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Issue no.
15; September 4, 2002
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This
is the second anniversary issue. The Crisis in Economics: The Post-Autistic Economics
Movement:
The first 600 days, a collection of
material from the first 12 issues, will be published by Routledge early
in 2003.
In this issue:
Deirdre McCloskey
Yes, There is Something Worth Keeping in Microeconomics
James K. Galbraith
Can we please move on? A
note on the Guerrien debate
Ha-Joon Chang
Kicking Away the Ladder
Emmanuelle Benicourt
Is Amartya Sen a Post-Autistic Economist?
Claude Mouchot
Towards a Realistic Epistemology for Economics
Robert E. Lane
The Economist’s Long Farewell
Yes, There is Something Worth Keeping in Microeconomics
Deirdre McCloskey (University of Illinois at Chicago / Erasmus
University Rotterdam)
Bernard Guerrien is severe on
Messrs. [and no Mesdames, I note] Varian, Schotter, Kreps, Mas-Collel,
Whinston, and Green, and I think he’s quite right to be so. The usual idea of “microeconomics”
is, as Guerrien avers, formalism useful only for the generation of articles
in the American Economic Review and worse. It’s scandalous that game theory and GE and overlapping
generations and other mere existence theorems are taught as “tools.” As we say in American English (with
thanks to Yiddish): tools, schmools.
No physicist would consider such stuff scientific. She would want tools that can
measure.
The problem comes partly from a
terminological confusion.
“Theorist” has come to mean in economics “guys trained in
Mathematics-Department math.” (I
note again that this Hilbert/Bourbaki style has nothing, nada, rien to do
with the sort of math that physicists and engineers actually use to investigate
the world; go have a look at The Physical Review and you’ll see what I
mean.) Since the “theorists” so
defined can’t do anything else (like give a substantive course in economic
history or in urban economics), they get assigned to first-year graduate
courses. It’s their comparative
advantage, considering that the department has made the mistake of hiring
them in the first place.
The result has been a
catastrophe for economic education.
Most economists arrive on the job without knowing how to think like
economists. In fact they’ve been
specifically and elaborately trained by the “theorists” not to think
like economists, but to think like Hilbert/Bourbaki mathematicians, though of
course to a childishly simple standard.
(By the way, a distinguished committee of the American Economic
Association was some years ago on the edge of doing something about the
catastrophe; Bob Lucas vetoed the proposal, since he wants economics to carry
on being unscientific.)
So I agree. I highly recommend a pamphlet just
published at the University of Chicago Press, The Secret Sins of Economics,
which shows how thoroughly I agree.
My disagreement with Guerrien is
merely this: if microeconomics were properly taught it would be obvious that
it does indeed have numerous scientific uses. Not the Whinston and Green stuff, on
the whole. Most of that is
useless, unless you think “use” means not “good for grasping the world
in a quantitative way” (called “science”) but “good for generating
publishable articles.”
Yet there is tons of really
useful stuff in, say, (the lamentable George) Stigler, The Theory of Price,
or in Steve Landsburg’s or David [sic] Friedman’s similar books; or
(if I may) in a wonderful but neglected book published last in 1985, The
Applied Theory of Price.
(It’s available free in its entirety, diagrams and all, on the
web site www.uic.edu/~deirdre2;
David Friedman’s is available free on his web site, too.) If graduate courses taught “micro
theory” in this sense—namely, ideas about how to show this or that effect in
an economy, quantitatively—economists would be good scientists instead of bad
philosophers. Some of the
economists, admittedly, survive the first-year courses and go on to actually
think about economic ideas and to measure their oomph in the world. But so do some children survive
households with beatings and sexual abuse.
It just won’t do, therefore, to
say as Guerrien does that price theory (as we Chicago types prefer to call
it) “obviously contradicts almost everything that we observe around us.” Huh? When OPEC (viz., Saudi Arabia) cut the supply of oil in
1973, didn’t the relative price of oil rise, just as a simple
supply-and-demand model would suggest?
And when the population of Europe fell by a third in 1348-50 didn’t
the ratio of wages to rents double, just as a simple
production-function-and-marginal-productivity model would suggest? The point is that both of these can
be made as quantitatively serious as you want. They are real scientific ideas. If you want to see hundreds upon hundreds of such
examples, see The Applied Theory of Price---or, indeed, the serious
scientific work of any serious economic scientist, someone actually trying to
measure the oomph of an effect: Robert Fogel, say, or Moses Abramowitz, or
Simon Kuznets (their teacher).
Let me put down the following
challenge to the people who think they hate, just hate, neoclassical price
theory. Go work through a
serious book about it—not the “theoretical” micro that Guerrien and I both
think is silly---and do the applied problems. If you can’t get inside the hundreds
of empirical exercises in, say, my book, or in the applications of price
theory as they occur (obscured by nonsensical existence theorems) in the
neoclassical literature then you don’t really know what the tradition of
Marshall-Wicksell-Friedman-Coase-Alchian is about, and you are not qualified
to sneer at it, right? Doesn’t
that sound fair? I think so, and
I would apply it to my own understanding of Marxian or institutional
economics.
-------------------------------------
Deirdre McCloskey’s books include The Rhetoric of Economics (Rhetoric of the
Human Sciences), The
Vices of Economists : The Virtues of the Bourgeoisie, and Knowledge
and Persuasion in Economics
SUGGESTED
CITATION:
Deirdre McCloskey,
“Yes, There is Something Worth Keeping in Microeconomics”, post-autistic economics review, issue
no. 15, September 4, 2002, article 1. http://www.btinternet.com/~pae_news/review/issue15.htm
Can we please move on? A note on the Guerrien debate
James
K. Galbraith (University
of Texas at Austin, USA)
Gentlemen, ladies,
comrades... Your contributions
to the Guerrien debate have been reflective, even wise occasionally. But even where points were most
deftly made, as they were (to my taste) by Peter Dorman and by Steve Keen,
something about the discussion troubles me. There is here the flavor of a certain type of social
activist, earnest and dedicated, honorable in every way, yet so caught up in
the problems of the poor that one comes finally to understand they would be
quite lost if poverty were ever made to disappear.
In other words, aren’t we
wasting our time? Isn’t there more important work to do? In the immortal words of Thorstein
Veblen:
If we
are getting restless under the taxonomy of a monocotyledonous wage doctrine
and a cryptogamic theory of interest, with involute, loculicidal, tomentous
and moniliform variants, what is
the cytoplasm, centrosome, or
karyokinetic process to which we may turn, and, in which we may find surcease
from the metaphysics of normality and controlling principle?
Critics of the neoclassical
doctrines have penned, over more than a century, millions of words -- though
few as good as those just cited.
But how many have devoted themselves to new and alternative theory, to
an economics that was not merely a variant or a gloss on neoclassical
doctrine? Keynes. Robinson. Schumpeter. Ayres. Simon. Leontief. Galbraith père. Georgescu-Roegen. Sraffa. Minsky. Davidson. Nelson and Winter, too tentatively. Pasinetti. Peter Albin.
And since then? Yes I know there are others, including some
readers of these very words. But
aren’t you tired of embedding your originalities in critical restatements,
however elegant, of what is already clear to thousands of bright undergraduates
on the second day of class?
It is time to get on with it. We
need a replacement for neoclassical economics. A new curriculum. Let’s build it. Let me suggest a few key
characteristics of what should follow.
1. The
micro/macro distinction should be abolished. It exists in principle to
separate irreconcilable doctrines.
The new classicals have recognized this, and have abolished macro. (As
Evelyn Waugh said of Randolph Churchill’s surgeons, it was a miracle, they
found the only part that was not malignant, and removed it.) We should
take the opposite tack: toward a theory of human behavior based on principles
of social interaction.
2.
Empirical work should be privileged.
Real science does not protect bad theory by concentrating on
unobservables. It is, rather, a
process of interaction between conjecture and evidence. In the history of science, new
technologies for measurement have often preceded new ideas. Believe it or not, this could happen in
economics too.
3. Mathematics should mainly clarify the
complex implications of simple constructs, not obscure simple ideas behind complex formulae. Dynamical systems (as Steve Keen
rightly insists), fractal geometries, cellular automata all help us to
understand the principles underlying evolutionary social dynamics. They are also fascinating. They help
students learn to think.
Mathematics should lie, in other words, at the essential core of a new
curriculum; it should not be
deployed defensively, as the protective belt.
4. Our economics should teach the great
thinkers, notably Smith, Marx, Keynes, Veblen and Schumpeter (to restrict
myself tactfully to a few of the honored dead). We need not reinvent the field; nor should we abandon it.
Economics over the sweep of history is not mainly about scarcity (which
technology overcomes) nor about choice (which is generally neither free nor
the defining characteristic of freedom). Rather, economics is about value,
distribution, growth,
stabilization, evolution. The great ideas in these areas, and the history in which they were
embedded, are fundamental. They
should be taught, and not as dogma but rather as a sequence of explorations.1
5. Pop constructs derived from
neoclassical abstractions (social capital, natural capital....) are not part
of our canon. While they are
noteworthy as efforts to reconcile neoclassical ideas and policy commitments
to real social problems, these constructs also extend, rather than attempt to
overcome, the logical defects of the neoclassical system. From the standpoint of post-autism,
therefore, they represent a dead end.
6. Nor should we accept the
reconstruction of economics as
an amalgam of interest-group politics. This approach -- popular these days at
the American Economic Association -- has become a way of isolating certain
dissenters who cannot conveniently be suppressed. But the fact that race, gender, and the environment
are important social constructs does not mean that economics requires a
separate branch for the economics of race, another for the economics of
gender, and another for “sustainable development.” It should instead mean that the core of what we teach
should handle these questions (which relate to power, discrimination,
entropy, and so forth) in a way that is central to the discipline we
espouse.
7. An economics of modern capitalism
should study the actual, existing features and behavior of our system. Households, business enterprises of
all the types (including some characterized by diminishing and others by
increasing returns, some with monopoly power and others without), money and
credit systems, governments and their budgets, and the international system
are all parts of a nested, hierarchical structure of rule- and convention-
setting institutions, of interacting and sometimes conflicting sources of
power. Their behavior is characteristically unstable and sometimes
violent. To have reduced the
subject to shapeless households, firms and markets, all linked by a uniform
conceptual structure of supply and demand curves (labor market, capital
market, goods markets...) - and in equilibrium! – that was the original
neoclassical mistake, already analyzed by Keynes in the first pages of the General
Theory.
8. Accounting matters. We should work with and teach from
the full spectrum of information sources, not merely sample surveys (with
their obsessive focus on personal characteristics such as years of schooling)
and the national accounts, but also credit, trade, industrial and financial
data. Not to mention linking
economic measurements to other information: political events, the
environment, quality of life, demography, health.
9. A focus on social structures and the
data that record them requires new empirical methods. The study of dispersions, of
inequalities, is intrinsic to the study of power. Neoclassical economics with its bias in favor of the
sample survey, the gini coefficient, and the assumption of normality in the
distribution of errors has neglected the mathematics and statistics of
dispersion measures. There are
large gains to be had here, for small investments of effort. Likewise the
study of social structures cannot be done properly with parametric techniques
held hostage to the dogma of hypothesis and test. There is no single formula
for empirical learning. Numerical
taxonomy, discriminant analysis, multidimensional scaling, and many other
techniques are available for studying the phenomena of real economic systems,
and we should learn, use, and teach them.2
10. Finally, our economics is about
problems that need to be solved. There remain before us the pursuit of full employment, balanced growth,
price stability, development, a sustainable standard of life. That is why students once were
attracted to our field. That is
why they abandon it now. That is
also why, if we develop a coherent research program, and a teaching
curriculum derived from it, that broadly respect the principles outlined
above, we will prevail in the long run.
Notes
1.I thank Pedro Conceição for
his characteristic insightfulness on this point.
. In my view, the study of
inequalities and social formations provides the linkage between Keynesian
macro principles and the behavior of smaller social formations – but I will not try to persuade you of
that right now. ________________________
On Sept. 1, James K. Galbraith became the Lloyd M. Bentsen, jr.
Chair in Government/Business Relations at the University of Texas at Austin,
where he directs the University of Texas Inequality Project ( ttp://utip.gov.utexas.edu ) He is also a Senior Scholar of the Levy Economics
Institute, and his most recent book, co-edited with Maureen Berner, is Inequality
and Industrial Change: A Global View (Cambridge, 2001).
SUGGESTED
CITATION:
James K. Galbraith,
“Can we please move on? A note
on the Guerrien debate”, post-autistic
economics review, issue no. 15,
September 4, 2002, article 2. http://www.btinternet.com/~pae_news/review/issue15.htm
Kicking Away the Ladder: How the
Economic and Intellectual Histories of Capitalism Have Been Re-Written to
Justify Neo-Liberal Capitalism
Ha-Joon
Chang (Cambridge
University, UK)
There is currently great
pressure on developing countries to adopt a set of “good policies” and “good
institutions” – such as liberalisation of trade and investment and strong patent law – to
foster their economic development. When some developing countries show
reluctance in adopting them, the proponents of this recipe often find it
difficult to understand these countries’ stupidity in not accepting such a
tried and tested recipe for development. After all, they argue, these are the
policies and the institutions that the developed countries had used in the
past in order to become rich. Their
belief in their own recommendation is so absolute that in their view it has
to be imposed on the developing countries through strong bilateral and
multilateral external pressures, even when these countries don’t want them.
Naturally, there have been
heated debates on whether these recommended policies and institutions are
appropriate for developing countries. However, curiously, even many of those
who are sceptical of the applicability of these policies and institutions to
the developing countries take it for granted that these were the policies and
the institutions that were used by the developed countries when they
themselves were developing countries.
Contrary to the conventional
wisdom, the historical fact is that the rich countries did not develop on the
basis of the policies and the institutions that they now recommend to, and
often force upon, the developing countries. Unfortunately, this fact is
little known these days because the “official historians” of capitalism have
been very successful in re-writing its history.
Almost all of today’s rich
countries used tariff protection and subsidies to develop their industries.
Interestingly, Britain and the USA, the two countries that are supposed to
have reached the summit of the world economy through their free-market,
free-trade policy, are actually the ones that had most aggressively used
protection and subsidies.
Contrary to the popular myth,
Britain had been an aggressive user, and in certain areas a pioneer, of
activist policies intended to promote its industries. Such policies, although
limited in scope, date back from the 14th century (Edward III) and
the 15th century (Henry VII) in relation to woollen manufacturing,
the leading industry of the time.
England then was an exporter of raw wool to the Low Countries, and
Henry VII for example tried to change this by taxing raw wool exports and
poaching skilled workers from the Low Countries.
Particularly between the trade
policy reform of its first Prime Minister Robert Walpole in 1721 and its
adoption of free trade around 1860, Britain used very dirigiste trade and industrial policies, involving measures very
similar to what countries like Japan and Korea later used in order to develop
their industries. During this period, it protected its industries a lot more
heavily than did France, the supposed dirigiste
counterpoint to its free-trade, free-market system. Given this history,
argued Friedrich List, the leading German economist of the mid-19th
century, Britain preaching free trade to less advanced countries like Germany
and the USA was like someone trying to “kick away the ladder” with which he
had climbed to the top.
List was not alone in seeing the
matter in this light. Many American thinkers shared this view. Indeed, it was
American thinkers like Alexander Hamilton, the first Treasury Secretary of
the USA, and the (now-forgotten) economist Daniel Raymond, who first
systematically developed the infant industry argument. Indeed, List, who is
commonly known as the father of the infant industry argument, in fact started
out as a free-trader (he was an ardent supporter of German customs union – Zollverein) and learnt about this
argument during his exile in the USA during the 1820s
Little known today, the
intellectual interaction between the USA and Germany during the 19th
century did not end there. The German Historical School – represented by
people like Wilhelm Roscher, Bruno Hildebrand, Karl Knies, Gustav Schmoller,
and Werner Sombart – attracted a lot of American economists in the late 19th
century. The patron saint of American Neoclassical economics, John Bates
Clark, in whose name the most prestigious award for young (under 40) American
economists is given today, went to Germany in 1873 and studied the German
Historical School under Roscher and Knies, although he gradually drifted away
from it.Richard Ely, one of the
leading American economists of the time, also studied under Knies and
influenced the American Institutionalist School through his disciple, John
Commons. Ely was one of the founding fathers of the American Economic
Association; to this day, the biggest public lecture at the Association’s
annual meeting is given in Ely’s name, although few of the present AEA
members would know who he was.
Between the Civil War and the
Second World War, the USA was literally the most heavily protected economy in
the world. In this context, it is important to note that the American Civil
War was fought on the issue of tariff as much as, if not more, on the issue
of slavery. Of the two major issues that divided the North and the South, the
South had actually more to fear on the tariff front than on the slavery
front. Abraham Lincoln was a well-known protectionist who cut his political
teeth under the charismatic politician Henry Clay in the Whig Party, which
advocated the “American System” based on infrastructural development and
protectionism (thus named on recognition that free trade is for the British
interest). One of Lincoln’s top economic advisors was the famous
protectionist economist, Henry Carey, who once was described as “the only
American economist of importance” by Marx and Engels in the early 1850s but
has now been almost completely air-brushed out of the history of American
economic thought. On the other hand, Lincoln thought that African Americans
were racially inferior and that slave emancipation was an idealistic proposal
with no prospect of immediate implementation – he is said to have emancipated the slaves in 1862 as a
strategic move to win the War rather than out of some moral conviction.
In protecting their industries,
the Americans were going against the advice of such prominent economists as
Adam Smith and Jean Baptiste Say, who saw the country’s future in
agriculture. However, the Americans knew exactly what the game was. They knew
that Britain reached the top through protection and subsidies and therefore
that they needed to do the same if they were going to get anywhere.
Criticising the British preaching of free trade to his country, Ulysses
Grant, the Civil War hero and the US President between 1868-1876, retorted
that “within 200 years, when America has gotten out of protection all that it
can offer, it too will adopt free trade”. When his country later reached the
top after the Second World War, it too started “kicking away the ladder” by
preaching and forcing free trade to the less developed countries.
The UK and the USA may be
the more dramatic examples, but almost all the rest of the developed world
today used tariffs, subsidies and other means to promote their industries in
the earlier stages of their development. Cases like Germany, Japan, and Korea
are well known in this respect. But even Sweden, which later came to
represent the “small open economy” to many economists had also strategically
used tariffs, subsidies, cartels, and state support for R&D to develop
key industries, especially textile, steel, and engineering.
There were some
exceptions like the Netherlands and Switzerland that have maintained free
trade since the late 18th century. However, these were countries
that were already on the frontier of technological development by the 18th
centuries and therefore did not need much protection. Also, it should be
noted that the Netherlands deployed an impressive range of interventionist
measures up till the 17th century in order to build up its
maritime and commercial supremacy. Moreover, Switzerland did not have a
patent law until 1907, flying directly against the emphasis that today’s
orthodoxy puts on the protection of intellectual property rights (see below).
More interestingly, the Netherlands abolished its 1817 patent law in 1869 on
the ground that patents are politically-created monopolies inconsistent with
its free-market principles – a position that seems to elude most of today’s
free-market economists – and did not introduce another patent law until 1912.
The story is similar in relation
to institutional development. In the earlier stages of their development,
today’s developed countries did not even have such “basic” institutions as
professional civil service, central bank, and patent law. It was only after
the Pendleton Act in 1883 that the US federal government started recruiting
its employees through a competitive process. The central bank, an institution
dear to the heart of today’s free-market economists, did not exist in most of
today’s rich countries until the early 20th century – not least
because the free-market economists of the day condemned it as a mechanism for
unjustly bailing out imprudent borrowers. The US central bank (the Federal
Reserve Board) was set up only in 1913 and the Italian central bank did not
even have a note issue monopoly until 1926. Many countries allowed patenting
of foreign invention until the late 19th century. As I mentioned
above, Switzerland and the Netherlands refused to introduce a patent law
despite international pressure until 1907 and 1912 respectively, thus freely
“stole” technologies from abroad. The examples can go on.
One important conclusion that
emerges from the history of institutional development is that it took the
developed countries a long time to develop institutions in their earlier days
of development. Institutions typically took decades, and sometimes
generations, to develop. Just to give one example, the need for central
banking was perceived at least in some circles from at least the 17th
century, but the first “real” central bank, the Bank of England, was
instituted only in 1844, some two centuries later.
Another important point emerges
is that the levels of institutional development in today’s developed
countries in the earlier period were much lower than those in today’s
developing countries. For example, measured by the (admittedly highly
imperfect) income level, in 1820, the UK was at a somewhat higher level of
development than that of India today, but it did not even have many of the
most “basic” institutions that India has today. It did not have universal
suffrage (it did not even have universal male
suffrage), a central bank, income tax, generalised limited liability, a
generalised bankruptcy law, a professional bureaucracy, meaningful securities
regulations, and even minimal labour regulations (except for a couple of
minimal and hardly-enforced regulations on child labour).
If the policies and institutions
that the rich countries are recommending to the poor countries are not the
ones that they themselves used when they were developing, what is going on?
We can only conclude that the rich countries are trying to kick away the
ladder that allowed them to climb where they are. It is no coincidence that
economic development has become more difficult during the last two decades
when the developed countries started turning on the pressure on the
developing countries to adopt the so-called “global standard” policies and
institutions.
During this period, the average
annual per capita income growth rate for the developing countries has been
halved from 3% in the previous two decades (1960-80) to 1.5%. In particular, Latin America virtually stopped growing, while
Sub-Saharan Africa and most ex-Communist countries have experienced a fall in
absolute income. Economic instability has increased markedly, as manifested
in the dozens of financial crises we have witnessed over the last decade
alone. Income inequality has been growing in many developing countries and
poverty has increased, rather than decreased, in a significant number of
them.
What can be done to
change this?
First, the historical
facts about the historical experiences of the developed countries should be
more widely publicised. This is not just a matter of “getting history right”,
but also of allowing the developing countries to make more informed choices.
Second, the
conditions attached to bilateral and multilateral financial assistance to
developing countries should be radically changed. It should be accepted that
the orthodox recipe is not working, and also that there can be no “best
practice” policies that everyone should use.
Third, the WTO rules
should be re-written so that the developing countries can more actively use
tariffs and subsidies for industrial development. They should also be allowed
to have less stringent patent laws and other intellectual property rights
laws.
Fourth, improvements in
institutions should be encouraged, but this should not be equated with
imposing a fixed set of (in practice, today’s – not even yesterday’s –
Anglo-American) institutions on all countries. Special care has to be taken
in order not to demand excessively rapid upgrading of institutions by the
developing countries, especially given that they already have quite developed
institutions when compared to today’s developed countries at comparable
stages of development, and given that establishing and running new
institutions is costly.
By being allowed to adopt
policies and institutions that are more suitable to their conditions, the
developing countries will be able to develop faster. This will also benefit
the developed countries in the long run, as it will increase their trade and
investment opportunities. That the developed countries cannot see this is the
tragedy of our time.
___________________
Ha-Joon Chang (hjc1001@econ.cam.ac.uk)
teaches in the Faculty of Economics, University of Cambridge. This article is
based on his new book, Kicking
Away the Ladder – Development Strategy in Historical Perspective,
which was published by Anthem Press, London, on 10 June 2002.
SUGGESTED
CITATION:
Ha-Joon Chang,
“Kicking Away the Ladder”, post-autistic economics review, issue no. 15, September 4, 2002, article 3. http://www.btinternet.com/~pae_news/review/issue15.htm
Is Amartya Sen a Post-Autistic
Economist?
Emmanuelle Benicourt
(co-founder of Austisme-Économie, Ecole des Hautes Etudes en Sciences
Sociales - Paris)
The numerous reactions to Bernard Guerrien’s essay
(“Is There Anything Worth Keeping in Standard Micro-Economics?”, pae
review n°12 and n°13) show that there is no consensus among heterodox
economists concerning what constitutes “autistic” economics. In this article,
I would like to initiate another but parallel debate by questioning the
widely held opinion that Amartya Sen has made an important contribution to
post-autistic economics. I wonder if he is really, as Geoff Harcourt implies,
“a real force for good in our discipline and [if] the award of the Nobel
Prize to him is a positive signal, to be embraced, not belittled”.
Before examining Amartya Sen’s theoretical system,
let’s recall that he was not awarded the Nobel Prize for his eventual
“heterodox” research programme, but for his very mainstream contributions to
“standard” economics - particularly for his work on Social Choice (Nobel
Press Release, October 14, 1998). The Prize thus mainly concerns Sen’s early
work in which he tried to go beyond Arrow’s “Impossibility Theorem” by
weakening certain formal – and secondary – conditions (see, for example, Collective Choice and Social Welfare,
1970). The 1998 Nobel Prize, therefore, does not reward Sen’s possible
“de-autistification” of economics.
Some people may argue that although Amartya Sen
oriented his early investigations to mainstream issues, a shift can be
observed in his publications since the early 80’s. Indeed, from 1982 on,
Amartya Sen focused his efforts on building the so called “capability”
approach. For many economists (whether orthodox or heterodox), this new
system constitutes real progress in economic theory: it “reintroduces”
ethical and philosophical considerations into economics. I will argue,
however, that although Amartya Sen’s “capability” approach treats some
philosophical issues (as do all economic theories), his underlying
theoretical system remains undeniably neoclassical.
Sen’s
“capability” approach
“Functionings” instead of
“utilities”
The concept of capability
was introduced so as to overcome the deficiencies of what Sen considers to be
the “rawlsian” and the “utilitarian” approaches. He defines his concept as
each individual’s freedom to achieve a particular life.
As he puts it : “The expression [capability] was
picked to represent the alternative combinations of things a person is able
to do or be - the various ‘functionings’ he or she can achieve (…)
Functionings represent parts of the state of a person – in particular the
various things that he or she manages to do or be in leading a life. The
capability of a person reflects the alternative combinations of functionings
the person can achieve, and from which he or she can choose one collection.
The approach is based on a view of living as a combination of various ‘doings
and beings’, with quality of life to be assessed in terms of the capability
to achieve valuable functionings” (“Capability and well-being”, 1993, p. 31).
In his last book, Development as
Freedom, Sen explains that
“a person’s ‘capability’ refers to the alternative combinations of
functionings that are feasible for her to achieve. Capability is thus a kind
of freedom: the substantive freedom to achieve alternative functioning
combinations (or, less formally put, the freedom to achieve various
lifestyles).” (Development as Freedom,
1999, p. 74-75).
Just a variation of
standard microeconomics
The theoretical approach proposed seems, at first
sight, revolutionary. However, when Sen explicitly describes his system
(particularly in Commodities and
Capabilities, 1985), it becomes
clear that it is just a variation of the mainstream approach. Instead of
reasoning in terms of an n-dimensional space composed of “commodities” (goods
or utilities), Sen proposes a space of “functionings”.
Sen starts from the standard model, and takes two
steps. First, following an approach developed by Gorman (1959) and Lancaster
(1966), he considers that it is useful to move to the space of the
“characteristics” of goods, rather than that of the goods themselves. Second,
Sen endows each individual with a set of “utilization functions” (reflecting
what each individual can do or be with the characteristics of goods), and
with a set of commodities (what he calls the ‘entitlement set’). The
functionings of each individual will then depend on the choice of a
particular commodity vector and of a utilisation function (see Commodities and Capabilities p. 11-14,
and p. 26-27). The capability of each individual is then given by all the
possible functionings an individual can achieve. The formal presentation of
Sen’s system (by Sen himself) shows how similar it is with the standard model
and contrasts sharply with his “literary” essays where he invokes his
approach.
What are Amartya
Sen’s contributions to post-autistic economics ?
I just don’t understand how this
theoretical system (which contains many inconsistencies, which I shall not
dwell upon here) can be considered as a contribution to post-autistic
economics.
His
empirical investigations
Some people seem to believe that
the capability approach - as opposed to the standard approach - is
particularly fruitful in empirical research. Yet, Sen (just like other
neoclassical economists) never uses his theoretical construction when he
examines concrete questions: he merely calculates correlations between
certain basic indicators (such as life expectancy, literacy, infant mortality
rates, etc…)
One does not really need his
theoretical framework to carry out these investigations. And I have not
found, in any of Sen’s publications, an empirical investigation that directly
apprehends concrete economic and social issues using the “capability”
concept.
Everyone knows that illiteracy, sickness, short life
expectancy, high infant mortality,
etc., should be eradicated because they impede people from leading good and
happy lives. Sen seems to believe that by giving these evils more
sophisticated names (“deprivation of basic capabilities”) some fundamental
breakthrough is made in our understanding of the causes and remedies of these
evils. At least that is the impression one gets in certain passages of his
work. For example, in a book with Jean Drèze, it is said : “Poverty is, thus,
ultimately a matter of ‘capability deprivation’, and note must be taken of
that basic connexion not just at the conceptual level but also in economic
investigations and in social or political analyses. This broader and more
foundational view of poverty has to be kept in view while concentrating, as
we often would in this monograph, on the deprivation of such basic
capabilities as freedom to lead normal spans of life (undiminished by
premature mortality), or the freedom to read or write (without being
constrained by illiteracy).”
(Drèze & Sen, India:
Economic Development and Social Opportunity, 1995, p. 11).
His Introduction of Moral
Philosophy into Economic analysis
Others may argue that although
Sen has a “mainstream bias”, he nonetheless reintroduces philosophy in
economic analysis. Although this is partly true, one may question Amartya
Sen’s objectives in this domain by quoting Sen himself. In his last book, he says:
In the absence of such imperfections
(including the nonmarketability of some goods and services), classical models
of general equilibrium have been used to demonstrate the merits of the market
mechanism in achieving economic efficiency. (…) It is possible, however, to
question whether the efficiency sought should not be accounted in terms of
individual freedoms, rather than in utilities. (…) I have, in fact,
demonstrated elsewhere [“Markets and Freedoms: achievements and limitations
of the market mechanism in promoting individual freedoms”, in Oxford Economic Papers, 45 (1993),
519-541] that in terms of some plausible characterisations of substantive
individual freedoms, an important part of the Arrow-Debreu efficiency result
readily translates from the ‘space’ of utilities to that of individual
freedoms, both in terms of freedom to choose commodity baskets and in terms
of capabilities to function. In demonstrating the viability of this
extension, similar assumptions are employed as are needed for the original
Arrow Debreu results (such as the absence of non marketability). With these
assumptions, it turns out that for a cogent characterisation of individual
freedoms, a competitive market equilibrium guarantees that no one’s freedom
can be increased any further while maintaining the freedom of everyone else.
(…) The basic result about market efficiency can, in this sense, be extended
to the perspective of substantive freedoms. (Development as Freedom, 1999, p. 117-119).
This excerpt clearly shows two things. First, it
indicates that Sen (like most neoclassical theorists) confuses the highly
centralized “general equilibrium model” with the completely decentralized
“market mechanism”. Second, it
shows that Sen indeed “introduces” some philosophical concepts into standard
economics, but that he does not, however, depart from the mainstream
approach. One may thus ask if he has enriched economics or if he has
impoverished moral philosophy.
Sen and Mainstream Economics
Finally, I would like to
highlight an important aspect of Sen’s vision: his faith in the future of
standard economic analysis and his optimism concerning the direction in which
it is being “enriched”, “broadened”, etc., making it more and more capable
(if one believes Sen) of understanding (and proposing solutions for) economic
and social problems. For example, in Development
as Freedom, he affirms:
The
modelling of the market economy in the recent development literature has
substantially broadened the rather limited assumptions made in the Arrow-Debreu
formulation. It has particularly explored the importance of the economies of
large scale, the role of knowledge, learning from experience, prevalence of
monopolistic competition, the difficulties of coordination between different
economic agents and the demands of long-run growth as opposed to static
efficiency. On different aspect of these changes see Avinash Dixit and Joseph
Stiglitz (…), Krugman (…) Romer (…) Lucas (…). These developments have very
substantially enriched the understanding of the process of development and in
particular the role and functioning of the market economy in that process.
They have also clarified the insights of earlier economists on development. (Development as Freedom, 1999, note 12,
p. 321).
Similarly, in a book that
on India’s economic development, he declares :
“Recent
work on economic growth has also brought out sharply the role of labour and
the so-called ‘human capital’. The economic roles of school education,
learning by doing, technical progress, and even economies of large scale can
all be seen as contributions – in different ways – to the centrality of human
agency in generating economic expansion. In terms of economic theory, this
shift in emphasis has provided one way of filling the large ‘residual’ that
was identified in the basic neo-classical model of Solow (1956), and recent
growth theory has done much to bring out the function of direct human agency
in economic growth, over and above the contribution made through the
accumulation of physical capital” (Dreze & Sen, India, economic
development and social opportunity, p. 37).
Furthermore, the note
relative to this quotation refers directly to very orthodox economists:
“There
is a vast literature in this field, beginning by Solow’s own works that followed
his 1956 model. For aspects of the recent revival of the subject, involving
‘new’ growth theory as well as further exploration of older neo-classical
models see Romer (…), Krugman (…), Barro (…); Mankiw, Romer and Weil (…),
Lucas (…)” (Dreze & Sen, India,
economic development and social opportunity, 1995, note 16, p. 37).
These abstracts show
clearly that Amartya Sen is not an opponent of the mainstream approach, and
that, on the contrary, he considers these theories as constituting great
progress in the understanding of concrete economic and social issues. In
fact, Sen himself declared openly last year, in a conference organised by the
OFCE (Observatoire Français des Conjonctures Economiques) : “I am a
mainstream economist” (Conference: “Economic development and freedom",
Paris, May 29, 2001)
The question thus remains
open to debate: is Amartya Sen post-autistic ? I believe he isn’t, but I am
eager to know why heterodox economists constantly consider his theoretical
approach as a real force for reform in economics.
References:
Drèze J. & Sen A.K., India: Economic Development and Social
Opportunity, Oxford, Clarendon Press, 1995.
Sen A.K., “Capability and
well-being”, The Quality of Life, (Nussbaum & Sen eds.) Oxford,
Clarendon Press, 1993.
---------- Commodities and Capabilities, Amsterdam, North Holland,
1985
---------- Development as Freedom (1999), New York, Anchor
Books, 2000
SUGGESTED
CITATION:
Emmanuelle Benicourt,
“Is Amartya Sen a Post-Autistic Economist?”, post-autistic economics review, issue no. 15, September 4, 2002, article 4. http://www.btinternet.com/~pae_news/review/issue15.htm
Towards a Realistic Epistemology
for Economics
Claude Mouchot (Centre Walras, Université Lumière-Lyon2, France)
If there is one point on which all economists would agree, it is that
they will never agree. And of
course these disagreements have always existed. There was a time when we attributed them to the
“youthfulness” of our discipline, but today we are forced to admit that
economics will remain eternally “youthful”. It therefore seems critical that we abandon this “youth”
fable, as well as stop aiming for the unification of our discourse; a fable
and an aim that arise from comparing economics to physics. That a century after Walras some of
us still hold to the same epistemological position as he is, at the very
least, surprising.
I wish to propose here a
realistic epistemology for the “science of economics” that hopefully will
enable us to explain our perpetual disagreements and thus the reasons why
economics is pluralist.
In order to avoid the temptation
to state the argument in terms of physics, let us begin by considering in the context of economics the
following key sentence from Thomas Kuhn.
Normal
science . . . is predicated on the assumption that the scientific community
knows what the world is like. (1970, p. 5)
One needs only to carefully
re-read this sentence to realize that it will never be applicable to the world
of economics nor to the social world in general. Economists will never agree on what the economic world is
like, and partly because of what such an agreement would signify. It would mean that the ideological
oppositions that have always run through the conceptions of man and society,
the great visions of the world -- individualism / holism, liberalism /
socialism, etc. -- would have disappeared. Now each of us is aware that repression of these
oppositions is possible only by totalitarian means, and, moreover, the worst
of their kind; a totalitarianism that, with no form of explicit violence,
would prohibit even the very thought of the term ‘opposite’, given that the
very notion of opposition would be nonexistent!
Therefore,
since these oppositions are a part of society, it follows that economics will
never be a “normal science” in T. S Kuhn’s sense of the words. The unification of economic theories
will never be achieved, at least not in a democratic society. Hence it is necessary to abandon all
reference to physics and to make a new effort to work out the epistemological
status of our discipline.
Economics is a Totalité
Let us begin by considering two “classical” definitions
of economics.
1.
Economics is the
study of humanity in the ordinary affairs of everyday life. (A. Marshall)
2.
Economics is the
science that studies human behaviour in relation to ends and scarce resources
having alternative uses. (L. Robbins)
It is clear that both
definitions define not just economics but also the entire social setting. The first definition includes,
friendship, fatigue, pain, power, prestige, etc. and for many people even
war. The second definition is no
less general as it pertains to all finalized action, ( Godelier pg. 19 – 20),
and, moreover, is at the very foundation of the totalitarianism mentioned
above.
But if on the other had one
tries to narrow these definitions by in Marshall’s substituting “economic”
for “ordinary” and in Robbin’s substituting “economic ends” for “ends”, then
the definitions dissolve in obvious circularity.
The impossibility of separating
the economic from the social, and the circularity of the definitions, (
economics is economics) which result when this impossibility is ignored,
illustrate the unfeasibility of defining economics. This fact can be summed
up by one word: economics is a Totalité. Defining an object, involves distinguishing it from other
aspects of reality, and one cannot distinguish an aspect of reality, if not
from within the whole of which it is a part. The whole, on other hand, cannot
be distinguished except to say that is the whole! Let us insist on the lack of a definition for the word
‘whole’. We have said that it
sums up the problems posed by the proposed definitions for economics, but it
does not resolves them. It only
illustrates the impossibility of definition in this case.
Here we have more or less
reached a cul-de-sac: economics is economics, and not much can be added to
that. But of course it does not
end here, as the existence of numerous economic theories proves.
Constructing Scientific
Domains
“a
science sets out to adequately delimit the problems likely to define a field
of research and on which a consensus can be reached……” (Piaget 1970, p 41)
This simple sentence supports
our proposition that “economics is not a science” and explains it further:
given that economics remains undefined, it cannot as a whole be considered
and accepted as a science. How
then, should we go about effectively delimiting these problems so as to be
able to constitute a domain that can be studied scientifically? My answer takes the form of
identifying a necessary and sufficient condition:
In order
to develop a scientific discourse in economics, it is necessary and
sufficient to privilege certain aspects of this Totalité, to
distinguish the aspects that we wish to study, in other words, to define the
object of study.
This condition is
sufficient. For example, if I define
my object as the study of how an individual allocates his income among
different expenditure alternatives, I end up with the marginalist’s consumer
equilibrium theory. Or if I
define it as the study of the conditions under which the division of income
between wages and profits is made in a capitalist economy, I end up with a
production cost theory, either neo-Ricardien or Marxist, depending on what
further hypothesis are made.
This condition is also
necessary. It follows from the
demonstrated nature of Totalité. Economics is economics, and nothing more can be said about
it without specifying the discourse, that is, without prioritising certain
aspects of this whole. All
positive economic discourse is simply the expression of a certain point of
view on economic reality, a point of view that consists of defining an object
within a whole and constructing for this object a scientific theory.
All the major approaches to
economics involve the construction of a scientific object focused on a
particular aspect of the whole. Therefore, classical, neoclassical, Marxist,
and Keynesian theories, are sciences highlighting certain aspects of economic
reality, while equally neglecting others. We may say that each of these
sciences “cuts out” its object within the whole of the social and economic
reality. This can be represented diagrammatically as follows:
  
Classical Economics
 Keynesian
Economics
|
