still preserves so much evocative power as to be used emblematically as a name for a whole historical period because of its natural use as a label for aggressive and unfair economic policies but, for analytic purposes we should bring to an end cross-purpose talk between historians of ideas and historians of society.

My objections are: first, we may ask whether the achievement of The Wealth of Nations has been that of creating a new and more encompassing conceptual framework where already existing theoretical elements could be integrated and whether the growth of knowledge could have originated from a growth in the consistency of a theoretical framework which synthesized already existing individual elements; secondly, we may ask whether Smith's "tendentious" presentation of the positions of both predecessors and opponents might be some kind of (...) unavoidable sin and he might have been guilty of that sin because this was a price to be paid to his rhetorical strategy; thirdly, whether the fact that a text has been canonized at a certain moment in history for quite contingent reasons is no decisive proof of the intrinsic worth or lack of worth of the text in itself. (shrink)

I suggest that the image of Adam Smith suffers from an emphasis on the role of “utilitarian calculus”, besides on overlooking the role of a “Stoic” point of view from which vanity, selfishness, and even enlightened self-interest are ultimately valueless, and finally a restricted view of prudence.

Friedrich Hayek’s defense of neoliberal free market capitalism hinges on the distinction between economies and catallaxies. The former are orders instituted via planning, whereas the latter are spontaneous competitive orders resulting from human action without human design. I argue that this distinction is based on an incomplete semantic history of “economy.” By looking at the meaning of “oikonomia” in medieval providential theology as explained by Giorgio Agamben and Joseph Vogl, I argue how Hayek’s science of catallactics is itself a secularization (...) of providential theology. This exposes Hayek to three criticisms: he unjustifiably neglects the possibility of tendencies toward spontaneous disorder in free markets, he condemns the “losers” of neoliberal competition to being providential waste on the road to general prosperity, and he imposes on people the duty to consent to a neoliberal order that hinders them from cultivating their inoperativity. (shrink)

We reexamine some of the classic problems connected with the use of cardinal utility functions in decision theory, and discuss Patrick Suppes's contributions to this field in light of a reinterpretation we propose for these problems. We analytically decompose the doctrine of ordinalism, which only accepts ordinal utility functions, and dis- tinguish between several doctrines of cardinalism, depending on what components of ordinalism they specifically reject. We identify Suppes's doctrine with the major deviation from ordinalism that conceives of utility functions (...) as representing preference di¤erences, while being non- etheless empirically related to choices. We highlight the originality, promises and limits of this choice-based cardinalism. (shrink)

GILBERT JEAN FACCARELLO (Paris, 1950) is professor of economics at Université Panthéon-Assas, Paris, and a member of the Triangle research centre (École Normale Supérieure de Lyon and CNRS). He is presently chair of the ESHET Council (European Society for the History of Economic Thought). He completed his doctoral research in economics at Université de Paris X Nanterre. He has previously taught at the Université de Paris-Dauphine, Université du Maine and École Normale Supérieure de Fontenay/Saint-Cloud (now École Normale Supérieure de Lyon). (...) He is a co-founder of The European Journal of the History of Economic Thought, which he co-edited for 20 years with J. L. Cardoso, Heinz D. Kurz, and A. Murphy. With Alain Béraud, he edited the Nouvelle histoire de la pensée économique (La Découverte, 3 volumes, 1992-2000) and, together with Heinz D. Kurz, he is presently editing a Handbook of the History of Economic Analysis (3 volumes, forthcoming with Edward Elgar). -/- EJPE interviewed Gilbert Faccarello about his research career in the history of economic thought, where he has focused especially on old and new classical and Marxian political economy, and French political economy during the 18th and 19th centuries. G. Faccarello discusses his interest not only in the logical structure and context of the economic ideas of past thinkers but also the links between economic thought, philosophy, and religion. (shrink)

Adam Smith is respected as the father of contemporary economics for his work on systemizing classical economics as an independent field of study in The Wealth of Nations. But he was also a significant moral philosopher of the Scottish Enlightenment, with its characteristic concern for integrating sentiments and rationality. This article considers Adam Smith as a key moral philosopher of commercial society whose critical reflection upon the particular ethical challenges posed by the new pressures and possibilities of commercial society remains (...) relevant today. The discussion has three parts. First I address the artificial separation between self-interest and morality often attributed to Smith, in which his work on economics is stripped of its ethical context. Second I outline Smith’s ethical approach to economics, focusing on his vigorous but qualified defence of commercial society for its contributions to prosperity, justice, and freedom. Third I outline Smith’s moral philosophy proper as combining a naturalistic account of moral psychology with a virtue ethics based on propriety in commercial society. (shrink)

There is a striking contrast between the significance of Harold Hotelling’s contribution to industrial economics and the fact that his location model was invalid, unrealistic and non-robust. It is difficult to make sense of the explanatory value of Hotelling’s model based on philosophical accounts that emphasize logical validity, representational adequacy, and robustness as determinants of explanatory value. However, these accounts are misleading because they overlook the context within which the explanatory value added of a model is apprehensible. We present Hotelling’s (...) model in its historical context and show why it is an important and explanatory model despite its apparent deficiencies. (shrink)

When the economic theory of the last decades becomes a subject of reflection for historians of economic theory, a striking feature which they will have to explain is the demise of the disequilibrium concept. Previously, economists had no qualms concerning the view that the market or the economy was exhibiting disequilibria. Amongst many possible quotations, the following, drawn from Viner's well-known article on Marshall, illustrates that.

Epistemic arguments play a significant role in the foundations of market liberalism as exemplified, in particular, by the work of F. A. Hayek. Competition in free markets is claimed to be the most effective device both to utilize the knowledge dispersed throughout society as well as create new knowledge through innovation competition. The fast pace with which new economic opportunities are discovered and costs are reduced is considered proof of the benefits of free markets to the common good. However, with (...) its inherently unpredictable consequences, innovation competition is actually ambiguous in this respect. This feature raises questions over the stringency of market liberal pleas that oppose quests for redistribution and environmental concerns in an absolute fashion. (shrink)

To a practitioner in the social sciences, game theory primarily helps to identify situations in which interdependent decisions are somehow problematic; solutions often require venturing into the social sciences. Game theory is usually about anticipating each other's choices; it can also cope with influencing other's choices. To a social scientist the great contribution of game theory is probably the payoff matrix, an accounting device comparable to the equals sign in algebra.

This paper revisits some recent contributions on ‘Why Management Theory Needs Popper’ to the journal Philosophy of Management. It proposes that those discussions provided an appraisal of the relevance of Popper’s falsification schema to management theory, but that they did not thereby bring to the fore all of the issues pertinent to a balanced and well-rounded understanding of Popper’s philosophy of critical rationalism. It is argued that such an understanding requires a discussion of what Popper himself declared to be the (...) real lynchpin of his thought: fallibilism and a critical approach. It is noted that this represents a rejection of the historical problem situation of philosophy – that knowledge claims need to be positively justified as true. It is argued that this rejection implies an anti-authoritarian, non-justificational philosophy based on the use of critical reason. Its application to several different objects of criticism is demonstrated and its ethical dimensions are explored. The relevance of critical rationalism to management studies and practice is assessed and an inherent limitation on the prospects of its adoption in management practice is identified. (shrink)

Egoism and altruism are unequal contenders in the explanation of human behaviour. While egoism tends to be viewed as natural and unproblematic, altruism has always been treated with suspicion, and it has often been argued that apparent cases of altruistic behaviour might really just be some special form of egoism. The reason for this is that egoism fits into our usual theoretical views of human behaviour in a way that altruism does not. This is true on the biological level, where (...) an evolutionary account seems to favour egoism, as well as on the psychological level, where an account of self-interested motivation is deeply rooted in folk psychology and in the economic model of human behaviour. While altruism has started to receive increasing support in both biological and psychological debates over the last decades, this paper focuses on yet another level, where egoism is still widely taken for granted. Philosophical egoism is the view that, on the ultimate level of intentional explanation, all action is motivated by one of the agent's desires. This view is supported by the standard notion that for a complex of behaviour to be an action, there has to be a way to account for that behaviour in terms of the agent's own pro-attitudes. Psychological altruists, it is claimed, are philosophical egoists in that they are motivated by desires that have the other's benefit rather than the agent's own for its ultimate object. This paper casts doubt on this thesis, arguing that empathetic agents act on other people's pro-attitudes in very much the same way as agents usually act on their own, and that while other-directed desires do play an important role in many cases of psychologically altruistic action, they are not necessary in explanations of some of the most basic and most pervasive types of human altruistic behaviour. The paper concludes with the claim that philosophical egoism is really a cultural value rather than a conceptual feature of action. (shrink)

No abstractThe Lakatosian stage in the progress of the philosophy and methodology of economics has served a useful role in helping launch a systematic and collective field of inquiry. In the course of the thirty years between 1976 and 2006, the field has advanced beyond that stage, but much of the spirit of the original ambitions had better be retained. As much as ever, if not more than ever, we need economic methodologies for normatively appraising assumptions, models, theories, explanations, research (...) programmes, and, importantly, for appraising academic and other institutions for their capacities in helping us acquire truths about the real world. Given the increasing complexity, diversity, and fragmentation of economics itself, practicing economists should be increasingly receptive to methodological reflection. (shrink)

This paper provides further evidence to the argument that Smith' theory of justice did not follow the natural justice school and that subsequently the ethical position on acquiring private property is not independent of the effects which such acquisition may have on the property-less individuals. I will show that the justification for private ownership is based on “reasonable expectations” which owners of assets have with regard to the fruits of the asset. The expectation to subsist through the use of one's (...) natural assets is equally reasonable. This is not to say that Smith believed that society should equally distribute income. But it does mean that the acquisition of private property must not interfere with the rights of individuals to subsist. Consequently, distribution is clearly an important part of Smith's conception of justice. (shrink)

David Hume's sympathetic principle applies to physical equals. In his account, we sympathize with those like us. By contrast, Adam Smith's sympathetic principle induces equality. We consider Hume's “other rational species” problem to see whether Smith's wider sympathetic principle would alter Hume's conclusion that “superior” beings will enslave “inferior” beings. We show that Smith introduces the notion of “generosity,” which functions as if it were Hume's justice even when there is no possibility of contract.

Modern law and economics received much of its impetus from Ronald Coase's analysis in ‘The Problem of Social Cost,’ and a goodly amount of that comes from the Coase theorem, which states that, absent transaction costs, externalities will be efficiently resolved through bargaining. The fact that the analysis that came to be codified in the Coase theorem was an exercise in pure fiction on Coase's part did not deter the erection of a substantial edifice of positive and normative analysis on (...) this foundation, nor, for that matter, has subsequent elaboration of Coase's intent done anything to abate the interest in the theorem and its implications. (shrink)

This paper extends the sensibilities of the Gilligan-Kohlberg debate into classical political economy and makes links with modern psychotherapeutics and the psychological development of individuals. The model of moral maturity represented in contemporary psychological theories is posited as the direct descendant, not only of Immanuel Kant, as is generally argued, but also of the universal, homogenous agent of classical economics; the ‘rational economic man’ representedin the writings of Adam Smith and J. S. Mill. Both thinkers lent their support to the (...) creation of an order which produces actors who are ’rational’ self-governing, separative, competitive, self-asserting, self-interested, acquisitive, pecuniary and driven to success by a desire for the social recognition afforded by consumerism; the same order which typically designates women moral failures and which renders them largely invisible. Liberalism generates conditions which enable it to sustain and reproduce itself at the psychic level. The assumption of the market as the paradigmatic social interaction and its status as the analytical and moral starting point in liberal capitalism infects the putatively private domain of ‘self-governance’ and contemporary psychotherapeutics; the development and management of the self in contemporary culture is a direct reflection of the imperatives and assumptions of market society. The separative self is the ‘healthy’ self, hence the parallel emphasis in modern therapy on ‘individuation’ as the highest level of psychological evolvement. Gilligan’s ‘care ethic’ is approached with some scepticism, nevertheless, her critique of Kohlberg guides us towards a more comprehensive critique of the ‘pneumatic’ and political assumptions of liberalism. (shrink)

In the ‘Introduction’ to Capitalism and Freedom, Friedman's stated intentions are to: establish the role of competitive capitalism as a system of economic freedom and a necessary condition for political freedom; indicate the proper role of government in a free society; and return the term ‘liberal’ ‘… to its original sense – as the doctrines pertaining to a free man’. In fact, Friedman accomplishes none of these things. This essay has three distinct, though related, objectives: first, to compare Friedman's position (...) with the liberal alternative; second, to show why Friedman's position is more properly regarded as libertarian than liberal; and third, to assess the quality of Friedman's argument in its own right. My purpose is to demonstrate that Friedman overlooks the important liberal insight that the unrestricted accumulation of private propety may limit rather than promote individual freedom. This omission is crucial. Not only does it divorce Friedman's conception from liberalism, it also vitiates his case for economic freedom as a necessary condition for political freedom. (shrink)

In a recent paper, Pierluigi Barrotta argues that Mises ‘ended up by defending an epistemological tenet very far from Kant's’, concluding that ‘Mises's apriorism cannot be vindicated through Kant's epistemology’. In contrast, I shall argue that certain of Mises's arguments can be reconstructed in Kantian terms, and thus the distance between Mises and Kant is not as extreme as Barrotta's argument may appear to suggest. Specifically, I shall argue that Mises, like Kant, seeks to establish the a priori nature of (...) the category of causality. To this extent at least, Mises's apriorism can be vindicated through Kant's epistemology. (shrink)

T. H. Marshall, a British sociologist, gave a series of lectures in 1949 under the title “Citizenship and Social Class.” To many American intellectuals, his analysis still offers a persuasive account of the origins of the welfare state in the West. But Marshall spoke in the early postwar era, when the case for expanded social benefits seemed unassailable. Today's politics are more conservative. In every Western country the welfare state is under review. Yet Marshall's conception can still help define the (...) issues in social policy and the way forward. (shrink)

Keynes's theory of interest is central to his broader argument. However, short‐run policy, which takes the so‐called normal rate of interest as given and aims at affecting the prevailing rate, must be distinguished from long‐run reform, which aims at changing the normal rate. The low demand that Keynes associated with high interest was believed to be inherent in a decentralized, consumption‐oriented economy. Consequently, he advocated reform in the direction of central control. Despite his “moral and philosophical” agreement with Hayek's Road (...) to Serfdom, Keynes differed fundamentally from Hayek in terms of their contrasting perceptions of the market's shortcomings and their judgments about the government's potential for improving the economy's performance. (shrink)

In spite of the important discoveries made by Adam Smith and later by the economists of the Austrian School, Friedrich Hayek remained intellectually challenged by the miracle of the price mechanism. As it turned out there was still some pioneering to do in describing the price mechanism. This became clear when Hayek identified the dispersal of information relevant to exchange transactions as the central issue of economic study. In the context of his distinction between competition as a state of things (...) and as a process the price mechanism manifests itself as a powerful integrator of information which is at first sight hopelessly dispersed in modern society. In 1945 he pointed out another intellectual challenge which the miracle of the price mechanism poses: How could such a marvelous functionality come into existence? “I am convinced that if it [the price mechanism] were the result of deliberate human design, and if the people guided by the price changes understood that their decisions have significance far beyond their immediate aim, this mechanism would have been acclaimed as one of the greatest triumphs of the human mind”. It is precisely because the free determination of prices is obviously not an invention, and because actors on the market in general do not realize that their decisions are at once also signals for the information-processing system that the market is, that in general this market order is not highly estimated. The market order is nevertheless the best illustration of the dual principle that the most beautiful forms of complex functionality are not deliberately created and are not deliberately maintained. (shrink)

Ramsey's critique of Keynes's ‘logical’ approach to probability is widely regarded as decisive, and his own ‘subjective’ approach and SEU framework are now familiar tools in economics. This paper challenges the standard view of Ramsey's critique and assesses the SEU model from a Keynesian viewpoint on probability. It consists of a summary of the two theories and an evaluation of Ramsey's criticisms and alternative. The two main conclusions are that although Keynes yields to Ramsey on the question of the existence (...) of logical probability relations, the formal structure of his theory is compatible with non-objectivist interpretations of probability; and that Ramsey makes far heavier demands on the capacities of the ‘rational agent’ than does Keynes. (shrink)

Most economists—old and new classical, old and new Keynesian, and Austrian postulate an immutable reality unchangeable by any human action. They differ only over the amount of information decisionmakers have, in the short run, about this unchanging reality. Keynes and the Post Keynesians provide an axiomatic alternative model that presumes a transmutable economic reality. Runde, Torr, Prychitko, and Boehm and Farmer fail to adequately address this dichotomous analysis of reality in responding to my review of O'Driscoll and Rizzo's book.

Contemporary Austrian‐school economists reject neoclassical welfare theory for being founded on the benchmark of a perfectly competitive general equilibrium, and instead favor a formal theory deemed consistent with the notions of radical subjectivism and disequilibrium analysis. Roy Cordato advances a bold free‐market benchmark by which to formally assess social welfare, economic efficiency, and externalities issues. Like all formalist, a priori theory, however, Cordato's reformulation cannot meet its own standards, being theoretically and empirically flawed, and perhaps ideologically suspect.

One calls a lot of things propositions. If one sees this, then one can discard the idea Russell and Frege had that logic is a science of certain objects – propositions, functions, the logical constants – and that logic is like a natural science such as zoology and talks about these objects as zoology talks of animals. Like a natural science, it could supposedly discover certain relations. For example, Keynes claimed to discover a probability relation which was like implication, yet (...) not quite implication. But logic is a calculus, not a natural science, and in it one can make inventions but not discoveries. Giving grounds, however, justifying the evidence, comes to an end; – but the end is not certain propositions' striking us immediately as true, i.e. it is not a kind of seeing on our part; it is our acting, which lies at the bottom of the language-game. (shrink)

The application of evolutionary ideas to socioeconomic systems has been an increasingly prominent theme in the work of Friedrich Hayek, and the motif has become dominant in his recent book. In an earlier issue of this journal, Viktor Vanberg raises two substantive criticisms of Friedrich Hayek' theory of cultural evolution that invoke some important questions concerning use of the evolutionary analogy in social science.