Normative economics without preferences

Economics and Philosophy

In his wide-ranging, intriguing and sophisticated new book, Robert Sugden uses important economic and philosophical insights in a powerful defence of markets. He combines a strong commitment to liberal principles with state-of-theart empirical insights from behavioural economics to argue for his, quite often refreshing views. Sugden criticizes both conventional welfare economics and the newly hyped 'nudge' paternalism and argues that we need a radical transformation of the normative underpinnings of market functioning and government intervention. In this review, I will summarize the book's main points, summarize some of the main chapters and finish with a more critical note. The scope of this book is broad and its ambitions are high. As in his other work, a lot of which returns here in some shape or another, Sugden combines the best of both economics and philosophy to get to the heart of a number of important questions. What is the role markets can and should play in light of widely recognized liberal principles? What are the implications of empirical insights from behavioural economists (and psychologists) for the role of markets? If people are not as rational as economists have often assumed and thus tend to make bad choices, does that justify paternalism? How exactly does the market's invisible hand work and what is the appropriate role for government regulation, again in light of recent findings from behavioural economics about individual beliefs, preferences and actions? The core of Sugden's approach to these big questions is contractarian in nature. As Sugden explains in Chapter 3, his basic idea is to evaluate any societal institution, such as a market or some piece of legislation, by asking not 'whether aggregate welfare is maximized' but 'whether it is in the interest of the individual to accept the rules of that institution, on the condition that everyone else does the same' (14). While this idea has been around since Thomas Hobbes, Sugden relies most heavily on David Hume who states that just institutions are those that are 'highly conducive, or indeed absolutely prerequisite, both to the support of society, and the well-being of every individual' (Hume 1739-40/1978: 497, cited in Sugden, 36). Since everyone should gain from such institutions, the goal is to find interactions and arrangements that work to everyone's benefit and hence that are mutually advantageous. The market, already labelled by John Stuart Mill (1871/1909: Book 3, Chapter 25, § 1) as a 'community of advantage', is the preeminent example of such an institution, argues Sugden (1). It offers its participants both opportunities and incentives to

Erasmus Journal for Philosophy and Economics

2011

Companion f o Economics and Philosophy, Edward Elgar (2004), 509+xxii pp., ISBN I-84064-964-x reviewed by Till Griine-Yanoff, Royal Institute of Technology, Dept of Philosophy and the History of Technology, Stockholm DESPITE ITS TITLE, this Companion contains little economics. Rather, it presents topics from the philosophy of economics. The title may still be appropriate, as the philosophy of economics addresses many issues that should be of great interest and importance to economists. However, many authors of this volume seem to understand their project as opposed to economics (or rather, what they call 'mainstream' economics). This is unfortunate. Philosophy of economics is dependent on the science that it purports to be of. It discusses economics' specific epistemic, conceptual and normative problems, and intends to contribute to their solution or at least clarification. Naturally, such a project requires a critical perspective. But it must be friendly criticism. If philosophers reject the core of contemporary economics, and 'seek to re-orientate the economics discipline' as a whole (Lawson in this volume, 322), they will be confined to a state of irrelevance: ignored by economists busy building their science, but unable to produce a serious alternative themselves. Nevertheless, the Companion includes many highly informative and at times provocative papers on important philosophical questions about economics. It contains twenty-three papers, categorized into three parts concerning political economy, methodology and ontology. The political economy part discusses the use of economic tools for the end of political philosophy, namely to understand and justify social order. Two papers from this part challenge contemporary economic theory to live up to this task. Hargreaves Heap points out that the rational choice model only provides incomplete explanations of institution formation. Coordination games used for this purpose typically have multiple Nash equilibria, and selecting the one that will or should be played requires reference to factors that are outside of the standard model. In particular, Hargreaves Heap argues, reference to convention alone is not enough: what motivates people to select one equilibrium is not only dictated by what they think what others will do (in accord with historical precedent), but what they

This note summarises the main contributions of my PhD thesis.

This series presents new advances and developments in social economics thinking on a variety of subjects that concern the link between social values and economics. Need, justice and equity, gender, cooperation, work poverty, the environment, class, institutions, public policy and methodology are some of the most important themes. Among the orientations of the authors are social economist, institutionalist, humanist, solidarist, cooperatist, radical and Marxist, feminist, post-Keynesian, behaviouralist, and environmentalist. The series offers new contributions from today's most foremost thinkers on the social character of the economy. Publishes in conjunction with the Association of Social Economics.

Presented at the ETF in Leuven 25 February 2017. On the basis of the understanding that economics is about relations rather than individuals (Bovenberg et al., March 2016) it distinguished 4 types of relations that organize how people get what they need (belonging, hierarchy, dependence and shared commitment) and consequently 4 types of economy (exemplified with kinship, states, markets and ideals). Homo economicus is reconceptualized as an animal that is social because of its limited mental capacities. Economists are called to take moral responsibility for the performative power of the parables they build which shape economic reality, e.g. markets as we know them, with all their problems.

Dialogue, 1983