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:
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:
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.