What do economic theories have to do with justice? Are economists economizing on justice? What does that mean?

Sixty years ago Robertson asked himself “What does the economist economize?”. The answer he gave was, “it is love”. When referring to “the economist”, he meant his role as designer of institutions or adviser to public decision makers. By using the word ‘love’ in a loose sense, he encompassed affections, public spirit, benevolence, and also justice concerns. Robertson’s main point was that the economist ought to contribute to create institutions in which egoistic drives should be transformed into (possibly unintended) beneficial outcomes to society.

Since the XIX century economics underwent a process of transformation aimed at separating it from moral philosophy and even political economy, in order to fulfil the requirements of becoming a ‘positive science’. This led economists to ‘economize on justice’ by seeing the discipline of economics as a value-free science, indifferent to or even adverse to redistributive justice claims. Dominant economic theory thus devised the Homo economicus, an hypothetical, ‘rational’ and self-interested entity, an abstract molecule that responds only to economic incentives, and “knows neither benevolence nor malevolence, only indifference”. The engagement of the Homo economicus with justice is thus purely instrumental: for him or her, justice matters only as long as it may help him pursue, or is not detrimental to, self-interest.

This idea however did not remain unchallenged. Just to mention a few, Bowles most recently challenged the Homo economicus providing evidence that “incentives that appeal to self-interest may fail when they undermine the moral values that lead people to act altruistically or in other public-spirited ways”.[1]

Also Sen challenged the positive-normative divide in order to reconcile economics with ethics and justice. His capabilities approach replaces the concept of utility – as the only factor considered by economists when analyzing people’s behavior – with a multidimensional consideration of values, which brings two components to the forefront: functionings (states and activities constitutive of a person’s being, such as being healthy, being safe, being happy, and enjoying self-respect) and capabilities (the alternative combinations of functionings which a person can achieve). Characteristic of Sen’s approach is his refusal to specify these relevant functionings and capabilities: he acknowledges the need to take into account the context of use of capabilities, which can vary, and the requirement of public involvement in the scrutiny of those values. Sen invites the economist to go beyond claims that “justice is not a matter of reasoning at all” to engage in “reasoned diagnoses of injustice, and from there to the analysis of ways of advancing justice.”[2]

Other economists challenged the idea that economics should be indifferent to inequality. Keynes for example, while considering justice not as an end in itself, but a means to the Good, believed that large inequalities should be addressed if necessary through state interference in the distribution of wealth and income. While believing that economic inequality was important for the stimuli to enterprise it entailed, he found no justification for the large disparities during his lifetime. After Keynes and decades of neglect in economics, concerns with inequality recently resurfaced. In a series of works published after his departure from the vice-presidency of the World Bank in 2000, Joseph Stiglitz has been standing out as one of the vocal contributors to the ongoing shift of the mind-set of economists and policy makers on inequality. One of his basic points is that inequalities in the 21st century have reached a level in which what must be considered is their costs not the costs of reducing them.

The paper argues that the “economizing on justice” approach has been having detrimental practical implications in respect to the realization of social justice. Reconciling the study of the economy with justice may require a revival of political economy based on presently marginalized traditions, allowing for a fruitful cross-fertilization with other social sciences.

[1] Samuel Bowles (2008), “Policies Designed for Self-Interested Citizens May Undermine ‘The Moral Sentiments’: Evidence from Economic Experiments”, Science, 320: 1605-1609

[2] Amartya Sen (2009), The Idea of Justice. London: Penguin Books.

By José Caldas
written for the ETHOS Project as Working Paper within D6.1
Find the full publication at: https://ethos-europe.eu/publications