Economics, Academic Philosophy

On the Relationship Between Economics and Philosophy

I am teaching a course this term which is basically an examination of modern libertarian political philosophy and political theory  for PhD students in economics.  But, I am also teaching an advanced topics course in economic theory for PhD students this term.  In the first course, we have so far discussed the evolution of the argument for taming man’s passions, including his passions expressed within the realm of politics.  We used Albert Hirschman’s The Passions and the Interests: Political Arguments for Capitalism Before Its Triumph (Princeton, 1977) to serve as the primary text to discuss this intellectual evolution.  In the past I have used Scott Gordon’s Controlling the State (Harvard University Press, 2002), but that is a much more historical rather than philosophical treatment of the issue — though getting that history right is vital to the exercise.  In my advanced topics course, our preoccupation so far has been on rationality and equilibrium modeling, and we have been focusing our reading on a variety of text and journal articles.  This week we discussed a paper by Paul Anand from The Economic Journal, on the issue of intransitivity and rationality in choice.  As luck would have it, Mario Rizzo — who is teaching a course on behavioral economics this term at NYU — just posted about this issue, and why being rational might not always be rational.  Restating last night’s conversation, however, is not my intent with this post, but rather I’d like to perhaps stimulate a discussion on what actually is the relationship between economics and philosophy.  In the Anand paper, he argues explicitly that while economists have freely borrowed and engaged the literature in psychology over human choice (e.g., consider Daniel Kahneman’s Thinking, Fast and Slow), they have failed to engage as seriously the philosophical literature in decision theory and action theory (e.g., Donald Davidson).  Reading that claim made me think — what exactly should the relationship between economics and philosophy be in the modern academic discourse.

My disciplinary training is squarely within economics, though I minored in philosophy as an undergraduate, and I devoted a considerable amount of time as a graduate student studying the philosophy of science under the guidance of my dissertation adviser Don Lavoie.  And while I have written a number of articles on the method and methodology of economics, my primary research has been in applied political economy that has drawn on the disciplines of history, politics and sociology far more than pure philosophy.  At GMU, besides my position in economics, I am a faculty member of the Department of Philosophy, Honors College, Russian Studies, and Center for Global Studies, and I have taught in the School of Law, and served on many dissertations in the School of Public Policy.  In each of my intellectual forays into interdisciplinary work, economics provides the guiding framework (perhaps arrogantly so).  Sociology might provide interesting questions, but it is within the argumentative structure of economics that answers are to be found.  Historical data has no meaning until made intelligible by way of economic analysis.  Politics may be an interesting subject matter, but again it is economics that provides the analytical lens to make sense of political behavior from voting to revolutions.  And, in political theory I think the position staked out by my teacher James Buchanan is the one I am most comfortable with, and serves as the guiding framework for my teaching approach to the course mentioned above.

Within the Buchanan analytical framework the relationship between social philosophy and economics can be understood to reflect the distinction between choice over the rules, and choice within a given set of rules.  Social philosophy examines “what is a good game of life”, but that question cannot be operationalized unless we talk about “what are the good rules that define that game”.  In answering that question, however, we must always be mindful of the strategies that players will play once the rules are established.  In other words, we have to answer “How will the players play the game given those rules?”, and to do that we require the analytical apparatus of economics.  It is the tacking back and forth between “What are the good rules?” and “How will players play given those rules?” that we form a political economy answer to questions of social organization.  This is one of the reasons I am so intrigued by non-ideal theories of justice, as opposed to ideal theorizing — the non-ideal theorizing takes seriously the constraints of treating men as they really are, and seeks to find the pattern of institutions that will allow us to live better together.  In short, it represents philosophy disciplined by economics in order to produce better philosophy.

That is one possible relationship between economics and philosophy in the context of political theory.

On the other hand, there is also the disciplining role of philosophical discourse in the context of economics.  Methodological discussions and the questions of philosophy of science should not just be the peculiar interests of some practicing economists, but should occupy the attention of all economists at least twice in their careers — at the beginning so they can make an informed choice over what sort of economics they want to do, and at the end of their careers as they reflect back on the success or failure of their research endeavors.  Ultimately, methodology matters because it determines not only what one considers interesting questions to pursue, but perhaps more importantly what are acceptable answers to those questions.

How do professional philosophers see the relationship between economics and philosophy?  Is Anand correct that economists could learn as much, if not more, from action theorists as from psychologists on the nature of human choice?  Is Buchanan right that philosophical inquiry into the ‘good society’ must always be tempered by a discussion of self-interest with guile and thus the possibility of strategic opportunism?

  • Anonymous

    Peter, I yield to no one in my disgust at the general ignorance (and self-satisfied ignorance at that) my colleagues in general have for economics. I think perhaps philosophers have more to learn from economists than vice versa. But the temptation to engage in normative thought is endemic, perhaps irresistible, and there it seems economists (not just economists) might benefit from both philosophical discipline and method, and discourse.

    • I actually didn’t communicate my position quite accurately.  I think a large part of modern economics got derailed precisely because it forgot its roots in philosophy — not only the moral philosophy of Smith and Hume, but at an even more fundamental level concerning the nature of critical reasoning — and the confusion that emerged when formalism was mistaken for argumentative rigor.  The Coddington piece from the British Journal makes the important distinction between syntactic clarity and semantic clarity, and the problem with formalism in economics.  So I personally think that philosophy has a lot to offer economics — but I wonder sometimes if philosophers themselves haven’t also fallen prey to the same formalistic delusion as economists.

      • Anonymous

        Peter, my sense is that the blind attraction to formalism is there in spots, but perhaps in some times and at some spots more than others. In the early 90’s, I recall, there was among some ethicists the “hope” that rational choice theory would supplant the rest of ethical theorizing as useless and pointless. I haven’t heard anybody voice that thought for a long time. Maybe there are still people who think that. Mostly not among ethicists, I’d guess, though there are certainly philosophers who think: if it can’t be formalized, it’s not philosophy. I’d guess they are at this point a fairly small minority, though. 

      • Greg Ransom

        A better case  an be made that the philosophical tradition as much as anything inspired modern economics to re-create itself into a pathological non-science or fake science, e.g. the explicitly articulated attempt by Schumpeter & Samuelson to make economics into “science” upon the false image of “science” derived from Mach’s positivism and Bridgeman’s operationalism, or, equally, the explicitly articulated attempt by Friedman and Lipsey to make economics into a “science” on upon the false image of “science” derived from Baconian statistical “empiricism” and instrumentalism, or, equally, the explicitly articulated attempt of JS Mill and many others to make economics into a “science” upon the false image of “science” derived from the false nomological deductive conception of science and knowledge, or, equally, the legacy of the formalist Hilbert and Vienna Circle programs which provided the background for much of the explanatory misuses of mathematics and axiomatization in the tradition of Wald, Arrow, and countless other math economists, or .. well I could go on to say more about the scientistic philosophical grounds of programs inspiring much of early econometrics or the explanatory patterns of Keynesian macroeconomics, but I’ll stop.

        All of these derived from married set of fallacies — (1) the false justificationist model of knowledge debunked and replaced by Wittgenstein, Kuhn, Popper and Hayek, and (2) the false & scientistic 2 or 3 co-varying linear “law” model of science totemized by the nomological deductive model or statistical inductivist or decision theory variants, a model exploded by advancing understanding of non-linear phenomena characterized by a sensitivity of initial conditions, by the example of Darwinian biology, and by the work of Thomas Kuhn.

        Peter ends by saying, “I wonder sometimes if philosophers themselves haven’t also fallen prey to the same formalistic delusion as economists.”

        This is a variant of the argument that philosopher of science Larry Wright makes in various papers and book, and of course it stands at the center of Wittgenstein’s later work, and it can also be derived from Kuhn’s critique of the formalist project in the philosophy of science.

        Sociology and economic self interest can tell us much about why the formalist delusion has such staying power within the institutional incentive system of the modern university.

        • Anonymous

          Hi Greg,
          It seems that Mises, Hayek and Rothbard come to economic reasoning via different routes. Mises has his neo-Kantian apriorism. Hayek, and please correct me here if I am off, was influenced by Wieser and incorporates Popperian falsificationism. And Rothbard, arrives at what are essentially Misesian axioms via Aristotle and ‘general wide observation’.

          I know you are a fan of examples to flush out issues. So I will ask you if Hayek’s approach to e.g. the economic calculation problem then differs in kind to Mises?  If so, what role, if any, does Popper’s falsification play here? Or does Hayek merely build on Mises by incorporating the ‘knowledge problem’ angle?

          How exactly does Popper alter the Austrian framework for Hayek?

          • Greg Ransom

            Hayek actually managed to get Popper to concede that the example of Darwinian biology and other essentially complex sciences offered a falsification of Popper’s own falsificationist criterion of science.  Hayek was not a falsificationist.

            Hayek points out that economics begins with a problem raising empirical problem in our experience, and the key explanatory elements in the science are contingent and causal, e.g. learning in the context of changing local conditions and relative prices, and the background of learnt negative rules, e.g. of property and honest dealing, etc.

            What Popper did for Hayek was to give him a better grip on the fallacies of the positivist program and deeper insight into the false picture of science that dominated the Viennese mind.  Eventually, under the influence of his own work, and that of his cousin Wittgenstein, Hayek came to completely abandon the deductive model and ideal as an image of “scientific” explanation.

            Note well that Hayek was a long way down this road already by the time he read Popper — Hayek’s first intellectual project was a refutation of Machian positivism, work which became Hayek’s landmark re-casting of global brain science.

            The big difference with Mises is simply getting overall science / explanatory strategy right — removing the pathology and articulating the empirical problems and causal elements that were buried in Mises beneath various false pictures of knowledge Mises and German thought had inherited from the justificationalist tradition in philosophy.

            Mises’ neo-Kantianism doesn’t come up much in his paper on collectivist economic planning — Hayek’s contribution is to flesh out almost every dimension of Mises’ argument, finally placing it within a re-imagined conception of knowledge and its relation to minds and social processes.

          • Damien S.

            Popper later recanted that concession about ‘Darwinism’.

          • Greg Ransom

            I think you are confused here.

            See Popper’s autobiography and his later writings on Darwinian biology — he recants his earlier false views on Darwinian biology.

            It’s pretty clear that Popper was outside his domain of competence when writing about Darwinian biology — his early remarks on Darwinian biology simply don’t properly characterize the nature of the explanatory strategy or the empirical problems addressed.

            But also remember that the modern neo-Darwinian synthesis was just being formed when Popper wrote his first book on “science” and that on the Continent , e.g. in France & Germany, Darwinian biology was not well understood or accepted till well after the end of WWII.  In France and Germany non-Darwinian biological traditions swamped the sort of neo-Darwinian thinking that was rising in Britain and especially America.  And the picture of the science “Darwinian evolution” held by Germans and the French was saturated with conceptions that play no role in the modern neo-Darwinian synthesis.

          • Damien S.

            I’m no expert on Popper, but I’m guessing three phases: early stage of saying whatever about Darwin; declaring it a metaphysical research program in 1976 (Unended Quest), perhaps under Hayek’s infuence;  and later saying “Nevertheless, I have changed my mind about the testability and logical
            status of the theory of natural selection; and I am glad to have an
            opportunity to make a recantation… The theory of natural selection may be so formulated that it is far from
            tautological. In this case it is not only testable, but it turns out to
            be not strictly universally true.”


          • Greg Ransom

            The bottom line is that Popper’s understanding of Darwinian biology as a science is a mess, and his floundering when it came accounting for the complex sciences as science was indicative of a failed picture of science, a failure brought to Popper’s attention by Hayek, e.g. in Hayek’s “The Theory of Complex Phenomena”, a paper written in honor of Popper.

            The sentential / nomological deductive model of “scientific” knowledge falling out of the Mill + Frege + Mach program exemplified by Carnap and taken up in new “non-positivist” form by Popper simply isn’t a good picture of science.

          • Anonymous

            Thanks Greg. Awesome reply.

            Ok. Hayek appreciates Popper’s criticism of the Viennese positivists. But Hayek is not satisfied with Popper’s reorientation on falsificationist grounds.

            Popper himself even backtracks on Darwinian biology (doesn’t he lecture on the topic at some point?).  There can be valid science not open to falsification; is this exemplified by the concept of genetic drift ? Did GD occur to scientists of Popper’s day?

            I’ve got questions. Pardon me if I get redundant. Back to Hayek. When you say he rejects the deductive model all together– are you referring to all science or merely the physical “natural” sciences?  In other words, does Hayek still accept the deductive process as Mises put it? 

            Of course you go on to reply that Hayek takes all the good he perceives in Mises’, builds on it, and even “re-imagines” it on more solid knowledge basis. You mention that Mises had a false picture of science. This is a sticking point and one of huge controversy among Austrians, am I right?

            There are a dozen or so Austrians at the Mises Institute that claim it was Hayek that disoriented economics by rejecting the deductive aprioristic stance. This is why Hayek never really comes out and says that econ calculation is impossible under socialism; rather, Hayek contends it is merely difficult, near impossible, given the current state of technology and the empirical (practical) knowledge problem.

            You have eminent economists like Steve Horwitz that assert that Hayek and Mises are not really that different.  Then there is Prof. Boettke, of course. Where does he stand on this?

            Do you have further work that draws out the distinctions between Hayek and Mises concerning knowledge, and what you mean by “various false pictures of knowledge Mises and German thought had inherited from the justificationalist tradition in philosophy.”? 

            I say this as someone that started reading Hayek– but as soon as I followed his citations to Mises, I found the latter more solid because of the deductive process.

            Thanks again!

          • Anonymous

            Now I read this from economics prof Lawrence H. White: “While sharing the subjectivist and methodological dualist positions of Menger and Mises, Hayek diverges from them on matters of epistemology. In particular, Hayek has distanced himself from Mises’ apriorism by accepting the philosopher of science Karl Popper’s principle that the hallmark of any scientific theory is its openness to empirical falsification.”

          • Anonymous

            reposted different spot

  • Aeon Skoble

    “How do professional philosophers see the relationship between economics and philosophy?”
    Well, two sorts of answers: one answer is “it’s something we can ignore when it tells us things that are contrary to our intutions about justice” – it’s sadly common.  The better answer is: you cannot do good work in political philosophy without at least a little understanding of economics.  Another way to put that might be that thinking about institutions and incentives is indispensible to how we talk about rights, liberty, government, authority, etc.  It is especially indispensible when philosophical arguments about, e.g., rights lead to the sorts of objections this blog is addressing.   A little EWOT goes a long way.

    • Kevin Vallier

      I think philosophers will differ on the relevant of economics because they differ over whether normative principles depend for their validity on how human beings function and make choices or on how institutions promote good outcomes. Some philosophers think philosophy has a monopoly on determining what morality requires at the most abstract level and that economics is simply “downstream,” telling us how to apply these generic principles. 

      In my view, however, things are considerably more complicated than that. Facts about how humans function and reason, along with facts about how institutions function, can not only help us choose among normative principles according to how well they help us solve real problems but actually constrain whether a moral principle is plausible at all. For someone with an internalist conception of reasons for action, I see our reasons and thus our moral principles as tightly bound up with our ideas and value commitments such that contingent features of our psychologies and institutions will make a big difference as to the reasons we have an endorse. So on my view, economics makes a gigantic different in moral philosophy because it not only helps us to select among abstract moral principles but helps us to rule out some principles and formulate others. And of course, economics is crucial for applying moral principles we already take to be valid.

      • Aeon Skoble

        Yeah, I don’t think we disagree here.   Naturally I think econ needs philosophy, but I feel more comfortable scolding my own tribe, and we definitely need econ.  I’m almost to the point where I want to say that if you are not in tune with some basic econ stuff, like seen-vs-unseen or unintended consequences, your political phil runs the risk of being the stuff of fantasy novels.  Let’s say you want to save the elephants- it’s simply foolish to ignore what econ tells us about optimal ways to do that.  (But sure, you need philoosphy to know whether this is a good goal in the first place.)

  • Roger Koppl

    Don’t forget epistemology!  Economists and (social) epistemologists have a lot to learn from one another.  Alvin Goldman has drawn on economic concepts and models.  In general, epistemological naturalism naturally blends into economics.  I should mention Shackle’s Epistemics and Economics, Chapter 12 of the General Theory, and Hayek’s knowledge papers.  Some philosophers are even doing experimental studies relating to epistemology:

  • Anonymous

    This is a follow-up to Aeon’s post. Many political philosophers remain dogmatically ignorant of the EWOT. To make a good argument for institutional reform you need to do comparative institutional evaluation, which requires doing social science, and this often involves doing economics. See my blog post Comparative Institutional Evaluation or How Not to do Political Philosophy.

    Daniel Shapiro

    • M Lister

      many political philosophers remain dogmatically ignorant of the EWOT

      Exercise with Oxygen Therapy?  I’ll admit that most are ignorant of that.  That’s what came up as the first 15 or so google results for me, so maybe lots of people are ignorant about what you mean. 

      • Aeon Skoble

        The Economic Way of Thinking

      • It would be if people were allowed to directly allocate their taxes according to their preferences.

  • Greg Ransom

    Wittgenstein & Popper were on the right track — philosophy works out the hard problems when science or everyday thinking crashes into a brick wall or gets tied in conceptual knots.
    A great example: the very productive work of the philosophers of biology, e.g. David Hull, Alex Rosenberg, Elliott Sober, who have made tremendous progress working out ideas about the unit of selection, the grounds for laying out hereditary trees, problems with tautological uses of the “fitness” notion, and on and on and on. Stuff that has gone straight into the hard core of biological science.
    And note well — the self interest of biologists has left almost no biologists working on the core problem of working out the global explanatory project of Darwinian natural selection, e.g. making sense of the relation between the pure mathematics of population genetics and the explanation of actual problem raising biological phenomena in the real world.
    Biologists themselves once set up a committee to address this problem.
    Ernst Mayr was perhaps the last prominent biologist working in this area.
    If the philosophy of economics was as institutionally established as the philosophy of biology, you would see a vibrant community working on like problems in economics. As it is, there are few working on these issues — in part because the unhealthy state of economic science itself channels philosophers to work on unproductive problems which start from the same pathological assumptions as the economists begin from — rather than from a perspective which focuses a spotlight on these pathologies, and works on putting together a better understanding of the global problem situation / causal empirical solution set.
    But you still see some good work, taking for granted the pathological problem situation assumed by mainstream economics, e.g. the work of Hausman and Rosenberg.

  • John Thrasher

    I think the economic familiarity is absolutely essential in ethics, political philosophy, and decision theory. I also think that the economic way of thinking is essential in all of philosophy, especially recognizing the distinction between the average and the margin. I also think that the economic focus on subjectivism as a methodological commitment is a potential antidote to some philosophical confusions.

    That said, I think the most interesting connection between economics and philosophy, where they both need each other is in understanding normative theories of rationality, sometimes called “practical rationality” by philosophers. Arguably, economics has been in crisis here for some time now. The work of Vernon Smith, Ostrom, and many of the behavioral economists have undermined, to many, the theoretical usefulness of the standard rational choice model that serves as the basis for modern neo-classical theory and game theory.  Philosophers, however, are mired in theoretical cal-de-sacs arguing about stranger and stranger accounts of practical rationality that are even more disconnected from behavioral data. 

    So, I think there is real potential for overlap between the two disciplines on this methodological issue that is fundamental to both disciplines. Furthermore, there is a philosophical question about the role of modeling in economics and how those models should be understood. Ryan Muldoon is a philosopher who is both concerned with modeling and with integrating a sophisticated appreciation for economic tools and concerns into his political philosophy, especially in this paper

  • Anonymous

    On my bepress website (which I haven’t updated in a while) I say quite directly that I believe philosophy is more useful than mathematics to economics as it ought to be. But most economists aren’t interested because (1) they are already tooled up in math and (2) because they want to be scientists in the sense of the natural sciences. This is closely related to the increased money and prestige they get. Also the State finds it useful to clothe itself in the mantle of Science to validate its activities. I could go on.

    Nevertheless, there are many areas in which economists have put themselves in methodological straightjackets that prevent them from saying important things. What is more: many economists are unaware of this and think that they are simply facing challenging technical problems.

    Even when economists want to say somehing nice about a philosopher they often  mess it up. An example is the comment George Akerlof maked about the excellent new book by Daniel Hausman, Preference, Value, Choice and Welfare. Akerlof says, in effect,  that Hausman explains the current practice of economists. What so bad about this? Well, the book is much more than that; it is a strong criticism of what economists do. To many economists, if there is a role for philosophers, it is simply describing what brilliant economists do — sort of a positive philosophy of science. Therefore, in that sense, if there is any learning, it is one-way from economics to philosophy, rarely vice versa.

    I have no optimism that the tide will turn very soon. But the tide always turns. My prediction has been since the mid-1990s that economics will break apart into several disciplines in the 21st century. Maybe one of those will be better than what we have now.

  • Anonymous

    How do you like my English-language innovation: “maked” instead of “made” above?

  • Roger Koppl

    Later, Akerlof “bade” a cake in the oven!  Mario:  What will be lost if economics breaks apart?  The economic point of view is indigenous to *economics*.  What happens to that POV and to economic logic if economics splinters?

  •  Everyone philosophises: that is part of
    what it is to be human. Economists who deprecate philosophy still philosophise;
    they just do it badly. There is no way of separating philosophy from science (either
    natural or social science). What is philosophy at one time may become science
    at a later time, when theory is further developed. And the consideration of
    philosophical questions can open up avenues of worthwhile scientific research
    which otherwise remain hidden, just as a dismissal of philosophical questions
    can leave a scientist blinkered.


    Everyone thinks economically: that, too, is
    part of what it is to be human. Philosophers who are ignorant of economics (as
    most of them seem to be, some of them apparently on principle), still do
    economics; they just do it badly. Philosophy cannot be done well if it is done
    in ignorance of the relevant sciences. Many philosophers’ intuitions, which set
    the limits for their research, have actually been refuted by one science or
    another, often economics.


    The obvious overlap between philosophy and
    economics is rational choice theory. However, I think both philosophers and
    economists have got themselves into a mess in that area. I was surprised to
    hear that Anand thinks that economists might benefit from reading Donald
    Davidson. This is not just because I have a low opinion of Davidson, but
    because Davidson is just another Humean positivist, and Human positivism has
    been, and still is, rife in economics – and that, from my point of view, is one
    of the problems we need to address.


    I hope it is not bad manners to plug my own
    stuff, but I have a forthcoming paper in THEORIA called ‘Popper, Rationality
    and the Possibility of Social Science’ which is concerned with the explanation
    of human action, and which involves (though often without stating explicitly)
    severe criticism of several tenets of contemporary orthodoxy in both economics
    and philosophy. It is available here:



    In general, I agree that philosophers and
    economists can and should learn more from each other. In a way, this is
    obvious, since they are often trying to solve the same or overlapping or
    otherwise-related problems. There are philosophers and economists who realise
    this. But too many seem to be blinkered to what might be going on in the other
    discipline. I am sure the explanation for this somewhat surprising state of
    affairs will be complex.

  • “Sociology might provide interesting questions, but it is within the argumentative structure of economics that answers are to be found. Historical data has no meaning until made intelligible by way of economic analysis. Politics may be an interesting subject matter, but again it is economics that provides the analytical lens to make sense of political behavior from voting to revolutions.”

    I call premises like this “economic reductionism”, because it overwhelmingly puffs up the explanatory power of the field of economics, to the point of overriding empirical data in any other field (indeed, effectively *replacing* sociology and psychology, and having veto power over just about any historical data). It also does come off rather arrogant and self-serving for economists to make such claims on behalf of their own field.

    Perhaps it’s actually the case that economics has rather limited explanatory power, and that there is something wrong with the very idea of “*the* analytical lens”. Many “analytical lens” and “levels of analysis” have their uses, and none of them can claim all-encompassing explanatory power of the world. That’s part of why they *are* lens. If one thinks “economics” can sufficiently explain social phenomena, we’ve gone down the wrong track.     

  • Certainly I agree that philosophers have much to learn from economists. So much so, in fact, that a philosopher can often score easy points just by taking something that economists find obvious and restating in philosophical language for a different audience! 

    But of course, I think economists can learn something from philosophers too. Your points about decision theory and the philosophy of science are correct. But I think that an even more basic thing that economists can learn – especially economists with an interest in public policy arguments – is how work with (or around) noramative claims.

    For instance, I’ve been listening to Rothbard’s Man, Economy, and State on my commute for a while now. And, to a philosopher’s ears, much of the material (especially in, say, the end of chapter 2) is pretty jarring. How could someone think that these kinds of normative assertions about property acquisition could be made without much more argumentative support, and without much more clarity regarding the meaning of terms?

    Sometimes, it’s worse. You wouldn’t believe how many economists think that consqeuentialism is somehow a more “naturalistic” and hence “rational” moral philosophy than deontology, because it’s about stuff we can see – consequences – rather than “mysterious” duties and rights. But no philosopher would take this seriously.

    It’s not so much that I think that economists should learn from philosophers the *correct views* on normative issues. The lesson is a methodological one, not a substantive one. Economists can learn from philosophers by observing how philosophers approach normative arguments. Philosophers will often draw the wrong conclusions despite their methodological rigor, precisely because they lack the kind of insights that economists are privy to. But their methodology is worth paying attention too even still.

  • I think at some point both economics and philosophy need law, lawyers and law enforcement … and we may be nearing that point.  

    If it wasn’t for Lincoln the lawyer and his enforcement of the Constitution’s slave tax provisions, assuming we even had something called the “United States” today, we’d still be debating about whether slaves should have a property right in their labor … and whether the value of a slave’s labor can be separated from the value of a plantation owner’s real estate.

    • A tax is a forced extraction. If one is allowed to retain any degree of discretionary power after being taxed, I would argue s/he hasn’t been taxed. 

      Also, what’s so special about 1833?

      • Just got this today and thought it answered your question better.

        “A Theory of the Taxing Power” by Cooter and Siegel:

        • Sorry, I just meant to call your attention to the abstract paragraph about the difference between a real tax and regulatory tax. 

          But I see your point about people not having “any sense of economic reality” under the current tax system, which employs a particularly subtle form of currency-regulating income tax. 

          Actually, this may sound odd, but under the current system, taxes are not even levied to raise revenue, but mostly to force us to regard our (otherwise worthless) fiat currency as having “value.” (Somehow our minds view our debt-based currency as valuable because we believe the IRS will successfully confiscate the wealth and produce of others at some future date.) 

          Anyway, once they have us using this kind of income-tax-regulated currency, the gov’t has almost unlimited discretionary power to spend money into existence in any way it deems “necessary.”

          In other words, the real, central purpose of the current system is to eliminate the need to go to “the people” for tax revenue, so it’s quite understandable that you feel you have no control over where your tax dollars go. You’re not supposed to have a choice, or even the right to complain about “taxation without representation.”

  • I’m afraid I joined this discussion hella late, and for that I am truly sorry. It is a good question, Peter. My area is philosophy (philosophy of education, but also political philosophy). One thing I’ve always been concerned about is that for all the talk among economists, behavioral economists, and psychologists, about whether ‘rational choice theory’ (etc.) is truly representative of how humans are, they all seem to assume that, on any issue, we all know what it means to be rational. (“Rational choice theorists must be wrong because the rational solution in situation x is y, and since people just as often do z, rational choice theory cannot be correct.”)

    Now, I am not arguing that we are homo economici – rational maximizers first and foremost (and strangely, I don’t know of many libertarian economists who went to that extreme either, so I smell a strawman). But the above example quote (which I’ve heard and read many times) ASSUMES that there is one and only one strategy per situation that can be called rational… and no one seems to question that assumption. That is one area I think economics can benefit from philosophy, because in order to know whether humans are best described as rational actors or some other such way, we NEED to articulate what we mean by ‘rational’ in the first place. 

    Without belaboring the point, I hear a lot made about the supposed irrationality of humans’ tendency toward loss aversion. Apparently, the fact that humans will often pay less to acquire something than they will pay to hold onto something is irrational. But that depends on an ASSUMPTION about rationality – that the rational thing would be for us to value acquisition of x and loss of x the same. But couldn’t it be argued also that loss aversion is rational when we consider that once we have a thing, we plan events on the assumption that we have that thing and value consistency (maintaining) over novelty (acquiring)? (My point, of course, is that it is at least possible to justify more than one strategy as rational, and maybe what is rational just depends on the personal characteristics and circumstances of the actor.) 

    So, to me, talk about what is or is not a rational strategy often comes with some pretty big assumptions, and that economics could benefit from getting a bit more philosophical about what we mean when we talk about rationality. 

  • Promissory note toward a future post.  I’ve been the lone political theorist among philosophers here; now I’ll have to do double-duty as the lone political scientist surrounded by the formalist-individualist alliance of economists and philosophers!  Pete Boettke is probably my favorite economic imperialist, but doesn’t make him any more right than other economic imperialists about the comparative explanatory value of economics and the other social sciences.  

    The core of law concerns individual-level arm’s-length transactions, usually over tradeables and when not, usually over commensurables.  So law & economics has been an incredibly fruitful and productive tool; economics brings a lot to bear on the study of law.

    The same is not likely to be true of:
    -areas where motivations center on status and relative or comparative measures, where zero- and negative-sum interactions are common, where pride, vanity, and glory make a has of people’s willingness to seek absolute advantage through mutual gain
    -areas where power and domination are central motivations; areas where the strategic logic of signalling means that there’s an active imperative to engage in counter-interest behavior just to show that you can.  “Demand curves slope downward”– except when they don’t.
    -areas where ideas and idea formation, norms and norm formation, are centrally in play– and I mean where they matter to one’s empirical explanation, not to one’s normative evaluation.  Economics can explain the breakdown of the French public finance system before the Revolution; it can’t explain the revolutionary fervor of democracy and nationalism, or the way in which those ideas transformed all of Europe within a generation.  It takes beliefs as exogenously given; but what people believe, and when, and how intensely, is a massive part of social explanation in the long term.
    -areas where the interpretation of phenomena shapes what can be perceived as a good, an interest, a value.  Again, economics takes preferences as exogenous.  That can be useful locally-in-time-and-space, but is wildly false across long distances or timespans.  (A few Austrian economists admit that economics benefits from hermeneutic ways of thinking, but it’s certainly not common for devotees of the alleged EWOT.)
    -areas where microfoundations, even if available ex post as a just so story, are really subservient to macro-level historical or institutional phenomena.

    and indeed it hasn’t been true.  Economics has not transformed sociology, political science, anthropology, or history in nearly the way it has transformed law.  There’s been lots of productive exchange at the borders– but the presumption of economists that nothing has ever really been studied until it’s been studied by an economist hasn’t helped, and much of the work is ex-post just-so-story microfoundations of what the other disciplines already knew, rather than the kind of real original contribution associated with law & economics.

    Incentives matter, resources matter, information matters, choice under constraint matters.  You won’t find many social scientists who deny any of this (though the importance of information is under-recognized).  But those are not the only things that matter; some of the other things are better studied by other disciplines and poorly understood when one obsesses about their microfoundations; the interactions among the various things that matter for social explanation are sufficiently complicated that overvaluing the subset of them that have tractable math associated with them is often likely to be distorting; and the habit of our friends and colleagues in economics to look for their car keys only under the street lights and call it science doesn’t make it so!

    • This! Down with economic reductionism! 🙂

      • Jacob, 
           This is a very nice reply and its a shame that its buried in the comments section of a libertarian blog. 
           I’ve never quite understood “economic imperialism”. I understand what its supposed to be but I don’t think that it really exists. 
           Dense mathematics is by no means limited to economics. Its not so much the math (or statistics since the practice of social science statistics and what you might call pure mathematics are not the same thing) is different. Rather, economics (read: mainstream economics) privileges formal modelling to an extent that sociology and poli sci do not (I can’t really comment on anthro). For example, sociology has journals like Rationality and Society and Mathematical Sociology that are focused on building formal models but its not at the core of the discipline. Formal models seem more important in poli sci but not nearly as central as they are in economics. 
           I’m probably not explain this very well but there is a huge difference between the applied models that dominate sociology and poli sci (regression in all its flavors, factor analysis, fuzzy sets etc.) and the formal models that are central to economics (dynamic stochastic general equilibrium, ISLM in all its varieties etc. ). This is not to say that economics doesn’t include the more applied approach also but this is the big difference that I see in the field. 
           So if we critique economics by saying that it is relies to heavily on math we should be careful to differentiate between the more applied approach and the formal modelling approach. From what I can tell a lot of the critique of mathematics or empiricism in social science does not make this distinction. For example, the Mises-inspired critique of social science empiricism that you here around the libertarian blogosphere doesn’t generally make a distinction between applied approaches and formal modelling. In my mind this distinction is very important. 
          I hope that I am articulating this point in a sufficiently understandable manner. Its not that econ uses too much math or statistics; its that formal modelling is front and center in the discipline while its in the second row of poli sci and in the third row of soc. 

        • “For example, the Mises-inspired critique of social science empiricism
          that you here around the libertarian blogosphere doesn’t generally make a
          distinction between applied approaches and formal modelling.”

          The ironic part about this is that mathematics is just formal logic. And AE is just econ by formal logic writ large. So if one wants to criticize the use of mathematics in econ it seems one would have to toss out AE from the start.

  • Damien S.

    Off topic: since I’ve been a prolific enough poster that people remember my name and detect patterns in me, I figured it’d be courteous to announce my intention to disappear.  Time to triage how I spend my time again; “you are what you attend to”, after all.  I hope I’ve provoked some thought, and good luck with your endeavors.  I don’t swear to totally disappear, but I’ll take the site off my RSS feed, apart from replies to this comment.

    • Damien, that’s really too bad! I’ve enjoyed your contributions here, and will certainly miss them in the future. You’ve certainly provoked a lot of thought, and filled a useful role here in keeping us on our toes. Come back anytime.

      • Damien S.

        Aww.  Thank you!

    • Anonymous

      I’ve enjoyed our debates–good luck!

    • Damien S.

      Oh, I’ve never pumped my ‘blog’ here, so:  Or the dreamwidth version.  It has no theme, just me, though in practice that means part personal (but not too personal), part discussion, part dumps of links.

  • Anonymous

    Historical data has no meaning until made intelligible by way of economic analysis.

    Perhaps it’s just a hastily stated position but it does imply that only economics offers a rational basis for analysis and interpretation of history. I don’t believe that is true, and I suspect you don’t either — economics offer one form of rational analysis that allow us to organize historical data into a meaningful image allowing our understanding of the past and the present.

    I think one of the places where modern economics has lost value that philosophy offers can be found in the question of distribution. For modern economics distribution is essentially a residual that falls form the economic allocation. Economics can say a number of important things about allocative efficiency but it doesn’t seem to have much to say about distributive efficiency — I’m not even sure that term has any meaning within economics.

  • I can’t speak to much on the relationship between economics (the academic discipline of economics) and philosophy but I feel somewhat qualified to offer some commentary on the relationship between economics and other social sciences like poli sci and sociology (demography, antho and public health is somewhere in the mix too….) 
    First off, the central difference that I see between economics and other social sciences is the central importance of formal mathematical models. As as far as the relative importance of formal modelling descends as you move from economics to poli sci to soc. Granted, poli sci folks have developed formal models of voter behavior and sociologists have developed mathematical models of collective behavior (riots, social movements etc.) but formal modeling seems to be on the margins of both disciplines. Additionally, sociology and poli sci embrace a degree of methodological pluralism that is not found in economics. That is, there are few if any economists doing ethnography, focus groups, semi-structured interviews etc. 
    But as someone who did undergrad in one social science and has taken grad courses in at least three others I honestly don’t think the boundaries between the disciplines are that distinct when you peel away the layers . 50 years ago the disciplines probably looked very distinct and the difference between them obvious. Indeed, my perception suggests that the elderstatespersons in any of the disciplines are the ones who make the most of the disciplinary barriers while younger folks like me see the lines between the social sciences as much more vague. 
    I should also note that within any given social science there is drastic segmentation and fragmentation. 
    At the risk of sounding arrogant a lot of these discipline vs. discipline discussions seem to be based on a superficial understanding of each. 
    Until later read this: 

  • One of my professors — Kenneth Boulding — was fond a saying that there is no economics, only social science applied to economic questions.  He was a pioneer in what has come to be known as economic sociology, as well as complexity science.  Boulding was also one of the early John Bates Clark Award winners in economics.  But Boulding’s perspective as reflected in this comment was to define the disciplines by subject matter.  I think if you survey most economists they would define the disciplines by method and methodology — economics is shorthand for an approach to formal modeling and empirical testing.  I am much closer to Boulding in intellectual temperament (including his explicitly contra-Whig intellectual history of economics) than say Becker, but I do believe that the discipline of methodological individualism and rational choice analytics is very important to steer the course between free floating abstractions and momentary concretes.

    And just to address one of the issues Adam mentions above — the work that I have championed both in my own works, but also in the research of my students is a variant of the analytic narrative approach to political economy that seeks to combine the economists penchant for “thin descriptive theory” with the historian and anthropologists penchant for “dirty empirical work”.  The most common methodological combinations are thin/clean and thick/dirty, are not pursued in this approach, but instead an effort is made to transcend the traditional methodological straightjackets — so that is why the focus on field work, historical study, and also the topic choice in comparative historical political economy.  The rally call has been to “look out the window” and find situations where “history appears to defy what logic dictates” and then to render that situation intelligible in terms of purposes and plans of the relevant actors and explain the rise of institutional patterns as coping mechanisms for the context of choice properly specified.

    This is why I have called for “anarchism as a progressive research program in political economy” — it is not a libertarian project per se, but a social science/historical research program.  I explain this in more detail in a recent paper on “Austrian Economics and Anarchism” — and by the way I point all to the little article written many years ago by Ragu Rajan for the IMF on why political economists studying transitions and development must “Assume Anarchy” to make progress.

    If you keep this methodological agenda in mind, then neither the mixing of Austrian and public choice with the sociological writings of Berger and more recently Swedberg, or the institutional analysis of the Ostroms, or the cognitive science of Gigerenzer, let alone the topic choice of black markets in transitional economies, or prohibition, or criminal gangs, or pirates, or post war reconstructions should be a surprise.  As I often say, rational choice as if the choosers were human, and institutional analysis as if history mattered.  That is the form of analytic narrative that our group have been producing in various studies —- thin description in the aid of dirty empirical accounts.

    • Peter,
         Thank you for the informed reply. Academia constantly talks of the importance of interdisciplinary work and mixed methods approaches to complex problems but such approaches are rare. I believe very strongly in methdological pluralism and, as such, I do not decry economics for its employment of methodological individualism and rational choice. Rather, I think we should recognize the limits of any methodological orientation. 
         My personal embrace of methodological and disciplinary pluralism is one of the central reasons why I can’t call myself a “libertarian” even if I sympathize with a number of libertarian views. 
          Disciplinary boundaries exist, for good or ill, and I welcome any attempt to transcend them. The project of economic sociology (which seems to be sociologists asking economic questions not economists thinking sociological about economics) is a very promising and vibrant research area. Admittedly, its very fractional and no one has come along to effectively systematize the broad literature (though I am not sure such an endeavor is possible or even useful). I would probably trace the project back to Weber and Veblen though Boulding is an important figure. 
         You might enjoy the work of Harrison White and Ronald Burt. All apologies for the spelling errors in my previous post; lets just say I was quite distracted. 

  • Dittos. This blog entry, and particularly the comments, has basically made my head hurt and left me bewildered.

    Oh, well. I guess this one is just inside baseball and I should leave it to the pros.

  • Jason Brennan

    If we’re doing so-called “ideal theory,” economics tells us what the information constraints are. If we are doing non-ideal theory, economics tells us what the information and motivational constraints are.