Social Economics

Premises, Findings and Policies

Edward O'Boyle

• Publisher: Routledge
• Year: 2005
• Topic: Business
• eBook ISBN:
  9781134776191
• Subtopic: Business General
• Index: Business

Social Economics is a way of thinking about economic affairs that begins with the philosphical foundations. It begins at this level, frequently overlooked by mainstream economists, to illustrate how critical premises are in the construction of an economy and the repair of a dysfunctional economy.
Social Economics uses these premises to undertake a rich range of empirical and policy related work. Much of this work is represented in this volume, which brings together leading practioners from the field of social economics. Subjects addressed include:
* values and premises in social economics
* justice, solidarity and community
* repairing the dysfunction of capitalist economies
* the transition from command economies

PART I

On the origins of values and
premises in social economics

A research program, such as neoclassicism, may be defined as a series of theories which share a common “hard core” belief which is irrefutable by decision of the protagonists. An example of part of the hard core is the premise of certainty or correct knowledge of an economic situation found in the neoclassical or orthodox strain of economics. The research program of Keynes or Schumpeter, on the other hand, presume the opposite; an uncertainty premise making their research programs essentially different from neoclassicism. Such hard core elements of a research program may not be so well articulated…. It is in fact, not in the nature of a research program to question the hard core. One should not confuse the axioms of a theoretical framework (say, perfect competition or maximizing profits in neoclassicism) with the hard core beliefs. The former are stated very specifically, the latter are given a silent treatment and are thus protected from conscious scrutiny.

(William R. Waters (1986) “Evolution of Science in General and Economics in Particular,” Forum for Social Economics, Fall: 62–3)

Economic sociology’s importance is that it identifies values, ideas, institutions, organizations and motivations including property rights, ideologies, cultural, political and all related structures in society as they impinge upon material welfare. If economic science is meant to explain reality, how can the economist do without it?

(William R. Waters (1991/1992) “Schumpeter The Sociologist – A Review Article,”Forum for Social Economics, Fall/Spring: 51)

1

ECONOMIC HISTORY AS A SOURCE OF SOCIOECONOMIC NORMATIVE VALUE

Lewis E. Hill

For the purposes of this chapter, social economics may be defined as the socioeconomic analysis of human behavior within a broad economic, social, and political context for the purpose of improving the quality of life and enhancing human welfare. All social economists are dedicated to the quest to achieve social and economic justice. Social economists have always been especially concerned with the impoverished people who have been denied the opportunities and the privileges that have been so easily available to the more affluent component of our population. Social economics is an applied policy science that seeks to solve problems of social injustice and economic privation (Hill 1978).

Professor William M. Dugger, in one of his most insightful and forceful essays, has correctly identified the emphasis on socioeconomic normative value as the first among five characteristics which specify the essence of social economics (Dugger 1977: 300–2). One of the reasons for this emphasis on normative value can be induced from the nature of social economics as a policy science. Any policy science must use normative value judgments as a necessary technique in the formulation of socioeconomic and politicoeconomic policy. The purpose of any policy is to plan and to implement a course of action which is intended to avoid a set of consequences that is judged to be undesirable and to achieve an alternative set of consequences that is judged to be desirable. The judgments concerning whether a set of consequences is undesirable or desirable are always normative value judgments. Socioeconomic normative values, therefore, provide the only possible basis for differentiating between the undesirable consequences which should be avoided and the desirable consequences which should be achieved; therefore, socioeconomic normative values are the essential basis of any successful policy.

The other reason for social economists’ emphasis on socioeconomic normative value judgments inheres in their concern for social justice and human welfare. Both of these concerns can be defined and specified only in terms of normative values. Social justice is a set of normative values which define and specify ethically correct relationships among persons. Human welfare is a set of normative values which provide a standard for the measurement of well-being of a people. Socioeconomic normative values, therefore, provide the very essence of social economics.

If it is accepted that socioeconomic normative values are the essence of social economics, then the question remains concerning the origin and nature of these values. Dugger and others have argued that these values originated from the Judeo-Christian tradition (Dugger 1977: 300-2), but this is a metaphysical rather than a scientific answer. The purpose of this chapter is to seek and to find a scientific answer to the question concerning the source or origin of socioeconomic normative values and the manner in which these values are verified or authenticated. The hypothesis of this chapter holds that socioeconomic normative values are induced from the previous economic history of a people through the application of inductive logic to that history and verified by reference to the subsequent economic history of that people.

HENRY MARGENAU’S THEORY OF NORMATIVE VALUE

Certainly the most systematic and probably the most scientific theory of the origin or source of socioeconomic normative values has been developed and articulated by Henry Margenau, who is a distinguished philosopher of science. Margenau contended that ethical theory can be derived through the use of a methodology that is analogous to the scientific method. In order to explicate this theory of ethics, therefore, it is first necessary to summarize his version of the scientific method. According to Margenau, the scientific method consists of two domains: the perceptual domain, which includes the empirical facts that are discovered through the application of inductive logic, and the conceptual domain, which includes the analysis of the empirical facts through the application of deductive logic (Margenau 1964).

Scientific inquiry begins in the perceptual domain with the collection and inductive analysis of the relevant empirical facts. The empirical facts imply a set of postulates, which are basic assumptions or preconceptions that cannot be proven empirically. These postulates provide the basis for the scientist to enter the conceptual domain and to apply deductive analysis of the empirical facts. This deductive analysis creates theoretical models from which conclusions concerning empirical reality can be derived. The verification of these conclusions requires the reentry into the perceptual domain, which can be achieved through the acceptance of a set of verification principles. These verification principles, like the postulates, cannot be proven empirically. Verification procedures and techniques, which are derived from the verification principles, are then applied to test and to verify or falsify the conclusions (Margenau 1964: 9-53).

Margenau argued that methods of ethical analysis exactly parallel the methods of scientific analysis. In ethical analysis, values replace facts in the perceptual domain, and imperatives or commandments replace postulates in the transition into the conceptual domain. Ethical theories are then derived from the imperatives or commandments through the utilization of techniques of deductive logical analysis. The commitment to apply these ethical theories to personal conduct replaces scientific verification principles to facilitate the reentry into the perceptual domain. The verification procedures and techniques consist of the actual application of these ethical theories to govern our personal conduct. This working methodology of ethical analysis always begins in the perceptual domain with the empirical observation of the normative values that have been induced from the historical experience of the people. Imperatives or commandments are then generalized from these values through the further use of inductive logic, and these commandments facilitate the transition from the empirical perceptual domain into the rationalistic conceptual domain. Deductive logic is utilized to achieve the conceptual analysis that is involved in the elaboration of the commandments into systems of normative principles which become ethical theories. The verification principle is replaced by the commitment to apply ethical principles to the life process. If the application of the ethical principles results in survival, happiness, and self-fulfillment, then the ethical system has been verified and, therefore, it will endure (Margenau 1964: 98-180).

Margenau’s methodology of ethical analysis clearly implies that people induce socioeconomic normative values from their past economic history through the application of techniques of inductive logical analysis to that historical experience. These values then become the basis for the imperatives or commandments which provide the rules that define ethical behavior. These imperatives or commandments are elaborated into ethical theories, which are verified by their application to the life process. In this manner, socioeconomic normative values are induced from previous economic history and verified by reference to subsequent economic history.

THE PRAGMATIC THEORY OF NORMATIVE VALUE

Pragmatic philosophers and economists approach the problem from a different perspective but reach a similar conclusion. Pragmatism is a philosophy which holds that all reality has practical consequences and that, therefore, certainly the best way and perhaps the only way accurately to know and correctly to understand reality is through an analysis of practical consequences. Pragmatism was originated by Charles Sanders Peirce during the late nineteenth century. Peirce believed that the only legitimate way to define an idea and to specify its true content was to list all of the practical consequences that are implied by that idea. The truth of an idea is embodied in its practical consequences. If an idea has no practical consequences, then the idea is false (Peirce 1966: 113-36).

Peirce’s concept of normative value is found in his theory of Christianity. According to Peirce, the essence of Christianity is embodied in the Doctrine of the Two Ways. The Way of Life symbolizes love and the other creative propensities of the human personality that characterize true Christianity. The Way of Death symbolizes hatred and the other destructive propensities that characterize the Antichrist and the forces of evil. Peirce found normative value in the Way of Life; he found normative disvalue in the Way of Death (Peirce 1966: 353-7).

Although Peirce’s concept of normative value seems to be a declaration of metaphysical belief, it also includes a logical and scientific content. In pragmatic reality, both the Way of Life and the Way of Death are defined by the historical experience of the people. It can be concluded, therefore, that both the socioeconomic normative values that are implied by the Way of Life and the socioeconomic normative disvalues that are implied by the Way of Death are induced by the people through the application of inductive logic to their previous economic history. It also follows that socioeconomic normative values and disvalues are verified or authenticated through the application of inductive logic to the subsequent economic history of the people.

William James, who popularized pragmatism, gave this philosophy a functional or instrumental emphasis which was more psychological than logical. According to James, an idea should be evaluated as true or false dynamically according to what it does, rather than statically according to what it is. The truth of an idea requires not only that the idea correspond to an external reality, but also that it proves to be useful in helping the person to adapt to that reality and to achieve a harmonious relationship with reality. The truth of an idea is a prediction of its usefulness; the usefulness of an idea is the verification of its truth (James 1908: 197-238).

Within this functional or instrumental context, value becomes a verb as well as a noun. Primarily, value as a verb refers to the process through which people evaluate ideas as true or false and their consequences as good or bad. Secondarily, value as a noun denotes the conclusions which specify the ideas that have been classified as true and good, and the ideas that have been classified as false and bad. The ideas that are classified as true and good become values; the ideas which are classified as false or bad become disvalues. The values and disvalues are induced from past historical experience through a process of inductive logic because people learn how to evaluate ideas from their previous experience. Moreover, a person’s set of values is the accumulation of outcomes from the inductive evaluations of ideas which have occurred during that individual’s personal history. Socioeconomic normative values, therefore, are induced from previous economic history through the application of inductive logic to that historical experience and verified and authenticated by reference to subsequent economic history.

JOHN DEWEY’S INSTRUMENTAL THEORY OF NORMATIVE VALUE

John Dewey, the last of the founding fathers of the pragmatic philosophy, completed the transition from Peirce’s logical pragmatism to James’s instrumental or functional pragmatism. Dewey always conceived ideas to be instruments or tools to be used to solve problems and to integrate the various diverse aspects of a person’s experience. The exclusive purpose of logical or scientific inquiry is to solve practical problems, and the best method of solving problems is through the application of the instrumental process (Dewey 1938: 280).

According to Dewey, the instrumental process of logical or scientific inquiry is motivated by an antecedent condition, which is a disequilibrium between a person and his environment. Because of this disequilibrium, actions produce unintended bad or undesirable consequences, instead of the intended good or desirable consequences which the person is seeking to achieve. The instrumental process of logical or scientific inquiry proceeds through five steps or stages. The first step or stage is to define the problem as a set of undesirable consequences which are occurring or which have already occurred. It is helpful, also, to specify a set of desirable consequences which would constitute a satisfactory solution to the problem. The second step is to analyze the problem to identify and specify all of the relevant facts and all of the cause-and-effect relationships that are involved in the problem. The third stage is to conceive ideas concerning how the problem might be solved. These ideas must be evaluated and symbolized. The fourth step is to use the ideas in the formulation of a plan of action that is designed to solve the problem. The final stage is to implement the plan of action in order to solve the problem and to transform the problematic antecedent condition into a determinant condition from which the problem has been eliminated (Dewey 1938: 101-19).

In order to utilize Dewey’s instrumental process to solve problems, a person must make two kinds of value judgments. First, he must evaluate the practical consequences of actions to distinguish between the good consequences, which he should seek to achieve, and the bad consequences, which he should seek to avoid. A person must also evaluate positive facts and cause-and-effect relationships in order to determine which facts and relationships are relevant to the problem and its solution and which facts and relationships are irrelevant.

Dewey always insisted that both of these types of value judgments were instrumental rather than metaphysical. He contended that ordinary people are entirely capable of applying inductive logic to their past experience, of inducing instrumental values from that experience, and of using these instrumental values to make normative value judgments which are perfectly valid (Dewey 1929: 254-86). Dewey refused to recognize any difference between judgments of normative value and judgments of positive fact. He argued that both judgments of value and...

Table of contents

• Cover Page
• Half Title Page
• Series
• Title Page
• Copyright Page
• Contents
• List of contributors
• Dedication
• Editor’s preface
• Introduction
• Part I On the origins of values and premises in social economics
• Part II On producing efficiently, turning a profit, and investing it
• Part III On justice, solidarity, and community
• Part IV On repairing the dysfunction of capitalist economies
• Part V On the transition from command economies
• Index