Philosophy of Economics

This essay aims to provide a rigorous foundation for Gilboa's, Postlewaite's, Samuelson's and Schmeidler's (GPSS's) account of the constitution of models and the role of models in explanation and prediction. Although I shall offer some criticisms, my goal is to sketch analyses of explanations and models that complement GPSS's distinctions between the uses of models to explain, prescribe, predict, and explore the consequences of theories.

Methodological appraisal usually aims at a discourse that contributes to the improvement of knowledge production processes in economics. Attempts by economists, such as that by Gilboa et al. (2022. Economic theories and their dueling interpretations. Journal of Economic Methodology, 1–20) to engage in such a discourse are laudable and needed because they draw on field-specific expertise and experience from economic practice and thereby can steer such discourse into promising directions. However, while Gilboa et al. seem to share the ambition of (...) doing economic methodology in the service of progress, their contribution is not sufficiently self-critical. Instead of seriously considering the diversity of contemporary modeling practices, their position commits them to an outdated view of economics and can be read as licensing the preservation of conceptual and theoretical elements of standard economics that the discipline has long been criticized for. As such, the authors miss out on fully reaching their own ambitions of a practice-based appraisal that pushes economists towards self-critical and forward-looking modeling. (shrink)

Economics is a societally influential discipline, but the relationship of its theoretical activity to social reality and practical policy is chronically puzzling. Its theoretical models appear to involve a lot of falsehood, and modellers seem unconcerned about this and about any possible future uses of the models, while sticking to the same unifying theoretical framework. Gilboa et al. (2014, 2022) aspire to resolve the puzzle in terms of varying interpretations of models. I offer critical comments on their ideas while expanding (...) and refining my own account of what I call model commentary whose task is to help understand and evaluate the process of modelling. I point out the rich complexity of adequate commentaries and discuss the issue of whose responsibility it is to construe and communicate them. (shrink)

This article critically evaluates Itzhak Gilboa, Andrew Postlewaite, Larry Samuelson, and David Schmeidler’s account of economic models. First, it gives a selective overview of their argument, highlighting their emphasis on similarity and oversight of the role of idealizations in economics. Second, it proposes a sketch of an account of models as arguments and argumentative devices. This account not only sheds light on Gilboa et al.’s approach, including its shortcomings, but also identifies key challenges in model-based inference, suggesting a fresh perspective (...) on the uses of models in economics for diverse objectives. (shrink)

We mobilise contemporary philosophy of science to further clarify observations on economic modelling made by Gilboa et al. (2023). We adopt a normative stance towards these modelling practices to identify the extent to which they are epistemically justified. Our message is simple: many of the distinctions proposed by Gilboa et al. (2023) are useful, but without the proper qualifications, too much flexibility in choosing the right interpretation risks downplaying the crucial role that empirical evidence should play in any modelling endeavour.

This comment on 'Economic theories and their Dueling interpretations' questions the descriptive adequacy of the ‘sociology of economics' proposed by Gilboa, Postlewaite, Samuelson, and Schmeidler (GPSS) (2022). We ask whether economists still perceive the role of microeconomic theory as central as do GPSS. In particular, is present-day economics unified by the principles of maximising, subject to constraints and equilibrium analysis? We argue that this is not the case. GPSS’ appeal to the interpretative flexibility of economic theories appears apologetic, especially the (...) suggestion that theories and models, which once were considered positive descriptions or predictive instruments, are now cast as analytical or methodological exercises. We conclude on a more constructive note, drawing from the recent philosophical discussion of modelling which, quite paradoxically, grants highly idealized and simplified models a more important role than GPSS appear to allow. (shrink)

Which implications follow for the value of freedom on a hybrid account of wellbeing that appeals to endorsement? On the basis of Olsaretti’s empirical claim that one is unlikely to endorse wellbeing when one is forced to achieve it, I show that standardly on the hybrid account there is a reason to protect people’s freedom to dysfunction, and hence that the freedoms to dysfunction are valuable. I also discuss whether freedom is non-specifically valuable on grounds of endorsement. I advance an (...) epistemic version of freedom’s non-specific value that is especially relevant for a theory of justice that appeals to publicity. (shrink)

Austrian engineer, philosopher, and political economist Josef Popper-Lynkeus (1838–1921) was a renowned public intellectual of Viennese Late Enlightenment. In this article, we unearth and explore Popper-Lynkeus’s social program. It sought to implement social conscription to unconditionally guarantee a basic level of goods and services for every human individual. We appraise the economic and ethical justifications provided by Popper-Lynkeus for his allegedly “rational” proposals and the intended consequences for the discipline of economics. Finally, and based on our disambiguation of different notions (...) of “unconditionality”, we clarify similarities and differences between Popper-Lynkeus’s social program and contemporary proposals for a universal basic income, characterising both as alternatives to traditional welfare states. (shrink)

Lara Buchak defends a Weight-Ranked Utilitarianism (WRU) that she says avoids the critique of Rawls’s that is sometimes thought fatal: utilitarianism unjustifiably blurs the distinction between persons. Buchak’s defence depends upon (i) a version of Harsanyi’s assumption that parties to a social contract should reason as if they have an equal chance of being anyone and (ii) a hypothesis she explores in a recent article. I argue that her assumption and hypothesis are untenable. WRU fails of the generality to which (...) Buchak aspires because it fails for one of her most important cases: the distributive question posed by Rawls. (shrink)

The classical liberal paradigm has always argued for strong economic freedom combined with limits on government power. But it has also been always openminded about using government programs to improve the society. These principles, if applied to today’s society, are simultaneously a criticism of “really existing” welfare state ideology – with its lack of economic freedom and its reliance on the expansive bureaucracy – but also an opportunity for reforming welfare states toward more freedom-based alternatives. There is a utopian potential (...) in classical liberalism. This book articulates how several strands of liberalism, including Austrian school liberalism and Chicago school liberalism, may support something like universal basic income (UBI). (shrink)

Recently, convergence liberals, such as Kevin Vallier, argue that the principle of social insurance could be publicly justified. Our paper challenges this marriage of convergence liberalism and welfare state. We begin by examining Vallier’s three reasons for the principle of social insurance: risk aversion, injustice and the promotion of political trust. We then argue that all these reasons are intelligibly objectionable. After examining five possible responses that convergence liberals may offer, this paper concludes that the principle of social insurance is (...) not conclusively justified in the convergence conception of public justification. (shrink)

This work offers the first comprehensive comparison between the philosophy of Adam Smith and that of his successor, Thomas Reid. It looks at Reid’s and Smith’s remarkably similar accounts of human perception and judgement, and at their different moral and economic theories. In this way, this paper offers not only a new perspective on Reid’s critique of Adam Smith’s Theory of Moral Sentiments, but also new insights into the intellectual roots of the genuinely Scottish debates about sense perception and the (...) task of scientific philosophy. “Reiding” Smith can thus offer a unique vantage point from which to understand the connections between epistemological and economic issues in Smith’s work. With a focus that is at once historical and philosophical, this undertaking serves three purposes: a) to familiarise economists with the philosophical and economic works of Thomas Reid, b) to sharpen our understanding of Adam Smith’s intellectual context in the Scottish Enlightenment, and c) to better understand the paradoxical role that individual human judgement plays in Adam Smith’s analysis of the economy. (shrink)

Austrian economics emphasizes a priori components of social scientific theory. Most emphatically, Ludwig Mises and Murray Rothbard champion praxeology, a methodology often criticized as extremely aprioristic. Among the numerous justifications and interpretations of praxeology to be found in the primary and secondary literature, conventionalism avoids the charge of extreme apriorism by construing the fundamental axiom of praxeology as analytic instead of synthetic. This paper (1) explicates the tentative structure of the fundamental axiom, (2) clarifies some aspects of a conventionalist defense (...) of praxeology, and (3) appraises conventionalist praxeology according to Rothbardian criteria. While Rothbard provides an essentialist justification of praxeology and embraces extreme apriorism, a mildly aprioristic conventionalist defense of praxeology fares better on Rothbard’s own criteria and is much more compatible with other contemporary methodological positions and economic theories. (shrink)

Although neoclassical economics faces frequent criticism, it remains the dominant paradigm, largely due to its immunisation strategies that rely on unfalsifiable concepts of utility and rationality. In this paper, I use Karl Popper’s philosophy to assess whether these strategies are justified. Firstly, I reconstruct Popper’s ideas on immunisation strategies, situational analysis, the rationality principle, and the metaphysical research programme. Next, I examine how neoclassical economics’ immunisation strategies counter critiques from behavioural economics. I conclude that neoclassical economics’ method does not produce (...) empirical conjectures. I assess and evaluate this finding in relation to the “rationality principle”, as it parallels neoclassical economics’ optimisation axiom. Furthermore, I explore Popper’s relevance in the context of neoclassical economics’ recent incorporation of behavioural economics’ insights to show that my analysis is not purely historical. (shrink)

A challenge for cost-benefit analysis is that it ignores ethical values such as justice, fairness, and equity. One standard response is to regard CBA results as just one factor in a more complex decision-process where ethical and democratic factors are also considered. This paper considers an alternative response: extending CBA so that it takes into account not only self-interested input but also moral preferences such as a ‘taste’ for fairness. Drawing on existing research and the example of resource allocation, the (...) paper develops and analyzes objections to extended CBA. Evaluation of these objections, the paper shows, depends on how the original challenge is interpreted and how the problem of ‘ignoring’ ethical values is understood. While some interpretations lead to an impasse between defenders and critics of extended CBA, the paper proposes a novel interpretation – focused on political representationality – and showcases the limits of CBA as a coherent response. (shrink)

This dissertation undertakes a philosophical analysis of “natural capital” and argues that this concept has prompted economists to view Nature in a radically novel manner. Formerly, economists referred to Nature and natural products as a collection of inert materials to be drawn upon in isolation and then rearranged by human agents to produce commodities. More recently, nature is depicted as a collection of active, modifiable, and economically valuable processes, often construed as ecosystems that produce marketable goods and services gratis. Nature (...) is depicted as consisting of various unproduced mechanisms or “natural machines” that are first discovered and then channeled so as to serve human ends. In short, nature as an ideal is a kind of garden that is characterized by natural objects purposefully arranged by intentional human agents. This dissertation first lays out working definitions of the key terms, such as capital and Nature, and then traces the historical roots of natural capital in the writings of eminent classical political economists, such as Adam Smith, John Stuart Mill, and Karl Marx. I then examine the question of substitutes for “critical natural capital”, and argue that the preservation paradox is warranted: no one can restore or preserve a part of Nature without turning it into an artifact. Following the recent work of Debra Satz and Michael Sandel, I finish my dissertation by situating the question of natural capital in the broader context of whether some goods should not be for sale, particularly those I define as Basic Ecological Goods. (shrink)

It has been shown that the Mere Addition Paradox occurs in a choice-functional approach with Path Independence (Stewart R.T., 2021, Path independence and a persistent paradox of population ethics, Journal of Philosophy, forthcoming). The present study is a three-part response to this finding. First, I show that Path Independence is not an essential property leading to this paradox and that logically weaker properties can get the same result. Second, I present a rationalizable choice function that does not yield the paradox. (...) And third, I argue that menu-dependent relations are nicely examined if Path Independence is relaxed to Property $\alpha $ (or equivalently, Contraction Consistency). (shrink)

We study original position arguments in the context of social choice under ignorance. First, we present a general formal framework for such arguments. Next, we provide an axiomatic characterization of social choice rules that can be supported by original position arguments. We illustrate this characterization in terms of various well-known social choice rules, some of which do and some of which do not satisfy the axioms in question. Depending on the perspective one takes, our results can be used to argue (...) against certain rules, against Rawlsian theories of procedural fairness, or in support of richer, multidimensional models of individual choice. (shrink)

Nozick’s ‘utility monster’ is often regarded as impossible, because one life cannot be better than a large number of other lives. Against that view, I propose a purely marginalist account of utility monster defining the monster by a higher sensitivity of well-being to resources (instead of a larger total well-being), and I introduce the concept of collective utility monster to account for resource predation by a group. Since longevity strengthens the sensitivity of well-being to resources, large groups of long-lived persons (...) may, if their longevity advantage is sufficiently strong, fall under the concept of collective utility monster, against moral intuition. (shrink)

Climate change economists have called it “the most important number you’ve never heard of” and the “holy grail of climate economic analysis.” It is the social cost of carbon (SCC), and its purpose is to reflect—in one dollar figure—the harm caused by emitting a single ton of carbon dioxide into the atmosphere. The SCC is an essential concept for environmental cost-benefit analysis, and for the idea of an “optimal tax” on carbon emissions. It is also the subject of fierce debate (...) in the academic literature and in American politics. This book offers the most systematic analysis yet of the social cost of carbon, its theoretical basis, and its proper role in climate economics and climate policy design. It explains that the SCC is not one concept but four, each of which is addressed to a distinct task in climate economics. Moreover, these four concepts can be sorted into two families that correspond to the two main branches of welfare economics, social choice theory and general equilibrium theory. The book explains these radically different theoretical frameworks and how a mathematically identical pair of SCC concepts can emerge from each. It then argues that the analytical power of each SCC concept is limited by its inability to capture the full array of ethical considerations that bear on responsible climate policy. Despite these limitations, the book explains how at least some SCC concepts can and should be put to work in real-world climate change policy analysis. (shrink)

Relational egalitarians argue that workplace hierarchy is wrong or unjust. However, even if workplace hierarchy is morally deficient in one respect, the efficiency of hierarchical cooperation might vindicate hierarchy. This paper assesses the extent to which relational egalitarians must make concessions to workplace hierarchy for the sake of efficiency. I argue that considerations of hierarchy provide egalitarians with reasons that make workplace hierarchy tolerable despite being unjustified, and, moreover, that under a predominantly hierarchical status quo, the practical import of egalitarian (...) reasons is unlikely to be undercut. This can be the case even if social hierarchy sometimes constitutes social cooperation. (shrink)

Variable-Value axiologies avoid Parfit’s Repugnant Conclusion while satisfying some weak instances of the Mere Addition principle. We apply calibration methods to two leading members of the family of Variable-Value views conditional upon: first, a very weak instance of Mere Addition and, second, some plausible empirical assumptions about the size and welfare of the intertemporal world population. We find that such facts calibrate these two Variable-Value views to be nearly totalist, and therefore imply conclusions that should seem repugnant to anyone who (...) opposes Total Utilitarianism only due to the Repugnant Conclusion. (shrink)

Many philosophical accounts of manipulation are blind to the extent to which actual people fall short of the rational ideal, while prominent accounts in political science are under-inclusive. We offer necessary and sufficient conditions – Suitable Reason and Testimonial Honesty – distinguishing manipulative from non-manipulative influence; develop a ‘hypothetical disclosure test’ to measure the degree of manipulation; and provide further criteria to assess and compare the morality of manipulation across cases. We discuss multiple examples drawn from politics and from public (...) policy with particular attention to recent debates about the ethics and politics of nudge. (shrink)

We present the first comprehensive theory of fairness that conceives of fairness as having two dimensions: a comparative and an absolute one. The comparative dimension of fairness has traditionally been the main interest of Broomean fairness theories. It has been analysed as satisfying competing individual claims in proportion to their respective strengths. And yet, many key contributors to Broomean fairness agree that ‘absolute’ fairness is important as well. We make this concern precise by introducing the Fairness formula and the absolute (...) priority rule and analyse their implications for comparative fairness. (shrink)

In the article ‘How to be absolutely fair, Part I: the Fairness formula’, we presented the first theory of comparative and absolute fairness. Here, we relate the implications of our Fairness formula to economic theories of fair division. Our analysis makes contributions to both philosophy and economics: to the philosophical literature, we add an axiomatic discussion of proportionality and fairness. To the economic literature, we add an appealing normative theory of absolute and comparative fairness that can be used to evaluate (...) axioms and division rules. Also, we provide a novel definition and characterization of the absolute priority rule. (shrink)

We argue that behavioural public policies (BPP) should be categorized by the kind of mechanism through which they operate, not by the kind of treatment they implement. Reviewing the energy consumption BPP literature, we argue (i) that BPPs are currently categorized by treatment; (ii) that treatment-based categories are subject to mechanistic heterogeneity: there is substantial variation of mechanisms within each treatment type; and (iii) that they also display mechanistic overlap: there is substantial overlap between mechanisms across treatment types. Consequently, current (...) categorizations of BPPs do not reveal the conditions of their efficacy and should be revised to better reflect mechanistic information. (shrink)

This article presents a fairness principle for evaluating decision-making based on predictions: a decision rule is unfair when the individuals directly impacted by the decisions who are equal with respect to the features that justify inequalities in outcomes do not have the same statistical prospects of being benefited or harmed by them, irrespective of their socially salient morally arbitrary traits. The principle can be used to evaluate prediction-based decision-making from the point of view of a wide range of antecedently specified (...) substantive views about justice in outcome distributions. (shrink)

In A Treatise of Human Nature, Hume argues that morality pertains primarily to character, and that actions have moral content only to the extent that they signal good or bad character. I formalize his signalling theory of moral/immoral actions using simple game-theoretic models. Conditions exist under which there is a separating equilibrium in which actions do indeed credibly signal character, but conditions also exist in which there is only a pooling or semi-separating equilibrium. A tradeoff is identified between the signalling (...) value of actions, and the consequentialist goal of incentivizing all character types to choose beneficial actions. (shrink)

If preference-based freedom rankings are based on all-things-considered preferences, they risk judging phenomena of adaptive preferences as freedom enhancing. As a remedy, it has been suggested to base preference-based freedom rankings on reasonable preferences. But this approach is also problematic. This article argues that the quest for a remedy is unnecessary. All-things-considered preferences retain information on whether the availability of an option contributes to the value that freedom has for a person’s self-expression. If preference-based freedom rankings use all-things-considered preferences to (...) evaluate whether an option contributes to a person’s self-expression, they are immune to the problem posed by adaptive preferences. (shrink)

When is state coercion for the provision of public goods justified? And how should the social surplus of public goods be distributed? Philosophers approach these questions by distinguishing between essential and discretionary public goods. This article explains the intractability of this distinction, and presents two upshots. First, if governments provide configurations of public goods that simultaneously serve essential and discretionary purposes, the scope for justifiable complaints by honest holdouts is narrower than commonly assumed. Second, however, claims to distributive fairness in (...) the provision of public goods also turn out to be more complex to assess. (shrink)

This book shows how careful attention to moral reasoning can enrich economic understanding and clarify the importance and the limits of an economic analysis of policy problems.

Alfred Sohn-Rethel's Intellectual and Manual Labour is one of the major texts of post-war Marxist theory. A tremendous influence on the major writers of the Frankfurt School, with ongoing relevance to current debates about value, abstraction, and domination, Sohn-Rethel's ideas are here presented at their fullest scope and with their greatest theoretical clarity. Out of print for many years, this new Historical Materialism edition contains a new introduction by Chris O'Kane, an afterword by Chris Arthur, and a complete compilation of (...) the responses to Intellectual and Manual Labour published in the Italian journal Lotta Continua, including a substantial article by Antonio Negri. (shrink)

Philosophical arguments about government contracting either categorically oppose it on legitimacy grounds or see it as largely anodyne. I argue for a normatively distinct kind of contracting – the advance market commitment, or AMC – and show that it is justified by the same liberal values that justify the welfare state.

Teaching a compulsory, large-scale Philosophy of Economics (PoE) course to economics students presents distinct challenges. Instructors face a heterogeneous student body with varying levels of interest in the topics, diverse occupational goals and a limited philosophical background. Unlike elective courses, for which students self-select based on interest, a compulsory course entails motivating disengaged students and managing their expectations. We put forward the case for a student-oriented approach to teaching PoE, emphasising four key strategies: recognising students’ limited philosophical knowledge, demonstrating the (...) relevance of PoE to their professional and personal lives, using real-world problems to engage them and avoiding the oversimplification of topics. We argue that PoE instruction should account for the distinct characteristics of economics students, moving beyond a supply-driven approach. Our suggestions aim to enhance student engagement and provide practical guidance for instructors navigating the challenges of teaching PoE at scale. (shrink)