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Economics, philosophy of

DOI: 10.4324/9780415249126-R005-1
Version: v1,  Published online: 1998
Retrieved May 19, 2024, from

Article Summary

People have thought about economics for as long as they have thought about how to manage their households, indeed Aristotle compared the study of the economic affairs of a city to the study of the management of a household. During the two millennia between Aristotle and Adam Smith, one finds reflections concerning economic problems mainly in the context of discussions of moral or policy questions. For example, scholastic philosophers commented on money and interest in inquiries concerning the justice of ‘usury’ (charging interest on money loans), and in the seventeenth century there was a great deal of discussion of policy concerning foreign trade. Economics only emerged as a distinct field of study with the bold eighteenth-century idea that there were ‘economies’ – that is autonomous law-governed systems of human interaction involving production, distribution and exchange. This view was already well developed in Adam Smith’s Wealth of Nations, from which much of economics derives.

Economics is of philosophical interest in three main regards: it raises moral questions concerning welfare, justice and freedom; it raises foundational questions concerning the nature of rationality; and it raises methodological or epistemological questions concerning the character and possibility of knowledge of social phenomena. The fundamental theory of standard orthodox economics is of particular epistemological interest because of its resemblance to theories in the natural sciences coupled with its uneven empirical performance.

More than 150 years ago John Stuart Mill confronted the problem of how to reconcile his high regard for economics (despite its empirical adequacies) with his commitment to empiricism. His solution, which was accepted by most economists until the 1930s, held that the basic principles of economics are well established by introspection or everyday experience. One can thus justifiably have confidence in economics, despite the inexactness of its implications, which is only to be expected, since economics deals only with the most important determinants of economic phenomena.

In the 1930s Mill’s views were rejected as too dogmatic and insufficiently empirical. But the views that succeeded Mill’s during the generation after the Second World War, most notably the position of Milton Friedman and views deriving from the work of Karl Popper and Imre Lakatos, were less able to deal satisfactorily with the empirical inadequacies of economic theories than were Mill‘s. Since the mid 1980s there have been several new approaches, ranging from Donald McCloskey’s rejection of methodological assessment at one extreme to Alexander Rosenberg’s conclusion that economics cannot be a successful empirical science at the other.

Citing this article:
Hausman, Daniel. Economics, philosophy of, 1998, doi:10.4324/9780415249126-R005-1. Routledge Encyclopedia of Philosophy, Taylor and Francis,
Copyright © 1998-2024 Routledge.

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