Economic Analysis, Moral Philosophy, and Public Policy

By Callahan, Gene | Independent Review, Summer 2008 | Go to article overview

Economic Analysis, Moral Philosophy, and Public Policy


Callahan, Gene, Independent Review


Daniel M, Hausman, a philosopher, and Michael S. McPherson, an economist, have written Economie Analysis, Moral Philosophy, and Public Policy (2d ed., New York: Cambridge University Press, 2006) to convince their readers, especially but not only economists, that current economic practice, particularly with regard to policy advice, is significantly more intertwined with moral philosophy than is usually admitted. Far from criticizing the inclusion of ethical judgments in economic analysis, they argue instead that such inclusion is practically unavoidable. Their aim is not to purge from economics all traces of moral philosophy, but to debunk the pretense that economists make their pronouncements from a purely objective, value-free vantage point. Recognizing the moral judgments that are often buried in arguments that purport to be purely a matter of economic science will, they contend, expose those moral assumptions to rational examination, enabling a more critical examination of the arguments and, consequently, better policy choices.

Along the way, Hausman and McPherson offer an outstanding introduction both to the fundamental tenets of modern, mainstream economics and to the current state of moral philosophy, particularly in regard to utilitarianism. They make a scrupulous attempt to be fair-minded in presenting serious rivals to their own views, carefully describing the arguments in favor of a theory before explaining why they nevertheless reject it. They show a keen eye for what is essential in contemporary "rational-choice" theory, clearly separating the core of the theory from the secondary assumptions that are often added in order to tease empirical predictions from what is largely a tautological framework. And it is in those subsidiary matters, such as the postulate that all actors are purely self-interested or concerned only with monetary gain, that economists most often introduce implicit moral presumptions into their analysis. These secondary assumptions are also the proper target of much of the criticism to which the rational-choice paradigm has been subjected because they foster the idea of a narrow-minded, selfish "economic man" that has been justifiably attacked as biased and unrealistic.

Hausman and McPherson's book has great merits, but it also has a few serious flaws. For example, the authors, despite their laudable efforts to give other viewpoints their just due, understate the case that economic reasoning makes for the superiority of free markets. In this instance, I suspect that Hausman and McPherson, as even the most objective of us are wont to do, have allowed their own political leanings to color their presentation of their opponents' arguments. In addition, they too readily dismiss the thesis that a "pure" science of economics, which is self-sufficient and can arrive at universal truths independent of any ethical stance, is both possible and desirable. The latter problem stems at least in part from the authors' failure to recognize the gulf that separates the earlier, logical approach to economics, kept alive today chiefly by Austrian economists, from the mathematical and empirical approach now followed by mainstream, neoclassical economics.

Although space does not permit a full examination of the wealth of material the authors draw into their theme, I note a few highlights here. At the start of their discussion, Hausman and McPherson point out that "moral theories are not cookbooks for good behavior," but instead "their main purpose is to help people understand what morality is, where it fits into their lives, and why they assign it the importance they do" (p. 3). This laudatory modesty about the role of moral theorizing in influencing moral practice contrasts sharply with the more grandiose view that an ethical system is capable of resolving any concrete moral dilemma from first principles. The latter position has been advanced by several prominent libertarian thinkers, such as Ayn Rand, Murray Rothbard, and Hans-Hermann Hoppe, with the unfortunate result that all too often libertarians have defended outlandish moral conclusions that discredit the broad libertarian project in the eyes of many critics. …

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