Foucault’s research reveals that “modern human sciences (biological, psychological, social) purport to offer universal scientific truths about human nature that are, in fact, often mere expressions of ethical and political commitments of a particular society.”[1] Our goal in this paper is to argue that the current grounding of economic theory in the apparently objective, neutral, and widely observable condition of scarcity is actually based on certain underlying methodological, ethical and political commitments.
Lionel Robbins (1932) argued the economics was not about “material welfare: the provision of goods to further prosperity and development” but rather, it was about “scarcity: the provision of goods to fulfill all wants”, whether conducive to welfare or not. His arguments came to dominate the field, and drove earlier conceptions out of sight; see Cooter and Rapopport (1984) for details. Nearly all modern conventional textbooks use scarcity as the fundamental defining problem of economics. For instance, the opening paragraph of a microeconomics textbook by Perloff (2001) states that: “If each of us could get all of the food, clothing and toys we wanted without working, no one would study economics. Unfortunately, most of the good things in life are scarce – we can’t all have as much as we want. Thus scarcity is the mother of economics.”
Both logical positivism and Weber’s idea that social science must be value-free strongly influenced the development of economic methodology in the early twentieth century. The full implications of the subsequent collapse of logical positivism have yet to be absorbed. Even deeper is the realization that facts and values often cannot be sharply separated. Even Quine, whose attack on the “two dogmas” of empiricism was influential in destroying positivism, did not accept the idea that values were also involved in the formation and formulation, as well as acceptance and rejection, of scientific theories. Putnam (2002) provides a detailed exposition of these ideas, and shows how aesthetic and epistemic values of elegance, simplicity, coherence, power etc. are inevitably involved in the selection of scientific theories.
Some statements are clearly factual and objective, while others are clearly evaluative and normative. It does not follow that all sentences can be classified into one or the other category; see Mongin (2006) for several illustrations. Deeper examination, as in Hausman and McPherson (2006), shows that facts and values are entangled and cannot be separated in a large class of statements central to economic theories. As a whole, there has been only peripheral recognition of these issues among economists. A recent survey by Hands (2009) concludes that: “So most modern economists generally consider rational choice theory to be a positive, not a normative, theory; endorse the position that normative statements/concepts should be prohibited from scientific economics; and equate normative theories/presuppositions with ethics.” Learning to think without the empiricist dogmas that have been part of our training is a real challenge, with correspondingly great potential promise. Paraphrasing Putnam (2002), developing a methodology which takes into account the collapse of positivism as well as the collapse of the fact/value distinction will open up “a whole new field of intellectual possibilities in every important area.” In this paper, we hope to demonstrate the necessity of pursuing developments along these lines by showing how values are built into the foundations of modern economic theory.
[1] This is a paraphrase of the entry for Michel Foucault in Stanford Encyclopaedia of Philosophy (accessed 23 February 2008): http://plato.stanford.edu/entries/foucault/; it has since been revised, but because it so aptly describes our main theme in this paper, we have retained the quote.