Today I'm guest blogging over at The Virtue Blog, on the topic of money and happiness. You'll find the text after the jump. 

One of the central questions of philosophical economics concerns the power and limitations of a science of economics. As it happens, the question "What is economics?" is a surprisingly live issue among philosophers and economists.  

Back in 1932, Lionel Robbins defined economics as "the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses." Versions of this definition reappear all over the place: in standard-issue economics textbooks like that of Frank and Bernanke as well as in my own behavioral economics text.

It is important to note that behavioral economists do not disagree with Robbins when it comes to the nature of economics. But they take the term "human behavior" quite literally, and have come to the conclusion that it is not well described by the neoclassical rational-actor model. If you are truly interested in actual human choices, they argue, you have to abandon the notion that the model is descriptively adequate.

In response, some orthodox economists have put pressure on the definition of economics. Ken Binmore thinks that anyone who accepts the reasoning in the previous paragraph is being "led by the nose." He argues that economics is not, as Robbins and behavioral economists believe, about all choice under scarcity. In his view, economic theory only applies if the following three criteria are simultaneously satisfied:  

• The problem is simple enough;
• The incentives are adequate; and
• The time allowed for trial and error is sufficient.

Binmore's conception of economics means that many real-life decisions – including the decision to buy a house, purchase life insurance, get married, and have children – do not fall within the purview of economics. He's fine with that. "[Have] we not got ourselves into enough trouble already by claiming vastly more than we can deliver?," he asks, and adds that he's tired of being made fun of by colleagues in marketing.  

Don Ross is no more a fan of behavioral economics than Binmore is, but he rejects the notion that economics is narrow in scope. He also rejects the notion that economics is essentially about people. Critics of neoclassical economics, Ross writes, all make the mistake of "supposing that microeconomics is bound to improve its empirical relevance to the extent that it substitutes the study of people for that of abstract economic agents." As this line suggests, economics is essentially about abstract economic agents, not people. What are economic agents? In brief, they are the sort of thing that is defined by the neoclassical model of the rational actor. This way orthodox theory cannot fail to describe the sort of thing orthodox theory is about, no matter what people do. If neoclassical theory turns out (accidentally) to capture the behavior of robots, martians, and neurons but not flesh-and-blood human beings, that might be a problem for some economists, in this view – but not for economics. 

One upshot of this debate is that no definition of economics will allow us to hold on to all three of the following claims:  

1. Neoclassical choice theory adequately describes economic choices.
2. Economics is about all choice under conditions of scarcity.
3. Economics is about human behavior.

If these are the desiderata, it appears we face a choice under scarcity – in that we can have at most two of the three.

Two other things to note about this debate: core questions in philosophical economics are hotly debated not only among philosophers, but among practicing economists as well. And the reason is that such questions matter: the definition of economics has vast implications for what practicing economists can study, and how they go about it.

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[UPDATE: Order it now!]

In the interest of promoting work in philosophical economics – about which more here – I will be running a Philosophical Economics Reading Group this term, covering what I think of as some central themes in the area. It is very much an experiment and I see a number of ways in which my selection is suboptimal. What texts would you include? 

The group is primarily aimed at graduate students in Mason's Economics and Philosophy programs, but all are welcome to attend. 

Work in the intersection between philosophy and economics – such as the stuff I do – often gets referred to as 'philosophy of economics.' It's a fine term. For one thing, it emphasizes affinities with philosophy of science – the branch of philosophy that examines philosophical problems emerging within the sciences. Many philosophers interested in economics (and economists interested in philosophy) do in fact occupy themselves with such problems. For example, a question such as "Can happiness be scientifically measured?" is properly categorized as philosophy of economics, since it addresses a philosophical problem that emerged within economics – in this case, the economics of well-being. 

Yet, the term 'philosophy of economics' when applied to all work in the intersection between philosophy and economics can be misleading. The term suggests that such work is largely derivative – as though philosophers care about topics in that intersection only because economists study them – when in reality philosophical reflection on things like rationality and well-being, wealth and inequality precede the emergence of economics as a scientific discipline by millennia. Aristotle's Nicomachean Ethics, for example, was written around 350 BC and discusses many issues that would now be considered economic in nature – including, of course, the topic of well-being. 

In the French-speaking world, the term 'philosophie économique' is not uncommon. The equivalent English construction, 'economic philosophy,' is sometimes used, most famously by Joan Robinson. However, using 'economic' as a modifier suggests that we are talking about a particular kind of philosophy, like analytic or continental – when in reality topics in the intersection between philosophy and economics are open to philosophical inquiry of all kinds. ('Economic' might also sound a little crass.) And both 'philosophy of economics' and 'economic philosophy' suggest that the work in question falls wholly within philosophy – ignoring the fact that as much interesting work in the intersection between philosophy and economics is done by economists and others who do not see themselves as advancing a purely philosophical agenda. 

I want to propose instead that we use the term 'philosophical economics' to refer to work in the intersection between philosophy and economics. The analogous term 'philosophical psychology' is already in widespread use. 'Philosophical economics' strikes me as descriptively accurate and suitably inclusive. It suggests that we are talking about economic topics, but in a philosophical manner. Meanwhile, it does not make the enterprise seem derivative and it does not give the impression that the work in question falls wholly within philosophy. 

I am not the first to use the term. And I am not saying that we should stop using term such as 'philosophy of economics' when they apply. But 'philosophical economics' is a good one. Let's use it. 

Only about a decade late to the party, but here we are.

I guess a blog needs a name. Suggestions welcome.