Let us begin this journey with a seldom discussed difference between the traditional view of economics, as seen from the curriculum guidelines of the American Economics Association, and the view of economics as set forth within Catholic Social Teaching (CST); what is it that defines the vision of economics?
Within traditional economics and a part of every principles class is the distinction between “positive” and “normative” economics. As accepted by many (but not all) within the economics profession over one hundred years ago:
(A) positive science may be defined as a body of systematized knowledge concerning what is; a normative or regulative science as a body of systematized knowledge relating to criteria of what ought to be, and concerned therefore with the ideal as distinguished from the actual . . . The object of a positive science is the establishment of uniformities, of a normative science the determination of ideals. (Keynes (1895) 1917, 34-35, emphasis in the original)
Proper economics is a positive science; the normative aspects are to be checked at the door for they necessarily involve value judgments. When asked by a politician what the effects of a tax increase will be, an economist can provide an answer. When asked if taxes should be increased, the properly trained economist would deflect the question back to the politician inasmuch as the answer would require judgment call. The politician could rephrase the question, “given that society has set a goal of equalizing incomes, would an increase in taxes as I have described be the least cost manner to achieve the goal society has set?” To this the economist could respond yea or nay and be within the realm of positive science.
The trick of the politician was to declare the income equalization as an a priori goal of society. As long as the economist has nothing to do with picking the goal but only with finding the most efficient manner to achieve them, then that economist is freed from expressing any statement of moral value. The economist is thus allowed to remain a scientist dealing with “laws of economics” in much the same way that an astrophysicist deals with “laws of planetary motion”. The laws of economics, then, deal with how to achieve a goal, or in an earlier way of stating it, an end in the most efficient manner:
As we have seen already, there are no economic ends. There are only economical and uneconomical ways of achieving given ends. We cannot say that the pursuit of given ends is uneconomical because the ends are uneconomical; we can only say it is uneconomical if the ends are pursued with an unnecessary expenditure of means. (Robbins (1932) 2007, 129)
And:
Economics deals with ascertainable facts. (Robbins (1932) 2007, 132)
What all of this is presupposing is that only that which is observable and measureable is to be admitted to the realm of economic science. Economic activity happens; economists merely try to discern what may be seen and measured and then systematize that knowledge.
The Catholic approach to economic activity is not that it simply happens; rather it happens for a reason. What is that reason?
St. Augustine wrote: “We all want to live happily; in the whole human race there is no one who does not assent to this proposition, even before it is fully articulated.” The Church recognizes, as did Abraham Maslow, that first step to living happily is to achieve some degree of physiological well-being, to stand atop Maslow’s first level in a hierarchy of needs. Economic activity happens for a reason, the earth and all its bounty was created so that through work (more this later) humanity could begin walking the path towards happiness.
Given this teleological foundation, this longing for happiness in the midst of a world provided for that purpose, the goals do matter and the ends to achieve those goals become secondary. Even more, economic activity moves beyond consideration of only that which may be seen, it becomes more than a science based upon empirical positivism. Meaning, an unobservable characteristic of human interaction, and power, the power to influence, shape, and determine outcomes, also an unobservable characteristic of human existence, become significant. The latter, power, becomes especially significant because social structures arise from the interaction of people living together, of societies forming. Social structures can arise which become intrinsically wrong because they deny the individual the freedom to pursue happiness. Andrew Yuengert, speaking to the Mission Driven Business Education Conference at Notre Dame, August 3, 2010, showed the flaw in the social structure of slavery when he said: The freedom of the individual to act is crucial to human happiness: a well-kept slavery is a greater affront to human dignity that the poverty of a free person.”
The positive/normative dichotomy is asserted in all the textbooks, but most of the scholarly articles on methodology that deal with it reject the distinction as clear or easy to make.
ReplyDeleteI have made it a point to state clearly when I get a chance to speak to neoclassical economics that there is no such thing as a "positive" statement in economics that is meaningful. One time in Dublin an economist rose to the challenge and said, "how about the rate of unemployment in Ireland is 15%. That is an "is" statement." It was the perfect set up and I wished I had paid him to use that example because that week the Irish government had redefined "official unemployment" to exclude anyone who was unemployed and over 50 years of age (they just joined the list of retired, the state benefit was the same), proving my point that terms like unemployment are social and often politically created, and thus value judgments play a strong role in creating and measuring them. We do not find any of the main concepts we use in economics in nature, we have to create them, and theories, along with the philosophical preconceptions that form the foundations of theories, play critical roles in this process. So that all economic theories are heavily value laden and cannot help being. Even the act of choosing what to look at and what to ignore is an expression of values. These are points Gunnar Myrdal made often in the 50s and 60s. In fact, Myrdal's carrer is a good illustration of this issue, for he originally raised the value ladenness of economics as a critique of economic theories (see his masterful, The Political Element in the Development of Economic Theory, yet when he started to do applied work (his American Dilemma and Asican Drama being two of the most important works in social sciences in 20th century, IMHO) he came to realize that you cannot do social analysis without values, and that the best and most honest thing a scholar can do is to explicitly state and defend the values upon which your analysis is based. How different economics would be if that were the norm!!