The Online Library of Liberty

A project of Liberty Fund, Inc.

• Introduction
• Part 1: Economics and Ethics
• Chapter 1: Are Economists Basically Immoral? *
• Chapter 2: Economics and Ethics: the Problem of Dialogue *
• Chapter 3: Income and Ethics In the Market System *
• Part 2: Economics and Theology
• Chapter 4: Can Homo Economicus Be Christian? *
• Chapter 5: Economic Scientists and Skeptical Theologians *
• Chapter 6: Christian Theological Perspectives On the Economy *
• Chapter 7: Controlling Stories: On the Mutual Influence of Religious Narratives and Economic Explanations *
• Part 3: Economics, Theology, and Justice
• Chapter 8: Justice, Natural Law, and Reformation Theology *
• Chapter 9: The Concept of Economic Justice In Religious Discussion *
• Chapter 10: The U.s. Catholic Bishops and the Pursuit of Justice *
• Part 4: Economics and History
• Chapter 12: Christian Social Thought and the Origination of the Economic Order *
• Chapter 13: Clerical Laissez-faire: a Case Study In Theological Ethics *
• Part 5: On Teaching and Learning
• Chapter 14: “the Nature of Man”: What Are We After? *
• Chapter 15: Researchers and Degree Purchasers *
• Part 6: Teaching Economics
• Chapter 16: Economics Is a Way of Thinking *
• Chapter 17: Teaching Introductory Economics *
• Chapter 18: Teaching Economics By Telling Stories *
• Chapter 19: Between Sterility and Dogmatism *
• Part 7: Economic Method
• Chapter 20: Ethics On the Road to Serfdom and Beyond *
• Chapter 21: Measures of Wealth and Assumptions of Right: an Inquiry *
• Chapter 22: The Foundations of Law and Economics: Can the Blind Lead the Blind? *
• Part 8: Policy Commentary
• Chapter 23: What Is the Responsibility of Business Under Democratic Capitalism? *
• Chapter 25: An Economic Perspective On Illegal Drugs *
• Chapter 26: Economics, Ethics, and Ecology *

CHAPTER 2

Economics and Ethics: The Problem of Dialogue*

Is economics a science or an ideology? Does it provide trustworthy descriptions and reliable predictions? Or are the descriptions and predictions of economists distorted by ideological presuppositions and commitments?

From Confidence to Confusion

As recently as fifteen years ago it would have been difficult to assemble a session on those questions at a professional economics meeting in this country. There were almost no Marxist economists in academic positions in the United States to press the argument that orthodox economics is bourgeois apologetics.1 And the “institutionalists,” who had vigorously attacked the philosophical and political biases of mainstream American economics a generation earlier,2 were by 1960 mostly intimidated, converted, compromised, or quarantined.3 Most economists simply accepted without serious question the position expressed in 1953 by Milton Friedman, that “economics can be, and in part is, a positive science” and that “positive economics is in principle independent of any particular ethical position or normative judgments.”4

The complacent consensus has been loudly shattered over the last decade. Those economists who remain convinced that economics is a purely positive science have found it increasingly difficult to ignore the charge that the theoretical corpus of their discipline is in large part an elaborate justification of capitalist society.5 Formation of the Union for Radical Political Economics;6 the selection by the American Economic Association of a president notorious for maintaining that economics is “a system of belief” and his subsequent presidential address castigating the profession for its blindness, biases, and sterility;7 the revival of a militant institutionalist movement organized in the Association for Evolutionary Economics;8 articles and reviews attacking “neoclassical economics” appearing regularly in official publications of the American Economic Association9 —the evidence is abundant that what was until recently a settled truth within the profession is today a very doubtful dogma indeed. Even the more determined defenders of the positive-normative distinction now admit that the line is extraordinarily difficult to draw.10

It would appear that Gunnar Myrdal, after many years of swimming “against the stream” (the title of a recent collection of his essays),11 is now riding triumphantly on the flood. When in the 1920’s he was composing his monograph on The Political Element in the Development of Economic Theory, Myrdal believed that it was possible to purge all political, ideological, or other normative elements from economic theory and thereby to construct a purely positive science of economics. But he soon afterward repudiated that position, calling it “naive empiricism.” Over the last forty years Myrdal has persistently criticized the implicit and explicit belief of economists “in the existence of a body of scientific knowledge acquired independently of all valuations.” He put the criticism succinctly in his Preface to the English edition of The Political Element:

Myrdal’s argument, elaborated subsequent to the 1930’s in books, essays, introductions, and appendices, was never seriously challenged. Nonetheless, economists continued to uphold and employ the positive-normative distinction in methodological essays, textbook introductions, and obiter dicta until the 1960’s, when the tide of opinion underwent a rapid reversal. Thomas Kuhn’s Structure of Scientific Revolutions,13 assisted by a changing political climate, accomplished quickly what Myrdal’s patient arguments had failed to do: convince a substantial number of economists that the science of economics is inescapably grounded upon non-scientific commitments. The new word with which to refute the defenders of a purely positive science became “paradigm.” Despite its considerable ambiguity—one careful reader has distinguished at least twenty-one different senses in which Kuhn employed that word14 —the concept of a paradigm became for some a philosopher’s stone that could transform any and every alleged science into a mere systematic elaboration of particular biases. Whether or not Kuhn intended this interpretation,15 and whether or not those who invoke his authority have actually read him, the entire context within which the positive-normative distinction was used, defended, or criticized by economists did change drastically toward the end of the 1960’s.

The resulting situation is unsatisfactory from any responsible point of view. Many economists continue to affirm the possibility of a positive science of economics, continue to assure their students and one another that economists possess or can create a purely scientific, purely descriptive, value-free, logical-empirical system of thought and knowledge, and continue to condemn as unscientific any attempt to derive economic generalizations with the explicit aid of value judgments. Such a rigid adherence to an untenable position severely restricts dialogue and inquiry16 and transforms suspicion into conviction for many who are beginning to wonder whether economics is not more ideology than science.17

At the same time we find economists and jubilant critics of economics who, in the words of Robert Solow, “seem to have rushed from the claim that no social science can be value-free to the conclusion that therefore anything goes,”18 or who—the words are again Solow’s—“have corrupted Thomas Kuhn’s notion of a scientific paradigm, which they treat as a mere license for loose thinking.”19

The Fatal Distinction

Where can dialogue begin? Surely it could begin with a universal agreement to abandon the positive-normative distinction. It is philosophically untenable, and all attempts to use it lead to question-begging procedures that stop discussion and impede the growth of knowledge. Myrdal’s basic argument, that values enter inevitably into the construction of any scientific generalization, has never been refuted because it is irrefutable. The analysis applies to every science, not just to the social sciences, as has been amply demonstrated by such distinguished and diverse students of the history and philosophy of science as E. A. Burtt,20 R. G. Collingwood,21 Alfred North Whitehead,22 Michael Polanyi,23 and now Thomas Kuhn. The citation of names is hardly an argument; but the horse is too dead for flogging. It is not possible, not even “in principle” (that strange phrase economists invoke when they do not know how to do what they nonetheless believe can somehow be done) to construct a science of economics that is “independent of any particular ethical position or normative judgments.”24

But the next constructive step is not so easy to discern. Myrdal has maintained that economists have an obligation to reveal their presuppositions as fully as possible so that readers can more easily assess the significance and limitations of any piece of analysis or description. There is an obvious deficiency in this procedure, however, that makes it at least as likely to mislead further as to reveal more fully. And Myrdal’s own “confessions” demonstrate the danger. They tend to tire the reader well before they succeed in adequately exposing the crucial presuppositions. Myrdal probably exaggerates the effectiveness of introspection and assigns insufficient importance to the role of criticism by others in detecting the preconceptions that shape our knowledge. The widespread neglect for so long of Myrdal’s diagnosis may be grounded in large part in economists’ dissatisfaction with his prescription: the constant explication of underlying value judgments. Lionel Robbins, for example, has complained of “the minute search for implicit value judgments, which . . . has even become something of a heresy hunt—and, like most heresy hunts, something of a bore.”25 Those who are in general agreement with Myrdal’s analyses may find his prefaces instructive; but those who consider his analyses inadequate or misleading will most likely find the same flaws in his presentation of the value framework underlying the analysis.

Robbins’ objection suggests another reason why most economists have not responded to Myrdal’s epistemological diagnosis. They believe that the value judgments which enter inevitably into scientific inquiry are trivial or ones which all serious inquirers hold in common. But if that claim was ever defensible, it is no longer. The fact is that the guiding preconceptions which have shaped the development of economic theory are being disputed today, and disputed in quite specific and concrete ways. Economists are accused of doing economics on the basis of analytical preconceptions that cause them to count as solutions what their critics perceive as problems and that prevent them from even seeing certain social relationships as in any sense problematic. If someone were to suggest, for example, that college professors ought to do their own typing and a portion of the janitorial work in their own classrooms and offices, most economists would invoke the principle of comparative advantage in defense of present procedures. That is not an illegitimate response, but it is certainly a limited response. The principle of comparative advantage is at best a clumsy tool for dealing with the social meaning of work or the alienation that accompanies specialization and the hierarchical organization of labor, and at worst it is a tool of thought that conceals these problems altogether.

This is hardly a trivial or peripheral objection. The principle of comparative advantage is at the very center of price theory, which is surely the closest thing to a ruling paradigm in contemporary economic science. It is the pursuit of comparative advantage that makes demand curves slope downward to the right and that establishes opportunity costs, thereby giving supply curves their tendency to slope upward to the right. The crucial concept of efficiency is defined in economics in terms of comparative advantage, and it is the pursuit of comparative advantage that establishes prices which are indicators of social scarcity, that induces efficient decisions, and that gives meaning to the concept of equilibrium in price theory. The comparative advantage concept provides a theoretical orientation that is neither trivial in importance nor universally accepted by those who think systematically about social interaction. One may legitimately ask: Can economists defend the significant theoretical decision to view social reality through the prism of relative price theory and the principle of comparative advantage?

One reply is to say simply that it works; that it yields good predictions or that it explains what we want to understand. But that begs important questions. What are we trying to predict or explain? Which aspects of social reality are brought into prominence by our analytical procedures and which aspects are submerged or even distorted? Why this and not that?26

Economists and other practicing scientists easily become impatient with questions of this sort and are tempted to reply that each scientist, including the critic, has the right to study whatever interests him in whatever way he chooses. But such an individualistic, laissez faire conception of science is unrealistic. The separate sciences are not collections of individuals who do as they please; they are professional communities with definite intellectual standards and substantial power to enforce those standards. They exercise this power by granting or withholding membership in the community, the rewards of income and recognition, and opportunities to influence society through the dissemination of research results. The theoretical decisions of scientists have coercive power.27 Moreover, knowledge is always power, and absolute power corrupts absolutely.

The Criterion of Science

The determination of some economists to find and enforce unambiguous criteria for genuinely scientific work arises in fact from their recognition of the social power of science. Genuine science leads to the progressive accumulation of warranted knowledge while other modes of inquiry do not—or at least do so less surely and effectively. And knowledge is useful, not least in the social sciences, where the inevitable conflicts engendered by opposition of interests are so often exacerbated by disagreement over matters of fact. A purely scientific, purely descriptive, value-free, logical-empirical science of economics could be immensely useful as an impartial conciliator of social conflict.28

The Holy Grail is objectivity. The activities, institutions, and achievements of science rest upon the presupposition of an objective universe, a reality external to each observer that is what it is irrespective of the opinions people entertain about it; truth, in other words, is “beyond human authority.”29 This conviction or article of faith has given rise in turn to the concept of “objective truth.” But if by “truth” we mean correct statements about reality, the phrase “objective truth” is confusing.30 Statements, propositions, or judgments are made and held by subjects and are therefore always subjective. It might be argued that they are “objective” insofar as reality confirms them. But as soon as we speak less metaphorically we realize that it is always other subjects and never objects that confirm or disconfirm a judgment. Hypotheses in biology concerning pigeons are confirmed by biologists, not by pigeons; and hypotheses in economics concerning business cycles are confirmed by economists, not by business cycles.

There is consequently no way to establish the validity of a proposition in economic science except by persuading other economists. To persuade anyone, it is necessary to begin with what he is willing to grant and to reply to the objections he raises. This is the method of science. Science is not a purely logical procedure whereby true judgments are inexorably extracted from objective reality by automata called scientists. Science is a social activity, an activity of a community, and the cardinal rule of scientific procedure is: Submit your conclusions without reservation to the critical examination of others.31 Scientific knowledge grows by testing; but it is scientists who do the testing, not “objective reality.”

It is true, of course, that scientists are not at liberty to accept or reject scientific conjectures on arbitrary or irrelevant grounds. But it is the scientific community that finally decides what is arbitrary or irrelevant. Within the confines of what Kuhn calls “normal science,”32 such decisions are often made with little reflection and typically without controversy. But they are relatively simple decisions only because and insofar as members of the scientific community have no serious doubts about the adequacy of their ruling paradigm.

The danger lies in the circularity of this system of community control. One must step outside a paradigm in order to examine realities that the paradigm overlooks or distorts, but work done outside the paradigm is not accepted as scientific. Extra ecclesiam nulla veritas. Scientists tend to reject with indignation the very possibility that someone doing competent scientific work might be excluded from influential journals or positions because he adheres to unpopular values. But such a rejection misconceives the problem. The values at issue are ones that affect the content and presumptive quality of scientific work. The problem has even arisen in the natural sciences;33 it is clearly far more serious in a discipline like economics where the very perception of problems to be studied depends so fundamentally upon conceptions of what human beings and human societies ought to be or can become.

Unfortunately, the view that value judgments cannot be fruitfully discussed because they are allegedly mere statements of subjective preference has acquired wide currency within the economics profession. Some economists may be insisting upon the possibility of a purely positive science because they have accepted the odd notion that “men can ultimately only fight”34 when their value judgments conflict, that the issue is then reduced to one of “thy blood or mine.”35 But it is sheer dogmatism to deny the possibility that one’s choice of a theoretical orientation may have been significantly affected by prior judgments concerning such matters as the value of freedom versus equality, the relative importance of individual opportunity and social harmony, the merits of democracy versus some kind of aristocracy, the risks and the possible gains from conservative and from radical approaches to social reform, or the nature of man and the meaning of the good life.36 And obscurantism is added to dogmatism by the strange insistence that such disagreements can never be resolved through discussion.37 The soft side of the positive-normative distinction is the implicit encouragement that it gives to ethical solipsism. Everyone agrees that political or value judgments must be added to positive economics in order to obtain policy recommendations. The positive-normative distinction implies that these judgments are essentially arbitrary, mere matters of personal preference that cannot be tested or revised through rational discourse.38

The preceding argument is a modest one. Economists should stop talking about positive and normative economics and speak instead simply about the science of economics. Economics is a science because knowledge about economic phenomena has long been systematically cultivated and continues to be cultivated by a recognized community of inquirers who read, build upon, and criticize one another’s work. No more is required. Science neither rests upon nor discovers indubitable truths. The theories and generalizations of economic science are conjectures; but they are warranted conjectures because and insofar as they have withstood attempts at critical refutation. Such a conception of science clearly implies that scientists are not entitled to withhold any of their conjectures from criticism, and that the disciplinary boundaries within which they will inevitably work must be regarded as potential sources of error as well as guides to the discovery of truth.

Furthermore, economists ought to re-examine their thinking on the whole subject of value judgments. They enter inevitably into scientific work. Their critical examination can sometimes contribute at least as much to the development of warranted knowledge as can the further refinement of data or the logical improvement of formal models. Economists will, of course, shy away from such a challenge if they continue to maintain that value judgments are nothing but statements of subjective preference. But this is itself a dogma that flies in the face of the undeniable fact that people do hold at least some value judgments to be interpersonally valid, that they do offer evidence and reasons to support their value judgments, and that rational discussion often does lead to consensus among people who began by holding (or supposing that they held) conflicting ethical or political positions.

Radicals and Neoclassicals

How does contemporary American economics fare when we apply this criterion, openness to criticism, to determine whether it is scientific or ideological? Contrary to what most outside observers currently seem to believe, it satisfies the criterion remarkably well. Despite formal adherence to the positive-normative dichotomy, with all its potential for begging questions and deflecting fundamental criticism, the economics profession over the past decade has encouraged the publication of radical criticism, has paid attention to it, and has publicly responded to it. This is not enough, of course, for those critics who define as ideological any position incompatible with their own or who distinguish science from ideology by looking at conclusions rather than procedures. And it will never be admitted by those who, whether from ignorance or malice, persist in caricaturing or flatly misrepresenting what economists are currently doing.39

The Journal of Economic Literature, an official publication of the American Economic Association, has repeatedly opened its pages in recent years to critics of “establishment” works and ways. The Association’s other journal, the American Economic Review, has also published, usually in the annual Papers and Proceedings volume, numerous criticisms of orthodox economics. Other prestigious “establishment” journals, such as the Quarterly Journal of Economics and the Journal of Political Economy, have offered articles, reviews, and symposia in which general and specific criticisms were forcefully presented. The accusation of official indifference or conspiratorial silence in the face of radical criticism simply cannot be sustained by anyone who pays attention to what economists have actually been doing in the last decade.

On the contrary, it is the critics who have tended to substitute dogma for dialogue by failing to modify their criticisms in the light of the responses that have been given to their arguments. Kuhn’s concept of scientific paradigms has become in some radical circles a justification for refusing to listen to those who do not begin with the correct presuppositions. The distinguished Marxist economist Paul Sweezy, commenting on Assar Lindbeck’s The Political Economy of the New Left: An Outsider’s View, complained that Lindbeck “has no empathy for the radical position” so that “I, as a radical, find it as irrelevant and boring as most neoclassical economics.”40 Lindbeck’s responses was testy:

Empathy is essential, of course, to genuine dialogue, but consensus is the goal of dialogue, not its precondition. While passion neither can nor should be excluded from scientific discussion, it does not entail or excuse abusive and ad hominem argument. And it surely does not justify a refusal to pay attention to what opponents are actually saying and doing.

Anyone who follows the professional literature and also reads the complaints leveled against it must wonder occasionally about the good faith of the critics. The charge is constantly made, for example, that economists ignore questions of income distribution and that this is an “untouchable” topic. Did the critics perhaps overlook the publication of two comprehensive books on income distribution by two well-known economists in 1971?42 Or the pair of review articles on these books featured in the Journalof Economic Literature?43 Or the Richard T. Ely Lecture to the 1974 meeting of the American Economic Association?44 Or the research and arguments associated with the names of Lester Thurow,45 A. Michael Spence,46 or Doeringer and Piore?47 The income distribution studies of Thurow, Spence, and Doeringer-Piore are specifically mentioned here because they have significant non-conservative implications and have attracted considerable attention among economists and others interested in public policy.

The Neoclassical Perspective

Fortunately, an alternative hypothesis to that of bad faith can be constructed. And as we sketch it out we begin to discover the nature of the gulf that currently divides Marxists from so-called neoclassical economists. The radical critics of orthodox economics are reluctant to concede that any research undertaken within the framework of neoclassical theory could constitute genuine investigation of real problems. Not even the radical implications of Thurow’s work or of Spence’s can redeem research that employs the perspective of marginal productivity theory. Marginal productivity theory is allegedly circular, empty, incoherent, and consequently nothing more than apologetics for capitalism.48 But marginal productivity theory is essentially nothing but the neoclassical or orthodox perspective applied to questions of resource pricing and allocation. It is the fundamental perspective of that broader theory to which radical critics are really objecting.

The neoclassical perspective is a way of thinking about social phenomena that conceives society as composed entirely of individuals whose conscious actions aim at maximizing expected utility. People choose continuously among perceived options, weighing the expected benefits and costs of each decision and electing those actions through which they expect to secure for themselves the largest net advantage attainable. Monetary prices are an important set of data for decision makers because they provide a common denominator through which the relative advantage of innumerable options can be precisely compared. The decisions people make entail offers and bids which ultimately establish these prices by moving them toward market clearing values.

Neither selfishness, materialism, nor obsession with money is assumed. The maximization of expected utility can lead to anything from self-sacrifice to self-aggrandizement; the self whose interests are pursued is not prescribed in the neoclassical perspective. Moreover, the notion that economizing is peculiarly directed toward “material” wealth is probably a careless inference from the correct observation that neoclassical economics is centrally concerned with exchange and consequently directs most of its attention to goods that are augmentable and transferable. The substantial role played by monetary costs and monetary transactions in economists’ analysis and research is simply a consequence of the fact that the institution of money enormously facilitates exchange.

Why is this perspective so offensive to most radical critics of economics?49

To begin with, it assigns fundamental importance to the actual preferences of individuals. Every sensible economist knows that the wants of individuals are the product of socialization and that people’s socialization sometimes serves them badly. But neoclassical economists place a heavy burden of proof upon anyone (Galbraith, Nader, Marcuse, or the Federal Communications Commission) who claims to know that what individuals want is not in their best interest.50 Wants expressed in the market are at very least the beginning point for all evaluative judgments.

Secondly, the neoclassical perspective assumes that each party to a voluntary exchange gains from that exchange; otherwise it would not occur. This is not the same as assuming a complete harmony of interests in society, as radical critics repeatedly claim. But voluntary exchange is the focus of attention and voluntary exchange is a method of inducing others to cooperate by adding to their range of opportunities rather than subtracting from them. Market interaction secures social cooperation, in short, through persuasion rather than coercion; and orthodox economic theory has developed over the last two centuries largely in an effort to explicate the coordinative potential in voluntary exchange. It must be noted at the same time that this preoccupation of economists with exchange relationships has produced a vast literature on “market failure” in which the limitations of market arrangements have been minutely explored. Orthodox economists have paid far more attention to the deficiencies of market arrangements than advocates of socialism have paid to the deficiencies of central planning.

This is closely related to a third major difference in approach. The neoclassical perspective views power as an insecure possession, because the advantages that power confers upon its possessor will tend to attract additional bids and offers that will undermine the power base. It is misleading to claim, as radicals do persistently, that orthodox economists ignore the problem of power. Ownership of resources is clearly recognized as power, and resource control coupled with the ability to exclude competitors is a constant object of study by neoclassical economists. It is ironic that the critics so rarely see the blindness toward the problem of power implicit in their own stated preference for a usually unspecified “social control” of resources. And it is an empirical question, on which neoclassical theory sheds important light, whether particular private individuals or organizations in any society actually possess excessive power through disproportionate resource ownership.

It is, furthermore, a critical difference between orthodox and Marxist economics that the former views competition as occurring between parties on the same side of the market. Thus employers compete against employers, employees against employees. This point of view is hostile toward notions of “the power of the capitalist class” or “the solidarity of the working class.” But these alternative conceptions so central to Marxist social analysis have not fared nearly as well as the neoclassical approach in explaining and predicting observed events. The radical contention that orthodox economists deliberately conceal the class basis of the distribution of income ought to be, but largely is not, supported by arguments and evidence showing that a class-oriented analysis can better explain actual changes over time in patterns of income distribution.51

Finally, neoclassical economics, by focusing on the efficient allocation of resources, implicitly asserts that the task of assigning resources to their most advantageous use is a task of great importance and complexity. This follows from the almost incalculable variety of presumably legitimate wants that individuals have and from the infinitely varied ways in which resources can be combined. Marxist economists deny the fundamental importance or difficulty of the allocative task and assert that efficient coordination is a relatively simple problem. They do this by claiming that people’s real wants are fairly simple and uniform and that the appropriate ways of combining resources for production are largely known data of technology. If the Marxists are correct, markets are a dispensable social institution and central planning will encounter no major information problems. If the neoclassical perspective is more nearly correct, the problem of information may not be solvable except through decentralized decision-making and market coordination.52

Conclusion

The thesis of this entire essay has been that the enemy is dogmatism, and the requirements of brevity have at the end led to a manner of statement which is unfortunately dogmatic in tone if not in intent. But perhaps these insufficiently qualified interpretations of the principal radical-orthodox disagreements will serve to focus attention on the depth of the divisions that give rise today to controversies over theory. Debates about marginal productivity theory are symptoms of divergent visions. It could not be wholly a waste of scientific energy for economists to explore, through critical but empathetic dialogue, the conflicting conceptions of human nature and society that the West and, increasingly, the entire world has inherited from the Enlightenment. We might begin, for example, with the French Revolution and ask to what extent liberty presupposes fraternity and the circumstances under which equality is the enemy and the circumstances under which it is the precondition of defensible liberty and genuine fraternity. But that is clearly a task too large to begin here.

[* ] Reprinted from Belief and Ethics, ed. W. Schroeder and G. Winter (Chicago: Center for the Scientific Study of Religion, 1978), 183-98, by permission of Mrs. Juliana Heyne.

[1. ] See Martin Bronfenbrenner’s “Notes on Marxian Economics in the United States,” American Economic Review (December 1964), pp. 1019-26, the subsequent exchange with Horace B. Davis, American Economic Review (September 1965), pp. 861-64, and Bronfenbrenner’s insightful survey “The Vicissitudes of Marxian Economics,” History of Political Economy (Fall 1970), pp. 205-24.

[2. ] Their best-known manifesto was The Trend of Economics, edited by Rexford Tugwell and published in 1924.

[3. ] A good sense of the situation two decades ago can be obtained from Kenneth Boulding, “A New Look at Institutionalism,” with comments by discussants, American Economic Review (May 1957), pp. 1-27; also Fritz Karl Mann, “Institutionalism and American Economic Theory: A Case of Interpenetration,” Kyklos (July 1960), pp. 307-23.

[4. ] The quotations are from Friedman’s influential essay on “The Methodology of Positive Economics,” published in his Essays in Positive Economics (Chicago: University of Chicago Press, 1953), pp. 3, 4. Friedman’s essay triggered an extensive discussion, but the discussion revolved almost exclusively about his claim that the proper test of a theory was the conformity of its predictions to observation rather than the realism of its assumptions. The premise with which he began, that there can be and is a positive science of economics independent of any particular ethical position or normative judgments, went largely unchallenged.

[5. ] The charge that the analytical tools employed by the majority of economists are marred by a fundamental bias in favor of laissez faire has been made most often and most vociferously by Joan Robinson, who enjoyed the forum of a Richard T. Ely Lecture for “The Second Crisis of Economic Theory,” American Economic Review (May 1972), pp. 1-10.

[6. ] The Minutes of the Annual Business Meeting of the American Economic Association in December, 1970, record one impact of URPE upon the larger profession: American Economic Review (May 1970), pp. 487-89. See also Martin Bronfenbrenner, “Radical Economics in America: A 1970 Survey,” Journal of Economic Literature (September 1970), pp. 747-66.

[7. ] John Kenneth Galbraith, “Economics as a System of Belief,” American Economic Review (May 1970), pp. 469-78; “Power and the Useful Economist,” American Economic Review (March 1973), pp. 1-11.

[8. ] The Association publishes the Journal of Economic Issues. The issues of December 1975, and March 1976, will adequately illustrate the militance of the institutionalist renaissance.

[9. ] See the Journal of Economic Literature and the annual issue of the American Economic Review which publishes the Association’s Papers and Proceedings.

[10. ] Friedman’s rethinking of his position is discussed in the Introduction, “Why Economists Disagree,” to his collection of essays, Dollars and Deficits (Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 1968), pp. 1-16.

[11. ] Gunnar Myrdal, Against the Stream: Critical Essays on Economics (New York, New York: Pantheon, 1973).

[12. ] Gunnar Myrdal, The Political Element in the Development of Economic Theory, trans. Paul Streeten (London: Routledge & Kegan Paul, 1953), p. vii. Paul Streeten assembled Myrdal’s scattered writings between 1933 and 1957 on the role of values in social science and wrote a lengthy introduction for the volume Values in Social Theory (London: Routledge & Kegan Paul, 1958). The most succinct statement of Myrdal’s essential position is his note on facts and valuations in Appendix 2 of An American Dilemma, reprinted in Value in Social Theory, pp. 119-64.

[13. ] Thomas S. Kuhn, The Structure of Scientific Revolutions (2d ed., enlarged; Chicago, Illinois: University of Chicago Press, c. 1962, 1970).

[14. ] Margaret Masterman, “The Nature of a Paradigm,” in Imre Lakatos and Alan Musgrave (eds.), Criticism and the Growth of Knowledge (Cambridge: At the University Press, 1970), pp. 61-65.

[15. ] Kuhn’s two contributions to Criticism and the Growth of Knowledge pass up numerous opportunities to dissociate himself from this position. See “Logic of Discovery or Psychology of Research,” op. cit., pp. 1-23, and “Reflections on My Critics,” pp. 231-78.

[16. ] A recent and particularly glaring example of an effort to restrict inquiry with the aid of this distinction may be found in Richard A. Posner, “Economic Justice and the Economist,” The Public Interest (Fall 1973), pp. 109-19.

[17. ] In an extended review of Assar Lindbeck’s The Political Economy of the New Left: An Outsider’s View (New York, New York: Harper and Row, 1971), Bruce McFarlane impatiently complains that Lindbeck assumes “objective research” is possible and “ignores what Thomas Kuhn has taught us about the nature of discovery in social sciences, to say nothing of Myrdal who not only maintains that research in the social sciences is subjective and based on political values, but especially singles out economics.” The Review of Radical Political Economics (Summer, 1972), p. 88.

[18. ] Robert M. Solow, “Science and Ideology in Economics,” The Public Interest (Fall 1970), p. 101.

[19. ] Robert M. Solow, “Discussion,” American Economic Review (May 1971), p. 63.

[20. ] E. A. Burtt, The Metaphysical Foundations of Modern Science (rev. ed.; Garden City, New York: Doubleday, c. 1932, 1954).

[21. ] R. G. Collingwood, The Idea of Nature (New York, New York: Oxford University Press, c. 1945, 1960).

[22. ] Alfred North Whitehead, Science and the Modern World (New York, New York: The Free Press, c. 1925, 1967); Modes of Thought (New York, New York: The Free Press, c. 1938, 1968).

[23. ] Michael Polanyi, Personal Knowledge: Towards a Post-Critical Philosophy (rev. ed.; New York, New York: Harper and Row, c. 1958, 1964).

[24. ] Whether or not we choose to designate these preconceptions as value judgments is less important than that we recognize the fact of pre-analytic commitments in scientific inquiry.

[25. ] Lionel Robbins, Politics and Economics (New York, New York: St. Martin’s Press, 1963), p. 6.

[26. ] The issue is not simply between radical and conservative points of view, of course. The various social sciences employ differing analytical frameworks, with the consequence that one group of scientists may see as a solution what another group takes as its problem. This point is clearly argued and illustrated in Mancur Olson, Jr., “Economics, Sociology, and the Best of All Possible Worlds,” The Public Interest (Summer 1968), pp. 96-118. Albert Hirschman has perceptively explored some consequences of the alternative frameworks brought by economists and political scientists to the study of social systems in Exit, Voice, and Loyalty (Cambridge: Harvard University Press, 1970).

[27. ] This is one of the themes running through Kuhn’s Structure of Scientific Revolutions. He has stated that if he were writing the book again he would begin by discussing the community structure of science. Kuhn, “Reflections on My Critics,” p. 252 and also pp. 237-41. The creative and disciplinary role played by the community in every science has been ably described by John Ziman in Public Knowledge: An Essay Concerning the Social Dimension of Science (Cambridge: At the University Press, 1969). Further implications of the fact that most sciences are now integral parts of the industrial and political structure are pointed out in Jerome R. Ravetz, Scientific Knowledge and Its Social Problems (New York, New York: Oxford University Press, 1971).

[28. ] This is the argument used by Friedman to support the sharp separation of positive from normative economics in “The Methodology of Positive Economics,” op. cit., pp. 3-7.

[29. ] The quotation is from Karl Popper, who has consistently criticized both the notion of an authoritative source for knowledge and the absolute relativism which is its polar opposite. See especially Popper, Conjectures and Refutations: The Growth of Scientific Knowledge (New York, New York: Harper and Row, 1965), pp. 29-30.

[30. ] The concept of “objective knowledge” is legitimate if it means knowledge that has been objectified by being expressed in language or some other external form. It is then public knowledge. Ziman finds a unifying principle for all of science in the quest for “public and consensible” knowledge. Public Knowledge, p. 11 and passim. If I understand him correctly, this is also what Popper has in mind in Objective Knowledge: An Evolutionary Approach (Oxford: At the Clarendon Press, 1972).

[31. ] “It is important to guard against the illusion that there can exist in any science methodological rules the mere adoption of which will hasten its progress, although it is true that certain methodological dogmas . . . may certainly retard the progress of science. All one can do is to argue critically about scientific problems.” K. Klappholz and J. Agassi, “Methodological Prescriptions in Economics,” Economica (February 1959), p. 74.

[32. ] “Normal science” means research firmly based upon one or more past scientific achievements, achievements that some particular scientific community acknowledges for a time as supplying the foundation for its further practice.” Kuhn, The Structure of Scientific Revolutions, p. 10.

[33. ] Instructive case studies from the natural sciences may be found in Polanyi’s Personal Knowledge. The problem is one of implicit beliefs rather than any kind of bad faith. See also Kuhn, The Structure of Scientific Revolutions, especially pp. 77-90, 110-34.

[34. ] Friedman, “The Methodology of Positive Economics,” p. 5.

[35. ] Lionel Robbins, An Essay on the Nature and Significance of Economic Science (2d ed.; London: Macmillan, 1935), p. 150.

[36. ] An excellent stimulus for economists willing to reflect on these questions has recently been rescued from the relative obscurity of its initial publication and reprinted as the leading essay in Edmund S. Phelps (ed.), Economic Justice (Baltimore, Maryland: Penguin, 1973): See W. S. Vickrey, “An Exchange of Questions between Economics and Philosophy,” pp. 35-62. This extraordinary essay was originally published in the first volume of the old Federal Council of Churches series on Ethics and Economic Life, Goals of Economic Life, edited by A. Dudley Ward (New York, New York: Harper and Brothers, 1953), pp. 148-77.

[37. ] Why do so many social scientists dogmatically assume that criticism of conflicting judgments (inevitably?) produces consensus in one area but is altogether useless in another? For philosophically informed discussions of this issue by economists, see Sidney S. Alexander, “Human Values and Economist’s Values,” in Sidney Hook (ed.), Human Values and Economic Policy (New York, New York: New York University Press, 1967), pp. 101-16, and Amartya K. Sen, Collective Choice and Social Welfare (San Francisco, California: Holden-Day, 1970), pp. 56-64.

[38. ] “We must certainly hold fast to the idea of a neutral science of economics. . . . To have recognized in this connection the distinction between positive and normative judgments is one of the achievements of thought since Adam Smith and the Physiocrats; and nothing but confusion could come from any attempt to slur it over. But the idea that there can be constructed a system of prescriptions which results more or less inevitably from the results of positive analysis can involve scarcely less of a confusion: any theory of economic policy must depend partly on conceptions and valuations which are imported from outside.” Robbins, Politics and Economics, p. 19. But if value judgments are arbitrary statements of subjective preference and also an inescapable part of any policy recommendation, then are not all policy recommendations finally arbitrary? And what then is the value for policy of a positive science?

[39. ] As long as the market for tirades is so much better than the market for balanced, judicious assessments, the intelligent lay public will continue to derive most of its notions about economics from books like Robert Lekachman’s Economists at Bay: Why the Experts Will Never Solve Your Problems (New York, New York: McGraw-Hill, 1975). The reasons for this harsh judgment may be found in a review of the book in Worldview (September 1976), pp. 53-54.

[40. ] “Symposium: Economics of the New Left,” Quarterly Journal of Economics (November 1972), p. 659. Lindbeck’s book, first published in 1971, has been reprinted in an expanded version that contains the contributions to this symposium plus additional reviews of the book and a further rejoinder by Lindbeck (New York, New York: Harper and Row, 1977). The book itself, its reception by economists, and now its republication along with vigorous radical criticism of the book (including a long and hostile review article from The Review of Radical Political Economics) are continuing evidence of establishment economists’ willingness to confront controversy and honor dissenting views.

[41. ]Ibid., p. 668. The Ethics and Society Department in the University of Chicago Divinity School would surely want to object to Lindbeck’s choice of a home for solipsists. If divinity schools are to be sanctuaries for those who wish to work without criticism within closed systems of thought, their faculties are no more entitled to a place in the university than are fundamentalist social scientists. For at least as long as Alvin Pitcher has been quartered in Swift Hall, students in the Divinity School have been urged to criticize fundamentalism of every type, religious or scientific, not to give it a comfortable home. This note offers a good opportunity to thank Al Pitcher for pushing me along the road of dialogue almost twenty years ago and for continuing efforts in the recent past to prevent my straying in the company of economists too far from the straight path.

[42. ] Martin Bronfenbrenner, Income Distribution Theory (Chicago, Illinois: Aldine-Atherton, 1971) and Jan Pen, Income Distribution: Facts, Theories, Policies (New York, New York: Praeger, 1971).

[43. ] C. E. Ferguson and Edward J. Nell, “Two Books on the Theory of Income Distribution: A Review Article,” Journal of Economic Literature (June 1972), pp. 437-53. These are actually two separate review articles. Ferguson was a neoclassical stalwart (he died before his review could be published). Nell writes from a neo-Marxist perspective.

[44. ] Alice M. Rivlin, “Income Distribution—Can Economists Help?” American Economic Review (May 1975), pp. 1-15.

[45. ] Arguments developed by Thurow against the notion of effective wage competition are summarized in his Generating Inequality: Mechanisms of Distribution in the U.S. Economy (New York, New York: Basic Books, 1975).

[46. ] Major presuppositions of the “human capital” approach to research on income distribution are sharply questioned in A. Michael Spence, Market Signaling Informational Transfer in Hiring and Related Screening Processes (Cambridge: Harvard University Press, 1974).

[47. ] The authors’ theory of dual labor markets is presented in Peter B. Doeringer and Michael J. Piore, Internal Labor Markets and Manpower Analysis (Lexington, Mass.: Heath, 1971).

[48. ] A surprising number of Marxists and other radicals who know nothing else about the professional literature of contemporary economics have heard about the Cambridge Capital Controversy and its alleged result: demolition of the marginal productivity theory. But the Cambridge Controversy only showed that marginal productivity theory could not produce a consistent and coherent theory of the aggregative distribution of income between workers and capitalists. The claim that it could perform this task was never central to neoclassical theory. No adequate account of the Cambridge Controversy will be easy reading. For good summaries by economists with opposite sympathies, see G. C. Harcourt, “Some Cambridge Controversies in the Theory of Capital,” Journal of Economic Literature (June 1969), pp. 369-405, and Mark Blaug, The Cambridge Revolution: Success or Failure (London: Institute of Economic Affairs, 1975).

[49. ] But not to all! Some Marxist economists have maintained that neoclassical theory will be an indispensable tool also in a socialist society because it can handle more effectively than Marxist theory problems of efficient planning. See for example the classic statement of Oskar Lange, “Marxian Economics and Modern Economic Theory,” reprinted from The Review of Economic Studies (June 1935) in David Horowitz, ed., Marx and Modern Economics (New York, New York: Monthly Review Press, 1968), pp. 68-87.

[50. ] For evidence that neoclassical theory can be used effectively to criticize the outcome of “consumer sovereignty,” see Staffan Burenstam Linder, The Harried Leisure Class (New York, New York: Columbia University Press, 1970) and Tibor Scitovsky, The Joyless Economy (New York, New York: Oxford University Press, 1976).

[51. ] There would seem to be no a priori reason to assume that any single theory will best explain both the British and the American economies. The relative preference of British economists for a class-based theory of income distribution may in part reflect the persistence of the class distinctions that were so obvious in David Ricardo’s time (the time of Jane Austen).

[52. ] The classic statement of the problem is still the essay of F. A. Hayek, “The Use of Knowledge in Society,” American Economic Review (September 1945), pp. 519-30.