Philosophy of economics
Encyclopedia
Philosophy and economics (also philosophy of economics) may refer to the branch of philosophy
Philosophy
Philosophy is the study of general and fundamental problems, such as those connected with existence, knowledge, values, reason, mind, and language. Philosophy is distinguished from other ways of addressing such problems by its critical, generally systematic approach and its reliance on rational...

 that studies issues relating to economics or, alternatively, to the branch of economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

 that studies its own foundations and status as a moral science.

Definition and ontology of economics

The first question usually addressed in any subfield of philosophy (the philosophy of X) is "what is X?" A philosophical approach to the question "what is economics?" is less likely to produce an answer than it is to produce a survey of the definitional and territorial difficulties and controversies.

Ontological questions continue with further "what is..." questions addressed at fundamental economic phenomena, such as "what is (economic) value?", "what is a market?". While it is possible to respond to such questions with real verbal definitions, the philosophical value of posing such questions actually aims at shifting entire perspectives as to the nature of the foundations of economics. In the rare cases that attempts at ontological shifts gain wide acceptance, their ripple effects can spread throughout the entire field of economics.

Methodology and epistemology of economics

An epistemology deals with how we know things. In the philosophy of economics this means asking questions such as: what kind of a "truth
Truth
Truth has a variety of meanings, such as the state of being in accord with fact or reality. It can also mean having fidelity to an original or to a standard or ideal. In a common usage, it also means constancy or sincerity in action or character...

 claim" is made by economic theories - for example, are we claiming that the theories relate to reality
Philosophical realism
Contemporary philosophical realism is the belief that our reality, or some aspect of it, is ontologically independent of our conceptual schemes, linguistic practices, beliefs, etc....

 or perceptions? How can or should we prove economic theories - for example, must every economic theory be empirically verifiable? How exact are economic theories and can they lay claim to the status of an exact science - for example, are economic predictions as reliable as predictions in the natural sciences, and why or why not? Another way of expressing this issue is to ask whether economic theories can state "laws". Philosophers of science and economists have explored these issues intensively since the work of Alexander Rosenberg
Alexander Rosenberg
Alexander Rosenberg is an American philosopher, and the R. Taylor Cole Professor of Philosophy at Duke University.Rosenberg was educated at Stuyvesant High School, the City College of New York and Johns Hopkins University...

 and Daniel Hausman dating to 3 decades ago.

Game theory and economic agents

Game theory
Game theory
Game theory is a mathematical method for analyzing calculated circumstances, such as in games, where a person’s success is based upon the choices of others...

 is shared between a number of disciplines, but especially mathematics
Mathematics
Mathematics is the study of quantity, space, structure, and change. Mathematicians seek out patterns and formulate new conjectures. Mathematicians resolve the truth or falsity of conjectures by mathematical proofs, which are arguments sufficient to convince other mathematicians of their validity...

, economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

 and philosophy
Philosophy
Philosophy is the study of general and fundamental problems, such as those connected with existence, knowledge, values, reason, mind, and language. Philosophy is distinguished from other ways of addressing such problems by its critical, generally systematic approach and its reliance on rational...

. Game theory is still extensively discussed within the field of the philosophy of economics. Decision theory
Decision theory
Decision theory in economics, psychology, philosophy, mathematics, and statistics is concerned with identifying the values, uncertainties and other issues relevant in a given decision, its rationality, and the resulting optimal decision...

 is closely related to game theory and is likewise very strongly interdisciplinary. Philosophical approaches in decision theory focus on foundational concepts in decision theory - for example, on the natures of choice
Choice
Choice consists of the mental process of judging the merits of multiple options and selecting one of them. While a choice can be made between imagined options , often a choice is made between real options, and followed by the corresponding action...

 or preference
Preference
-Definitions in different disciplines:The term “preferences” is used in a variety of related, but not identical, ways in the scientific literature. This makes it necessary to make explicit the sense in which the term is used in different social sciences....

, rationality
Rationality
In philosophy, rationality is the exercise of reason. It is the manner in which people derive conclusions when considering things deliberately. It also refers to the conformity of one's beliefs with one's reasons for belief, or with one's actions with one's reasons for action...

, risk
Risk
Risk is the potential that a chosen action or activity will lead to a loss . The notion implies that a choice having an influence on the outcome exists . Potential losses themselves may also be called "risks"...

 and uncertainty
Uncertainty
Uncertainty is a term used in subtly different ways in a number of fields, including physics, philosophy, statistics, economics, finance, insurance, psychology, sociology, engineering, and information science...

, economic agents.

Ethics and justice

The ethics of economic systems deals with the issues such as how it is right (just, fair) to keep or distribute
Distribution (economics)
Distribution in economics refers to the way total output, income, or wealth is distributed among individuals or among the factors of production .. In general theory and the national income and product accounts, each unit of output corresponds to a unit of income...

 economic goods. On a different level, ethics and economics relates ethical studies to welfare economics
Welfare economics
Welfare economics is a branch of economics that uses microeconomic techniques to evaluate economic well-being, especially relative to competitive general equilibrium within an economy as to economic efficiency and the resulting income distribution associated with it...

. This area overlaps strongly with other disciplines. Approaches are regarded as more philosophical when they study the fundamentals - for example, John Rawls
John Rawls
John Bordley Rawls was an American philosopher and a leading figure in moral and political philosophy. He held the James Bryant Conant University Professorship at Harvard University....

' A Theory of Justice
A Theory of Justice
A Theory of Justice is a book of political philosophy and ethics by John Rawls. It was originally published in 1971 and revised in both 1975 and 1999. In A Theory of Justice, Rawls attempts to solve the problem of distributive justice by utilising a variant of the familiar device of the social...

(1971) and Robert Nozick
Robert Nozick
Robert Nozick was an American political philosopher, most prominent in the 1970s and 1980s. He was a professor at Harvard University. He is best known for his book Anarchy, State, and Utopia , a right-libertarian answer to John Rawls's A Theory of Justice...

's Anarchy, State and Utopia (1974). As analytical term, 'justice' in economics is a subcategory of welfare economics
Welfare economics
Welfare economics is a branch of economics that uses microeconomic techniques to evaluate economic well-being, especially relative to competitive general equilibrium within an economy as to economic efficiency and the resulting income distribution associated with it...

 with models frequently representing
Mathematical problem
A mathematical problem is a problem that is amenable to being represented, analyzed, and possibly solved, with the methods of mathematics. This can be a real-world problem, such as computing the orbits of the planets in the solar system, or a problem of a more abstract nature, such as Hilbert's...

 the ethical-social requirements of a given theory. "Practical" matters include such subjects as law
Law and economics
The economic analysis of law is an analysis of law applying methods of economics. Economic concepts are used to explain the effects of laws, to assess which legal rules are economically efficient, and to predict which legal rules will be promulgated.-Relationship to other disciplines and...

 and cost–benefit analysis

Utilitarianism
Utilitarianism
Utilitarianism is an ethical theory holding that the proper course of action is the one that maximizes the overall "happiness", by whatever means necessary. It is thus a form of consequentialism, meaning that the moral worth of an action is determined only by its resulting outcome, and that one can...

, one of the ethical methodologies, has
its origins inextricably interwoven with the emergence of modern economic thought. Today utilitarianism has spread throughout applied ethics as one of a number of approaches. Non-utilitarian approaches in applied ethics are also now used when questioning the ethics of economic systems - e.g. rights-based (deontological) approaches.

Many political ideologies have been an immediate outgrowth of reflection on the ethics of economic systems. Marx, for example, is generally regarded primarily as a philosopher, his most notable work being on the philosophy of economics.

Non-mainstream economic thinking

The philosophy of economics defines itself as including the questioning of foundations or assumptions of economics. The foundations and assumption of economics have been questioned from the perspective of noteworthy but typically under-represented groups. These areas are therefore to be included within the philosophy of economics.
  • Cross-cultural perspectives on economics: an example is the Buddhist-inspired Bhutan
    Bhutan
    Bhutan , officially the Kingdom of Bhutan, is a landlocked state in South Asia, located at the eastern end of the Himalayas and bordered to the south, east and west by the Republic of India and to the north by the People's Republic of China...

    ese "Gross National Happiness
    Gross national happiness
    The assessment of gross national happiness was designed in an attempt to define an indicator that measures quality of life or social progress in more holistic and psychological terms than only the economic indicator of gross domestic product .-Origins and meaning:The term...

    " concept (suggested as a better development measure than GNI/GDP). Amartya Sen
    Amartya Sen
    Amartya Sen, CH is an Indian economist who was awarded the 1998 Nobel Prize in Economic Sciences for his contributions to welfare economics and social choice theory, and for his interest in the problems of society's poorest members...

     is a renowned advocate for the integration of cross-cultural phenomena into economic thinking ("It may be well asked why anyone should try to lecture the World Bank on culture"). Related area: economic anthropology
    Economic anthropology
    Economic anthropology is a scholarly field that attempts to explain human economic behavior using the tools of both economics and anthropology. It is practiced by anthropologists and has a complex relationship with economics...

    .
  • Feminist perspectives on economics: e.g. Drusilla Barker & Edith Kuiper eds., ; see also feminist economics
    Feminist economics
    Feminist economics broadly refers to a developing branch of economics that applies feminist lenses to economics. Research under this heading is often interdisciplinary or heterodox...

    .

Figures cited in the scholarly literature

  • Kenneth Arrow
    Kenneth Arrow
    Kenneth Joseph Arrow is an American economist and joint winner of the Nobel Memorial Prize in Economics with John Hicks in 1972. To date, he is the youngest person to have received this award, at 51....

  • Roger E. Backhouse
  • Ken Binmore
  • Milton Friedman
    Milton Friedman
    Milton Friedman was an American economist, statistician, academic, and author who taught at the University of Chicago for more than three decades...

  • Friedrich Hayek
    Friedrich Hayek
    Friedrich August Hayek CH , born in Austria-Hungary as Friedrich August von Hayek, was an economist and philosopher best known for his defense of classical liberalism and free-market capitalism against socialist and collectivist thought...


  • David Hume
    David Hume
    David Hume was a Scottish philosopher, historian, economist, and essayist, known especially for his philosophical empiricism and skepticism. He was one of the most important figures in the history of Western philosophy and the Scottish Enlightenment...

  • John Neville Keynes
    John Neville Keynes
    John Neville Keynes was a British economist and father of John Maynard Keynes.-Biography:Born in Salisbury, he was the son of Dr John Keynes and his wife Anna Maynard Neville . He was educated at Amersham Hall School, University College London and Pembroke College, Cambridge, where he became a...

  • John Maynard Keynes
    John Maynard Keynes
    John Maynard Keynes, Baron Keynes of Tilton, CB FBA , was a British economist whose ideas have profoundly affected the theory and practice of modern macroeconomics, as well as the economic policies of governments...

  • Tony Lawson
  • John Locke
    John Locke
    John Locke FRS , widely known as the Father of Liberalism, was an English philosopher and physician regarded as one of the most influential of Enlightenment thinkers. Considered one of the first of the British empiricists, following the tradition of Francis Bacon, he is equally important to social...


  • Karl Marx
    Karl Marx
    Karl Heinrich Marx was a German philosopher, economist, sociologist, historian, journalist, and revolutionary socialist. His ideas played a significant role in the development of social science and the socialist political movement...

  • John Stuart Mill
    John Stuart Mill
    John Stuart Mill was a British philosopher, economist and civil servant. An influential contributor to social theory, political theory, and political economy, his conception of liberty justified the freedom of the individual in opposition to unlimited state control. He was a proponent of...

  • Ludwig von Mises
    Ludwig von Mises
    Ludwig Heinrich Edler von Mises was an Austrian economist, philosopher, and classical liberal who had a significant influence on the modern Libertarian movement and the "Austrian School" of economic thought.-Biography:-Early life:...

  • Ayn Rand
    Ayn Rand
    Ayn Rand was a Russian-American novelist, philosopher, playwright, and screenwriter. She is known for her two best-selling novels The Fountainhead and Atlas Shrugged and for developing a philosophical system she called Objectivism....

  • Murray Rothbard
    Murray Rothbard
    Murray Newton Rothbard was an American author and economist of the Austrian School who helped define capitalist libertarianism and popularized a form of free-market anarchism he termed "anarcho-capitalism." Rothbard wrote over twenty books and is considered a centrally important figure in the...


  • John Rawls
    John Rawls
    John Bordley Rawls was an American philosopher and a leading figure in moral and political philosophy. He held the James Bryant Conant University Professorship at Harvard University....

  • Paul Samuelson
    Paul Samuelson
    Paul Anthony Samuelson was an American economist, and the first American to win the Nobel Memorial Prize in Economic Sciences. The Swedish Royal Academies stated, when awarding the prize, that he "has done more than any other contemporary economist to raise the level of scientific analysis in...

  • E. F. Schumacher
    E. F. Schumacher
    Ernst Friedrich "Fritz" Schumacher was an internationally influential economic thinker, statistician and economist in Britain, serving as Chief Economic Advisor to the UK National Coal Board for two decades. His ideas became popularized in much of the English-speaking world during the 1970s...

  • Amartya Sen
    Amartya Sen
    Amartya Sen, CH is an Indian economist who was awarded the 1998 Nobel Prize in Economic Sciences for his contributions to welfare economics and social choice theory, and for his interest in the problems of society's poorest members...

  • Adam Smith
    Adam Smith
    Adam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...

  • Bernard Williams
    Bernard Williams
    Sir Bernard Arthur Owen Williams was an English moral philosopher, described by The Times as the most brilliant and most important British moral philosopher of his time. His publications include Problems of the Self , Moral Luck , Ethics and the Limits of Philosophy , and Truth and Truthfulness...



Related disciplines

The ethics of economic systems is an area of overlap between business ethics
Business ethics
Business ethics is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations.Business...

and the philosophy of economics. People who write on the ethics of economic systems are more likely to call themselves political philosophers
Political philosophy
Political philosophy is the study of such topics as liberty, justice, property, rights, law, and the enforcement of a legal code by authority: what they are, why they are needed, what, if anything, makes a government legitimate, what rights and freedoms it should protect and why, what form it...

than business ethicists or economic philosophers. There is significant overlap between theoretical issues in economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

and the philosophy of economics. As economics is generally accepted to have its origins in philosophy, the history of economics overlaps with the philosophy of economics.

Degrees

Some universites offer joint degrees that combine philosophy, politics and economics. These degrees cover many of the problems that are discussed in Philosophy and Economics, but are more broadly construed.

Journals


External links

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