Economics as a Moral Science

But what is a moral science? And what are the implications of the claim that economics is a moral science? 

A preliminary issue concerns science generally. Science in the Western tradition seeks to understand reality through introspection, observation, and the formulation and testing of hypotheses. These activities are often described as “the scientific method.” Science is more than a method, however. It is, as Michael Polanyi emphasized throughout his career, a social practice by which humans seek after truth. 

Communities of scientists—communities of truth-seekers—exert mutual influence over one another’s interests, questions, interpretations, and standards of judgment.³ Communities of scientists determine whether a hypothesis—or, more plainly, an explanation—is interesting and worth pursuing. Communities of scientists determine whether a hypothesis has been sufficiently falsified. The economist Paul Heyne wrote, “hypotheses in biology concerning pigeons are confirmed by biologists, not by pigeons; and hypotheses in economics concerning business cycles are confirmed by economists, not by business cycles.”⁴

Different scientific endeavors and communities adopt different practices and standards. Engineers, for example, demand higher degrees of precision than biologists and economists. But all sciences share a dimension that is irreducibly social, since all sciences are practiced by humans and for humans. In that sense, all sciences are moral, at least on the primary meaning of that term. The first definition of moral in Samuel Johnson’s Dictionary of the English Language is: “relating to the practice of men towards each other, as it may be virtuous or criminal; good or bad.”⁵ 

If all sciences are already moral, what exactly is a “moral science”?

Working from Samuel Johnson’s definition, a “moral science” can first be described as a science that takes “the practice of men towards each other” as its principal object of study. A moral scientist on this understanding is a student of civilization, an inquirer into the principles of human nature and the ways those principles shape history and current affairs. Moral science is what David Hume had in mind when, at the outset of his Treatise of Human Nature, he announced ambitions to pioneer a “science of man” that would encompass logic (human reasoning), morals, criticism, and politics.⁶ 

The first meaning of “moral science” might seem odd to today’s reader. Today, “moral” is more commonly understood in an ethical sense. A moral action is an action that accords with the principles of right and good action; an immoral action violates such principles. With this second definition of “moral” in view, one may understand a “moral science” to be a science that not only treats human conduct but more specifically contributes to our understanding of right and wrong, good and evil, with practical implications for how we ought to live. Moral science, on this second meaning, means specifically the science of ethics and not just any social study (such as history, economics, psychology, etc.). 

For many philosophers until the nineteenth century, the two senses of moral science just elaborated were largely coextensive, for few perceived a wedge between facts and values. To study the practice of men towards one another was to study and promote right conduct; to study and promote right conduct was to study the practice of men towards one another. This correspondence derived from a conviction that how things ought to be flows naturally from a proper consideration of how things are. That conviction was central from Aristotle to Hume.

Hume taught that moral obligations depend upon a sense of duty, and that the sense of duty flows from our sentiments, which are themselves a factual component of the way things are. For Hume, to investigate the principles of the human mind, the frame of human nature, and the organization and cooperation of men in history is then to investigate the basis of rightness, goodness, and beauty, and to advance understandings of how these can be promoted in social life. That, in my view, is a proper way to conceive of the scope and purpose of moral science in its broadest sense.

Moral science can be thought of as a tree. Its growth corresponds to superior understandings of civilization and enhancements of human life. The tree of moral science has many branches that reinforce the structure of the tree and provide nutrients and sunlight to the whole. Some branches are large and some are small. Some are closely intertwined. Some appear to grow in relative isolation. Some occasionally die off and must be cleared away. But all work together as a part of some organism in service of its ends. The branches of the tree of moral science include theology, philosophy, psychology, history, politics, sociology, aesthetics, and literature, among many others, including economics.

Economists will agree that economics can contribute to our understanding of the “practice of men towards each other” and that applied ethicists ought to consult economists. Economists will concur that economics is a resource for aspiring moral scientists. But some will view characterizations of economics as a moral science as overly broad. On the one hand, the reaction is sensible. Economics can be studied and practiced to a large extent without forays into some of the wider concerns of the moral scientist. On the other hand, it is clear that economics can never be fully separated from such concerns. To extend the tree metaphor, we might say that the economics branch invigorates the life of the tree of moral science, but it is not a life force unto itself. And to continue growing, it must occasionally borrow resources and nutrients from other branches, such as history, psychology, ethics, politics, sociology, and anthropology, even to accomplish its own selected explanatory goals.

This view runs counter to understandings of economics as a value-​free, independent science of choice, exemplified by the work of Carl Menger and later Lionel Robbins. In his Investigations into the Method of the Social Sciences, Menger articulated a definition of theoretical economics not dependent, in his view, on historical circumstance, psychology, or ethics: theoretical economics is the narrow study of our self-​interested attempts at material provision.⁷ Theoretical economics underdetermines empirical reality for Menger. But it uncovers genuine, independent laws with which we can explain the way things are. Inspired by Menger, Lionel Robbins suggested that economics is the “science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.”⁸ Economics, for Robbins and Menger, delineates a logic of choice and deduces its implications. The implications will pertain to our moral contexts, and hence to applied ethics. But the so-​called logic of choice does not rely on anything external to itself. In this view, the content of choices—preferences subject to constraints—and the relation of our preferences to the preferences of others can be investigated by psychologists, historians, and sociologists. But such considerations are auxiliary to economics proper.

Rather than illuminating a path forward for an economic science that is value-​free and separate from and independent of other branches of social study, the drift of Menger and Robbins implicates ethical and psychological issues. A consideration of their definitions draws out economics’ occasional dependence on other branches of moral science.

The crux of the matter is that “self-interest”—or “preference,” “constraints,” “the utility function”—cannot be meaningfully defined or operationalized without reference to moral—i.e., social—phenomena. Our decisions about how to make use of our scarce resources are in continuous conversation with our moral contexts. What we each want to do depends in important ways on what we each feel we ought to do. What we feel we ought to do depends in important ways on how we perceive the feelings of others towards our actions. One can simply shoehorn moral sentiments into an individual, self-​interested utility function. But the merits of this approach are questionable. It has difficulty accounting for why individuals undertake actions that demonstrably sacrifice their expressed interests. In general, it is more of a redescription than an explanation: the man decided to deploy his scarce resources to return a cash-​filled wallet to a stranger because he prefers to see himself as the type of person who returns wallets.

Rather than clinging to its sense of independence, economics is better served by coming to terms with evidence in literature, history, ethics, and psychology—and the common course of human life—that humans are rule-​following beings concerned with proper behavior. We often follow rules not primarily because we estimate that doing so will benefit our wealth or bodily comfort, but because we have learned and internalized the belief that we ought to follow them. The economist may try to assimilate “ought” motivations into the agent’s utility function, but to do so with any accuracy will call for the economist to understand processes of moral formation. Such understanding helps us account for puzzling situations and apparent inconsistencies in behavior.⁹ It helps account, for example, for why common-​pool resources are preserved in some instances and depleted in others and why attempts to influence behavior through material incentives sometimes backfire.¹⁰ More broadly, it helps us better understand what has increasingly been recognized as a driver of economic progress, namely, culture—which often passes under the codeword “institutions.” 

Institutions are broadly understood and modelled by economists as formal rules and constraints that guide behavior, including legal rules, political regulations, and organizational by-​laws. But formal constraints and rules alone are insufficient. Constraints and rules will only bind if they are supported by a substrate of moral opinion that believe in their legitimacy and efficacy. The heart of an institutional arrangement is not the letter of the law, but the spirit behind the letter. Many countries, as Justice Antonin Scalia liked to remark, have written bills of rights, but far fewer countries are populated by citizens who believe that the written word of their bills of rights corresponds to real moral obligations of governments. Without a healthy moral substrate, sound, formal institutions are, John Witherspoon wrote, like metal bands holding together the trunk of a slowly rotting tree.

Much economic analysis presupposes cultural context. That is fine. But when “institutions” turn out to be a fundamental factor in what economists are trying to explain, they themselves call for explanation and analysis. That analysis reveals that a key component of institutional variance comes down to differing moral sensibilities among populations. To neglect an investigation and consideration of these sensibilities and their genealogies is to neglect a major determinant of the wealth of nations.¹¹  

Economics shines in its treatment of exchange relationships. Exchange relationships flourish within certain kinds of cultural and institutional forms, and the forms include attitudes and moral sensibilities. When the right forms obtain and people opt for the peaceable propensity to “truck, barter, and exchange,” economics illuminates the marvels that ensue. The demonstration of the marvels makes an ethical case for the cultural and institutional forms that make them possible. Hence economics functions as an input into ethical theorizing. Economics teaches us how to live better together.

Economics brings into focus things often unseen. Economic analysis since before Adam Smith has illustrated the remarkable order, innovation, and dynamism that unfolds within a deceivingly simple framework of conventions of property and contract. Hume wrote that after settling these conventions—which he described as “laws of nature”—that “there remains little or nothing to be done towards settling a perfect harmony or concord.”¹² Individuals seeking to better their circumstances within the bounds of justice, check each another’s vices (e.g., avarice, sloth) and spur each other’s virtues (e.g., industry, thrift). To get ahead, individuals must provide a service for which others are willing to exchange. Individuals rely on prices to formulate their own enterprises.

Enterprises enjoy profits when they make what others deem to be a productive transformation of resources. Individuals feel the pinch of financial loss for failing to supply what others value. In these pursuits, individuals develop specializations and extend the division of labor. As the market extends, the scope and scale of production increases, driving down production costs and lowering prices. The tendency is toward abundance, innovation, and improvement. From a god’s-eye view, the whole appears finely-​tuned, remarkably coordinated. It is, however, the result of myriad human actions, most of which are far from any meaningful seat of governmental power.

Such insights illustrate the extent to which the social order we inhabit outpaces our ability to comprehend it. Hayek remarked that the “curious task of economics” is to “demonstrate to men how little they really know about what they imagine they can design.”¹³ We are unable to fully untangle the genealogy of even the simplest production process. We cannot hope to replicate the beneficial effects of the decentralized system through central planning. As history continues to show, our efforts to intervene in the market process, beyond enforcing the very rules that make the process possible, very often subvert our most sacred purposes. 

In elaborating the limits of our knowledge, the complexities of social orders, and the remarkable features of the market process, economic thinking serves the tree of moral science. The good economist recognizes that, in social affairs, less is seen than is unseen. The good economist recognizes that he himself affects and is affected by the workings of the social order he attempts to understand. The good economist is moved by curiosity, wonder, and humility on observing the myriad spontaneous orders that constitute civilization more broadly.