This paper argues that economics, over the past 200 years, has become steadily more anti-philosophical and that there are three stages in the development of economic thought. Adam Smith intended economics to be a descriptive social science, rooted in an understanding of the moral and psychological processes of an individual’s decision-making and its connection to society in general. Yet, immediately after Smith’s death, economists made a clean cut and invented a totally new discipline: they switched towards a physicalist understanding of human nature. Humans, like atoms, follow a natural law: they are driven by an emotion (defined as a non-emotion, rationality), namely selfishness. Thus economics became a ‘natural’ science. In the 20th century, the second reinterpretation removed all traces of humanity from the study of economics and declared economics to be a formal science like mathematics and logics. The actor in Phase 3 economics is homo economicus syntheticus, a postulate whose only connection to real humanity is the word homo. The paper asks what the results of this dramatic relocation are and why Phase 3 economics still claims descent from Smithian economics, despite the massive differences.
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Ghoshal (2005) has explained the hidden ethical content in economics’ most important axiom, the rationality principle: humans must be radically selfish as selfishness is rationality. This paper will refer to the debate later.
Upon taking office as Chair of Moral Philosophy had to sign the Westminster Calvinist Confession before the Glasgow Presbytery (Oslington 2012: 431)
There are no contemporary scholarly papers on Knightian Uncertainty and mainstream economics. It took 40 years and the mainstream’s toughest critics, the libertarians (Mises 1957: Mises 1966), to start looking at Knight’s ideas. And Knight was not shy about his contribution: he specifically pointed out that his uncertainty is “radically distinct from the familiar notion of Risk” and that his ideas should have “far-reaching and crucial” consequences. Knight was also trained in philosophy and in his remarkable introductory chapter pointed out that one could go too far in deducting and that it was a “matter of taste” when to stop the process of deduction.
It is maybe no coincidence that those business schools that firmly stuck to the axioms of economics and focused on Finance, like Harvard and Wharton, were much bigger commercial successes than for instance MIT, where the HRM was thriving. Ethics was still regarded as something dangerous.
I would argue that when a scientific research programme demands that its axioms are accepted as facts, despite acknowledging the problems with the axioms, that research programme becomes and ideology. Accordingly, I would suggest that we need to add “ideological facts” to Feyerabend’s everyday facts, inferred facts, hypothetical facts. One does not automatically dismiss ideological facts out of hand, it depends whether one accepts the ideological goal of a research programme. In Friedman’s case it is the protection of individual freedom. Popper, for instance, accepted Chicago Economics on that shared belief.
Recently, I talked to one of Germany’s best-published young full professors about his research programme that centred around an ethical concept introduced by Kant and Fichte. He had never read either and never even heard of Fichte.
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Hühn, M.P. The Unreality Business - How Economics (and Management) Became Anti-philosophical. Philosophy of Management 14, 47–66 (2015). https://doi.org/10.1007/s40926-015-0006-6
- Economic theory
- Moral philosophy
- Philosophy of science
- Adam Smith