Philosophy of Economics - A Contemporary Introduction

Citation

Simon Derpmann (2015), "Philosophy of Economics - A Contemporary Introduction", International Journal of Social Economics, Vol. 42 No. 12, pp. 1227-1228. https://doi.org/10.1108/IJSE-04-2015-0087

Although quite a number of important thinkers in the history of economics – take Hume or Smith – are also central to the history of philosophy, both disciplines are often conceived as utterly unrelated enterprises. Accordingly, philosophy does not occupy a central role in the curricula of most economics programs. However, the philosophical reflection of economic theory can be argued to be quite valuable, and the inclusion of philosophical theory into the study of economics has been given increasing importance recently. Thus, there is a need for good textbooks that introduce into this sort of reflection. Julian Reiss meets this desideratum with his contemporary introduction to the philosophy of economics.

The first thing that one has to remark about the relation of philosophy and economics is that philosophy encounters economic theory on different levels. There is a difference between economic philosophy and the philosophy of economics. On the one hand, there are a number of theorists – like Mill, Marx, or Simmel – whose works contain analyses of economic phenomena from a philosophical perspective. On the other hand, philosophy may also analyze the general aims, methodology, impact and boundaries of economics as an independent discipline within the social sciences – in particular of a specific strand of economics that evolved toward the end of the nineteenth century and that still provides fundamental assumptions to contemporary economics. Reiss presents an introduction to the philosophy of economics in the latter sense. It is not primarily a contribution to the philosophy of economy, or to economic philosophy, but rather a philosophical inquiry into economics as an academic discipline. Accordingly, the topics covered by this introduction are not immediate economic phenomena like money, value, or labor, but the scientific tools and methods that are deployed in economics viewed from the perspective of contemporary philosophy.

Reiss organizes the introduction in three parts that deal with different philosophical questions regarding economics. The first part (Chapters 3-7) addresses problems of economic theory and its status as a social science. Reiss discusses three problems of understanding economics as a deductive-nomological discipline drawing logical inferences from the combination of statements of facts and their subsumption under laws. First, it may generally be inadequate to describe human behavior in terms of natural laws. Rational choice theory and game theory provide attempts to meet this objection by offering different accounts of the explanation of economic action. Second, it is unclear whether the concepts of cause and mechanics can be applied to economic action, and what kind of regularities can be assumed to determine economic phenomena in general. Third, the idealizations that are contained in economic models make them, strictly speaking, false in a variety of ways. Reiss helps to grasp – not to resolve – the paradox that there are good reasons to believe that models have some explanatory value despite their essential inadequacy. The second part (Chapters 8-11) deals with problems of economic methodology. Reiss describes the complex process of making theoretical claims verifiable by means of reference to economic realities. He discusses the means of generating empirical evidence for economic models, and the scientific status of tools like measurement through indicators, statistical data, experiments and trials. The third part (Chapters 12-15) addresses areas in which ethics and economics may be perceived to overlap. Reiss discusses the fundamental theorems of welfare economics, markets and market failure, theories of justice, as well as choice and autonomy. The first two parts of the book clearly contain philosophical questions about the fundamentals of economics. The third part discusses issues that are clearly of fundamental relevance to economic policies, but that immediately emerge as unanswerable with the tools of economics alone. Their discussion requires reference to social norms and value judgments. While these issues can and should be reflected by economic scholars, it is important to understand at what points their reflection may lie outside the boundaries of economic theory. Thus one may argue that these chapters do not immediately belong the philosophy of economics, but rather concern issues where philosophy and economics collaborate in order to provide answers to social and political problems. In this collaboration, it is important to perpetually reflect on whose terms the questions at stake are met. Although Reiss does remark on these methodological matters in the introductory chapter and when discussing the fundamentals of welfare economics, the questions concerning the boundaries of economics and the normative foundation of political economy could also have been treated in a separate chapter.

The intended readership of this introduction – that draws from two related, but nonetheless quite distinct, disciplines – is obviously twofold. The first group of readers who will benefit from studying this introduction are students and scholars of economics that want to gain an external perspective on their own discipline. Reiss takes this perspective by discussing an impressive range of aspects of economic theory. He offers challenging views on central concepts of economics like rational choice, utility functions, prisoner’s dilemmas, ultimatum games, externalities, transaction costs, consumer price inflation, moral hazard, randomized trials, capabilities, etc. But the book is also recommendable to scholars who are at least somewhat familiar with the basics of economic theory and who are interested to see an application of fundamental questions from the philosophy of science to economics. These readers will gain intriguing insights into fundamental questions of economic theory. The writing is crisp and comprehensible, and the diverse topics are well illustrated by examples. All chapters are accompanied by keywords, a short overview and a conclusion, as well as study questions that encourage further discussion.

Reiss covers a lot of ground in his introduction, and his reasonable aim is not to give answers to the problems posed, but rather to raise those questions that help to understand problems at stake. The book conveys and exemplifies a mode of thought that is most crucial to gaining access to the complex array of questions surrounding the philosophy of economics. His introduction provides exactly the type of impulse to the reflection of the tools of economic theory that should be part of every academic study of economics.