Recent examinations have shown that for most contemporary economists, discussions of social norms and ethical values belong to normative enterprises that should play no role in scientific studies. Making these examinations more historical, we can explain the causes of this position in more detail and discover economists who have not excluded normative considerations from economics and offered innovative models or insights for incorporating objective evaluations of values and norms into economics. While it is worthwhile to start such historical examinations from the very foundation of modern economics by Adam Smith, focusing on post-classical economic thought can be more beneficial for contemporary discussions of norms and values, the ontological and epistemological foundations of economics having changed radically since the marginalist revolution.
We should also note that despite agreeing with the position of numerous contemporary economists when considering the assessment of values and norms as part of philosophy and ethics rather than scientific economics, unlike most contemporary economists, a significant number of classical economists worked as much on economics as on philosophy. Moreover, classical economists often excluded the appraisal of values and norms from economics because, for most of them, ‘political economy informs us of the laws which regulate the production, distribution, and consumption of wealth’ (Mill, 1836/1967, p. 313). Given this, they often argued that economics should study social phenomena through the prism of material wealth only, which explains, at least in part, why it should exclude most values and norms. However, since the marginalist turn, notably after Pareto’s ordinalist revolution and Robbins’s definition of economics as a science of choice, economics has reduced its focus on the so-called material aspect of human life: it has been increasingly interested in individual or social action in all its dimensions, as long as that action embodies a choice. Thus, post-classical economics has no longer investigated social phenomena through the prism of material opulence only.
Values and norms in Marginalist economic thought
The evolution of economics since the marginalist revolution could have encouraged economists to pay more attention to the ethical values and social norms that affect, or ought to influence, the formation of people’s preferences and the choices made by individuals and collective institutions. However, the advent of marginalism did not discourage economists from maintaining that values and norms should play no role in the theoretical part of economics. Moreover, contrary to classical economists, most marginalist economists worked almost exclusively on theoretical economics, their philosophical writings often limited to merely methodological questions.
For example, one of the founders of marginalism, Menger, maintains that the theoretical and scientific part of political economy should investigate, independently of all normative considerations, the general nature of economic phenomena and the laws governing them. He maintains that normative considerations belong instead to the practical part of economics, whose task is to study ‘the basic principles for suitable action’ (Menger, 1985, p. 39). However, Menger’s Principles of Economics does not discuss the practical part, and even when he does, in Investigations into the Method of the Social Sciences, he is mainly polemical and intends to reject the position of the members of the German Historical School.
Among prominent economists of the late nineteenth century and the early twentieth century, only John Neville Keynes and Léon Walras embraced a different position on the role of values and norms in economics. Indeed, Keynes and Walras oppose the exclusion of values and norms from economics and their relegation to philosophy or often-overlooked practical parts of economics.
JN Keynes’s investigations in The Scope and Method of Political Economy (1891) regarding different tasks of economics have been far more impactful than Walras’s as Friedman’s highly influential article from 1953, ‘The Methodologic of Positive Economics’, starts with a brief discussion of Keynes’s distinction between positive and normative economics. However, Friedman does not offer an accurate representation of Keynes’s position. Indeed, contrary to Keynes, Friedman considers positive economics the only scientific and objective part of economics and argues that only the further development of positive economics can resolve disagreements over the choice of the norms underlying the reform of social situations. In contrast, as emphasized by Deane and Mongin, Keynes maintains that scientific and theoretical economics is not limited to positive economics since ‘a department of knowledge does not necessarily belong to the category of art, as distinguished from science, simply because it is concerned with what ought to be’ (Keynes, 1891, p. 35). Indeed, under the influence of Wagner, in Keynes eyes ‘a leading representative of the more moderate section’ of the German Historical School (ibid., p. 27) and ‘whose observations respecting economic method are unexceptionable’ (ibid., p. 298), Keynes emphasizes that economics should pay close attention to values and norms. He, therefore, underlines the possibility of offering unbiased normative evaluations of social phenomena and policies.
Still, Keynes’s examination of the epistemological and theoretical specificities of normative economics and its tasks are much less detailed than his discussion of positive economics. Had he paid attention to Walras’s writings, especially the distinction between the économie politique pure and the science morale pure, he might have found them related to his attempts at characterizing the role of values and norms in economics and the relationship between the latter’s positive and normative tasks.
For a long time, those few economists referencing Walras’s writings limited their appraisals to general equilibrium and sometimes merely to the latter’s specific equations. Thus, they often overlooked Walras’s other writings, notably those of a philosophical character. Akin to the scholarship on Smith, taking into account Walras’s entire writings has become unavoidable only since the publication of his Œuvres completes, leading to utterly different interpretations. In fact, Walras relies on ontological reflections to distinguish persons from things, by which he deduces, on an epistemological level, four kinds of science: économie politique pure, science morale pure, économie politique appliquée,and économie sociale appliquée. While the normative character of the two pure sciences is somewhat implicit, that of the two applied sciences is explicit: the criterion of justice guides the theory of the distribution of wealth (économie sociale), and that of usefulness steers the theory of production of wealth (économie appliqée). Walras tries to justify the objectivity of his definitions of these two criteria by deducing them from the theory of property and the theory of social wealth. He considers these theories as true not just in the logical sense but especially in the ontological sense of corresponding to the true nature of persons, things, and also, collective institutions.
Thus, Walras offers an intriguing intellectual construction in which ontological, epistemological, and theoretical levels are articulated within a complex architecture which should be examined in detail for potentially significant contributions to contemporary discussions in normative economics and philosophy.
The marginalization of values and norms in ordinalist and positivist economic thought
To be sure, until the early twentieth century, most economists did not share Walras’s and Keynes’s insistence on the possibility and desirability of objective evaluations of values and norms in economics. Still, more often than not, either they also worked on normative questions in their philosophical writings or at least emphasized that economics should take on the normative task of evaluating social phenomena and recommending policies to change the functioning of public institutions. However, since the early twentieth century, most economists have not only eschewed the position of Walras and Keynes, but moreover, have maintained that as evaluations of norms and values lack objectivity, these evaluations lack rigor and economists should abstain from working on them. Although challenging to pinpoint the exact moment when economists adopted this pessimistic attitude, we know that purely formal theories of choice and preference have predominated in economics since Vilfredo Pareto’s ordinalist turn and, more precisely, since Robbins’s influential Essay on the Nature and Significance of Economic Science. Influenced by Ludwig von Mises, Robbins follows him in maintaining that the science of economics should only study the formal structure of human action and choice, centered on the means–ends relationship. For Mises and Robbins, discussing the normative foundations of how people and public institutions choose or ought to choose should be left to philosophers and ethicists. Formal theories of choice and preference have allowed economists to discuss the structure of individual and collective choices without examining why individuals and public institutions make specific choices or how their preferences are formed.
Other than Robbins, no economist has played a more crucial role in this evolution than Pareto. Indeed, on top of instigating the ordinalist turn in economics, thanks to his background in engineering he also developed a series of mathematical techniques that allowed significant progress in economists’ formal investigations of individual and collective choice. Moreover, Pareto’s rejection of the normative dimension of Walras’s writings and his characterization of Walras’s attempts at justifying the objectivity of his normative evaluations as unfounded and metaphysical played an important role in how later economists received Walras’s writings. By appraising Pareto’s rejection of Walras’s position on the normative aspects of economics critically and systematically, we can more clearly understand why economists have not pursued the path opened up by Walras and Keynes. Moreover, examining Pareto’s critique of Walras can offer other crucial insights since, despite his rejection of Walras’s attempts to justify the objectivity of his normative evaluations, Pareto does not entirely rule out the possibility of making objective and substantial evaluations of social norms and values, at least in sociology.
Contemporary critiques of the positivist marginalization of values and norms in economics
Pareto’s critique of Walras, and his role in marginalizing substantial evaluations of norms and values in economics, have received less scrutiny in English-speaking economics than Robbins’s Essay, often considered the starting point of the positivist turn in economics. Since Robbins’s distinction between positive and normative economics, later reinforced by Friedman, has dominated economics, defending the distinction has led to the increasing marginalization of normative studies in economics and the oft-repeated characterization of such studies as lacking objectivity. Hence, recent attempts to problematize the marginal role of the studies of norms and values in economics have questioned the very possibility of distinguishing between positive and normative economics.
For example, many scholars have pointed to the difficulties of clearly distinguishing positive facts from normative judgements, while others have shown that economists often use thick concepts (such as development, poverty, and inequality), which are simultaneously descriptive and evaluative. The use of such concepts shows that factual judgments and normative judgements are always entangled, hence the erroneous character of positivist approaches in economics, according to which only judgments about facts are objective, while judgments about values and norms lack objectivity.
Other scholars have highlighted that economists’ normative predilections tend to influence their work in positive economics. For instance, when choosing the topics of their research, economists’ values decide whether they work on economic growth, economic sustainability, equity, or other topics. Similarly, when designating the empirical content of formal concepts such as inflation or GDP, their values influence the bundle of goods and services chosen to calculate them. Relying on a comparable but more critical position, post-Foucauldian writings on economics have tried to reveal the role played by political ideologies in the theories of certain economists.
The distinction between positive and normative approaches in economics has been equally challenged by authors working on the performative influence that positive theories exert on the social world. By performativity, they seek to highlight the following observation: when positive theories describe various so-called factual patterns of behavior, they end up encouraging social agents to act according to these patterns, thus creating, instead of representing, a pattern of behavior. For these authors, the positive/normative distinction is problematic since it insinuates that only normative theories can influence the existing world while positive theories only passively represent the world. Consequently, because theories in so-called positive economics can also have normative influence, the distinction between positive and normative approaches obfuscates the nature and function of theories instead of clarifying them.
Last but not least, numerous scholars have argued that in all areas of scientific inquiry, especially when it is impossible to choose the right theoretical approach on the basis of predictions, researchers often opt for certain epistemic values, such as formal rigor or simplicity, to the detriment of others, such as practical relevance or the descriptive accuracy of the assumptions of theories. Yet epistemic values, especially those governing the practice of scholars working at institutions, are themselves a sub-category of ethical and social norms. Thus, even the discussion of epistemic values cannot avoid the discussion of non-epistemic norms and values. In other words, discussions of non-epistemic norms and values and their influence on epistemic values should play an equally important role in all economic theories. Therefore, positive economics cannot be characterized as a non-normative or value-free way of doing science.
Through their painstaking examinations of economic ideas, theories, and practices, the above-mentioned studies have laid bare the determining influence of epistemic and non-epistemic norms and values on economics. Still, many of them seem to insinuate that such influences undermine the objectivity of the positive theories of economists. In other words, beyond showing that various norms and values permeate the positive theories of economists, these works seem to agree with economists in considering that evaluations and examinations of norms and values lack objectivity. Therefore, according to these studies, as norms and values are not absent from the positive theories of economists, and since economists maintain that evaluations and examinations of norms and values lack objectivity, their positive theories are as biased and unobjective as their explicitly normative positions. So, despite their undeniable critical merit, most of these works have not problematized the skeptical position of economists regarding the objectivity of the evaluations of norms and values. Instead, they extend this skepticism to the positive theories of economists, and thus lead to a generalized skeptical vision, where objectivity as such is rejected.
Nevertheless, given the necessity of tackling several highly urgent social problems, especially those related to the ecological and climate crises and the latter’s social and political consequences, we cannot simply highlight the failures of past or present attempts to attain objectivity in economics. We should, instead, complement these critical studies with helpful proposals to improve the objectivity of economics. Economics should therefore rethink the question of objectivity when it comes to evaluating and examining non-epistemic norms and values, which underlie all discussions about the choices of public institutions and individuals. Moreover, given the direct or indirect effect of non-epistemic norms and values on theories in positive economics, economists can no longer defend the objectivity of positive economics and maintain, at the same time, that discussions of norms and values lacks objectivity. Indeed, once economics regains the ability to offer objective appraisals of non-epistemic norms and values, it can also deal with its own implicit normative assumptions, be they epistemic or non-epistemic, in more transparent and objective ways. Still, when rethinking the possibility of objective discussions of norms and values in economics, we should keep in mind two significant lessons drawn from the aforementioned critical works:
- Various epistemic and non-epistemic normative assumptions underlie the non-evaluative analyses of social situations, and economists should try to make these assumptions explicit.
- The evaluations of social phenomena, preferences, and choices, and the recommendations of policies, rely on positive assumptions regarding the behavior of individuals, their identity, and the relationship between individuals and their social milieu, and economists should ensure such assumptions are empirically sound and relevant.
The second lesson is crucial because, in the history of modern economics, we encounter examples of theories that were initially presented as positive or non-evaluative but which, when it became clear that they could not explain the functioning of existing social situations or individuals, were later presented as normative. Thus, we should be careful about theories that are presented as normative to avoid acknowledging that they are not very relevant. Besides the general equilibrium theory as developed by neo-Walrasians, other examples of theories that became normative only after their failure as positive theories are rational choice theory and expected utility theory. Consequently, if we ignore the positive assumptions of normative theories and their practical and empirical relevance, normative economics may become a dustbin of theories deemed unsatisfactory in positive economics.
Beyond these two lessons, attempts to revalorize the study of norms and values in economics do not have to start from scratch. As already mentioned, Walras offers a rigorous manner for integrating normative considerations into economics. Besides Walras’s, we can equally rely on the work done by numerous economists after the positivist turn, especially that on different theoretical frameworks and approaches within normative economics. Indeed, by working on normative economics, these economists have refused to subscribe to the positivist dismissal of the study of norms and values in economics. However, the intellectual zeitgeist that has led economists to avoid substantial discussion of norms and values has exerted deleterious influences even on two prominent theoretical frameworks in normative economics: welfare economics and social choice theory. These influences, which we will discuss in the following sections, have prevented welfare economics and social choice theory from persuading most economists to recognize the necessity of substantial investigations of norms and values. Thus, it is worthwhile to reconstruct and rehabilitate Walras’s manner of offering substantial appraisals of norms and values.
Shortcomings of the new welfare economics
Robbins played an important role in shaping the widespread rejection of Pigouvian welfare economics as unscientific and biased. For some scholars, Robbins’s critique was motivated by his liberal antipathy toward the egalitarian ramifications of Pigou’s recommendations for monetary redistributions and by the broader ‘ideological dispute between the economists of the London School of Economics and Cambridge’ (Aslanbeigui, 1990, p. 617). Still, the rejection of Pigouvian welfare economics was made easier by Pigou’s lack of the rigorous and detailed examination of alternative, and conflicting, norms and values. Therefore, even Pigou’s most radical recommendations are not based on any elaborated theory of justice. Instead, they aim at maximizing overall social welfare by establishing a fairly straightforward relationship between total social utility and the diminishing marginal utility of individuals as they get richer.
Given Pigou’s justification of his conclusions using a few utilitarian principles that he did not justify at length, those who criticized his method of doing normative economics focused their critical scrutiny on one of the main pillars of his technical apparatus, the interpersonal comparison of utility and the value judgements involved in such comparisons. In effect, by simply rejecting the interpersonal comparison of utility, they could undermine most of Pigou’s conclusions. Hence, economists such as Bergson, Hicks, Hotelling, Kaldor, and Samuelson, sharing Robbins’s critical appraisal of Pigou without fully subscribing to Robbins’s expulsion of all discussions of norms and values from economics, had to find methods of appraising social situations without making use of interpersonal comparisons of utility. They therefore rediscovered, albeit only slowly, numerous Paretian concepts that could allow them to compare social situations without presupposing any cardinal measure of utility or any comparison between how different individuals evaluate their preferences.
However, this rediscovery of Pareto and the prominent role played by Paretian concepts in the new form of welfare economics that Bergson, Hicks, Hotelling, Kaldor, and Samuelson developed did lead them to examine Pareto’s reflections on the epistemological and ontological status of these concepts. Indeed, it has been argued that ‘modern welfare economics, when considering what it set out to achieve, is at best an illegitimate child whose father, Pareto, would find hard to recognize’ (Cirillo, 1973, p. 145). So, for example, they ignored the place of these concepts within Pareto’s contributions to economics and sociology and did not try to evaluate the soundness of Pareto’s rejection of Walras’s far more substantial integration of norms and values into economics. From the beginning, the new welfare economics was reluctant to scrutinize the ontological and epistemological assumptions that underlie its most central concepts and the significant normative judgements involved in policy recommendations made on the basis of its compensation principle.
Moreover, those working on the new welfare economics did not pay enough attention to the ontological and epistemological status of another key concept of their theoretical apparatus: general equilibrium. In effect, to deduce the fundamental theorems of welfare economics, one should rely on a general equilibrium model of an economy. Contemporary analyses of general equilibrium mainly result from the work of a group of neo-Walrasian economists associated with the Cowles Commission for Research in Economics. The failure to explain the unicity and stability of hypothetical economic states in equilibrium prevents models of general equilibrium from elucidating the positive functioning of any empirically existing economic situation or explaining how existing economic situations can be transformed to correspond to specific states of equilibrium. As a result of these failures, general equilibrium is increasingly presented as a normative model that gives us information about the functioning of an ideal economic state of affairs, and the formal conditions that should prevail for such a state to exist. Considering the failure of attempts to justify the pertinence of general equilibrium as a positive or descriptive theory, it is not obvious to use general equilibrium as a positive theory in welfare economics and, a fortiori, to justify the conclusions drawn based on its two fundamental theorems.
The limits of merely formal evaluations of values and norms in contemporary normative economics
To be sure, until the 1950s, the new welfare economics remained the dominant, or even sole, theoretical framework used by theoretical economists to evaluate social situations and economic policies. The breakthrough that exposed its limits was Arrow’s 1951 Social Choice and Individual Values. This book has played a remarkably contradictory role in the history of modern normative economics. On the one hand, Arrow’s main achievement in the book – especially in its improved second edition, which corrected some of the errors of the first edition pinpointed by Blau – namely his impossibility theorem, is often cited by the practitioners of welfare economics as the latter’s third fundamental theorem. On the other hand, the book is considered the founding text of social choice theory, which, for many of its practitioners, has replaced welfare economics as the leading theoretical framework of normative economics. Mongin, Fleurbaey, and especially Amartya Sen, have managed to show divergences between welfare economics and social choice theory concerning at least three points:
- Interpersonal comparisons of utility
- The problem of Welfarism
- The fate of Paretianism
Most debates between proponents of welfare economics and those who mobilize social choice theory in its different forms to criticize welfare economics have revolved around these three points. The first has led to the conclusion that Bergson–Samuelson social welfare functions either should make interpersonal comparisons of utility or are dictatorial in the sense of Arrow’s impossibility theorem. Sen has shown that pertinent evaluations of social welfare cannot be done without interpersonal comparisons, but such comparisons do not necessarily require the abandoning of ordinal utility and a return to cardinal utility, even if dropping ordinal utility gives us more options for evaluating social settings. The second point is about whether the non-utility features of social states should influence the ranking of social states, especially when the rankings involve aggregating people’s interests and not their judgements. It has shown the necessity of broadening the informational base of normative economics, since the utility functions of individuals do not provide all the relevant information required to evaluate social situations and can lead to absurd situations where we cannot even distinguish the rich from the poor. The third point is about whether the Pareto criteria are useful in guiding policy appraisals and decisions, and the necessity of finding more relevant criteria to examine social situations and policies.
Still, even those who have criticized welfare economics and its restricted capacity for policy recommendations have often focused on mostly formal and logico-mathematical analyses, often associated with various kinds of impossibility theorems. Indeed, theoretical approaches that avoid substantial discussions of social norms and ethical values, and focus almost exclusively on logico-mathematical analyses of the internal coherence and (in)compatibility of various norms and values, embody the ‘official interpretation of social choice theory’ (Mongin, 1999, p. 546). For Mongin, such formal analyses should ‘play the role of preliminary groundwork’ (2006a, p. 43), whereas they often constitute the only part of what most social choice theorists do. Hence, by limiting normative economics to merely formal evaluations of abstract normative criteria, the practical consequences of such evaluations, i.e., whether these evaluative frameworks or the conclusions drawn on their basis can be implemented in practice, are often left undiscussed. However, even from epistemological and theoretical perspectives, implementation issues are unavoidable since ‘they count among the considerations weighing for or against evaluative criteria’ (ibid., p. 44). At this point, we should also recall the second lesson to draw from works critically examining the positive/normative distinction in economics. These works have shown that just as theories in positive economics should make their normative assumptions explicit, theories in normative economics should ensure that their positive assumptions are realistic and relevant. Indeed, logico-mathematical consistency and rigor becomes the only criterion when judging normative theories if we do not care about implementing their evaluative frameworks or recommendations. While it is true that ‘the issue of feasibility is a distinct one from that of social desirability’ (Sen, 1979a, p. 552), besides logico-mathematical coherence, whether the evaluations and prescriptions offered on the basis of such formal analyses can be effectively implemented is an important criterion when deciding whether to use them in concrete settings.
Recent challenges facing normative economics
Paying attention to the practical scope (and pertinence) of normative economics is imperative if economics wants to remain relevant to debates in the public sphere and contribute to collective discussions regarding the choices of public institutions. For example, in view of the climate and ecological crises and the socio-economic transformations required to deal with them, ecological economists argue that economics should offer substantial analyses of choices and preferences, and contribute to establishing an objective hierarchy of them. For ecological economists, we should consider the nature of the preferences that different activities aim to satisfy when appraising the impacts of these activities on the environment and climate. These impacts should be evaluated differently depending on whether an activity seeks to satisfy basic needs or other preferences.
Similarly, those working on three influential proposals for bringing about social justice in light of the widening inequalities and the ecological and climate crises, i.e., Universal Basic Income, Universal Basic Services, and Minimum Inheritance, have emphasized the necessity of paying closer attention to people’s basic needs and the priority of such needs over other preferences. The practical necessity both of appraising the preferences behind individual and collective choices to determine which are socially more legitimate and of finding the most equitable norms underlying various distributive measures shows to what extent substantial evaluations of the ethical values and social norms that influence the choice of different objectives and the distribution of economic capabilities should henceforth occupy an important place in economics. However, other than Atkinson’s defense of Minimum Inheritance, the proponents of these proposals rarely mobilize theoretical economics. Due to this theoretical deficit, it is sometimes difficult to offer impartial appraisals of the pros and cons of these proposals and their normative foundations. Thus, instead of criticizing the feeble presence of theoretical economics in discussions involving these proposals and other urgent social problems, it is more beneficial to revalorize and take advantage of all the resources theoretical economics can offer concerning the evaluation of social choices and the norms and values underpinning them.
Among contemporary normative economists, very few have followed Sen in moving beyond purely formal analyses. Indeed, by focusing on topics such as poverty and basic capabilities, Sen has reintroduced substantial discussions of norms and values into normative economics. Pursuing this line of research has led Sen to move beyond social choice theory and standard frameworks in normative economics, culminating in the creation of the capability approach. Nevertheless, most substantial contributions to the latter have been made not by Sen himself but by philosophers such as Nussbaum and Robeyns. In effect, even if Sen has emphasized the importance of demarcating basic capabilities to find ‘a cut-off point for the purpose of assessing poverty and deprivation’ (1987, p. 109), he has not offered more substantial examinations of what these basic capabilities are and how they should be chosen, or how public institutions should facilitate the creation of such capabilities. Therefore, even the capability approach has not escaped the standard view in economics, according to which substantial discussions of norms and values belong not to economics but to philosophy and ethics.
Contemporary discussions of the role of norms and values in economics raise another difficulty related to the necessity of articulating the ontological, epistemological, and theoretical aspects of the problem posed by the study of values and norms. Indeed, contemporary discussions of the role of values and norms in economics mostly focus on only one of these aspects. For example, Mongin has shown that they often pay little attention to epistemological discussions concerning the role of epistemic values and non-epistemic norms in scientific studies. For Mongin, most economists continue to believe that they should always refrain from making value judgments, even though the post-positivist philosophy of science has rigorously criticized this position. Similarly, Tony Lawson has shown that most epistemological appraisals of the role of values and norms in science pay feeble attention to the ontological specificities of social entities and the necessity of considering these specificities before examining the epistemological characteristics of social science.
Consequently, renewing the project of Walras is one way, our way, of contributing to a better integration of norms and values into economics, offering an articulation of the ontological, epistemological, and theoretical levels as called for in recent literature, and making meaningful contributions to public debates concerning practical questions involving values and norms. As we have seen, among economists who worked on norms and values prior to the positivist exclusion of normative considerations from economics, Walras is probably the only prominent post-classical economist to have written on different aspects of the challenges facing the integration of such considerations into economics.