Dismal Science Redeemed: What's Gone Wrong

 
 

A new book challenges us to rediscover the missing element of our economic science. The first in a two-part series.

In Natural Right and History (1953), the University of Chicago political theorist Leo Strauss challenged the reigning “value-free” political science of his day, arguing that the study of politics and social life generally could not prescind from questions of right and wrong, good and bad. Against a “historicism” that would reduce all value to the whims of a particular people at a particular time, Strauss maintained that the ancient and medieval quest for a transhistorical standard of nature that revealed natural ends to man was indispensable to the study of politics and political regimes. Indeed, Strauss insisted that any purportedly value-free social science could be shown, in the end, to be variously dependent on judgments of value: judgments of which phenomena ought to be studied and judgments of which features of those phenomena are salient. In other words, “a political life that does not know of the idea of natural right is necessarily unaware of the possibility of political science and, indeed, of the possibility of science as such.” Every science rests on prior evaluative judgments to get the scientific inquiry moving and to keep it running on the right tracks.

A generation later, in Natural Law and Natural Rights (1980), the Oxford analytic legal philosopher John Finnis challenged the reigning orthodoxy within the legal academy that uncritically accepted legal positivism, either in its primitive Benthamite form or in the more sophisticated form proposed by Finnis’s mentor H.L.A. Hart. Finnis’s critique paralleled Strauss’s in being two-pronged, but went deeper in its identification of the grounds of our practical judgments in what Finnis called “basic human goods,” fundamental and irreducible aspects of human wellbeing and fulfillment that, as such, provide more than merely instrumental reasons for acting and whose integral directiveness offers a rational standard of moral judgment. The first prong of Finnis’s critique showed that even to attempt to perform the type of descriptive legal theory that Hart set out to do requires one to grasp focal cases of law, and thus to grasp the intelligible purposes—the human goods—that law, in the focal sense, seeks to secure, and that lawmakers must at least claim, for the sake of their own legitimacy, to be pursuing. Any adequate description, therefore, rests on getting these prior judgments right. The second prong of Finnis’s critique showed how these evaluative judgments in identifying focal cases and principles of right action are possible (hence his defense of basic human goods as first principles of practical reason).

Now, another generation has passed, and John D. Mueller’s new book, Redeeming Economics: Rediscovering the Missing Element, seeks to reorient the debates within economic theory in the way that Strauss reoriented debates in political philosophy and Finnis reoriented debates in philosophy of law. Mueller’s book is not quite on a par with the other two, for Mueller is not, strictly speaking, an academic: he is currently The Lehrman Institute Fellow in Economics at the Ethics and Public Policy Center, and has extensive experience as an economist, speechwriter (to Jack Kemp), and policy advisor (to Ronald Reagan). Redeeming Economics, however, displays the virtue of an author who possesses a breadth and depth of knowledge not only of economics but of a whole host of other topics, as well (including philosophy, theology, and political theory).

Redeeming Economics is an ambitious, wide-ranging book. Though it clocks in at 450 pages (100 of which are endnotes), it is intended for and accessible to the common educated reader. Its thesis is simple: In order to provide an adequate description of economic activity, one must take seriously the reasons actors have for their economic choices. Reducing everything to self-interest and utility is descriptively inadequate, because it fails to take seriously the real nature of economic behavior that seeks to benefit people. Though he is not primarily wrestling with questions of good and bad, right and wrong, Mueller’s critique is fundamentally akin to Strauss’s and Finnis’s in insisting that economic science attend to the salient aspects of human behavior and that only a sound philosophic anthropology can reveal which aspects are salient. Mueller knows that what he has written isn’t the last word on this topic, but an important first word, intended to provide an overarching critique of current neoclassical economics and launch us into the next phase, what Mueller dubs “neoscholastic economics.”

Neoscholastic economics will take its bearings from the economic theory first articulated by Thomas Aquinas. Unlike those who equate Aquinas with Aristotle, Mueller is clear that his is an AAA theory: “Aristotle + Augustine = Aquinas.” And in the first section of Redeeming Economics, Mueller provides readers with a history of economic theory from Aristotle to today. As Mueller tells the story, Aquinas was the first to put together a complete economic science by combining key insights from both Aristotle (on production, exchange, and political distribution) and Augustine (on personal distribution and consumption based on utility). Mueller explains:

The first revolution in economics had occurred five centuries before [Adam] Smith, when Thomas Aquinas (1225-74) set forth the basic elements of economic theory. Synthesizing the work of Aristotle (384-322 B.C.) and Augustine of Hippo (A.D. 354-430), Aquinas offered a comprehensive view of human economic actions. All such actions fall into four categories: humans produce, exchange, distribute, and consume goods (human and nonhuman). Thus the theory Aquinas outlined—known as “Scholastic” economics—had four key elements: the theory of production, which explains which goods (and how many of them) we produce; the theory of justice in exchange, which accounts for how we are compensated through the sale of goods for our contributing to their production; the theory of final distribution, which determines who will consume our goods; and finally, the theory of consumption (or utility), which explains which goods people prefer to consume.

Production, exchange, distribution, and consumption: Any adequate economic science will need to account for all four of these aspects of economic choice. And Mueller is insistent that this is true of all economic choices, across time and place, for individuals and families, corporations and nations.

The second revolution took place when Adam Smith, whom history holds up as the founder of economics, did a grave disservice to the science by eliminating from the economic equation both distribution and consumption based on utility. This incomplete economic science helps explain why classical economics did such a poor job of describing and predicting economic behavior. Neoclassical economics of the previous century or so, the third revolution in Mueller’s account, restored the utility variable, but it, too, Mueller argues, fails in its descriptive and predictive power, because it overlooks and thus reduces an irreducible variable. Only with all four variables restored, by the neoscholastic revolution Mueller hopes to spark, can economics flourish.

But before embarking on this fourth revolution, it behooves us to understand where economics went wrong. Joseph Schumpeter, the great economic historian of the 20th century, wrote of Adam Smith in his History of Economic Analysis (1954) that “the Wealth of Nations does not contain a single analytic idea, principle or method that was entirely new in 1776.” Mueller goes a step further to say not only that Smith does not add anything to economics, but that his theory actually leaves out both distribution and utility.

The elimination of these two aspects should come as no surprise to anyone familiar with the debates in philosophy and political theory over the so-called “modernity project.” Consider how a Scholastic such as Aquinas understood various sciences. At the heart of Aquinas’s social thinking was a recognition that order exists on four irreducible planes, distinguished by how they relate to our mind and will: the order that exists in nature, independent of human thought and choice; the order that we bring into our thinking itself; the order that we bring into our thinking about what to do; and the order that we bring into our thinking about how to do it. These four orders give rise to four irreducible sciences: first, metaphysics and natural science to study what is, what exists independently of human choice; second, logic to study the relations of concepts; third, ethics and practical philosophy to study what is to be, the ends of human choice; and finally, the applied arts and sciences to study how to achieve those ends, the means.

Yet much of modern social thinking rests on the explicit rejection of this third order, and thus of this third science. Machiavelli announced the ambitions of this new political science in Chapter 15 of The Prince (1513): “Many have imagined republics and principalities that have never been seen or known to exist in truth; for it is so far from how one lives to how one should live that he who lets go of what is done for what should be done learns his ruin rather than his preservation.” In a thinly veiled assault on Plato’s Republic and Augustine’s City of God as the imagined republics and principalities that argued for how one should live, Machiavelli set out to reveal the “effectual truth” of how successful people do live. Implicit here was a reduction of political thought to the first and fourth orders. Investigate how people are (first order), and then reason about the means (fourth order), in this case, to staying in power, without any concern for how people ought to be, quite apart from how they might serve our interests (third order).

Thomas Hobbes and David Hume make this reduction even more explicit. In the Leviathan (1651), Hobbes writes that “the thoughts are to the desires, as scouts, and spies, to range abroad, and find the way to the things desired.” And in A Treatise on Human Nature (1739), Hume argues that “reason is, and ought only to be the slave of the passions, and can never pretend to any other office than to serve and obey them.” The third-order science that considered which ends one should act for has been eliminated. It is now for political science to study man’s passions as they are given (first order), and then to devise the best way to secure those ends (fourth order). If this is how one understands human action, then, of course, distribution (deciding which people should be the ends of one’s economic acts) will be eliminated from consideration.

Yet Adam Smith went even further. Smith was, of course, taught by David Hume and Francis Hutcheson (the famous Scottish Enlightenment moral sense/sentiment theorists). Mueller argues that Smith, in his quest for a Newtonian science of economics and under the influence of Stoic pantheism, went further than Hume to deny reason a role in selecting either the ends or the means. Smith thought that the sentiments fully determine human action, so that the only variables to explain are production and exchange: a streamlined science with fewer moving parts. (And, it should be noted, this theory of production and exchange logically leads to Karl Marx’s criticisms, based on Smith’s faulty “labor theory of value” of modern capitalism.)

With time, economists came to understand just how thin this theory really was and reintroduced the concept of consumption based on utility (helpfully refining the idea into one of marginal utility). This reintroduction of the Augustinian understanding of consumption based on utility corrected for the problems in both Smith and Marx. Rather than viewing the worth of objects for human consumption as intrinsic to the object (or the labor that produced the object), the theory of utility saw that an actor’s preference for an object, based in the utility it brought, explained the value in and the choice for the object. But this still left unexplained the choice of which person(s)—self, other(s)—would obtain the object. That is, it left out distribution. And rediscovering that element of economic science is at the heart of Redeeming Economics. More on that in Part II.

Ryan T. Anderson is Editor of Public Discourse.

 

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