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Collection: IHS Studies in Economic Theory
Subject Area: Economics

Economics and Ethics: the Positive and the Normative - Israel M. Kirzner, The Economic Point of View [1960]

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The Economic Point of View: An Essay in the History of Economic Thought, ed. with an Introduction by Laurence S. Moss (Kansas City: Sheed Andrews McMeel, 1976).

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Economics and Ethics: the Positive and the Normative

Mention has already been made in this chapter of one important implication of Robbins' formulation of the nature of economic activity, viz., the necessary ethical neutrality of the economic point of view. The highly controversial consequences that have been drawn from this principle and the profound effect that adherence to it must have on the role of the economist and on the nature of his analysis demand a more detailed account of this aspect of Robbins' definition as well as the criticism with which it has been confronted.

The demand that the economist preserve a scientific neutrality with regard to the desirability of particular situations explored by his analysis has been maintained with a fair degree of consistency. Nineteenth-century economic methodologists had stressed the distinction between the science of political economy and a possible art of political economy. “Almost all leading economists, from N. Senior and J. S. Mill onwards” had made pronouncement “that the science of economics should be concerned only with what is and not what ought to be ... ”51 By the turn of the century the relationship between economics and ethics had become a lively topic for discussion in the German literature. Heated controversy over the place of the Werturteil (value judgment) in economics culminated, at the famous Vienna meeting in 1909 of the Verein fürSozialpolitik, in what Schumpeter describes as almost amounting to a row.52 It was at this time that Max Weber was vigorously campaigning for professional and academic Wertfreiheit in the social sciences. What Robbins injected into this time-honored issue was the claim to have demonstrated that such ethical neutrality on the part of the economist follows with rigorous necessity from the very definition of an economic problem.

Previously, the question of freedom from judgments of value on the part of the economist had been debated chiefly from considerations of scientific propriety. Weber had devoted great pains to demonstrating that investigation into the “cultural sciences” is not incompatible with an attitude of detachment. Now Robbins had attempted to make it clear that ethical considerations can, by definition, in no way affect the economic aspect of affairs. The economic point of view is concerned with a concept of the act in which the ends of action have been previously determined and for the duration of which those ends are not permitted to change. The content of these ends is completely irrelevant to the economic aspect of the act and hence to economic analysis. Introduction of judgments of value into the consideration of the economic consequences of action thus constitutes deliberate transgression of the proper scope of economic inquiry.

In Robbins' exposition, this point of view found its expression in the emphasis on the distinction between “positive” studies, on the one hand, and “normative” studies, on the other.53 Between these two fields of enquiry Robbins saw a “logical gulf,” and it is this unbridgeable chasm that separates economics from ethics. The two fields of study are “not on the same plane of discourse.” “Propositions involving the verb ‘ought’ are different in kind from propositions involving the verb ‘is.’” “Economics deals with ascertainable facts; ethics with valuations and obligations.”54

Several years before the publication of his Nature and Significance of Economic Science, Professor Robbins, in objecting to Hawtrey's postulation of the ethical character of economic propositions, had been able to declare that Hawtrey's position was contrary to the general agreement of economists.55 However, Robbins' more extended discussion in his Nature and Significance and especially his postulation of the gulf between the positive and the normative met with far from general agreement. Two streams of sharp dissent may be distinguished in the subsequent literature. The one group of critics, with Souter, denied the validity of Robbins' positive-normative dichotomy on the ground that it is a part of a wholly unacceptable view of the nature of economic activity and economic science. Their condemnation of this distinction followed consistently from fundamental disagreement with Robbins' principal theses. On the other hand, several writers, with Macfie, have built solidly on the general framework constructed by Robbins, but have reached conclusions on the possibility of a normative economics that are sharply at variance with those developed by Robbins himself.56

Souter's' rejection of Robbins' characterization of economics as a “positive” science is closely connected with his previously cited condemnations of Robbins' entire position as “positivist.” The treatment of the ends of action as abstract might indeed justify a distinction between two levels of inquiry: one concerned with the concrete ends of action taken as the “norms,” and the other wtih the “positive” disposition of means with regard to these ends considered in the abstract. But the norms themselves may be studied quite as “positively.” The rules of logic, for example, offer a field of study altogether as “positive” as does the “psychology of reasoning,” even though the former deals with how we “ought” to reason (with truth as our norm), and the latter with how we do.57 The distinction between positive and normative levels of discourse is thus seen to be only a relative one, not at all necessarily warranting the withholding of the name “science” from normative disciplines.58 Moreover, as we have seen, Parsons forcefully pointed out that Robbins' conception of a positive end in the abstract, free of any normative tinge, contradicts the very nature of an end, which necessarily involves the notions of effort and purpose. While the circumstance that men do try to economize can be described and analyzed in “positive” terms by abstracting from the normative aspect of action, such an abstraction must necessarily pass over the essential quality of purposive action.59

The Souter-Parsons critique of Robbins' dichotomy and especially of its application to problems of economy thus has its source in a fundamental disagreement with the conceptual framework into which Robbins has fitted the economic act. Of quite a different character is the position taken up by Macfie with regard to the possibility of a “normative” economics. Macfie vigorously pursues his theme, which leads him to the conviction “that economics is fundamentally a normative science, not merely a positive science like chemistry.”60 But Macfie arrives at this conclusion, diametrically opposed to that of Robbins, by enthusiastically accepting Robbins' general framework and building solidly upon it as the foundation for his own position. In acknowledging his indebtedness to the work of Robbins, Macfie expresses the belief that Robbins' essay is final, “within its chosen scope.” Macfie's own contribution he regards as a “superstructure” erected on it.61

But the superstructure that Macfie has erected would turn the concept of economy and the entire science of economics in a direction completely different from that envisaged by Robbins. Macfie accepts the analysis of economic action as the allocation of means with regard to given alternative ends. He endorses with fervor the rejection of the view linking the concept of economy with specific types of ends. He, too, relies heavily on the notion of economy as an aspect of all kinds of human endeavor. Although Macfie stresses the purposive character of human action far more than Robbins does, he too stresses the essential homogeneity of the economic element in action regardless of the particular type of motivation involved. Where he parts company with Robbins and attempts to embark on the construction of his own “superstructure” is in his elevation of the idea of “economy” into a “value” in its own right.62

With earlier writers the concept of economy was treated simply as the neutral expression of the concrete purposes of action. Where given ends were the motives of human endeavor, the desire to encompass these ends in the face of inadequate resources enforced the application of “economy,” of careful comparison of ends and means, simply in order to fulfil the given goals of endeavor as completely as circumstances would permit. The practice of economy fulfilled only the originally selected goals of action; the content of these goals having been selected before the economic act, analysis of such an economic act could be “positive,” i.e., unconcerned with the nature of the ends of action.

What Macfie introduced into this schema was the idea that, with given competing ends of action and with scarce resources, economy is enforced on the economic agent as an end and final value in itself. By acting rationally to achieve the optimum satisfaction of his previously selected desires, economic man is realizing a reasonable objective. “And the realisation of an objective which is reasonable is in some sense good in itself.”63 The principle “that scarce means should not be wasted, or should be used to the best advantage” is seen as a universal human value that fundamentally affects all kinds of endeavor, whether singing, writing, or activity in the market. If this view of the nature of economy is accepted, then the economic act becomes immediately more than merely the allocation of limited means in order to achieve specific competing ends. Economy, the fitting of scarce means to ends, is imposed not merely by force of the originally selected ends, but “under the persuasiveness of a value, to maximize total satisfactions.” Economics does not “just accept human desires, and give them back unchanged. The principle of economy itself transmutes them through its criticism.” The choice that emerges from subjecting competing desires to judgment in terms of the value, economy, is something quite different from the originally selected ends. Ends cannot remain “constant” throughout economic action because such action in itself injects a new “end” into the system of the agent's desired ends.64

Economics as Macfie conceives it thus emerges as an essentially normative discipline, analyzing the impact on numerous desired ends of a new end, viz., the value, economy, which is introduced through the presence of scarcity. This view has found favor with Professor Knight,65 among recent writers, but the basic thesis is not new. Macfie's value, economy, is strikingly reminiscent of Veblen's “instinct for workmanship.” In Veblen's view there is in the human character “a taste for effective work and a distaste for futile effort ... a sense of the merit of serviceability or efficiency and of the demerit of futility, waste, or incapacity ... ”66 Man is “possessed of a discriminating sense of purpose, by force of which all futility of life or of action is distasteful to him ... It is not a proclivity to effort, but to achievement—to the encompassing of an end. ... Within the purview of economic theory, the last analysis of any given phenomenon must run back to this ubiquitous human impulse to do the next thing.”67 In this discussion of what he calls the “pervading norm of action,” Veblen, in what, coming from his pen, must be considered a remarkable passage, is clearly covering the same ground as Macfie.

[[51]]G. Myrdal, Value in Social Theory (London: Routledge & Kegan Paul, 1958), p. 237; see also Myrdal's Political Element in the Development of Economic Theory.

[[52]]J. A. Schumpeter, History of Economic Analysis (1954), p. 805.

[[53]]Nature and Significance, pp. 147 ff.

[[54]]For the claim to have discovered an inconsistency in Robbins' position on this point, see L. M. Fraser, “How Do We Want Economists to Behave?” Economic Journal, December, 1932, p. 557 n.; A. L. Macfie, An Essay on Economy and Value, p. 27.

[[55]]L. Robbins, “Mr. Hawtrey on the Scope of Economics,” Economica, 1927, p. 174.

[[56]]On Knight's position in the positive-normative controversy, see his article: “Professor Parsons on Economic Motivation,” Canadian Journal of Economics and Political Science (1940), p. 461; see, however, below n. 65.

[[57]]R. Souter, Quarterly Journal of Economics, May, 1933, pp. 402 ff.

[[58]]Cf. T. W. Hutchison, Significance and Basic Postulates of Economic Theory (London, 1938), pp. 153–155.

[[59]]See T. Parsons, Quarterly Journal of Economics, May, 1934, p. 520.

[[60]]A. L. Macfie, An Essay on Economy and Value (Macmillan & Co.), p. 69.

[[61]]Ibid., pp. vii-viii. See also Macfie's article “What Kind of Experience Is Economizing?” Ethics, 1949, pp. 19 ff.

[[62]]See also the discussion concerning Macfie's position above in ch. III of this essay.

[[63]]A. L. Macfie, Economy and Value, p. 34.

[[64]]Ibid., pp. 69–70.

[[65]]See Knight's preface to Macfie, Economic Efficiency and Social Welfare (London, 1943), p. v; see also F. H. Knight, “‘What Is Truth’ in Economics?” Journal of Political Economy, February, 1940, reprinted in his On the History and Method of Economics (Chicago, 1956), p. 172; F. Kaufmann, “On the Postulates of Economic Theory,” Social Research, September, 1942, p. 393.

[[66]]T. Veblen, Theory of the Leisure Class (Modern Library, 1934), p. 15.

[[67]]T. Veblen, Essays in Our Changing Order (New York: Viking Press, 1943), pp. 80–81; see also R. B. Perry, “Economic Value and Moral Value,” Quarterly Journal of Economics, May, 1916, pp. 444 f.