Methodological and Ethical Perspectives on Economics

Paper Session

Saturday, Jan. 7, 2017 2:30 PM – 4:30 PM

Sheraton Grand Chicago, Millennium Park
Hosted By: International Network for Economic Method
  • Chair: Don Ross, University of Cape Town

Paternalism, Externalism About Preferences, and Heterogeneity of Risk Attitudes

Glenn W. Harrison
,
Georgia State University
Don Ross
,
University of Cape Town

Abstract

A principal source of interest in behavioral economics has been its advertised contributions to policies aimed at ‘nudging’ people away from allegedly natural but self-defeating behavior toward patterns of response thought more likely to improve their welfare. This has occasioned controversies among economists and philosophers around the normative limits of paternalism, especially by technical policy advisors. One recent suggestion has been that ‘boosting,’ in which interventions aim to enhance people’s general cognitive skills and representational repertoires instead of manipulating their choice environments behind their backs, avoids the main normative challenges. A limitation in most of this literature is that it has focused on relatively sweeping policy recommendations and consequently on strong polar alternatives of general paternalism and strict laissez faire. We review a real instance, drawn from a consulting project we conducted for an investment bank, of a proposed intervention that is more typical of the kind that economists are more often actually called upon to offer. In this example, the sophistication of current tools for preference attribution, combined with philosophical externalism about the semantics of preferences that makes it less plausible to attribute their literal self-conscious representation to people as propositional attitude content becomes more tightly refined, blocks applicability of the distinction between nudging and boosting. This seems to call for irreducible, context-specific ethical judgment in assessing the appropriateness of the forms of paternalism that economists must actually wrestle with in going about their everyday business.

The Commitments of Nudge

Mariam Thalos
,
University of Utah

Abstract

The "Nudge" framework for improving citizen behavior through engineering choice context is meant to take advantage of cost-effective ways of cueing good behavior, without intruding upon subjects' conscious awareness, for the most part without new legislation and regulation. This paper argues that the premise is flawed: Nudge promises short-term modification of behavior and will succeed only marginally. The largest flaw of Nudge is the opportunity cost. There are alternative ways to non-legislatively encourage improvement in citizen behavior, and at bargain basement prices too. Additionally, the alternative approaches do not take a "below-the-radar" approach and hence are not open to charges of manipulation. The alternatives involve supporting autonomy and enhancing awareness of subjects as responsible and committed citizens.

Was Carl Menger a Precursor of Karl Popper?

Reinhard Neck
,
University of Klagenfurt

Abstract

The proximity of the Austrian School of Economics and Critical Rationalism has often been hinted at, mostly under the perspective of the influence of Friedrich A. von Hayek on Karl Popper and vice versa. On the other hand, one of the main proponents of Austrian Economics, Ludwig von Mises, developed philosophical positions like essentialism and praxeology that were in sharp contrast to those of Critical Rationalism. In this paper, we will investigate to what extent the founder of the Austrian School of Economics, Carl Menger, had ideas which foreshadowed those of Critical Rationalism and of Karl Popper in particular.
We concentrate on similarities and differences between the philosophical positions of the two authors in the following fields: 1) Epistemology and philosophy of science (we show how Popper’s fallibilism and rejection of inductivism were already present in the positions Menger took in the Methodenstreit); 2) Political philosophy (we show that Menger can be characterized as a social liberal similar to the Popper of The Open Society); 3) Methodology of the social sciences (we argue that Menger can be regarded as one of the founders of methodological individualism, a doctrine that was central also in Popper's philosophy of social science).

We argue that the central methodological idea of Carl Menger was the emphasis on the unplanned social results of individually rational behaviour and the emergence of (rational or irrational) social results from interaction instead of from social design. This idea is less explicit in the philosophy of Critical Rationalism but deserves strong support by philosophers of this persuasion as it is basic to Popper’s methodological, political and social science positions and can be regarded as one of the unifying principles of his philosophy. Its implications for ethics will be briefly sketched.

Temperance and Economic Theory: Towards a Framework of Virtue Economics

Robert Hanson
,
Durham University

Abstract

Economics has a long established history of employing ethical rhetoric, with concepts like justice, fairness and equality often appearing in critiques of economic policies. The type of ethical rhetoric has seen a fundamental shift since 2008, with discussions focusing on the types of individual policies should profit, raising discussions of if the ‘right kind of people’ are rewarded. With these discussions on Vices, Virtues and the type of world we should aim for becoming commonplace, the question of if Virtue Theory can assist in the economic discussion making process has been raised. This paper will seek to dissuade the common belief that Virtue cannot provide an adequate framework to evaluate economic policy through considering the application of the Virtue of Temperance. <br />
<br />
I will outline the concept of the Virtue of Temperance I will be employing, one which lies between the Vices of Selfishness and Selflessness, as established through observations of the human animal. I will then review how this concept of Temperance and the Virtue Ethics’ framework can provide an adequate lens to evaluate economic considerations, focusing specifically on moral considerations relative to tax levels. The question of the right to deduct from an individual’s earnings will be outlined with reference to the individual’s interdependence on society and the kind of individuals required and not required for a stable, well-functioning society. <br />
<br />
It is my aim to show that Virtue Ethics does not demand saintly, self-sacrificing, impartial individuals, but ones sensitive that they are not independent from the world nor operate in a social vacuum, and so should give just regard to their objective moral equals and the institution, society, that they all depend upon. With this done, it will be my conclusion that Virtue Ethics can provide a practical, moral lens to evaluate economic policies.
JEL Classifications
  • B4 - Economic Methodology