EXPLICATING THE NORMATIVE CONTENT OF ECONOMIC THEORY 1

John B. Davis

In a recent discussion of the normative nature of eco- nomics, Warren Samuels (1988) notes that while it is conven- tional in economics to distinguish between the normative and the positive, in practice it is extremely difficult to dist- inguish the two or separate out the elements of one from the elements of the other. Thus, since it is fair to say that the fact-value dichotomy breaks down in economics, it is appropriate to investigate the nature of economics as a characteristically normative discipline. This can begin to be done by recognizing that because the economy is a human artifact, there are important limits to its positive study. First, economic reality is itself normative in significant degree, since production is undertaken with respect to goals that themselves embody moral purposes. Second, since the mind mediates the representation of economic reality, eco- nomics is inevitably influenced by the undeniably normative character of thinking. Third, the perception of economic reality is itself mediated by reigning belief systems which reflect normative assumptions.

Samuels himself explains the normative nature of eco- nomics largely in terms of the social control function economics serves. The process of social control involves both description and legitimation.

Analytical tools also serve justificatory roles; indeed, their utility as analytical tools is in part a result of a selection process governed largely by ideological considerations and factors. Selective perception is a central process (351).

Yet, it should be noted that to say that every theory is normative, because selective in its objects of investigation and methods of analysis is to make all theory but trivially and uninformatively normative. More seriously, to claim that perspective directly implies normative content is to confuse a theory's normative propositions, that is, those which spe- cifically determine right and wrong according to standards of welfare, justice, and the traditional concerns of ethics, and its simply value-laden ones, that is, those which make recommendations less specifically on a variety of levels, for example, with regard to the importance of a concept, a desired perspective, a choice of method, a commitment, etc. Indeed, not only have moralists long recognized that the two sorts of propositions are essentially distinct in nature, but, more importantly, have generally argued that a theory's value-laden propositions, together with their associated value judgments, typically permit a variety of competing, and

2

sometimes contradictory, inferences regarding the normative commitments of that theory, thus demonstrating that a theory's value-laden propositions neither necessarily imply specific normative conclusions nor are reducible to those commitments. Put simply, a theory's value-laden propositions and value-judgments as often as not have indeterminate nor- mative implications (Maokie).

The view that perspective implies content, then, though indeed important for signaling the value-laden character of economics, does not by itself permit identification of a given theory's specific normative commitments. Thus, while Samuels is correct in asserting that the fact-value distinc- tion is suspect in economics, he leaves open how one moves from ostensibly value-laden propositions to specifically normative ones, and, therefore, how one translates pur- portedly positive propositions in economics into their par- ticular normative commitments. This, however, would be cen- tral to a complete account of the normative nature of econom- ics, and would also be important to the task of identifying the particular role various sets of value-laden propositions have in particular economic theories in generating the par- ticular normative commitments of those theories. Further, because a given theory component might well ultimately pos- sess competing or even contradictory normative implications, normatively self-conscious theory elaboration stands to bene- fit from systematic attention to the precise normative impli- cations of that theory's recognized value-laden propositions. Accordingly, having a general strategy for interpreting the normative implications of a theory provides both the occasion for critical assessment of different established theories' normative contents and the opportunity for a progressive theory elaboration that embodies a desired normative content.

Recent emphasis in economic methodology upon the para- digmatic character of theory - that is, that "strong network of commitments - conceptual, theoretical, instrumental, and methodological" that distinguishes a particular approach in a discipline or science (Kuhn, 1970, 42) - suggests a means of eliciting specific normative commitments from value-laden propositions in economic theory. That a theory is paradig- matic implies that its practitioners develop its concepts to fit the overall heuristic intent of the theory. For example, in neoclassical economics all choices are conceptualized to solely reflect individuals' responses to changing prices. Accordingly, the economic agent must be conceived atomisti- cally, or free of social influences that might explain indi- vidual choice in some alternative fashion. Put differently, the very concept of the atomistic economic agent is func- ti_onal to the general strategy of explanation of neoclassical theory.

In the thinking of John Dewey, these conceptualizations would effectively represent the conclusions of a particular set of problems believed inherent in the neoclassical vision.

3

Dewey emphasizes this instrumental character of concept development in his Theory of Valuation:

In all inquiry, even the most completely scien- tific, what is proposed as a conclusion (the end- in-vlew in that inquiry) is evaluated as to its worth on the ground of its ability to resolve the problem presented by the conditions under investi- gation. There is no a priori standard for deter- mining the value of a proposed solution in concrete cases (46-7).

The conclusion here, that is, in the neoclassical portrayal of the economic agent as a rational maximizer, is that the characterization of individual economic decision in terms of atomistic choice resolves he problems that arise in neoclas- sical efforts to narrow the conception of the economic agent to that of rational maximizer. Accordingly, a given concep- tualization, proposed as a means of servicing a theory's paradigmatic concerns, can be said to be functional to the general strategy of explanation of that theory. Moreover, as Dewey emphasizes, this paradigmatic perspective is intrinsic to all theory, however seemingly scientific: there simply never are a priori standards for the framing of concepts.

The attention to functional concepts is important in that in twentieth century philosophy of language functional concepts have for some time been recognized to permit infer- ences from "is" to "ought" (Prior, Searle). For example, from the fact that X is an airline pilot (an "is" proposi- tion) it can be said to follow - depending upon one's value judgments - that X ought not unnecessarily endanger passen- gers' lives (an "ought" proposition). That "ought" can be derived from "is" follows from the fact that airline pilot is a functional concept that itself presupposes an implicit "ought" proposition (that the meaning of being an airline pilot implies airline pilots ought not unnecessarily endanger passengers' lives). That one accepts this characterization of an airline pilot accordingly implies that one accepts the relevant value judgment reflected in the inference from "is" to "ought."

It should be emphasized, however, that it is unnecessary that value-laden reasoning explicitly exhibit "is" - "ought" inferences in order to embody value judgments. Indeed, des- pite the essential role of value judgments in much reasoning, value judgments often go undetected precisely because a statement in question is formulated in fully positive dis- course. Thus, one could just as well infer, in pure descrip- tive terms, that because X is an airline pilot, X will not unnecessarily endanger passengers' lives. In this instance, despite the absence of "ought" language, the evaluative char- acter of the inference is no less a part of the reasoning, because one operating with the value judgment in question understands that airline pilots do not unnecessarily endanger

passengers' lives in generally acting as they ought to as airline pilots.

This more surreptitious employment of value judgments is particularly important in economics, since economic theories are generally formulated in positive, descriptive "is" lan- guage. Yet that economic theories are paradigmatic implies that in each case a theory's concepts are functional to that theory's overall heuristic intent and thus implicitly convey a variety of "ought" propositions. That is, to understand a given concept in a certain way is to conclude that it ought also he used in a certain way. Quite simply, just as social roles are human artifacts, as in the instance of airline pilots, so too are theory concepts human artifacts. Thus, explicating the evaluative rather than normative content of a theory requires first determining what value judgments are implicit in the theory's statements.

In neoclassical theory, for example, from the fact that X is an economic agent, it is usually argued that X is to he conceptualized as making choices without regard to social influence. As a functional concept, however, this charac- terization of the economic agent implicitly asserts the value judgment that economic agents ought to be understood as autonomous to justify the "is" - "ought" inference that when one is specifically speaking of neoclassical economic agents, one ought, paradigmatically, treat them as autonomous. In this case, as is so often the case, the value judgment and the associated "is - "ought" inference are concealed in the seemingly positive characterization of the economic agent as autonomous. Yet on the assumption that theory is generally paradigmatic, this appearance is straightforwardly unmasked to reveal its evaluative content.

This much, then, enables economists to identify the value judgments in economic theory. The general strategy of the analysis is to determine what precisely justifies the "is" - "ought" inference implicit in a given conception in order to discover what underlying values are presupposed in generating that inference. However, this still leaves uni- dentified the characteristically normative commitments of a theory that involve positions taken with respect to welfare, equity, justice, etc., that is, the traditional normative concerns that produce particular judgments regarding right and wrong. Here the process of analysis is inevitably less direct, since a single value judgment by itself as often as not permits a variety of inferences regarding a theory's normative positions. For example, given the value judgment that economic agents make choices autonomously, if one also holds that externalities are generally rare and difficult to substantiate - an additional value judgment - then one is more likely to argue market intervention reduces welfare, than if the original value judgment is conjoined with the opposing value Judgment that externalities are common and easily demonstrated. Given the further difficulties assooi-

ated with moving from the identifiable value judgment(s) to normative recommendations, then, it might well be said that the fact-value distinction is transformed and reproduced on a slightly different terrain as the value judgment-normative value distinction, and that the more intractable issue accordingly becomes that of determining how one can pass from the former to the latter when the respective contents are, for all their similarities, nonetheless genuinely distinct in nature.

Yet on analogy to the method of deriving "ought" from "is" above, the normative commitments of a theory can be elicited by examining how a theory's inferences link one value judgment to another, and how the theory's distinctive normative commitments emerge in the functional relationships underlying that pattern of reasoning. For example, that ordinalist neoclassical theory precludes interpersonal cardi- nal utility comparisons, and makes preference functions foun- dational to its account of consumer choice, links the value judgment that the economic agent is autonomous with that which treats the agent's utility function in ordinal terms to produce its distinctive Pareto optimality prescriptions regarding welfare. The functional relationship between these two value judgments and the Pareto welfare conception make it morally permissable to ignore income re-distribution propos- als in welfare calculations, since combining the value judg- ments in question results in the conclusion that one cannot make coherent normative claims regarding the relevant trans- fers. In this instance, neoclassical theory generates spe- cific normative commitments from seemingly positive (though value-laden) propositions concerning the choice-theoretic characterization of the economic agent and the measurement of utility, so that it is correct to say that the neoclassical conception of atomistio ordinal utility maximization is func- tional to normative Pareto judgments.

In contrast, the central value judgments of cardinal utility theory are functional to the distinctive normative commitments that emerge from that theory. Besides assuming that economic agents are autonomous, utility functions are represented in cardinal terms, an additional value judgment, thus generating an account of welfare dependent upon inter- personal utility comparisons. The functional relationship between these two value judgments - only one of which is shared with ordinal utility theory - produces the distinctive normative commitments of cardinal theory that focus upon income re-distribution recommendations. In this instance, the neoclassical conception of atomistic cardinal utility maximization is functional to normative re-distribution judg- ments.

In conclusion, then, it is an important first step in developing an explanation of the normative nature of econom- ics to realize that perspective implies evaluative content. yet more remains to be done to tie the ultimate normative

commitments of a theory to its sometimes seemingly positive premises. The argument here is that Dewey's understanding of the instrumental character of theory, combined with attention to the functional nature of language and the recent under- standing of theory as paradigmatic, provides a two-step procedure for analyzing the particular normative commitments of different economic theories. Determining such commitments in rigorous fashion, it seems, deserves more attention than it has customarily received, since the elaboration of eco- nomic theory without attention to associated moral positions is neither moral nor good theory.

NOTE

iThe author is grateful to Hans Jensen, Warren Samuels, and Zohreh Emami for comments on previous versions of this dis- cussion�9

REFERENCES

Dewey, John. Theory of Valuation. Chicago: University of Chicago Press, 1939.

Hudson, W. D., ed. The Is-Ought Question. London: Macmil- lan, 1969.

Kuhn, Thomas. "Objectivity, Value Judgement, and Theory Choice�9 In The Essential Tension: Selected Studies in Scientific Tradition and Change�9 Chicago: University of Chicago Press, 1977.

�9 The Structure of Scientific Revolutions, 2nd ed. Chicago: University of Chicago Press, 1970.

Mackie, J. L. Ethics. Inventina Riqht and Wrong. Harmonds- worth, Middlesex: Pengin, 1977.

Prior, A. N. Loaic and the Basis of Ethics�9 Oxford, 1949.

Samuels, Warren J. "An essay on the nature and significance of the normative nature of economics." ~0urnal of Post Keynesian Economics, Spring 1988, I0 (3), 347-354.