ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

A+| A| A-

Economics and Philosophy: Interface and Agenda

The roots of economics go back to philosophy and the great economic thinkers have been rightly acclaimed as worldly philosophers. Yet economists pose the question: should economists pay attention to philosophers? If anything, it is economics that raises serious philosophic issues. Can economics, a subject of cognitive dissonance with no predictive power, claim to be a science? Economic laws are at best statements of tendencies which make it "a discipline, not a science", for it "deals with the ever changing and subtle forces of human nature". But economics does adhere to the scientific method and the criteria of falsifiability. Paradoxically, despite its deficiencies, economics has emerged as the imperial social science and economists function as imperial advisors to government and civil society. Economics and philosophy are both techniques of analysis rather than bodies of doctrine. The most fruitful approach to the interface between economics and philosophy is through the relevant subdisciplines of philosophy, viz, epistemology, religion, ethics, psychology as well as rhetoric.

Special articles

Economics and Philosophy: Interface and Agenda

The roots of economics go back to philosophy and the great economic thinkers have been rightly acclaimed as worldly philosophers. Yet economists pose the question: should economists pay attention to philosophers? If anything, it is economics that raises serious philosophic issues. Can economics, a subject of cognitive dissonance with no predictive power, claim to be a science? Economic laws are at best statements of tendencies which make it “a discipline, not a science”, for it “deals with the ever changing and subtle forces of human nature”. But economics does adhere to the scientific method and the criteria of falsifiability. Paradoxically, despite its deficiencies, economics has emerged as the imperial social science and economists function as imperial advisors to government and civil society. Economics and philosophy are both techniques of analysis rather than bodies of doctrine. The most fruitful approach to the interface between economics and philosophy is through the relevant subdisciplines of philosophy, viz, epistemology, religion, ethics, psychology as well as rhetoric.

ANAND CHANDAVARKAR

Prologue

T
here is an unsuspected commonality between philosophy and economics. Both disciplines are not amenable to an unambiguous monolithic definition. Thus Isaiah Berlin claimed that “there is no universally accepted answer to the question: What is the subject matter of philosophy?” [Berlin 2000: 24]. He sought to define philosophy with reference to its purpose. “It is to try to answer...questions of general importance for which no technique either empirical or logical can provide solutions” [Berlin and Jahanbegloo 1991: 136]. As against this, Karl Popper argued that “all life is problem solving and that “error correction is the most important method in technology and learning” [Popper 1999: 99-100].

There is, however, a more positive commonality between economics and philosophy as so well expressed by the two towering giants of modern economics and philosophy – Keynes and Wittgenstein. Keynes viewed economics as a technique of analysis even as Wittgenstein insisted that philosophy was an activity and not a body of doctrine [Magee 2001: 13]. In fact, for Keynes, “Philosophy came before economics; and the philosophy of ends came before the philosophy of means” [Skidelsky 1983: 133]. The dominant philosophical influence on Keynes was Moore’s Principia Ethica (1903) and Keynes essentially formulated the basic idea of his Treatise on Probability (1921) as a result of grappling with the applications of the Principia Ethica. Keynes’s exposure to philosophy through Moore is strikingly paralleled by the critically important influence of the distinguished Italian economist Piero Sraffa in bringing about “Wittgenstein’s momentous movement from his early position in Tractatus Logico-Philosophicus (1921) to the later Philosophical Investigations (1951)” [Sen 2003: 1240]. According to Wittgenstein, “the most important thing that Sraffa taught him was an anthropological way of seeing philosophical problems... While the Tractatus tries to see language in isolation from the social circumstances in which it is used, the Philosophical Investigations emphasises the conventions and rules that give the utterances particular meaning” [Sen 2003: 1242]. Likewise, Sen stresses that Sraffa’s economic contributions cannot in general be divorced from his philosophical understanding, particularly in altering and broadening the nature of the inquiries in mainstream economics. For instance, Sraffa found that the use of counterfactuals involved problems that purely observational propositions did not; there was a big methodological divide between factual descriptions and counterfactual magnitudes.

The very roots of modern economics go back to philosophy and the great economic thinkers (Adam Smith, Malthus, John Stuart Mill, Karl Marx, Henry George, and John Maynard Keynes) have been rightly acclaimed as the worldly philosophers [Heilbroner 1980]. Yet economists have posed the question: “should economists pay attention to philosophers? The answer is...not much…the economist qua economist, need not pay much attention to philosophy, good or bad, but the philosopher of science had better attention to economics, good and bad” [Gordon 1978: 728]. While this point of view may not necessarily be shared by the majority of economists, it merits attention as a core issue of the discourse between philosophers and economists. If anything it is economics that raises serious philosophic issues which have to be squarely faced by its practitioners. For instance, given the character of economics as preeminently a subject of cognitive dissonances, can it claim to be a science? If it is a science is it deductive or inductive, positive or normative? While its explanatory power is considerable, its predictive power is virtually nil. Paradoxically, despite its flaws as a science, economics has emerged as an imperial science among the social sciences. There is also the question whether given its character as a problem-solving and policy discipline, it confers a superior role to the economist as an expert advisor and source of value judgments in a functioning liberal democracy.

Economics: Cognitive Dissonance

There is not even an agreed definition of economics and economists are notorious for their perennial propensity to disagree on matters of analysis and policy, a situation without parallel in the physical sciences. The most representative definitions cover some but not all aspects of what economists study and prescribe, but there is no single comprehensive and logical definition of economics. According to Keynes’s classic definition in his preface to the Cambridge Economic Handbook Series (Nisbet and Co 1928): “Economics does not furnish a body of settled conclusions immediately applicable to policy. It is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions”. Keynes’s definition is eminently congruent with Karl Popper’s definition of scientific method – the generation and testing of hypotheses. Keynes’s definition, while scientific does not convey any notion of the subject matter of economics. It could well apply to any of the other social sciences. Alfred Marshall defined economics as “a study of men as they live and move and think in the ordinary business of life. But it concerns itself chiefly with those motives which affect, most powerfully and most steadily, man’s conduct in the business part of his life...the motive is supplied by a definite amount of money, and it is this definite and exact money measurement of the steadiest motives in business life, which has enabled economics far to outrun any other branch of the study of man...But economics cannot be compared with the exact physical sciences; for it deals with the ever changing and subtle forces of human nature” [Marshall 1920:14]. While Marshall’s balanced definition conveys the substance of economics, it omits its techniques of investigation. The celebrated definition of economics as a “science which studies human behaviour as a relation between given ends and scarce means which have alternative uses” captures the core concept of economics, namely, opportunity cost, i e, the price which one pays for foregone alternatives [Robbins 1962: 15]. But what happens to Robbins’s definition and to opportunity cost when there is sustained unemployment? It also overlooks the techniques of analysis employed by economists.

The cognitive dissonance manifested in the definitions of economics is paralleled in the subject matter of economics, which shows up the polar divergences between equally reputed economists on matters of substance and policy, despite the widespread “feeling that modern economics has established itself as a science enjoying a high degree of consensus” [Frey et al 1984: 985]. Jurg Niehans states: In fact, the economic doctrines taught in Nairobi, Sao Paulo, New Delhi, Tel Aviv, Geneva, Harvard, and Bowling Green State...have a large common core” [Niehans 1981:170]. This, however, is a pedagogic rather than an epistemic consensus. The results of a stratified random sample survey of 2,072 economists with respect to country, position, and occupation who were asked to respond to 27 propositions about economic problems are instructive [Frey et al 1984: 994]. The answers by the over 900 economists in five countries (the US, Germany, Austria, France, and Switzerland) showed the highest degree of consensus in respect of the market price system as an effective and desirable social-choice mechanism, as well as the most disagreement about normative propositions relating to income distribution and government spending and issues such as monetarism and supply-side economics. The major cause for dissension was the different views of economists, attributable to differences in history, politics, and culture. In general, it could not be confirmed that positive and micro-propositions showed a greater consensus than normative and macro-propositions.

The persistence of cognitive dissonance is glaring in both analysis and policy. For instance, the Nobel Prize for Economics in 1978 was shared between Arthur Lewis and Theodore Schultz for their contributions to development economics despite their diametrically opposite findings regarding the marginal productivity of peasant farmers in poor countries, which was zero according to Lewis and positive according to Schultz. This would be the figurative equivalent of dividing the Nobel Prize for Physics between Ptolemy and Copernicus. Similarly, the effects of globalisation have been hotly debated between Joseph Stiglitz (Nobel Laureate 2001), who argues its downside in his Globalisation and Its Discontents (2002), and Jagdish Bhagwati, who is equally articulate on its net benefits in his In Defence of Globalisation (2004). In fact, the acrimony of debate between economists on just about every issue recalls the memorable verdict of an eminent archaeologist, Mortimer Wheeler, that saw his own discipline “as more of a vendetta than a science”. This may well reflect the sheer complexity of economic phenomena and its pervasive anomalies and paradoxes, regularly featured in the Journal of Economic Perspectives, which pose a challenge to economists and philosophers alike. There are those who explain “why Economics Is Not yet a Science” [Eichner 1983]; that it is essentially a positive science (Milton Friedman, Nobel Laureate 1976); and that it can never be a value-free science (Gunnar Myrdal, Nobel Laureate 1974). The jury will always be out on Is There an Economic Consensus? [Brittan 1973]. Is the term “economic science” then an oxymoron?

Epistemology: Is Economics a Science?

Economics is regarded by its practitioners as the imperial social science, but its regalia will be seen to be ersatz if one examines its major epistemic features and contrasts them with those of the exact sciences.

To begin with, the basic concepts and magnitudes of economics, such as gross national product, balance of payments, and money supply are portmanteau concepts which are composites of disparate elements subject to errors and ambiguities, unlike the monistic concepts of the physical sciences, like atoms and molecules. Economic concepts need to be further disaggregated into nominal and real elements as well as stock and flow magnitudes. Similarly, economic variables can be classified into exogenous and endogenous, depending upon whether they are governed by influences external or internal to the economic system. Econometrics is classified into explanatory and instrumental variables. Some variables are akin to fuzzy sets, with differences of degree rather than of kind, as for instance, the concept of central bank independence, which may be de jure or de facto, constitutional or statutory, strategic or tactical, and of goals or instruments. The “money illusion”, which occurs because economic agents often overlook the real variables, distorts both behaviour and policy. More importantly, economic agents are cognitive and subject to autonomous and feedback influences. As Hicks (Nobel Laureate 1972) remarked, “there are few economic laws which can be regarded as all firmly based. Economics is a leading example of uncertain knowledge” [Hicks 1983: 2]. Economic laws are at best statements of tendencies, subject to “other things being equal”, and there are no identifiable determining influences, like gravitation in the movement of the tides, which also explains why economic policy cannot claim triumphs comparable to those of applied scientists or engineers. Economics lies on the edge of both science and history, since the economist is “concerned with the present and for the sake of the present with the past” (Ibid: 4). It is “specially concerned with the making of decisions and with the consequences that follow from the decisions” (Ibid: 5). This makes economics a prescriptive policy science, in addition to its descriptive and analytic functions, which has to cope with the phenomena of contemporaneous as well as sequential causality.

Paradoxically, while economics does not qualify as an exact science, it does adhere to the scientific method and the criteria of falsifiability, say, as defined by Karl Popper, whose formula of objective knowledge is used in practice by economists [Popper 1975: 145].

P1 → TS → EE → P2

Where P1 is the initial problem, TS the trial solution proposed, EE the process of error elimination applied to the trial solution, and P2 the resulting situation with new problems. This is essentially a feedback process, which is neither cyclical nor dialectical, and validates the objective theory of essentially conjectural knowledge. Unfortunately, falsifiability in economics is too uncritically associated with econometrics, and “no piece of research in economics seems now to be regarded as respectable unless it is decorated with least squares and confidence intervals” [Hicks 1983: xi-xii]. Econometrics, too, is often bedevilled by a failure to distinguish between statistical significance and economic significance [McCloskey and Ziliak 1996]. Likewise, falsifiability is as much a test of patterns and trends in economic events as embodied in history as is orthodox regression analysis of timeseries. The use of statistical techniques to quantify causality (Robert Engle and Clive Granger, Nobel Laureates 2003) poses the basic philosophic issue: Is it legitimate to quantify causality, which is an amalgam of varied factors, qualitative and quantitative? Economic decisions affect and are affected both by the sign as well as the magnitude of change. Also, causality can be contemporaneous or sequential.

Economics as a social science is afflicted with peculiar foibles which do not affect the exact sciences. Thus, George Stigler (Nobel Laureate 1982) observed that “there is a simply enormous amount of unprogressive publication, articles which certainly add nothing to the accumulation of rigorous theory or tested findings”, which he substantiates in the case of the literature on the kinked demand curve in oligopoly, where he found that “two-thirds at a minimum made no positive contribution to received knowledge” [Stigler 1982: 240]. This suggests that peer review in publication puts a premium on technical virtuosity as against realism and relevance. Even more disconcerting is the prevalence of interpersonal and institutional bias: “[Local faculty receive a perhaps inevitable preference in the student’s work and the ideological preferences of the professors are communicated in some degree to the students” (221)]. The obsessive preoccupation of economists with methodological issues has no counterpart among natural and physical scientists or even in the other social sciences.

Allied to the premium on technical virtuosity, is the “attractive Anglo-Saxon kind of unnecessary originality” [Myrdal 1965: 8] which now afflicts the economics profession as a whole, where the claims to originality also rest on a studied neglect of past contributions, as for instance, the Nobel laureate (1992) Gary Becker’s Treatise on the Family (1991), which takes no account of Philip Wicksted’s profound analysis of family behaviour in his Commonsense of Political Economy (1910). Likewise, the copious literature on credit rationing scarcely mentions its provenance in Keynes’s seminal concept of “the fringe of unsatisfied borrowers” in his Treatise on Money (Volume II). The cavalier attitude (“I have no interest in the history of my subject. What the dead had to say, when of value, has long since been absorbed” Hahn 1992: 165) is all too typical of the profession. In physics even Newton proudly confessed that he “stood on the shoulders of giants”, a sentiment totally bereft among economists thanks to the total omission of the history of economic thought in the syllabus for which no university seems willing to endow a chair. No wonder that in economics neophilia can pass muster as originality.

The power and utility of a scientific theory are often judged by its ability to explain and to make predictions that can then be tested by observation or experiment. Prediction, however, is not an imperative condition for scientific status if one takes the case of a major theory like evolution in biology, which fully explains evolution but is unable to predict the future course of evolution. On the other hand, Ptolemaic astronomy had predictive capability but lacked an adequate explanatory apparatus. How central is prediction to economics considering that prediction is not the only exercise with which economics is concerned as a descriptive, analytic, and prescriptive science? Prescription in a policy science like economics has to go well beyond pure prediction, because no prescription can be made without a careful assessment of all its implications, good and bad. Of course, some of economics is concerned with description and analysis without being explicitly involved with either prescription or prediction. For instance, in examining the trends of population or economic growth, the object of enquiry is researching actual facts without being directly concerned with prediction or prescription. Description does involve choice, but that does not make the act of description necessarily predictive or prescriptive [Sen 1980].

Economists are sharply divided on the centrality or even the relevance of predictability for economics theory. Thus, according to Milton Friedman, the worth of a theory “is to be judged by the precision, scope, and conformity with experience that it yields... The ultimate goal of a positive science is the development of a “theory” a hypothesis that yields valid and meaningful... predictions about phenomena not yet observed” [Friedman 1953: 3, 4, 7]. In stark contrast, Ronald Coase (Nobel Laureate 1991) argues that “the view that the worth of a theory is to be judged solely by the extent and accuracy of its predictions seems to me wrong... We are not interested simply in the accuracy of its predictions. A theory also serves as a base for thinking” [Coase 1982: 6]. Furthermore, Coase argues that “testable predictions are not all that matters. Realism in an assumption is needed if our theories are ever to help us understand why the system works in the way it does” (7). A more balanced and realistic assessment of the role of prediction in economics has been presented by Sen, who develops the theme that “not all of economics is concerned with predicting but the crucial role of prediction in economics can scarcely be denied” [Sen 1986: 4] and attempts to answer the following critical questions: Why are economic predictions so difficult? What techniques does economic theory use to cope with these difficulties?

The proverbial difficulties of making accurate economic predictions are aptly exemplified by the fact that to date no Nobel Prize has been awarded for the most predictive economic model even though the work of Lawrence Klein on the creation of econometric models and their application to the analysis of economic fluctuations and economic policies was recognised by the Nobel Committee in 1980. This is also borne out by the track record of major economic predictions like the failure to anticipate post-second world war inflation. The classic prediction of Milton Friedman that eventually the oil cartel will collapse has yet to materialise. Why are predictions more difficult in economics than in the natural and physical sciences? There are two specific sources of difficulties in making economic predictions:

(i) difficulties in predicting human behaviour and choice, which can be influenced by a complex collection of social, political, psychological, biological, and other factors (“the choice problem”), and (ii) difficulties in predicting the results of interactions of countless different entities encountering each other in a wide variety of ways (“the interaction problem”). The traditional techniques of dealing with complexities which involve a reductionist use of the concepts of equilibrium, rationality, and maximisation are not entirely realistic, and their “reductionist” usefulness may be outweighed by the extent to which they mislead and misdirect” [Sen 1982: 18]. Any economic theory that does not recognise the variations of social norms between societies and enterprises is unlikely to serve as a basis for economic predictions with an acceptable measure of success. The task of prediction must be seen as necessarily more modest than often conceived; it must be a matter of estimating possible variations of parameters that indicate the predicted values of outcomes within specifiable ranges, rather than predicting that the outcome will be a particular point. “However, the nature of economics leaves us with no other intellectually satisfactory options. The impressions of economic predictions have to go hand in hand with a precise recognition of these imprecisions” (Ibid: 20). There is also one overriding constraint on economic predictions arising from the nature of uncertainty defined as unique uninsurable risks in dynamic nonlinear systems. As Keynes famously remarked, “The inevitable never happens. It is the unexpected always” [Keynes 1982: 1117].

The discussion shows up the fundamental difference between economics and the physical sciences. In the physical sciences, the basic equations can generate their own “observations”, whereas in economic models the equations are derived empirically from the economic data. Likewise, weather forecasts have no effect on the weather, whereas economic forecasts often affect the economy and may sometimes be even self-fulfilling. The past is more directly relevant for economic prediction because of the influence of memory and learning than it is, say, for meteorological predictions, in which the influence of the past is largely confined to the currently observable variables.

Given the intrinsic limitations of economic predictions, is the obsession of economists with the predictive powers of their science justified, or is it a subliminal and none too subtle mimesis of the physical sciences? One may well ponder the reasoned scepticism of Ronald Coase, who boldly asserts: “Faced with a choice between a theory which predicts well but gives us little insight into how the system works and one which gives us this insight but predicts badly, I would choose the latter..would do the same” [Coase 1982: 6]. This approach rightly emphasises the priority of the explanatory power of economic theory, deriving from its relevance and realism, over its predictive properties in any research programme.

The ambiguities of economics lend credence to the memorable summation of economics as “a discipline not a science” [Hicks 1983: 365], a discipline, that has evoked starkly opposite reactions from eminent physicists and mathematical philosophers. Thus, Max Planck, the originator of quantum theory, remarked to Keynes that he had once thought of studying economics “but had found it too difficult” [Keynes 1972: 186], whereas Bertrand Russell intended to study economics but gave it up, as he found it too easy! This paradox is best explained by Keynes, a mathematician who contributed to both economics and philosophy:

The study of economics does not seem to require any specialised gifts of an unusually high order. Is it not, intellectually regarded, a very easy subject compared with the higher branches of philosophy and pure science? Yet good, or even competent, economists are the rarest of birds. An easy subject, at which very few excel! The paradox finds its explanation, perhaps, in that the master-economist must possess a rare combination of gifts. He must reach a high standard in several different directions and must combine talents not often found together. He must be mathematician, historian, statesman, philosopher – in some degree. He must understand symbols and speak in words. He must contemplate the particular in terms of the general, and touch abstract and concrete in the same flight of thought. He must study the present in the light of the past for the purposes of the future. No part of man’s nature or his institutions, must lie entirely outside his regard. He must be as aloof and incorruptible as an artist, yet sometimes as near the earth as a politician (1973-74).

However, Keynes’s explanation has to be suitably qualified, keeping in mind that since second world war, which witnessed the impressive mobilisation of economists in the war effort, economics has been transformed from a liberal arts discipline into a profession with a meaningful role for the competent – as distinct from the talented and the brilliant – rather like the humble dentist as Keynes himself recognised in another context.

Economics: The Imperial Social Science

Paradoxically, the dissonance of economics has not inhibited the steady enlargement of its intellectual domain to other fields of social inquiry such as: the economics of law, pioneered by Aaron Director, with Ronald Coase and Richard Posner; the “new” economic history, which combines economic theory and quantitative methods to explain economic and institutional change (Robert Fogel and Douglas North, Nobel Laureates 1993); the economic analysis of social structure and non-market behaviour, such as crime, hatred, racial discrimination, marriage, divorce, fertility, and the family (pioneered by Gary Becker); and the economic analysis of constitutional design, politics, and bureaucracy by James Buchanan (Nobel Laureate 1986), Gordon Tullock, and Anthony Downs, the founders of the “Public Choice” school. Economics has been therefore aptly christened the “Imperial Science” by George Stigler. But the label goes back much earlier, as pointed out by Harcourt in a characteristically clarion address “By social science imperialist...I mean that leading species of the large genus social scientists..the economists...the late 1970s are the age of economic imperialism” as well described by Lester Thurow [Harcourt 1979: 379]. Unsurprisingly, the economic profession is divided even over the imperialism of economics. The senior members have not been too enthusiastic about the extension of their domain, and not one of the leading exponents of this movement, such as Coase, Buchanan and Becker, has been elected president of the American Economic Association, even though each one of them won the Nobel Prize. But this disapproval, judging by citations, is not shared by the younger economists, who support Schumpeter’s view that “a science progresses through the dying off of its old professors” [Stigler 1984: 311]. The emerging heterodoxy is ably argued by Edward Lazear (2000), who adduces the extension of economics to the valuation of non-monetary attributes of goods, services, jobs, and even linguistics, as additional proof of the scientific character of economics and the success of economics as an imperial science. Equally, within its own domain, “descriptive economics has suffered from the imperialism of predictive economics” [Sen 1980: 363].

Economists: Imperial Advisors

The advisory role of economists, which derives from the prescriptive function of economics, is one more dimension of economics as the imperial social science. There are economic advisors of all stripes but hardly any sociological or political advisors. The advisory role of economists, however, is far from being purely advisory. It “is close to being participatory” and “also closer to that of an insider or player rather than that of a detached expert” [Dixit 1997: 226]. It is also closer to what most economists who give policy advice actively perform like those who work or consult for the ruling government, the opposition, labour unions, business associations, lobbies, etc, and thereby become direct participants. Even think tanks and many policy institutes who profess expertise or objectivity barely disguise their partisanship as so well exemplified by the published work of prominent Washington think tanks like the Brookings Institution, the Cato Institute, the American Enterprise Institute, and the Institute for Policy Studies, each representing a particular shade of the political spectrum. “For the vast majority of economists, giving policy advice entails accepting a participatory role, at least to some extent. And to play that role effectively, economists must include politics and the strategic games of policy-making in the analysis” [Dixit 1997: 229]. This stance, while unexceptionable, encounters daunting complexities in the case of coalition democracies. Is there also not a critical threshold at which economic advisors turn into mere kibitzers, given their Scheherazade complex to “tell them something?” Be that as it may, economists have turned a dissonant imperial science into a highly marketable commodity through sheer product-differentiation. The participatory role of economists is an added factor that blurs the distinction between judgments of fact and judgments of value.

In sum, the cognitive dissonance of economics, coupled with the imperialism of economics, poses issues for the philosopher which far transcend the philosophy of economics, whose remit is conventionally restricted to the study of methodological issues facing positive economic theory and normative problems of the interface of welfare economics with political and moral philosophy. It involves a comprehensive evaluation of the interaction of economics and the various branches of philosophy, notably religion, ethics, psychology, epistemology, and even rhetoric, and the role of the philosopher in public policy. Given the generic character of philosophy and the complexity of economics, the analyst has to necessarily seek the Aristotelian path of “illumination through disaggregation”, beginning with the most universal form of organisation, viz, institutional religion. Every economic agent is born and raised in a specific religion, which can influence his conduct and behaviour in varying degrees.

The Economics of Religion

Religion has a two-way interaction with political economy, both as a dependent and as an independent variable [McCleary and Barro 2006]. As a dependent variable, a central question is how economic development and institutions affect religious participation and beliefs. As an independent variable, a key issue is how religiosity affects individual characteristics such as work ethic, honesty, trust, and thrift and thereby influences economic performance. Religion, which is usually regarded by economists as a directly unproductive activity, has not attracted much professional attention, even though economic historians and sociologists like Richard Tawney (Religion and the Rise of Capitalism, 1926) and Max Weber (The Protestant Ethic and the Spirit of Capitalism, 1930) made it their central theme. According to Tawney, the economic categories of modern society have their roots in the economic expansion and social convulsions in the age of the Renaissance and the Reformation. One can also identify various religious and quasi-religious elements which have had an economic outcome, like the economic doctrines of Calvin, the teachings of Jesus on usury and allied topics, and the attitudes of English non-conformists (Wesleyans and Quakers). Weber’s theme of the Protestant ethic as the engine of capitalism is subject to the strictures of all monocausal theories, like the Marxist interpretation of history derived from economic factors, and lacks any empirical support. Even historically, Weber’s thesis is flawed as it fails to take account of economic success stories like those of the Catholic city states of Antwerp, Florence and Venice. Surprisingly, the positive contributions of Christian missionaries to the infrastructure of many African and Asian countries, principally in education and health services, have not been systematically analysed in the literature, although some British historians, like Keith Hancock, refer to the role of the “missionary frontier” in the economic development of West Africa.

A prime example of the interface between religion and economics is the injunction against usury in the Abrahamic religions

– Judaism, Christianity and Islam – which is based upon the fallacious notion of money and capital as unproductive assets, whereas in point of fact it embodies the core element of exponential economic growth and the concept of compound interest, hailed by Einstein as the greatest invention outside of the natural sciences. Even the notion of usury as exploitation overlooks that it reflects the high-risk premium attached to particular categories of loan transactions. The interest-free Islamic financial systems of Saudi Arabia, Iran and Pakistan also exhibit the familiar phenomenon of evasion of interest through surrogate categories variously named as fees and commissions. A more fundamental criticism of the Islamic ban on interest is that it strictly applies to fixed rates of interest but not to variable rates of interest, a point often overlooked by advocates of Islamic finance. Variable interest rates make loan transactions as risky as profit-oriented activities which are approved by Islamic law. Yet Islamic states impose a blanket ban on all interest. The application of Islamic economics, too, is highly selective; it is confined to the interdiction of interest but does not pay due regard to equally important elements like ‘Zakat’, the capital levy on affluent Muslims as a transfer payment to the needy and poor. Islamic redistribution schemes have had no perceptible effects on poverty or destitution. The negative economic aspects of religion emerge in Muslim countries like Indonesia, where the highly productive Chinese minority (Buddhist and Christian) is subject to periodic discrimination.

The eastern religions like Hinduism, Buddhism, Sikhism, Jainism, Confucianism, Taoism and Shintoism do not have a specific economic content in their teachings, and the differential economic performance of their respective societies can be confidently attributed to more influential non-religious factors. For instance, Taiwan, the only country where Confucianism is a state religion, has achieved a phenomenal combination of growth and equity due to a favourable conjuncture of policies like timely and effective land reforms, meaningful economic incentives, and realistic exchange, interest rate, and fiscal policies. Japan, a Shintoist country by religion, is an example of the application of the Confucian work ethic and values while absorbing the best of western technology. In a sense, Confucian values are universal and hardly merit a doctrinal label as when some analysts argue that “Confucianism has room for survival as a synthesis of distinctive social practices and a competitive identity” [Rozman 2002: 37].

This discussion poses the question: How significant is the economics of religion given the growing secularisation and globalisation of the world economy? Some would argue: “Like religious economics, economics of religion is likely to be an expanding pursuit for the foreseeable future. It has largely explored the norms why religion exists and the functions it serves...Important contributions may well grow out of the expanding interdisciplinary literature on the role of trust and morality in social systems. Though this literature has not yet focused on religion per se, many of its insights carry implications for issues that the economics of religion will sooner or later begin analysing in depth” [Kuran 1995: 774].

One can discern a response to this agenda in the pioneering empirical research of Robert Barro and Rachel McCleary (2003), which analyses “Religion and Economic Growth across Countries” using six international survey data sets on religiosity for a broad panel of countries between 1981 and 1999. The estimation which relies on instrumental variables (presence of state religion, regulation of the religious market, and an indicator of religious pluralism) and dependent variables (church attendance and religious beliefs) shows that economic growth responds positively to religious beliefs but negatively to church attendance, i e, growth depends on the extent of believing relative to belonging. These results also accord with a model in which religious beliefs influence individual habits that embrace economic performance. Theauthors recognise that it would be valuable to extend the analysis of religiosity at a countrywide level to individual behaviour and to political and social variables, including democracy, the rule of law, fertility, and health. Their results, while interesting and suggestive, do not throw light on the more basic question: How influential is religiosity compared to non-religious variables like economic incentives, appropriate state policies, and rule of law?

Even religious extremists seem to obey economic laws in some cases when radical religious militias like Hamas provide public goods such as education and health services in failed or weak states such as Palestine, Algeria, Somalia and Chechnya [Berman 2003]. This is an apt example of rational fanatics, who are conceptually akin to the category of a rational fool, defined as “the thoroughly methodical person who chooses with impeccable consistency but does not distinguish between different issues...the rational fool is invoked a great deal in economic theory” [Sen 1982: 9]. There are, of course, notable exceptions to Berman’s theory, such as Saudi Arabia, where despite generous state provision of public services, extremists flourish: the Al Qaida terrorists are neither illiterate nor impoverished. In contrast, the Jewish extremist group Gush Emunim has failed to evoke public support in Israel, a functioning welfare democracy, where it is not the sole or major supplier of public goods to its members.

The real challenge of religion to economics lies in the fact that every religion’s tradition and sacred literature “contains enough ambiguity to justify any number of economic positions…religion seems to matter, but its impact is far from uniform” [Iannacone 1998: 1478]. It affects some behavioural outcomes – such as earnings, education, and economic attitudes – much less than others. Religious effects do not reduce to a single unobserved factor.

Economics as Applied Ethics

Contemporary economics, with its clear-cut distinction between judgments of fact and judgments of value, would appear at first blush to be a self-consciously non-ethical subject, as so categorically stated in the 1930s by Lionel Robbins in his influential book An Essay on the Nature and Significance of Economic Science, where he argued that “it does not seem logically possible to associate the two studies (economics and ethics) in any form but mere juxtaposition” [Robbins 1962: 148]. But the historical evolution of modern economics has been largely as an offshoot of ethics. In fact, economics has had two rather different ways, concerned respectively with ethics, on the one hand, and with what may be called the logistic and engineering task of identifying means to attain given ends in the most efficient way. The ethical tradition goes back to Aristotle’s Nichomachean Ethics, which relates economics to human ends, and to his Politics, where he argues that the end of the state is the common promotion of a good quality life. The engineering and logistical approach has been developed, as it happens, by actual engineers, like the French economist, Leon Walras, the Italian economist Vilfredo Pareto, and the Englishman Sir William Petty, who had a strong interest in the natural and mechanical sciences and is justly regarded as a pioneer of numerical economics. The engineering approach also connects with the technique-oriented approach to statecraft pioneered by Kautilya (the advisor and minister of the Indian emperor Chandragupta), a contemporary of Aristotle. Kautilya wrote in the fourth century BC his classic treatise on economic statecraft, Arthashastra (in Sanskrit), which distinguishes between metaphysics, ethics (knowledge of the right and the wrong), the science of government, and the science of wealth. However, ethical considerations do not figure too prominently in Kautilya’s analysis of human behaviour, which makes Kautilya with his emphasis on economic realpolitik, an economic forerunner of Machiavelli.

Historically, economics, with its origins in moral philosophy, has been an offshoot of ethics, and the influential Cambridge School of Marshall and Pigou has always regarded economics as a branch of applied ethics. The father of modern economics, Adam Smith, was a professor of moral philosophy at the University of Glasgow who authored his Theory of Moral Sentiments (1759) long before his classic Wealth of Nations (1776). In fact, modern economics shows a varying mix of ethics and economics, with a greater emphasis on ethics in the writings of Adam Smith, John Stuart Mill, Karl Marx, and Francis Edgeworth, whereas the contributions of William Petty, Francois Quesnay, David Ricardo, Augustino Cournot, and Leon Walras are more focused on the logistic and engineering problems within economics. This, in turn, poses the classic core question of economic methodology: Is economics essentially a positive science, as argued most notably by Milton Friedman, or a normative science, which can never be neutral or objective in the positive sense, as maintained by Gunnar Myrdal [1973: vi]. These polar attitudes have only served to impoverish modern economics, as so cogently argued by Amartya Sen: “Economics can be made more productive by paying greater and more explicit attention to the ethical considerations that shape human behaviour and judgment...the methods used in economics, related, inter alia, with its engineering aspects...can be of use to modern ethics as well and the distance that has grown between economics and ethics has also been...unfortunate for the latter” [Sen 1980: 9].

The intermixture of motives and incentives complicates both economic analysis and policy, as is well illustrated in the case of Japan, where there is strong empirical evidence to suggest that systematic deviations from self-interested behaviour in the direction of duty, group loyalty, and goodwill account for Japan’s economic performance, a blend of the best practice of western technology and the Japanese ethos. Similarly, the Confucian explanation for the industrial success of South Korea, Taiwan, and Singapore shows that ethical factors can be as influential as profit-centred motivation. “The jettisoning of all motivations and valuations other than the extremely narrow one of selfinterest is hard to justify on grounds of predictive usefulness, and it also seems to have rather dubious empirical support” [Sen 1980: 79]. In taking account of non-market motivation and behaviour, the distinction between “deontological” and “consequentialist approaches” is highly relevant. The deontological approach assigns the concept of duty a primary position, whereas the consequentialist approach, which derives duty and right actions on the basis of their respective consequences, is more pertinent to the concerns of economics. Deliberate human actions and policies pose some of the most intractable problems for economic analysis and policies, which have unforeseen and unintended consequences. “The significant goes well beyond the proximate” [Sen 1993: 227].

The complexities of the interface between economics and ethics are typified by the variety of ways in which the criteria of justice can be interpreted and applied. One source of variation is the metric or unit of measurement in terms of which a person’s advantage is to be evaluated in assessing equity and justice. The various metrics analysed in the literature include utility, primary goods index (as in the Rawlsian theory of justice), capabilities index (Sen), and statistical measures of poverty. Secondly, there are different ways of aggregating the diverse information regarding the advantages of different individuals. For instance, utilitarianism is only concerned with the aggregate of the overall utilities of different people. Other approaches are more concerned with the distributional properties of the relative positions of different individuals vis-à-vis each other. There is also the issue concerning the priority of some particular person’s valuation (e g, Rawls’s insistence on the priority of liberty), or the nonconsequentialist priority of processes over results (e g, Nozick’s view of rights as unreliable constraints). One can also argue about the relevant dimensions of justice – horizontal, vertical, and intergenerational – and their relative weight in policy. What, for instance, is the optimal social rate of discount and who determines it? What weight should we give to the interests of future generations? How do we respond to the person who asks, “What has posterity done for me”. At least one philosopher has argued, “the social discount rate is indefensible” [Parfit 1987: 357].

In sum, as Amartya Sen argues, “Welfare economics can be substantially enriched by paying more attention to ethics, and ...the study of economics can also benefit from a closer contact with ethics...Even predictive and descriptive economics can be helped by making more room for welfare economic considerations in the determination of behaviour. These exercises involve deepseated ambiguities, and many of the problems are inherently complex. But although the case for bringing economics closer to ethics does not rest on this being an easy thing to do...the rewards can be expected to be rather large” [Sen 1980: 89]. As the citation for the Nobel Prize awarded to Sen in 1998 stated: “By combining tools from economics and philosophy, he has restored an ethical dimension to the discussion of vital economic problems.”

There is, however, another neglected aspect of this debate which poses important epistemic problems. It has been argued that “many so-called ‘value-judgments’ are not value judgments at all, but subjective judgments of fact” [Ng 1972: 1014]. While value judgments are admittedly untestable, not all untestable judgments are value judgments. Economists are often more qualified than non-economists to make subjective judgments of fact related to their expertise, but many subjective judgments of fact are subjective only because the inter-relationships are too complex to be identified precisely. The advisory role of economists derives from their capacity to make subjective statements of fact which do not have the same validity as well-established scientific propositions, but they are necessary and unavoidable in making important policy decisions. Positive welfare economics exists, but normative welfare economics involves value judgments which are actually subjective statements of fact. It also involves trade-offs between different aspects of policy, most importantly between economic efficiency, and non-economic objectives such as equity and justice, in which the ultimate decisions rest not on expertise per se but on social values and objectives as formulated by legislators and policy-makers in a democracy.

Ethical variables affect not only issues of economic efficiency and equity but also economic growth and development, as demonstrated by the sociologist Edward Banfield in his seminal work The Moral Basis of a Backward Society (1958), which explained the poverty of southern Italy as being due not to government neglect or poor education but to a peculiar kind of “amoral familism” manifested in the reluctance of people to cooperate outside their families [Wilson 2003: 64]. This finding is corroborated on a global scale by contemporary research, which shows that economic development (GNP/capita) is significantly correlated with levels of interpersonal trust transcending family groupings [Inglehart 2000: 90-91].

Relevance of Psychology

Traditionally, economics as a behavioural science has relied largely on the assumption of a “homo-economicus” actuated by self-interest aimed at the maximisation of utility, income, or wealth, and capable of rational decision-making. This was modified by Herbert Simon (Nobel Laureate 1978), who proposed that decision-makers should be viewed as boundedly rational and developed a model in which utility maximisation was replaced by “satisficing”. Subsequently, Daniel Kahneman (Nobel Laureate 2002) integrated the insights of cognitive psychology into economic science, especially those concerning human agents and decision-making under uncertainty. He has demonstrated how human decisions may systematically depart from those predicted by standard economic theory and how human judgment may take heuristic shortcuts that systematically depart from basic principles of probability. The researches of Kahneman and Amos Tversky (1937-1996) draw a map of bounded rationality by exploring the systematic biases “that separate the beliefs that people have and the choices they make from the optimal beliefs and choices assumed in rational-agent models” [Kahneman 2003: 1449]. Their researches are particularly noteworthy for their provenance and interdisciplinary discourse. They viewed their research primarily as a contribution to psychology, “with a possible contribution to economics as a secondary benefit” (1449). The collaborative research of Kahneman, Tversky, and others comprised three separate programmes of research which explored, respectively; the heuristics that people use and the biases to which they are prone in various tasks of judgment under uncertainty, including predictions and evaluations of evidence; prospect theory, a model of choice under risk and with loss evasion in riskless choice; and framing effects, with their implications for rational-agent models. Kahneman develops a unified treatment of intuitive judgment and choice, whose guiding ideas are that most judgments and most choices are made intuitively and that the rules underlying intuition are generally similar to the rules of perception. This implies that the discussion of the rules of intuitive judgments and choices relies exclusively on visual analogies, which also shows up its limitation.

Kahneman’s framework helps explain why the effects of incentives are neither large nor robust and why cognitive effort expended in bolstering a decision already made will not improve its quality. Does this throw light on the Hamlet syndrome? It is not that economic agents reason poorly but that they often act intuitively and on what they often happen to see at a given moment. Kahneman’s approach highlights several features of the cognitive system; that intuition and reasoning are alternative ways to solve problems; that intuition resembles perception; and that categories are represented by stereotypes. More importantly, Kahneman’s findings have restored a central role to emotion, which is incorporated in his view of intuition, and thus substantially respond to the criticisms of Jon Elster (1998)1 that economists have not been able to incorporate emotions into the toolkit of economics. On the other hand, Elster also makes several valid points, particularly the central issue, viz, how emotions combine with other motivations such as self-interest to affect behaviour. There is an extensive spectrum of emotions, personal and social, which allows for innumerable variations and nuances, some of which are universal while others are culture specific. According to Elster, emotions have a dual role in shaping choices as well as rewards, and there is a trade-off between emotional and other rewards.

The insights of social and cognitive psychology have also been harnessed by Timur Kuran in his ground-breaking work on the social consequences of preference falsification (1990, 1995), which seriously undermine the core concept of revealed preference underlying neoclassical economic methodology. This concept asserts that people’s preference orderings are revealed by their actions, which, according to Kuran, produce either useless tautologies or serious errors of interpretation. His framework accords explicit recognition to the multiplicity of human motivations using three sources of individual utility: the available options; the social consequences evoked by an individual’s decisions; and an individual’s decisional autonomy. These potentially conflicting determinants generate for each individual two distinct preferences: a private preference known only to him, and a public preference he reveals to others. Kuran argues that the divergence between private and public preferences throws light on important contradictory social phenomena: why, despite substantial and growing opposition, as reflected in confidential opinion polls, vocal support for affirmative action remains strong in the US; why even the victims of India’s caste system do not always speak against it in public; why, despite contrary evidence, welfare economics continues to be grounded on the assumption that welfare depends on absolute, not relative, income; why, despite growing income inequality, the US has the least progressive tax system of any industrial nation. The conventional rational-choice model of the economist simply cannot answer many of these questions. Kuran blends the insights of psychology and sociology into a behavioural model which explores the causes and consequences of holding one set of opinions privately while expressing another in public – the pathology of private truths and public lies, a phenomenon more usually associated with the world of politics and diplomacy.

Since economics abounds in cognitive dissonance, it would be appropriate to examine the consequences of cognitive dissonance to which psychologists have devoted considerable attention. Akerlof (Nobel Laureate 2001) and Dickens have incorporated cognitive dissonance theory into a decision model that is a modification of the standard model of rational decision-making but closely follows it insofar as persons are completely informed about the potential consequences of their actions and make their decisions to maximise their own utility or welfare. Akerlof and Dicken’s results (1982) differ from the standard analysis and provide a better explanation for several phenomena that are a puzzle according to the standard approach, as for instance, why noninformational advertising is effective; why safety legislation and social security legislation are popular; why persons fail to purchase actuarially beneficial hazard insurance for flood and earthquake; and why workers tend to underestimate the dangers of hazardous jobs. The explanations do not rely on the assumption of misinformation; if people believe something other than the truth, they do so by their own choice. The theory of cognitive dissonance can thus be expressed in economic terms in three propositions: persons have both preferences and beliefs about the state of the world; they have some control over beliefs; and they can manipulate their own beliefs by selecting sources of information and knowledge which are likely to confirm “desired” beliefs. Studies in social psychology show that people in certain circumstances behave according to each of these propositions. The Akerlof-Dickens model formulates an economic theory of the choice of beliefs, which, initially, are only adopted if the net economic and psychic benefits are positive. But once adopted, beliefs are persistent because of cognitive dissonance, which explains why persons tend to resist or avoid new information that contradicts already established beliefs. This is borne out by the history of science as well by the experience of industrial organisation, which shows that the major innovations mainly come from outside.

While psychological research has been fruitful and suggestive, it is equally important to bear in mind that “not all psychological research will be both confirmed by field data and proven to be of great importance...We can confront plausible hypotheses about human behaviour with both healthy scepticism and genuine curiosity, empirically test their validity, and carefully draw out their implications” [Rabin 1998: 41]. A particularly intractable problem in the application of psychology to economics is the admixture of motivation, like the combination of self-interest with altruism, reciprocity, and social conformity. What is the relative weight of different motives and emotions in the decisions of economic agents? Psychological economics has yet to be extended to agents other than individuals and households. How do firms, clubs, bureaucrats, central bankers, politicians, and institutions think and act? How does the psychology of institutional traders on the stock exchange differ from that of individual operators?

Economics as Rhetoric

Rhetoric, the art of using language for persuasion in speaking, writing, and oratory, is a necessary adjunct to economics as a prescriptive discipline, and every economist seeks to propagate his doctrines as well as his policy prescriptions with literary devices. Yet it did not figure in the otherwise prolific methodological discussions on economics until the publication of Deirdre McCloskey’s provocative work The Rhetoric of Economics (1985) and its revised edition (1998). McCloskey’s work is part of a wider intellectual trend towards rhetorical inquiry which occurs in an interdisciplinary matrix that touches not only on such fields as philosophy, cognitive science psychology, sociology, anthropology, political theory, and accounting but even on mathematics, physics, and biology [Bender and Wellbery: 1990]. McCloskey’s principal argument is that economics is essentially literary, and relies, in addition to facts and logic, on literary devices like stories and figures of speech – metaphors, analogies, and appeals to authority, which “are not mere frills. They think for us” [McCloskey 1998: xix]. The most important example of economic rhetoric is metaphor, which economists call “models”. A prime example of the metaphorical character of even the most quantitative and technical contributions, cited by McCloskey, is the famous 1957 essay by Robert Solow (Nobel Laureate 1987) on the production function and productivity change. Solow’s production function takes the special form Q = A(t)f(K,L) and the multiplicative factor A(t) measures the cumulative effects of shifts over time. It will be seen that four master literary tropes are at work here: metaphor, metonymy, synecdoche, and irony.

The aggregate production function says that the making of our daily bread is like a mathematical function, i e, a metaphor: the K and L in the equation are metonymics, symbols standing for other things. The L reduces the human attentiveness in making bread to an hour of work. “The K reduces the material inheritance of the work place to a pile of shmoos” [McCloskey 1998: 50]. The identification of A(t) with technical change is a synecdoche, taking a part for the whole, since technical change is an umbrella concept which includes a vast variety of inventions and improvements. One can concede that “economists make more appeals to their audience than simply their appeals to the Facts or the Logic” (ibid: 51), but it only reminds us that rhetoric is just one more instrument in the toolkit of the economist, like logic, mathematics, econometrics, and history, which scarcely warrants the wholly disproportionate controversy generated by McCloskey’s work. Rhetoric accentuates the persuasiveness of a new theory or a policy as demonstrated by the triumphalism of Keynes’ General Theory of Employment, Interest and Money (1935) or his classic Economic Consequences of the Peace (1919), a magisterial indictment of the inequity and the irrationality of the Treaty of Versailles. The General Theory would not have had its vogue but for the richness and eloquence of its fastidious prose and the consummate use of Mandeville’s The Fable of the Bees; or, Private Vices, Public Benefits (1714), a mint specimen of an organising metaphor used to illustrate its central theme. Keynes, the master theorist, was also the master rhetorician. Adam Smith’s “invisible hand”, too, is arguably the most visible and effective metaphor of economics.

Economics and Philosophy: Agenda

The scope and mechanics of cooperation between economics and philosophy are perhaps best summed up in the mast-head of the journal Economics and Philosophy.

It aims to “bridge the increasingly artificial disciplinary boundaries that divide economics and philosophy. Economists more and more acknowledge that their work in both positive and normative economics depends on methodological and ethical commitments that demand philosophical study and justification. Philosophers increasingly insist that philosophy of science must be informed by and test against studies of current science and of its history, while ethics and political philosophy must depend on what we know about human aims and interest and about the principles, benefits, and drawbacks of different forms of social organisation. Articles in Economics and Philosophy will explore the foundations of economics as both a predictive/explanatory enterprise and a normative one and will examine the relevance of economic techniques, methods, and conclusions to philosophical questions in ethics and social theory.

The collaboration of Amartya Sen with the philosophers Bernard Williams and W C Runciman and Sraffa’s with Wittgenstein typifies the potentialities of interchange between economists and philosophers. But given the plurality of avenues these are best approached on strictly pragmatic grounds as argued by Robert Solow in the following comment on the author’s original article.

I am a minimalist on matters of scope and method, i e, I don’t feel any need to take a position on big, general questions; it is enough to look for a pragmatic answer to small questions as they come along. I don’t really care if economics is a science, or what it would mean if it were. But I do think economics should be scientific, not in any complex or grandiose way, but in the sense that it should respect logic and facts. I realise that “fact” is a concept with many layers, but there too I am happy to come to a decision in any concrete case, on pragmatic grounds. ...my pulse rate does not budge in either direction when McCloskey tells me that some formulation of mine embodies this or that rhetorical trope. The only interesting question to me is whether this metaphor or metonymy, or whatever, is a good one or a bad one, i e, whether it fits the known facts reasonably well, leads one to look for other interesting facts or ideas, whether it contains any logical contradiction, and so on. I don’t have to decide whether “economics” should cooperate with “philosophy”. My view is: if this philosopher wants to cooperate with that economist in the investigation of this particular question, let them try: if it works out usefully, so much the better, if it does not, well, they have probably learned something any way. Ditto for psychology, andditto for sociology, which strikes me as more relevant than psychology, and more often neglected (emphasis provided).

To this agenda, one could add the Economics and Law movement, whose relevance is even more enhanced with the advent of economic liberalisation and the need for a strong regulatory apparatus to make markets efficient and to reconcile growth with equity. However, the realm of economics as a policy discipline is also the world of the second best and perennial trade-offs for which there are no final solutions. This only reflects that economic space is habited by asymmetries, anomalies, and indeterminacy which together account for the unintended and unforeseen consequences of purposive actions. Given the sheer complexity and limitations of their discipline, and its interface with philosophy and the social sciences to which one could add that the economist innocent of the history of economic ideas is likely to be an incomplete economist. Economists might do worse than heed John Stuart Mill: “A person is not likely to be a good economist who is nothing else” [Marshall 1920: 771].

EPW

Email: anandchand@starpower.net

Note

[This is a revised version of an article on ‘Philosophy and Economics: Issues and Questions’ in Daniel Kolak and Raymond Martin (eds), Experience of Philosophy (sixth edition), Oxford University Press, New York, Oxford, 2006, based on an invited presentation to the Annual Meeting of the Philosophical Association (Eastern Division), December 27-30, 2003. My grateful thanks to Robert Solow and G C Harcourt for helpful comments, with the usual disclaimers; to Southamini Borlo of the Joint Fund-Bank Library, Washington DC, as always, for superb bibliographic assistance; and Sathya Menon for very professional word processing.]

1 This article analyses the psychology of the emotions and its bearing on economic theory and behaviour and thus supplements Matthew Rabin’s survey (1998) which deals with cognitive psychology. Its main focus is on “How can emotions help us explain behaviour for which good explanations seem to be lacking?”

References

Akerlof, George A and William T Dicken (1982): ‘The Economic Consequences of Cognitive Dissonance’, American Economic Review, Vol 72, No 3, pp 307-19.

Altman, B M (2001): ‘Disability Definitions, Models, Classification Schemes and Applications’ in G L Albrecht, K D Seelman, M Bury (eds), Handbook of Disability Studies, Sage Publications.

Barro, Robert J and Rachel M McCleary (2003): ‘Religion and Economic Growth across Countries’, American Sociological Review, Vol 68, pp 760-81. Bender, John and David Wellbery (eds) (1990): The Ends of Rhetoric: History, Theory, Practice, Stanford University Press, Stanford. Berlin, Isaiah and Ramin Jahanbegloo (1991): Conversations with Isaiah Berlin, Charles Scribner’s Sons, New York. Berlin, Isaiah (2000):The Power of Ideas, Princeton University Press, Princeton, New Jersey.

Berman, Eli (2003): ‘Hamas, Taliban and the Jewish Underground: An Economist’s View of Radical Religions Militias’, Working Paper100004, National Bureau of Economic Research, Cambridge, MA.

Bhagwati, Jagdish (2004): In Defence of Globalisation, Oxford University Press, New York. Blaug, Mark (1992): The Methodology of Economics, second edition,

Cambridge University Press, Cambridge. Brittan, Samuel (1973): Is There an Economic Consensus? Macmillan, London. Coase, Ronald H (1982):How Should Economists Choose, American Enterprise

Institute, Washington DC. Dixit, Avinash (1997): ‘Economists as Advisers to Politicians and to Society’, Economics and Politics, Vol 9, No 3, November. Eichner, Alfred S (1983): ‘Why Economics Is Not Yet a Science’, Journal of Economic Issues, Vol XVII, No 2, pp 507-19. Elster, Jon (1998): ‘Emotions and Economic Theory’, Journal of Economic Literature, Vol XXXVI, pp 47-74.

Frey, Bruno S, Werner W Pommerechene, Friedrich Schneider and Guy Gilbert (1984): ‘Consensus and Dissension among Economists: An Empirical Inquiry’, American Economic Review, Vol 7, No 5, pp 986-94.

Friedman, Milton (1953): Essays in Positive Economics, University Press, Chicago. Gordon, Scott (1978): ‘Should Economists Pay Attention to Philosophers?’ Journal of Political Economy, Vol 86, No 4, pp 717-28.

Hahn, Frank (1992): ‘Autobiographical Notes with Reflections’ in Michael Szenberg (ed), Eminent Economists: Their Life Philosophies, Cambridge University Press, New York.

Harcourt, G C (1979): ‘Conclusion: The Social Science Imperialists’, Politics, Vol XVI, No 2, pp 2431-51. Hausman, Daniel M (1994): The Philosophy of Economics, second edition, Cambridge University Press, Cambridge. Helibroner, Robert L (1980): The Worldly Philosophers: Lives, Times and

Ideas of the Great Economic Thinkers, Simon and Schuster, New York.

Hicks, J R (1983): ‘A Discipline, Not a Science’ in Classics and Moderns: Collected Essays 3, Basil Blackwell, Oxford.

Iannacone, Laurence R (1998): ‘An Introduction to the Economics of Religion’, Journal of Economic Literature, Vol XXXVI, pp 1465-96.

Inglehart, Ronald (2000): ‘Culture and Democracy’ in Lawrence E Harrison and Samuel P Huntington (eds), Culture Matters: How Values Shape Human Progress, Basic Books, New York.

Kahneman, Daniel (2003): ‘Maps of Bounded Rationality: Psychology for Behavioural Economics’, American Economic Review, Vol 93, No 5, pp 1449-75.

Keynes,John Maynard (1972): ‘Alfred Marshall’ in Essays in Biography, Vol X, Collected Writings of J M Keynes, Macmillan, London.

– (1982): Social, Political, and Literary Writings, Vol XXVIII, Collected Writings of J M Keynes, Macmillan, London.

Kuran, Timur (1990): ‘Private and Public Preferences’, Economics and Philosophy, Vol 6, pp 1-26.

  • (1995): Private Truths, Public Lies: The Social Consequences of Preference Falsification, Harvard University Press Cambridge, MA. Lazear, Edward P (2000): ‘Economic Imperialism’, Quarterly Journal of
  • Economics, Vol 115, pp 99-145. Magee, Bryan (1978): Popper, Fontana Collins, London.
  • (2001): Talking Philosophy: Dialogues with Fifteen Leading Philosophers, Oxford University Press, Oxford. Marshall, Alfred (1920): Principles of Economics, eighth edition, Macmillan, London. McCleary, Rachel M and Robert J Barro (eds) (2006): ‘Religion and Economy’, The Journal of Economic Perspectives, Vol 20, No 2. McCloskey, Deidre N (1998): The Rhetoric of Economics, second revised edition, University of Wisconsin Press, Madison. McCloskey, Deidre N and Stephen T Ziliak (1996): ‘The Standard Error of
  • Regressions’, Journal of Economic Literature, Vol XXIV, pp 97-114. Myrdal, Gunnar (1973): Against the Stream, Pantheon Books, New York.
  • (1965): Monetary Equilibrium, Augustus Kelly, New York. Ng, Yew-Kwang (1972): ‘Value Judgments and Economists’ Role in Policy Recommendations’, The Economic Journal, Vol 82, No 327, pp 1014-18. Niehans, Jurg (1981): ‘Economics: History, Doctrine, Science, Art’, Kyklos,
  • Vol 34, pp 165-77.

    Parfit, Derek (1987): Reasons and Persons, Clarendon Press, Oxford.

    Popper, Karl (1975): Objective Knowledge: An Evolutionary Approach,

    Oxford University Press, Oxford.

  • (1999): All Life Is Problem Solving, Routledge, London. Rabin, Matthew (1998): ‘Psychology and Economics’, Journal of Economic Literature, Vol XXXVI, pp 11-46. Robbins, Lionel (1962): An Essay on the Nature and Significance of Economics Science, second edition, Macmillan, London. Rozman, Gilbert (2002): ‘Can Confucianism Survive in an Age of Universalism and Globalisation? Pacific Affairs, Vol 75, No 1, pp 11-37.
  • Sen, A K (1980): ‘Description as Choice’, Oxford Economic Papers, Vol 32, pp 353-69.
  • (1982): ‘Rational Fools: A Critique of the Behavioural Foundations of Economic Theory’ in Choice, Welfare and Measurement, MIT Press, Cambridge, Massachusetts.
  • (1986): ‘Prediction and Economic Theory’ in Predictability in Science and Society: A Joint Symposium of the Royal Society and the British Academy, March 20-21, organised and edited by Sir John Mason, P Mathias and J H Westcott, the Royal Society and the British Academy, London.
  • (1993): ‘Money and Value: On the Ethics and Economics of Finance’, Economics and Philosophy, Vol 9, pp 203-27.
  • (2003): ‘Sraffa, Wittgenstein and Gramsci’, Journal of Economic Literature, Vol XVI, pp 1240-53. Skidelsky, Robert (1983): John Maynard Keynes: Hopes Betrayed, 1883-1920, Viking, New York.
  • Stigler, George J (1982): The Economist as Preacher and Other Essays, University of Chicago Press, Chicago.
  • (1984): ‘Economics: The Imperial Science?’ Scandinavian Journal of Economics, Vol 86, No 3, pp 301-13. Stiglitz, Joseph E (2002): Globalisation and Its Discontents, W W Norton, New York.
  • Tawney, Richard H (1998): Religion and the Rise of Capitalism, New Brunswick, N J and London: Transaction (reprint of the classic 1926 edition with a new introduction by Adam B Seligman).

    Weber, Max (1930): The Protestant Ethic and the Spirit of Capitalism, Allen and Unwin, London. Wilson, James (2003): ‘The Independent Mind of Edward Banfield’, Public Interest, Winter, pp 63-68.

    Dear reader,

    To continue reading, become a subscriber.

    Explore our attracive subscription offers.

    Click here

    Comments

    (-) Hide

    EPW looks forward to your comments. Please note that comments are moderated as per our comments policy. They may take some time to appear. A comment, if suitable, may be selected for publication in the Letters pages of EPW.

    Back to Top