Normative Economics

For over a decade now epistemologists have been thinking about the peer disagreement problem of whether a person is reasonable in not lowering her confidence in her belief P when she comes to accept that she has an epistemic peer on P who disbelieves P. However, epistemologists have overlooked a key realistic way how epistemic peers can, or even have to, differ epistemically—a way that reveals the inadequacy of both conformist and non-conformist views on peer disagreement by uncovering how the (...) causes of peer disagreement bear on the debate’s core philosophical issue. Part of our argument for this thesis will involve giving a thorough yet entirely informal presentation of mathematical theorems in economics by Robert Aumann :1236–1239,1976) and Polemarchakis and Geneakoplos which represent a formally precise description of how two rational agents must deal with disagreement under certain epistemically interesting circumstances. (shrink)

The goal of the article is to substantiate that despite the criticism the paradigm in economics will not change because of the axiomatic assumptions of value-free economics. How these assumptions work is demonstrated on the example of Gary Becker’s economic approach which is analyzed from the perspective of scientific research programme. The author indicates hard core of economic approach and the protective belt which makes hard core immune from any criticism. This immunity leads economists to believe that they are objective (...) scientists and, consequently, it results in epistemological hubris. Due to its tautological nature, economic approach is considered to be a degenerative programme. This conclusion is extended on value-free economics. In spite of these problems, many economists still believe in positive economics and they dismiss normative approaches. It has a negative influence on people. The conclusion of the article is that thanks to axiomatic assumptions economists do not have objective and ironclad methodology and they should accept normative values in their research. (shrink)

In response to Eric Aarons' `Why Communism failed' (Dissent no. 4, 2001) it is argued that the present "capitalist" system is in fact so regulated as to be a hybrid of capitalist and socialist principles. It has some success in putting economic power into the hands of most people, though it needs restraint to cope with market failures.

This paper discusses ethical issues surrounding Integrated Assessment Models (IAMs) of the economic effects of climate change, and how climate economists acting as policy advisors ought to represent the uncertain possibility of catastrophe. Some climate economists, especially Martin Weitzman, have argued for a precautionary approach where avoiding catastrophe should structure climate economists’ welfare analysis. This paper details ethical arguments that justify this approach, showing how Weitzman’s “fat tail” probabilities of climate catastrophe pose ethical problems for widely used IAMs. The main (...) claim is that economists who ignore or downplay catastrophic risks in their representations of uncertainty likely fall afoul of ethical constraints on scientists acting as policy advisors. Such scientists have duties to honestly articulate uncertainties and manage (some) inductive risks, or the risks of being wrong in different ways. (shrink)

Reprint of an article initially appearing in Philosophical Papers (2017).

Over the last two decades, the capabilities approach has become an increasingly influential theory of development. It conceptualises human wellbeing in terms of an individual's ability to achieve functionings we have reason to value. In contrast, the African ethic of ubuntu views human flourishing as the propensity to pursue relations of fellowship with others, such that relationships have fundamental value. These two theoretical perspectives seem to be in tension with each other; while the capabilities approach focuses on individuals as the (...) locus of ethical value, an ubuntu ethic concentrates on the relations between individuals. In this article, we ask: to what extent is the capabilities approach compatible with this African ethical theory? We argue that, on reflection, relations play a much stronger role in the capabilities approach than often assumed. There is good reason to believe that relationality is part of the concept of a capability itself, where such relationality has intrinsic ethical value. This understanding of the ethical centrality of relations grounds new normative perspectives on the capabilities approach, and offers a more comprehensive grasp of the relevance of relationships to empirical enquiry. (shrink)

This note comments on Bruni and Sugden's interesting notion of fraternity among contract partners as joint commitment to cooperate for mutual benefit. I raise two points on their paper, both concerning the role of sacrifice. First I maintain that, differently from other social preferences, guilt aversion does not imply self-sacrifice. Secondly, I argue that aiming for mutual benefit does not prevent individuals from facing trade-offs between their own and their partners’ surplus, so the notion of sacrifice cannot be entirely eschewed. (...) To the contrary, reciprocal ‘sacrifices’ enhance cooperative intentions and help create feelings of friendliness. (shrink)

Neuroscience can contribute to economics by inspiring new models, helping to distinguish models that have similar implications for readily available data, and guiding interpretations of decision-making processes by policy-makers. However, there is an additional less straightforward role for it to play: augmenting, along with survey data and other non-revealed-preference sources, assessments of well-being. The need for such augmentation lies in the slightly bizarre stance taken by modern economic theory, namely that economics is concerned only with choices and not with welfare (...) per se. It is shown that this is neither historical nor at all necessary, even within the standard paradigm. Although neuroscience is by no means a panacea for determining true utility, which ultimately remains a subjective concept, it provides a uniquely useful complementary dataset. (shrink)

How is a person's freedom related to his or her preferences? Liberal theorists of negative freedom have generally taken the view that the desire of a person to do or not do something is irrelevant to the question of whether he is free to do it. Supporters of the “pure negative” conception of freedom have advocated this view in its starkest form: they maintain that a person is unfree to Φ if and only if he is prevented from Φ-ing by (...) the conduct or dispositions of some other person. This definition of freedom is value-neutral in the sense that no reference is made to preferences over options or indeed to any other indicators of the values of options, either in the characterization of “Φ-ing” itself or in the characterization of the way in which Φ-ing can be constrained. (shrink)

Upon learning that John C. Harsanyi was awarded the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel, in 1994, for his pioneering work in game theory, few economists probably questioned the appropriateness of that choice. The Budapest-born social scientist had already been recognized as a first-rank contributor to non-cooperative game theory for some time. However, as many readers of this journal will be aware, Harsanyi first contributed to welfare economics, not game theory. More importantly, he was (...) philosophically minded and accordingly has been “acknowledged as the most influential philosopher in economics”. 1 This is of some significance since, before Harsanyi became acquainted with economics around 1950, his main interest was philosophy and, to a lesser extent, sociology and psychology. Rather than an economist with philosophical leanings, Harsanyi was actually a philosopher turned economist. (shrink)

My philosophical case study concerns textbook presentations of the theory of demand. Does this theory contain anything more than just a collection of tautologies? In order to determine its empirical content, it must be viewed holistically. But then, the theory implies false factual claims. We can avoid this result by embracing the theory's normative character. The resulting consequences will be illuminated with the new autodetermination thesis recently proposed in the philosophy of physics by Oliver Timmer. Applying his ideas to the (...) theory of demand reveals that the statements of this discipline simultaneously concern both values and acts. (shrink)

This essay argues in favor of retaining the positive/normative distinction in economics, in spite of developments in methodology and epistemology that have cast doubt on the possibility of a “value-free” economics. The central claim is that it is worthwhile to distinguish between positive economic analysis and normative judgments, even if economics is viewed as being permeated with ethical values. This argument is presented without trying either to demonstrate that there is a profound epistemological difference between science and ethics or to (...) show that positive science can afford us access to objective reality. (shrink)

When economists pay homage to the wisdom of the distant past it is more likely that a work two decades old is being admired than one two centuries old. Economics is a science, and the sciences are noteworthy for their digestion and assimilation of the work of previous generations. Contributions remain only as accretions to the accepted body of knowledge; the writings and the writers disappear almost without trace. A conspicuous exception to this rule of professional cannibalization is Adam Smith. (...) Since 1776 he has not lacked for honors that have escaped even his most illustrious peers. Who, after all, wears a David Ricardo necktie? So to the author of The Wealth of Nations, all praise! (shrink)

Shortened version of an article that first appeared in Philosophical Papers (2017).

Recent work by comparative philosophers, global ethicists, and cross-cultural value theorists indicates that, unlike most Western thinkers, those in many other parts of the globe, such as indigenous Africa, East Asia, and Latin America, tend to prize relationality. These relational values include enjoying a sense of togetherness, participating cooperatively, creating something new together, engaging in mutual aid, and being compassionate. Global economic practices and internationally influential theories pertaining to justice, development, and normative economics over the past 50 years have been (...) principally informed by characteristically Western and individualist values such as utility, autonomy, and capability. In this article I consider what economic appropriation, production, distribution, and consumption would look like if they were more influenced by relational values typical of non-Western worldviews, and especially the sub-Saharan ethic of ubuntu. (shrink)

Rather than answering the broad question, ‘What is a just income?’, in this essay I consider one component of income—economic rent—under one understanding of justice—as giving people what they deserve. As it turns out, the answer to this more focused question is ‘no’. People do not deserve their economic rents, and there is no bar of justice to their confiscation. After briefly covering the concept of desert and explaining what economic rents are, I analyze six types of rent and show (...) that each is unjustified from the point of view of desert. I conclude by drawing some political and economic lessons from the preceding analysis, and by describing how these considerations can create a more just and efficient economy. (shrink)

John Rawls's work (1971) has greatly contributed to rehabilitating equality as a basic social value, after decades of utilitarian hegemony,particularly in normative economics, but Rawls also emphasized that full equality of welfare is not an adequate goal either. This thesis was echoed in Dworkin's famous twin papers on equality (Dworkin 1981a,b), and it is now widely accepted that egalitarianism must be selective. The bulk of the debate on ‘Equality of What?’ thus deals with what variables ought to be submitted for (...) selection and how this selection ought to be carried out. (shrink)

There is growing concern that a global economic system fueled predominately by financial incentives may not maximize human flourishing and social welfare externalities. If so, this presents a challenge of how to get economic actors to adopt a more virtuous motivational mindset. Relying on historical, psychological, and philosophical research, we show how such a mindset can be instilled. First, we demonstrate that historically, financial self-interest has never in fact been the only guiding motive behind free markets, but that markets themselves (...) are representations of our individual and collective moral identities. Building on this understanding, we review the research on how economic incentives crowd out virtue-oriented concerns. We then introduce the concept of moral self-awareness (MSA), an evolving mindset informed by reflection on moral identity, namely what one’s actions say about oneself given the impacts on others or society that one’s action may effect. MSA comprises three fundamental aspects of virtue-oriented reasoning: pride, shame, and guilt. Finally, we offer a four-stage model anchored in systems theory, yielding ever more refined motivating strategies for maximizing human flourishing and social welfare externalities. (shrink)

Mark Pennington’s Robust Political Economy is a systematic exposition of a framework for analyzing institutional performance. The Robust Political Economy framework evaluates institutions according to their ability to solve knowledge and incentive problems. On grounds of robustness, Pennington combines insights from Austrian market-process theory and public-choice theory to defend classical liberalism from several compelling critiques. These include theories of market failure in economics; communitarian, deliberative-democratic, and liberal-egalitarian theories of justice; and concerns with social capital, domestic and international poverty, and ecology.

The phenomenon of corruption is a cancer that affects our country and that it is necessary to eradicate; This dilutes the opportunities for economic and social development, privileging the single conjunction of particular interests, political actors in non-legal agreements for their own benefit, which lead to acts of corruption. Recent studies indicate that the level of corruption present in a political system is directly related to the type of institutional structure that defines it (Boehm and Lambsdorff, 2009), as well as (...) the ineffectiveness of the control organisms (Casar, 2015; Cárdenas, 2010, Rojas, 2010, Carbonell, 2009, Restrepo, 2004), which requires citizen action to combat corruption (Sandoval, 2010, Villanueva, 2006). This work, focuses our attention on the federal public administration, presenting as a proposal to empower the citizen action in the fight against corruption and in the National Anticorruption System; the figure of Whistleblowers or generator of citizen alert, based on two fundamental principles: i) recognizing the citizen's obligation to report acts of corruption and ii) the granting by the authority of witness protection. These two actions will result in two important results: i) Consolidate the citizen's complaint to inform society about acts of corruption and ii) and the exercise of freedom of information so that society is able to be informed about acts of corruption. These actions will allow promoting and consolidating a culture of reporting acts of corruption that may constitute a crime as a fundamental pillar in the National Anticorruption System in Mexico. (shrink)

Abstract: Economists are accustomed to distinguishing between a positive and a normative component of their work, a distinction that is peculiar to their field, having no exact counterpart in the other social sciences. The distinction has substantially changed over time, and the different ways of understanding it today are reflective of its history. Our objective is to trace the origins and initial forms of the distinction, from the English classical political economy of the first half of the 19th century to (...) the emergence of welfare economics in the first half of the 20th century. This sequential account will also serve to identify the main representative positions along with the arguments used to support them, and it thus prepares the ground for a discussion that will be less historical and more strictly conceptual. -/- Résumé : Les économistes ont coutume de distinguer entre une composante positive et une composante normative de leurs travaux, ce qui est une singularité de leur discipline, car cette distinction n'a pas de répondant exact dans les autres sciences sociales. Elle a fortement évolué au cours du temps et les différentes manières de la concevoir aujourd'hui en reflètent l'histoire. On se propose ici d'en retracer les origines et les premières formes, de l'économie politique classique anglaise de la première moitié du XIXe siècle jusqu'à l'apparition de l'économie du bien-être dans la première moitié du XXe siècle. Ce parcours séquentiel vise aussi à identifier les positions les plus représentatives et les arguments invoqués pour les soutenir, en préparant ainsi une discussion qui serait moins historique et plus strictement conceptuelle. (shrink)

This volume provides an overview of issues arising in work on the foundations of decision theory and social choice. The collection will be of particular value to researchers in economics with interests in utility or welfare, but also to any social scientist or philosopher interested in theories of rationality or group decision-making.

This is a systematic evaluation of the main arguments for and against the market as an instrument of social organization, balancing efficiency and justice. It links the distinctive approaches of philosophy and economics to this evaluation.

It has always been an important task of economics to assess individual and social welfare. The traditional approach has assumed that the measuring rod for welfare is the satisfaction of the individual’s given and unchanging preferences, but recent work in behavioural economics has called this into question by pointing out the inconsistencies and context-dependencies of human behaviour. When preferences are no longer consistent, we have to ask whether a different measure for individual welfare can, and should, be found. This book (...) goes beyond the level of preference and instead considers whether a hedonistic view of welfare represents a viable alternative, and what its normative implications are. Offering a welfare theory with stronger behavioural and evolutionary foundations, Binder follows a naturalistic methodology to examine the foundations of welfare, connecting the concept with a dynamic theory of preference learning, and providing a more realistic account of human behaviour. This book will be of interest to researchers and those working in the fields of welfare economics, behavioural and evolutionary economics. (shrink)

Thomas C. Leonard presents an intellectual history of the Progressive Era from the perspective of economists. It is hard to understate the influence this group had in developing Progressive ideas. Leonard brilliantly details how Progressive economists wielded enormous influence not only in spreading ideas about traditional economic concepts, but also ideas and theories that influenced political and civil liberties. For example, the Progressives gave us the social science professor, the scholar-activist, social worker, muckraking journalist, and expert government advisor. All of (...) these reform-vocations, according to Leonard, sought to replace the invisible hand of the market with the visible hand of the administrative state. In short, Leonard’s book is a must-read for everyone remotely interested in political economy. (shrink)

This paper discusses the nature of normative economics by distinguishing the alternative conceptions that economists have entertained in this respect. It attempts at connecting these conceptions with their philosophical sources, which essentially consist in variants of positivism and Weber's philosophy of values. The paper defends the claim that positive and normative economics differ from each other to the extent that the former does not, while the latter does, involve value judgments made by the theorist himself. This claim runs counter to (...) the Weberian thesis of value-freedom that is implicitly endorsed by a majority of today's normative economists. -/- . (shrink)

Benefit/cost analysis is a technique for evaluating programs, procedures, and actions; it is not a moral theory. There is significant controversy over the moral justification of benefit/cost analysis. When a procedure for evaluating social policy is challenged on moral grounds, defenders frequently seek a justification by construing the procedure as the practical embodiment of a correct moral theory. This has the apparent advantage of avoiding difficult empirical questions concerning such matters as the consequences of using the procedure. So, for example, (...) defenders of benefit/cost analysis are frequently tempted to argue that this procedure just is the calculation of moral Tightness – perhaps that what it means for an action to be morally right is just for it to have the best benefit-to-cost ratio given the accounts of “benefit” and “cost” that BCA employs. They suggest, in defense of BCA, that they have found the moral calculus – Bentham's “unabashed arithmetic of morals.” To defend BCA in this manner is to commit oneself to one member of a family of moral theories and, also, to the view that if a procedure is the direct implementation of a correct moral theory, then it is a justified procedure. Neither of these commitments is desirable, and so the temptation to justify BCA by direct appeal to a B/C moral theory should be resisted; it constitutes an unwarranted short cut to moral foundations – in this case, an unsound foundation. Critics of BCA are quick to point out the flaws of B/C moral theories, and to conclude that these undermine the justification of BCA. But the failure to justify BCA by a direct appeal to B/C moral theory does not show that the technique is unjustified. There is hope for BCA, even if it does not lie with B/C moral theory. (shrink)

Several areas of welfare economics seek to evaluate states of affairs as a function of interpersonally comparable individual utilities. The aim is to map each state of affairs onto a vector of individual utilities, and then to produce an ordering of these vectors that can be represented by a mathematical function assigning a real number to each. When this approach is used in intertemporal contexts, a central theoretical question concerns the evaluative weight to be applied to utility coming at different (...) times. This question concerns the rate of pure time preference, which is one key determinant of the social discount rate. This article argues that the standard philosophical account of pure time preference is mistaken, because it ascribes to economists a methodological commitment they need not, and often do not, accept. This in turn undercuts the most common philosophical objection to pure time preference, which traces at least to Rawls’s A Theory of Justice. The article then evaluates three further objections to pure time preference, concluding that it might still be defensible under certain circumstances. The article closes by articulating a final argument that is suggested by the “Social, Economic and Ethical Concepts and Methods” chapter of the most recent Intergovernmental Panel on Climate Change report. If this further argument is sound, it would constitute a decisive objection to pure time preference as it currently figures in much intertemporal welfare economics. (shrink)

This paper discusses the validity of nudges to tackle time-inconsistent behaviours. I show that libertarian paternalism is grounded on a peculiar model of personal identity, and that the argument according to which nudges may improve one’s self-assessed well-being can be seriously questioned. I show that time inconsistencies do not necessarily reveal that the decision maker is irrational: they can also be the result of discounting over the degree of psychological connectedness between our successive selves rather than over time. Time inconsistency (...) can call for paternalism if and only if we accept that an individual is characterised by stable “true” preferences over time-dependent outcomes, and that she is rationally required to make time-consistent choices. This model is descriptively and normatively questionable. I then argue that behavioural findings may still justify paternalistic interventions, but on a non-welfarist basis. (shrink)

In this paper, we examine different forms of altruism. We commence by analysing the definition and, after clarifying its conditions for altruism, we argue that it is not in with everyday linguistic usage of the term. We therefore consider a definition, which we likewise refine, and argue that it better reflects ordinary language use. Both behavioural and psychological approaches define altruism descriptively and thus fail to capture an important aspect of altruism, namely its normative component. Altruism, we argue, is a, (...) i.e. one which embodies both positive and normative components. We discuss and compare various formulations of this normative component. (shrink)

Le but de ce recueil est d’offrir des commentaires accessibles et introductifs aux textes classiques qu’ils accompagnent, en ouvrant des perspectives de discussion sur le thème du capitalisme. C’est en ce sens qu’Emmanuel Chaput lance le débat en commentant le texte de Pierre-Joseph Proudhon, « Qu’est-ce que la propriété ? ». Les textes de Karl Marx ne sont bien sûr pas laissés pour compte : Samuel-Élie Lesage s’engage fermement dans cette voie en discutant L’idéologie allemande de Karl Marx, Christiane Bailey (...) nous offre d’approcher différemment l’œuvre marxienne en abordant son traitement de la question animale dans des extraits du Manifeste du parti communiste et du Travail salarié et capital, et Mathieu Joffre-Lainé nous présente une analyse fine des questions proprement économiques du Capital. Abordant les alternatives au capitalisme dans la pensée de Léon Bourgeois, Éliot Litalien commente La Solidarité et Simon-Pierre Chevarie-Cossette s’attaque à l’analyse de l’Essai d’une philosophie de la solidarité. Enfin, en liant capitalisme, patriarcat et pouvoir politique, Tara Chanady propose une lecture du texte Du mariage et de l’amour de Emma Goldman. La conclusion de Marie-Eve Jalbert se situe dans une perspective contemporaine et critique en décortiquant la critique du socialisme avancée par Friedrich A. Hayek. (shrink)

In addition to his Noble Prize-winning work in economics, Milton Friedman produced some of the most influential philosophical work on the role of government in a free society. Despite his great influence, there remains a dearth of scholarship on Friedman’s social and political philosophy. This paper helps to fill this large void by providing a conceptual analysis of Friedman’s theory of freedom. In addition, I argue that a careful reading of his arguments for freedom ought to lead Friedman, and like-minded (...) liberals and libertarians, to give absolute priority to his negative income tax proposal. A substantial basic income furthers effective economic freedom (on Friedman’s own understanding), redeems his central claim that markets enable cooperation without coercion, and enables him to address his lifelong interlocutors by mitigating concerns for the ways in which economic dependence and inequality undermine both freedom and democratic legitimacy. (shrink)

The purpose of this paper is to examine the normative interpretation of the fast-and-frugal research program and in particular to contrast it with the normative reading of rational choice theory and behavioral economics. The ecological rationality of fast-and-frugal heuristics is admittedly a form of normative naturalism – it derives what agents “ought” to do from that which “is” ecologically rational – and the paper will examine how this differs from the normative rationality associated with rational choice theory. I will also (...) attempt to assess the relative adequacy of normative ecological rationality. (shrink)

Abstract: This paper examines Mark Blaug's position on the normative character of Paretian welfare economics: in general, and specifically with respect to his debate with Pieter Hennipman over this question during the 1990s. The paper also clarifies some of the confusions that emerged within the context of this debate, and closes by providing some additional arguments supporting Blaug's position that he himself did not provide.

We offer a concise introduction to the methodology of order-ethics and highlight how it connects aspects of economic theory and, in particular, game theory with traditional ethical considerations. The discussion is conducted along the lines of five basic propositions, which are used to characterize the methodological approach of order ethics.

This paper shows that implicit assumptions about the numeraire good in the Kaldor-Hicks efficiency-equity analysis involve a "same-yardstick" fallacy (a fallacy pointed out by Paul Samuelson in another context). These results have negative implications for cost-benefit analysis, the wealth-maximization approach to law and economics, and other parts of applied welfare economics--as well as for the whole vision of economics based on the "production and distribution of social wealth.".

John Broome claims that there is a sacrifice-free solution to climate change. He says this is a consequence of elementary economics. After explaining the economic argument in somewhat more detail than Broome, I show that the argument is unsound. A main problem with it stems from Derek Parfit's ‘nonidentity effect.’ But there is hope, since the nonidentity effect underwrites a more philosophical yet more plausible route to a sacrifice-free solution. So in the end I join Broome in asking economists and (...) policymakers to help make this a reality. (shrink)

Journal of Economic Methodology, Volume 19, Issue 2, Page 165-167, June 2012.