Economic philosophy is undergoing a renaissance. Social ontology is a growing discipline, decision and game theoretic methods are being applied to traditional philosophical topics like causality and ethics, and the methodology of economics is again a respectable topic of study.
But what is the connection between philosophy and economics exactly? This question lies at the heart of Robert Heilbroner’s text The Worldly Philosophers (WP). Part introduction to political economics, part gossipy history, and part philosophical reflection on the relation of capitalism to social thought, there is no book quite like it. Heilbroner’s thesis, which he supports rationally with arguments and rhetorically by retelling the most memorable (and often silly) episodes in the lives of the great economists, is that economic thought is the systematic reflection on the mechanism and structure of capitalism.
The book begins with the question of why the great philosophers before Adam Smith never gave an account “worldly” things. Plato, Aristotle, Augustine and Aquinas all formulated complex political and ethical theories. Why then did none of them come up with systematic theory of production, labor, or trade? Heilbroner argues that it simply could not have occurred to them to do so before the economic revolution. The first chapter describes this great transformation in detail, explaining how land, labor, and capital progressed from being treated as natural objects to being bought and sold on a market as factors of production.
On Heilbroner’s account, this advent of capitalism demanded a new philosophy that could answer novel and suddenly pressing questions. Perhaps the most influential and basic of these was Adam Smith’s question: why are some nations rich and others poor? But as capitalism developed, still further questions needed to be addressed. Who does the system benefit and who does it harm? Are booms and busts inherent instabilities in the market system, and if so, how might they be remedied? Where did the capitalism come from, and where is it going?
Heilbroner’s treatment is neither a technical introduction to economics nor a history of the academic discipline. One finds no modern macro models and none of the logical minutiae of micro. Historiographically unsophisticated, the book might be criticized for presenting a great man history centered on such figures as Smith, Malthus, Ricardo, Mill, Marx, Veblen, Keynes, and Schumpeter. Nor would everyone agree with the selection of figures. Heilbroner gives many pages to utopian socialists like Robert Owen and Charles Fourier but hardly mentions heterodox schools like Austrian economics. The book was written in 1953 so the fact that game theory and behavioral economics are ignored is unsurprising; but even the marginal revolution appears marginal.
The value of the book is not in its comprehensiveness or even in its even-handedness. Rather it is important because it makes a sustained argument that economics at its core is a form of human inquiry that directly confronts and tries to explain the phenomenon of capitalism. In the Introduction, Heilbroner writes that great economists were worldly philosophers because “they sought to embrace in a scheme of philosophy the most worldly of all man’s activities- his drive for wealth.” Heilbroner adds “It is not perhaps the most elegant kind of philosophy, but there is no more intriguing or important one.” (WP p.16)
The rest of the book is devoted to substantiating this claim through an examination of the works of the great economists. The forward march of the book, which shows that at each stage of capitalist development a new set of questions was necessitated, results in the view that real economic inquiry – worldly philosophy – is a reflection on the conditions and effects of such developments. Thus economics is a kind of philosophy, namely the philosophy of capitalism.
But if it is difficult to disagree with Heilbroner’s treatment of political economy, his account faces a major challenge. For since the middle of the twentieth century, economics has increasingly distanced itself from ‘big picture’ philosophical questions concerning long run claims about wealth and poverty, and the future of the world economy. The questions under consideration have become increasingly specialized and technical, and many economists avoid talking about capitalism directly. How then can the central conceit of The Worldly Philosophers be true? How can economics be the philosophy of capitalism?
Published 20 years after The Worldly Philosophers, Heilbroner’s essay “Economics as a ‘Value-free’ Science” (EVFS) argues that contemporary economics rests on a fundamental confusion concerning the relation between values and objectivity. Because many economists wrongly take their own inquiry to be neutral or “value-free,” modern economics fails to distinguish clearly between its normative and positive judgments. Repudiating any evaluative stance, economics clothes normative judgments in positive garb, claiming a false objectivity and thus losing its actual scientific status. Even worse, this movement forgets the original purpose of economics as a moral science, reducing the explanation of capitalism to a set of abstract exercises.
In arguing that economic judgment is never neutral, Heilbroner notes that even an economist’s choice of research question and data to answer that question is value-laden in the minimal sense that it requires some norm to separate what is of interest from what is not of interest, of what counts as a worthy topic of research. But even if judgments of value on this level are ignored, Heilbroner claims, there is another way in which values enter directly into economic research.
Suppose that the collection of data about economic facts and the statistical analysis of that data are just as neutral as the analogous collection and testing of data in physics. Heilbroner asserts that economic analysis nevertheless requires a further step beyond economic statistics, namely that of the economist “ascribing meaning to the data and the relationships he has so painstakingly acquired” (EVFS, p.28). This hermeneutic activity is the “vital element” of economic analysis.
To show how this hermeneutic step differs from analysis in natural science, Heilbroner uses an appropriately New York-oriented example. Suppose a rent ceiling is imposed on apartments, below the equilibrium price. More renters enter the market and there is an increase in demand for housing at below-market prices that results in a shortage in housing. Heilbroner asks,
Has not the unduly depressed price of the commodity “attracted” buyers… in the same way that the force field of the magnet has “attracted” the needle to the second? The question brings us to the critical parting of ways between the value-free natural science and the value-laden social science. (EVFS, p.29)
On the one hand, this kind of analysis lends itself to prescriptions the like of which are not available to the physicist: the economist may recommend the construction of more housing, and such judgments of value often depend on latent values (such as an implicit preference for the market as way of making long-run allocations). But more fundamentally, the kind of “behavior” of physical particles differs from that of economic actors in that only the latter have cognition and volition. As Heilbroner puts it, “one of the decisive attributes that distinguishes the social world from the physical is that social events are not merely interactions of forces, but contests of wills” (EVFS,p.30)
In other words, Heilbroner holds that social ontology is distinct from the ontology of natural science. The full reasoning behind this conviction is too detailed and complex to describe here. The upshot, however, is a shift in focus onto the relationship between the economist and the social structure she is investigating, of which she is simultaneously a part. The social scientist’s place in the social order does not prevent her inquiry from attaining scientific status, but it does mean that economics at base a moral activity, i.e. an activity of making claims not just about facts but also about values. Hence,
…the process of social investigation inescapably embroils the investigator in his subject in a way that is different from that of the natural scientist. For the latter, the discovery of an anomaly may constitute a blow to his intellectual “security,” perhaps even to his psychological “integrity.” But it does not threaten his moral position as a member of a social order. (EVFS, p.34)
Economics can thus be both value-laden and objective: by admitting her values, the social scientist opens to rational debate not only the methodological assumptions of her study but also the “indispensable…value grounds” from which she begins her inquiry (EVFS, pp.36-37). Far from making economics less scientific, admitting its moral status gives economic analysis the kind of transparency and possibility of gradual self-correction that is the hallmark of the scientific enterprise.
In a thoughtful tribute to Heilbroner in Economic Issues, Matthew Forstater, himself a former student New School, argues that for Heilbroner, value-judgments are an important part of an economist’s vision. When they are made explicit, judgments of value are not opposed to science. On the contrary it is when they remain merely implicit in economic analysis that they are truly ideological. Worldly philosophy achieves the status of a science precisely when it submits its arguments to public scrutiny.
Academic economics has been widely criticized over the last several years for failing to have predicted the US financial crisis. An even more damning criticism has been that professional economists contributed to the crisis. Perhaps most publicly, the film Inside Job suggested to the public that some professional economists benefited from writing reports touting the stability of financial institutions that were in fact on the brink of collapse. But even if such informal charges of academic dishonesty are unfounded, recent history has made professional economics look quite disconnected from reality.
Yet this very discomfort with the state of the discipline has spurred some important economists to turn towards Heilbroner’s ideal the worldly philosophy. R.J. Schiller and V.M Schiller’s Cowles Foundation Discussion Paper entitled “Economists as Worldly Philosophers” (PDF) concludes that economic inquiry should be driven by “the broad moral purpose of improving human welfare.” At the New School, the newish Robert L. Heilbroner Center for Capitalism Studies is predicated on the idea that in the wake of the last financial crisis, social science must return to its task of analyzing capitalism. This is likewise driven by a judgment of value: “A more generous, egalitarian, patient, deliberate, and accountable economic system must begin with incisive and interdisciplinary social inquiry, without which policy change cannot be successful.” Worldly philosophy for these writers is the remedy for the overspecialization and irrelevance of contemporary social science.
Remarkably the concept of worldly philosophy arose in an altogether different context. Working as a freelance writer while still a graduate student at the New School, Heilbroner managed to arrange a lunch meeting with a senior editor at Simon & Schuster to discuss a possible book deal. The meeting started badly: the editor dismissed each of the young writer’s pitches. With little else to talk about, they began to discuss a seminar Heilbroner was taking at the New School on the work of Adam Smith with Adolph Lowe. After some discussion, the writer and editor decided that the book project would be a history of economic thought.
But when Heilbroner brought up the idea to his teacher, the reception was different. Nearly fifty years later, Heilbroner described the situation thus:
The very exemplar of German scholarship at its formidable best, Lowe was aghast. “That you cannot do!” He declared with magisterial finality. But I had the strong conviction that I could do it – born, as I have written elsewhere, of the necessary combination of confidence and ignorance that only a graduate student could have possessed. Between free-lance assignments and further studies, I produced the first three chapters and with some trepidation presented them to Professor Lowe. It is a measure of that remarkable man (who remained, until his death at 102, my warmest and severest critic) that after he read the pages he said, “That you must do!” With his help, that is what I did. (WP Preface, pp.7-8)
What made Lowe change his rejection of the hubristic and naïve project to the statement that it must be done? Why should his prohibition turn into an imperative? Surely it cannot have been the mere appreciation of Heilbroner’s enjoyable style. Rather, it came from the realization that Heilbroner’s philosophical reconstruction of economics displays a certain vision of the history and prospects of social science. These prospects at base involve the recognition of social inquiry as a form of moral philosophy.
If this vision is correct, it follows not only that the social sciences have a moral purpose, but also suggests that legitimate moral philosophy requires engagement with society. Just as real economic inquiry cannot arise in a vacuum in which there are no judgments of value, values themselves are in part formed by the social structure. Thus consideration of values apart from the social milieu in which they arise is just as empty as supposedly “value-free” economic ideas. The unity of moral philosophy and social inquiry entails that capitalism, with all its destructive and creative force, be taken as the fundamental datum informing both social and moral theory.
Heilbroner, R.L. The Worldly Philosophers. (Revised Seventh Edition) New York: Simon and Schuster 1999.
Heilbroner, R.L. “Economics as a ‘Value-free’ Science” reprinted in Marr, W.L. and Baldev, R. (Eds.) How Economists Explain. University Press of America, 1983, pp.27-38.
 In Social Ontology, John Searle and Tony Lawson should be mentioned. In discussions of causality, Judea Pearl and Nancy Cartwright come up and game theory in ethics is a subject unto itself. In the methodology of econ, Dan Hausman‘s work is influential as is Deirdre McCloskey’s “rhetorical criticism.”
 These criticisms have of course been controversial. Krugman argues that economics’ failure to predict the crisis was due to economists’ faith that the financial insturments. Another interesting treatment is available here.
 The statement (italicized in the original), is from the HCCS webpage. The mission statement derives directly from Heilbroner’s late thought. For in an additional chapter added to the Revised Seventh Edition of the Worldly Philosophers, he writes that the purpose of economics is “to help us better understand the capitalist setting in which we will most likely have to shape our collective destiny for the foreseeable future.” (p.319)