The Science of Economics and the Art of Political Economy

|Peter Boettke|

The various discussions about the moral responsibility of those who not only provide social criticism of public policy, but also advise and in many instances design public policy, has led to an interesting discussion on the HES discussion list on the history of economic thought on these matters.  Of course, there and elsewhere there is also the question of the unwarranted intrusion of ideology into scientific matters.

This is a topic that I think is valuable to explore.  I have in several essays carved out my position on this over the years.  I had to, because my chosen field of interest was comparative political economy and thus I was dealing with the battle line between socialism and capitalism, etc.  Those essays are available here, here and here.  There are other efforts, but that is more than enough to glean my basic position --- which is that political economy is a value-relevant discipline only to the extent that economic science is an approximately value-neutral discipline.  It is because economics is capable of "objective knowledge", the conversation in the ideologically charged field of comparative political economy can be a progressive one.  If economics was incapable of being "scientific" in this sense, then political economy would devolve into a battle of mere politicized opinion.  But if economics is capable of providing "objective knowledge", then it can serve as a tool for social critique and put parameters on people's utopias.

In this approach to the issues, economics per se is limited to means-ends analysis; treating ends as given.  Economics is a tool for social criticism, not a tool for policy advocacy.  To shift from social critic to policy designer, value judgements must come into play, and responsible policy dialogue should demand that those value judgements are introduced and openly debated.  The problem with so much of 20th century public policy is that the dominant approach to economic policies treated policy design as if it was an objective technical discipline (a form of social engineering) and that the value judgements embedded in the advocacy efforts were taken for granted rather than stated explicitly and defended.  See this important paper by Murray Rothbard on Value Judgements and Economic Analysis.

Here is a discussion by Robert Heilbroner on Schumpeter.  Schumpeter distinguished between vision and analysis; where vision provides the pre-analytic raw material for the objective analysis that economic science provides.  In short, even in the science of economics there is a positive role to be played by ideology and moral philosophic propositions.  Without this pre-analytic cognitive act, the science of economics doesn't have the raw material to work with in order to derive propositions about economy and society.

David Colander discusses the science and art of economics and political economy.  And here is the link to the first of a three part series by Israel Kirzner discussing the anatomy of economic advice.

When I think about the issues recently being discussed on the moral responsibility of economists in their capacity as policy advisors, these are the issues that think about and want to revisit.  Ultimately, it turns on the very nature of economics as discipline to operate as a "scientific" enterprise and what role that discipline serves when economics is thought of as a public science.

 

Comments

[Barkley Rosser]

David Colander's commentary is especially thoughtful. I just hope that this does not turn into another round of people with strong opinions about the economic and political views of particular economists engaging in then either applauding or excusing or criticizing their particular interventions or actions in the public arena simply on the basis of their own personal prejudices.

[Peter Boettke]

Barkley's right --- lets focus on the substantive arguments, not the personalities of various economists. Think of it this way --- if you had to provide an academic discussion of the underlying discourse in the Inside Job, how would you go about doing it? What ideas would you draw on, which one's would you criticize; which one's are most suggestive for future development?

[Mario Rizzo]

I remember some conversations with Walter Block back when I was an undergraduate and he a graduate student at Columbia. As I recall, he was worried about economists (mainly Chicago economists) becoming efficiency experts for the state. The analogy was made to a hypothetical economist who might have advised the Nazis about how to kill Jews more efficiently. Obviously, this is the use of "objective knowledge" in the service of bad ends.

But one can make arguments short of the Nazi argument. Suppose one believes that the welfare state in some particular regard -- or generally -- is wrong. Then it is arguably wrong for an economist to give advice to the government on how to make these programs more efficient. (I say "arguably" because a lower tax burden -- if it occurred -- would be good but that is not the only possible outcome of the efficiency advice.)

Giving advice to governments is a tricky business because all policy advice involves value judgments in the giving of the advice. As Neville Keynes argued, the art of political economy (say, policy) involves using the science in the service of ends that are philosophical or moral in nature.

Now consider how a "typical" economist might treat this issue: The voters, through their elected representatives, choose the goals or ends of policy. We, the economists, simply use our knowledge of the science to inform them about how to achieve these goals more efficiently or with fewer conflicts of goals.

But I do not believe that an economist should abdicate his moral responsibility so easily. He must also ask himself the question: Do I want to be part of an a structure that promotes these goals?

[Rafe Champion]

W H Hutt wrote good stuff on the role and responsibilities of economists re policy, with case studies.

[Arash Molavi]

Mario Rizzo's comment above reminds me of Milton Friedman's claim that those who favor small government should cherish the inefficiency of big government. Yet, he himself advocated a more efficient monetary policy. It seems hard to resist advocating against blunt policy failures, especially since the public interpret the negative impact of bad policy as market failure.

[Richard Ebeling]

Twenty years ago, when I was doing consulting work in the former Soviet Union on market reform and privatization, I recall having a conversation with a couple of Russian economists about what they considered "necessary" in a post-communist state. (These were classical liberal-oriented Russian economists, familiar with both Austrian and Chicago School literature.)

They said they wanted a limited, but "strong" state. This seemed strange to me at first, until they explained that while the power of the state needed to be constitutionally restrained to "limited and enumerated functions," it had to be, at the same time, "strong enough" to protect individuals rights (including market-based property rights) from violence and trespass by private gangs, thugs, and plunderers, whom they feared would exist in a post-Soviet Russia.

The problem is, how do you keep (assuming you believe even in a limited government?!) government "strong" and efficient in those areas of responsibility consistent with the protection of individual liberty and property rights, and, at the same time, "weak" and inefficient in those areas in which he threatens or acts to encroach upon people's liberty and property?

Richard Ebeling

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