A Re-Assessment of Aristotle's Economic Thought

Ricardo F. Crespo

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781134674893
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Business allgemein

The world has seen several financial and economic crises in the past few years. Psychological, ethical and philosophical levels of causal analysis have been discussed, and in this context, an interest in classical thinkers has emerged.

The work of Aristotle has influenced writers from Marx and Menger to Amartya Sen. This book introduces us to Aristotle's thought on 'the economic' and on its influences on economists. First, it focuses on Aristotle´s ideas, situating Aristotle in his historical context, describing his positions on the economic and analysing what kind of reality the economic is, its relation with ethics and with politics. Then, it determines what kind of science is concerned with the economic. Later, it analyses related topics and shows the influence of Aristotle's ideas on contemporary economists. It concludes by highlighting the Aristotelian contributions to today's economy.

This scholarly volume offers important new insights into the Aristotelian approach to the economy itself, as well as to the idea of economics as a science, bringing Aristotle's views to bear on the modern economy.

1 Introduction

Economics as a moral science

While the expression ‘economics as a moral science’ may sound paradoxical, it is not an extravagant novelty. In 1968, Kenneth Boulding entitled his Presidential Address to the American Economic Association ‘Economics as a moral science’ (1969). Albert Hirschman gathered and published two essays under the title L’économie comme science morale et politique (1984). Amartya Sen has also compiled a number of papers under L’économie est une science morale (1999). In 2009, Anthony Atkinson published a paper with the same title in Economica. More recently, Robert J. Shiller and Virginia M. Shiller (2011) wrote a paper entitled ‘Economists as Worldly Philosophers’, the title of a classic book by Robert Heilbroner, with one of its sections headed ‘Economics as a Moral Science’, evoking the title and content of Boulding’s address, and followed by a section entitled ‘Promoting Economics as a Moral Science’.¹

However, this is not only a matter of labels. Economics has been a moral science since its ‘proto-foundation’ by Aristotle, remained a moral science for its ‘official’ founder, Scottish moral philosopher Adam Smith, and it continues to be so today for many economists. Then, what should we understand by the expression ‘moral science’? For Boulding – as for Aristotle – every culture, including the scientific culture, is defined by a set of common values and agreed upon preferences, which are also values. An old paper by Richard Rudner (1953: 6) states that value decisions are intrinsic even in the scientific method. For Boulding, the standard economics notion that ‘ends are given’ – which implies that values are put aside in economics – is ‘for birds’ (1969: 2), not for human beings. In addition, when sciences move from pure knowledge to action, ethical decisions are made (1969: 3).

The idea of value-neutrality as a requirement for good science stems from modern philosophical conceptions. Indeed, David Hume’s noted distinction between ‘ought’ and ‘is’ statements, or facts and values, has become a hallmark of the philosophical stance that draws values away from science. This division is associated with Hume’s conception on the irrationality of values. For him, there is no possible rational deliberation about ends; and the deliberation on means is not tied to any rational consideration of ends. His statement is very well known: ‘Reason is and ought only to be the slave of passions, and can never pretend to any other office than to serve and obey them’ (Hume [1739–1740] 1968: 415). Ends are thus defined by passions or sentiments, and the task of reason is reduced to looking for ways to secure them.

This reduction abolishes the practical or moral use of human reason – with reason scrutinizing and rationally deciding about human ends – and confines reason to its instrumental use: allocating means in order to achieve given ends. Hence, economics acquires a relevant role because, as conceived from Lionel Robbins onwards – what I call ‘standard economics’ – it seeks to perform this task with an interesting addition: maximizing the use of means in order to achieve those ends.

Hume’s distinction between ‘ought’ and ‘is’ statements largely prevailed for more than two centuries. It was finally challenged in the twentieth century by Willard Van Orman Quine (1951) and in this century by Hilary Putnam (see 2002), among others. Putnam argues that human activity features an entanglement of facts and values. He speaks about a ‘collapse of the fact–value dichotomy’ trying to ‘explain the significance of this issue particularly for economics’ (2002: vii). For him, ends are in fact important in economics and must be debated rationally. He maintains that ends cannot be separated from economics because evaluation and description are interwoven and interdependent (Putnam, 2002: 3). This philosophical view is slowly penetrating economics (and the other social sciences more quickly).² For Hirschman, economics is a moral and political science because a satisfactorily working economy requires the exercise of personal moral virtues and social justice. He suggests elaborating a ‘moral-social science in which moral considerations are neither avoided nor put into brackets, but systematically intertwined with analytic thought’ (1984: 109–110).

The reduction of the use of reason to its instrumental task was also challenged during the twentieth century. Indeed, several German and French authors and currents have returned to Aristotle’s practical science, a normative rational reflection about the right goals for human actions. A condition of possibility of this reflection is that we can know what is good for human beings, as opposed to Hume’s ethical agnosticism that was widely spread in Modern times. Aristotle and current practical science supporters believe that a rational research on values is possible. The Aristotelian predecessor of social science, practical science, is an essentially moral or evaluative science. Ideology might emerge if values are not founded and established rationally, and, if so, what happens to the value-neutrality requirement of science? A different interpretation becomes necessary: values should not be ‘officially’ set aside but ‘impartially’ considered. This is a task for practical reason, as the neutral description of social facts is only achievable through the scientific definition of the standards of practical reasonableness (see Finnis 1980: 12). In other words, practical reason is used to determine the set of values that should be sought; thus, values are not discarded but reasoned. Practical science has been notably reinstated in Germany, both by the Frankfurt School and by other social philosophers.

These authors claim that the classical Greek science priority order – i.e. theoretical science, practical (or moral) science and techniques – has been reversed. Today, a new component, economic logic, is prioritized. Maximizing revenues (or minimizing costs) has become the new cornerstone for both action and science, and this criterion is also applied to technique. As a result, technique prevails over morality: nowadays, what is technically possible becomes ethically mandatory. Finally, theoretical thinking has disappeared from many fields (including the human domain) or has become subordinated to technique in the form of techno-science – which defines research avenues. Ultimate values are now economic values: science only makes sense if optimally applicable. This brings serious negative anthropological consequences, as German philosopher Hans-Georg Gadamer warns that:

the real problem lies right here: the threatening loss of identity by people today. The individual in society who feels dependent and helpless in the face of its technically mediated life forms becomes incapable of establishing an identity. This has a profound social effect. Here lies the greatest danger under which our civilization stands: the elevation of adaptive qualities to privileged status.

(1981: 73)

Looking at people’s lives, one realizes that people are not fully aware of this process; most tend to adapt to this kind of life, taking its rules for granted. John Davis (e.g. 2003 and 2011) has worked extensively on the absence of a human identity concept that underlies classical and new economic currents. Many people ‘buy’ into a mainstream commercial life model. Their differentiation is rooted in their possessions, including knowledge, which is also assessed for its economic value. Globalization conveys these criteria all over the world. Gadamer takes a kinder look at the Latin world:

I see certain traits of the Latin world, which has adopted a protective posture opposed to the profit making of the world with an astonishing power of resistance, a cheerfulness of natural living that we encounter in southern countries as a sort of partial proof of a more stable centre of happiness and of the capacity to enjoy on the part of human beings at large.

(1981: 86)

As a native and dweller of one of these countries as well as being familiar with the Anglo-Saxon culture, I find some truth in Gadamer’s words, but I also feel the tensions provoked by these truths. Ultimately, this Latin happiness pales when compared with the material advantages of northern countries. I think that the solution does not come from the kind of protective behaviours mentioned by Gadamer, but from a more radical change. Modernity’s reversion of the Greek priority of theory and morality over technique and economics took 300 years. Should this process start to reverse again, it would take at least another 300 years. However, it must begin, and it is actually starting. Economists stand at the ‘pole position’ of this grid, having a relevant role in driving these changes. It is not only a matter of resigning this position and returning to the previous one. Keynes famously stated in his Essays on Persuasion, ‘If economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid’ (1972b: 333). Yet, more is expected of economists. Rather than confining themselves to a technical task, economists should embrace their moral duty, letting morality into their science, dealing not only with the allocation of means but also with decisions on ends.

This new task assigned to economics brings new challenges that have been overcome by Aristotle. Accordingly, the thesis that underlies this book is that Aristotle’s economic thought is not only relevant today, but it is also the place to look for solutions to economic crises. This is a book for economists. Nonetheless, being an economist myself, I am aware that it will not be an easy book because of its philosophical perspective, which relies on reasoning methods that are sometimes unfamiliar to us. Still, I firmly believe that the best way to reinstate economics as a moral science is to start by understanding the groundwork laid by its primitive founder, Aristotle.

I think – and I hope to convincingly prove it – that, though conditioned by the primitive economy of his time, Aristotle provides a set of economic ideas that stand the test of time. Aristotle was not an economist and did not try to be one. He was a philosopher; therefore, even today he would probably not aspire to be an economist. However, the economy is a natural human reality with enough universality to warrant universal conclusions. The deepest and most relevant knowledge on any subject-matter is philosophical, and Aristotle did pave the way for a philosophy of economy.

Joseph Schumpeter starts his History of Economic Analysis by defining economic analysis as ‘the intellectual efforts that men have made in order to understand economic phenomena’ ([1954] 2006: 2). Following this definition, Aristotle’s would be the first economic analytic effort, albeit not in the modern sense. Specifically referring to Aristotle, Schumpeter underscores his analytic intentions and work ([1954] 2006: 54–55). However, concerning economics, he asserts:

But only a small part of his analytic performance is concerned with economic problems. His main work as well as his main interest, so far as social phenomena are concerned, was in the field we have decided to call economic sociology or rather it was in the field of political sociology to which he subordinated both economic sociology and technical economics. It is as a treatise or textbook on state and society that his Politics must be appraised. And his Nicomachean Ethics – a comprehensive treatise on human behavior presented from the normative angle – also deals so preponderantly with political man, with man in the city-state, that it should be considered as a companion volume to the Politics, making up together with the latter the first known systematic presentation of a unitary Social Science.

([1954] 2006: 55)

I agree with this appraisal of Aristotle’s political thought, and I think that therein lies the upside of Aristotle’s treatment of the economy: he views it not as an isolated human reality but as immersed in the whole of political society: ‘the first known systematic presentation of a unitary Social Science’. The loss of this unity is at the root of political, social and economic crises.

According to Aristotle, if we do not have the economy serve the polis’ common good, we cannot judge if economics is fulfilling its mission, and neither can we determine if individual economic behaviours are just. For him, it would be a conceptual error to think of economics aside from politics – in the classical sense of the most architectonical moral science. The marriage between economics and politics, indissoluble by nature, went through a divorce in the nineteenth century. The time has come for a reconciliation.

How this book is organized

The book is divided into two parts. Part I presents Aristotle’s economic thought and its close ties to ethics and politics. This is possibly the hardest part for economists, because it is predominantly philosophical. For this reason, these chapters begin by introducing a current economic topic related to the subject of the chapter and end with Aristotle’s answer, while supporting arguments are developed in the middle. However, if readers trust my arguments, they may choose to skip them, reading only the introductions and conclusions in every Part I chapter. In fact, I recommend reading this book in a ‘circular’ fashion: starting with this Introduction and the Conclusion (the brief Chapter 10) and then moving on to the introductions and conclusions of each chapter, then delving further into the arguments of each. Chapter 2 is an exception, because it provides the elements to take into account in the whole book. It is divided into three sections: first, it introduces Aristotle’s life and time, especially focusing on the prevailing economic mindset and facts. Second, it briefly surveys the Aristotelian texts that are relevant to the book’s topic. Third, it describes the content of these texts, thus depicting Aristotle’s economic thought.

Chapter 3 undertakes an ontological analysis of the economy: it asks what the nature of the subject-matter of economics is according to Aristotle – in a nutshell, ‘what is economy’? That is, what is the nature of the stuff economists deal with? I think that this is a relevant question for economists. Once the subject-matter has been defined, Chapter 4 considers what kind of science economics is for Aristotle, taking a look at its characteristics, scope and limits. Simply stating that ‘economics is what economists do’ is not enough for an eager economist in search for the definition of economics. Aristotle sheds some light on this issue that has escaped consensus among economists thus far.

Chapter 5 discusses the connection between Aristotle’s economy notion and ethics. This is a hot topic in economics today. Many voices have recently risen on the moral causes underlying crises. Nonetheless, just any ethical theory would not have been useful to ameliorate or prevent these crises. Aristotle’s proves to be so. As his ethical theory is a ‘virtue ethics’, it introduces the concept of virtue and enumerates ‘economic virtues’. Actually, given the ethical character of Aristotle’s notion of the economy, this entire book is about economics and ethics, and this relation crops up in all its chapters. However, I think that it is useful to dedicate a chapter to economics and ethics, focusing on virtues. The final chapter in Part I concentrates on the links between economy and politics according to Aristotle, trying to establish the main goals of an ‘Aristotelian economic policy’. As noted earlier, except the first, all chapters are preceded by an introduction on the current state of economics concerning the topic at hand in order to offer a better understanding of Aristotle’s contribution to economics.

Part II tackles specific economic themes from an Aristotelian point of view – this is probably the most useful section for economists. The first two chapters address two recent economic trends that take into account economy ends: ‘happiness economics’ and Amartya Sen’s ‘capability approach’. Concerning happiness economics, this chapter shows that Aristotle’s eudaimonic concept of happiness would add to this current with a more comprehensive analysis. As regards the capability approach, it will show that Aristotle’s thought would help to overcome the troubling incommensurability of capabilities, which make economic policy-making difficult. The third chapter in this part of the book deals with the possible contribution of Aristotle’s causality thinking to current views on scientific explanation in social sciences – and, specifically, in economics. Should economists look for the real causes of economic events, or is it enough to accurately predict them? This debate spanned the entire second half of the twentieth century and remains just as heated today.

Finally, a couple of side notes. First, it is my intention that every chapter can be read and understood on its own, as a result, some ideas will be repeated. Second, despite my efforts, this book cannot escape being a little exegetical at times – for instance, in the last part of Chapter 2 and in Chapter 3. Its primary purpose is not to analyse Aristotle’s economic thought in depth (as excellently done by Scott Meikle 1995) but to show its contribution to present-day economics.

Notes

1 Jeffrey Young also used this expression to entitle a book about Adam Smith’s thought, as ‘for Smith as well as for Boulding, economics is a moral science’ (1997: 3–4). This author published his book La economía como ciencia moral (Crespo 1997) in Spanish and held a writte...