Suppose that you prefer A to B, B to C, and C to A. Your preferences violate Expected Utility Theory by being cyclic. Money-pump arguments offer a way to show that such violations are irrational. Suppose that you start with A. Then you should be willing to trade A for C and then C for B. But then, once you have B, you are offered a trade back to A for a small cost. Since you prefer A to B, you (...) pay the small sum to trade from B to A. But now you have been turned into a money pump. You are back to the alternative you started with but with less money. This Element shows how each of the axioms of Expected Utility Theory can be defended by money-pump arguments of this kind. The Element also defends money-pump arguments from the standard objections to this kind of approach. This title is also available as Open Access on Cambridge Core. (shrink)

It is argued that one can learn from minimal economic models. Minimal models are models that are not similar to the real world, do not resemble some of its features, and do not adhere to accepted regularities. One learns from a model if constructing and analysing the model affects one’s confidence in hypotheses about the world. Economic models, I argue, are often assessed for their credibility. If a model is judged credible, it is considered to be a relevant possibility. Considering (...) such relevant possibilities may affect one’s confidence in necessity or impossibility hypotheses. Thus, one can learn from minimal economic models. (shrink)

The Pareto principle states that if the members of society express the same preference judgment between two options, this judgment is compelling for society. A building block of normative economics and social choice theory, and often borrowed by contemporary political philosophy, the principle has rarely been subjected to philosophical criticism. The paper objects to it on the ground that it indifferently applies to those cases in which the individuals agree on both their expressed preferences and their reasons for entertaining them, (...) and those cases in which they agree on their expressed preferences, while differing on their reasons. The latter are cases of "spurious unanimity", and it is normatively inappropriate, or so the paper argues, to defend unanimity preservation at the social level for them, so the Pareto principle is formulated much too broadly. The objection seems especially powerful when the principle is applied in an ex ante context of uncertainty, in which individuals can disagree on both their probabilities and utilities, and nonetheless agree on their preferences over prospects. (shrink)

The debate about the credentials of sociobiology has persisted because scholars have failed to distinguish the varieties of sociobiology and because too little attention has been paid to the details of the arguments that are supposed to support the provocative claims about human social behavior. I seek to remedy both deficiencies. After analysis of the relationships among different kinds of sociobiology and contemporary evolutionary theory, I attempt to show how some of the studies of the behavior of nonhuman animals meet (...) the methodological standards appropriate to evolutionary research. I contend that the efforts of E. O. Wilson, Richard Alexander, Charles Lumsden, and others to generate conclusions about human nature are flawed, both because they apply evolutionary ideas in an unrigorous fashion and because they use dubious assumptions to connect their evolutionary analyses with their conclusions. This contention rests on analyses of many of the major sociobiological proposals about human social behavior, including: differences in sex roles, racial hostility, homosexuality, conflict between parents and adolescent offspring, incest avoidance, the avunculate, alliances in combat, female infanticide, and gene–culture coevolution.Vaulting Ambitionthus seeks to identify what is good in sociobiology, to expose the errors of premature speculations about human nature, and to prepare the way for serious study of the evolution of human social behavior. (shrink)

To study animal welfare empirically we need an objective basis for deciding when an animal is suffering. Suffering includes a wide range ofunpleasant emotional states such as fear, boredom, pain, and hunger. Suffering has evolved as a mechanism for avoiding sources ofdanger and threats to fitness. Captive animals often suffer in situations in which they are prevented from doing something that they are highly motivated to do. The an animal is prepared to pay to attain or to escape a situation (...) is an index ofhow the animal about that situation. Withholding conditions or commodities for which an animal shows (i.e., for which it continues to work despite increasing costs) is very likely to cause suffering. In designing environments for animals in zoos, farms, and laboratories, priority should be given to features for which animals show inelastic demand. The care ofanimals can thereby be based on an objective, animal-centered assessment of their needs. (shrink)

The tenuous claims of cost-benefit analysis to guide policy so as to promote welfare turn on measuring welfare by preference satisfaction and taking willingness-to-pay to indicate preferences. Yet it is obvious that people's preferences are not always self-interested and that false beliefs may lead people to prefer what is worse for them even when people are self-interested. So welfare is not preference satisfaction, and hence it appears that cost-benefit analysis and welfare economics in general rely on a mistaken theory of (...) well-being. This essay explores the difficulties, criticizes standard defences of welfare economics, and then offers a new partial defence that maintains that welfare economics is independent of any philosophical theory of well-being. Welfare economics requires nothing more than anevidentialconnection between preference and welfare: in circumstances in which people are concerned with their own interests and reasonably good judges of what will serve their interests, their preferences will be reliable indicators of what is good for them. (shrink)

Ontic structural realism (OSR) is crucially motivated by empirical discoveries of fundamental physics. To this extent its potential to furnish a general metaphysics for science may appear limited. However, OSR also provides a good account of the progress that has been achieved over the decades in a formalized special science, economics. Furthermore, this has a basis in the ontology presupposed by economic theory, and is not just an artifact of formalization. †To contact the author, please write to: 4th Floor, Humanities (...) Building, University of Alabama at Birmingham, 900 13th Street South, Birmingham, AL 35294‐1260; School of Economics, Leslie Social Science Building, University of Cape Town, Private Bag, Rondebosch 7701, Cape Town, South Africa; e‐mail: don.ross@uct.ac.za. (shrink)

This paper examines the strengths and weaknesses of one of science's most pervasive and flexible metaprinciples;optimalityis used to explain utility maximization in economics, least effort principles in physics, entropy in chemistry, and survival of the fittest in biology. Fermat's principle of least time involves both teleological and causal considerations, two distinct modes of explanation resting on poorly understood psychological primitives. The rationality heuristic in economics provides an example from social science of the potential biases arising from the extreme flexibility of (...) optimality considerations, including selective search for confirming vidence, ex post rationalization, and the confusion of prediction with explanation. Commentators are asked to reflect on the extent to which optimality is an organizing principle of nature, a set of relatively unconnected techniques of science, a normative principle for rational choice and social organization, a metaphysical way of looking at the world, or something else still. (shrink)

The paper analyses economic evaluations by distinguishing evaluative statements from actual value judgments. From this basis, it compares four solutions to the value neutrality problem in economics. After rebutting the strong theses about neutrality (normative economics is illegitimate) and non-neutrality (the social sciences are value-impregnated), the paper settles the case between the weak neutrality thesis (common in welfare economics) and a novel, weak non-neutrality thesis that extends the realm of normative economics more widely than the other weak thesis does.

In Preference, Value, Choice, and Welfare, I argued, among other things, that preferences in economics are and ought to be total subjective comparative evaluations, that the theory of rational choice is a reformulation of everyday folk-psychological explanations and predictions of behaviour, and that revealed preference theory is completely untenable. All three of these theses have been challenged in essays by Erik Angner (2018), Francesco Guala (2019) and Johanna Thoma (2021a, 2021b). This essay responds to these criticisms and defends these three (...) theses. (shrink)

F. A. Hayek's realistic economic theory has been replaced by the formalistic use of equlibrium models that bear little resemblance to reality. These models are as serviceable to the right as to the left: they allow the economist either to condemn capitalism for failing to measure up to the model of perfect competition, or to praise capitalism as a utopia of perfect knowledge and rational expectations. Hayek, by contrast, used equilibrium to show that while capitalism is not perfect, it contains (...) error‐correcting institutions that bring it closer to perfection than is intuitively apparent. (shrink)

The money-pump argument aims to show that cyclic preferences are irrational. The argument can be based on a number of different exploitation schemes that vary in what needs to be assumed about the agent. The Standard Money Pump works for myopic and naive agents, but not for sophisticated agents who use backward induction. The Upfront Money Pump works for sophisticated agents, but not for myopic or naive agents. In this paper, I present a new money pump, the Universal Money Pump, (...) that works for myopic, naive, and sophisticated agents. Moreover, the Universal Money Pump (just like the Upfront Money Pump) also works for minimally sophisticated agents who need not assume that they will choose rationally at nodes that can only be reached by irrational choices. This enables an argument that rational preferences are acyclic, which is based on weaker assumptions about dynamic rationality than existing money-pump arguments. (shrink)

Economic methodologists most often study the relations between models and reality while focusing on the issues of the model's epistemic relevance in terms of its relation to the ‘real world’ and representing the real world in a model. We complement the discussion by bringing the model's constructive mechanisms or self-implementing technologies in play. By this, we mean the elements of the economic model that are aimed at ‘implementing’ it by envisaging the ways to change the reality in order to bring (...) it more in line with the model. We are thus concerned mainly not with the ways to change the model to ‘fit’ the reality, but rather with the model's own armature that is supposed to transform the world along theoretical lines. The case we study is Arrow–Debreu–McKenzie general equilibrium model. In particular, we show the following: gradient methods and stability could be regarded as constructive mechanisms of general equilibrium modeling in the context of market socialism debates; the obsession of general eq.. (shrink)

Some behavioral economists argue that the honoring of social norms can be adequately modeled as the optimization of social utility functions in which the welfare of others appears as an explicit argument. This paper suggests that the large experimental claims made for social utility functions are premature at best, and that social norms are better studied as equilibrium selection devices that evolved for use in games that are seldom studied in economics laboratories.

This paper analyzes communication with a language that is vague in the sense that identical messages do not always result in identical interpretations. It is shown that strategic agents frequently add to this vagueness by being intentionally vague, i.e. they deliberately choose less precise messages than they have to among the ones available to them in equilibrium. Having to communicate with a vague language can be welfare enhancing because it mitigates conflict. In equilibria that satisfy a dynamic stability condition intentional (...) vagueness increases with the degree of conflict between sender and receiver. (shrink)

This paper supports the literature which argues that derivational robustness can have epistemic import in highly idealized economic models. The defense is based on a particular example from mathematical economic theory, the dynamic Walrasian general equilibrium model. It is argued that derivational robustness first increased and later decreased the credibility of the Walrasian model. The example demonstrates that derivational robustness correctly describes the practices of a particular group of influential economic theorists and provides support for the arguments of philosophers who (...) have offered a general epistemic justification of such practices. (shrink)

We reexamine some of the classic problems connected with the use of cardinal utility functions in decision theory, and discuss Patrick Suppes's contributions to this field in light of a reinterpretation we propose for these problems. We analytically decompose the doctrine of ordinalism, which only accepts ordinal utility functions, and distinguish between several doctrines of cardinalism, depending on what components of ordinalism they specifically reject. We identify Suppes's doctrine with the major deviation from ordinalism that conceives of utility functions as (...) representing preference differences, while being non- etheless empirically related to choices. We highlight the originality, promises and limits of this choice-based cardinalism. (shrink)

The classical theory of rational choice is built on several important internal consistency conditions. In recent years, the reasonableness of those internal consistency conditions has been questioned and criticized, and several responses to accommodate such criticisms have been proposed in the literature. This paper develops a general framework to accommodate the issues raised by the criticisms of classical rational choice theory, and examines the broad impact of these criticisms from both normative and positive points of view.

This article analyses how normative decision theory is understood by economists. The paradigmatic example of normative decision theory, discussed in the article, is the expected utility theory. It...

Dramatic changes or revolutions in a field of science are often made by outsiders or 'trespassers,' who are not limited by the established, 'expert' approaches. Each essay in this diverse collection shows the fruits of intellectual trespassing and poaching among fields such as economics, Kantian ethics, Platonic philosophy, category theory, double-entry accounting, arbitrage, algebraic logic, series-parallel duality, and financial arithmetic.

This paper develops an account of what it is that rational agents choose and what it is that rational agents prefer. There are three desiderata to satisfy when offering such an account. First, the account should maintain canonical axioms of rational choice theory as intuitively plausible. Here I focus on contraction and expansion consistency properties. Second, the account should prevent canonical axioms of rational choice theory from becoming trivial—it should be possible to actually violate these axioms, less rational choice theory (...) becomes useless for many purposes. Third, the account should allow rational choice theory to be put to several different philosophical projects. I show that existing accounts of what we choose and prefer fail along at least one of these metrics. The account I develop does not fail across any of these metrics. (shrink)

Barbara Fried takes the view that uniform taxation—that is, a single rate applicable to all income levels—cannot be defended on any grounds of justice. She goes further by saying that, of all possible rate structures, it might be “the hardest one”? to ground in “a”? theory of fairness. Using the contractarian-constitutional perspective advanced by John Rawls and James Buchanan, this article argues that tax uniformity can be seen as a requirement of justice. After modelling how the political world realistically decides (...) to distribute tax shares (self-interested parties act under a majority constraint), I show how the uniformity principle could emerge from the constitutional contract. In other words, rational individuals would choose uniformity as a procedural constraint under a “veil of uncertainty”?; that is, with limited knowledge regarding their positions under the future application of the rule. Moreover, I elucidate how the uniformity requirement integrates generalized criteria of fairness and efficiency into fiscal politics as it precludes fiscal exploitation and constrains majorities, and their most influential subgroups, to opt for policies in the direction of the Pareto frontier, and as such promotes outcomes acceptable to all participants. (shrink)

Ever since Sen criticized the notion of internal consistency of choice, there exists a widespread perception that the standard rationalizability approach to the theory of choice has difficulties in coping with the existence of external norms. We introduce a concept of norm-conditional rationalizability and show that external norms can be made compatible with the methods underlying the traditional rationalizability approach. To do so, we characterize norm-conditional rationalizability by means of suitable modifications of revealed preference axioms that are well established in (...) the theory of rational choice on general domains as analysed in contributions by Richter and Hansson, for example. We compare our approach to alternative suggestions that have appeared in response to Sen's criticisms, and we discuss its links to Sen's notion of self-imposed choice constraints. (shrink)

It is generally recognized that descriptive and normative individualism are logically independent theses. This paper defends the stronger view that recognition of the falsehood of descriptive individualism is crucial to understanding the evolutionary and developmental basis of normative individualism. The argument given for this is not analytic; rather, it is based on empirical generalizations about the evolution of markets with specialized labor, about the nature of information processing in large markets, and about the socialization of human children.

Abstract:Humans often comply with social norms, but the reasons why are disputed. Here, we unify a variety of influential explanations in a common decision framework, and identify the precise cognitive variables that norms might alter to induce compliance. Specifically, we situate current theories of norm compliance within the reinforcement learning framework, which is widely used to study value-guided learning and decision-making. This framework offers an appealingly precise language to distinguish between theories, highlights the various points of convergence and divergence, and (...) suggests novel ways in which norms might penetrate our psychology. (shrink)

Social scientists could learn some useful things from philosophy. Here I shall discuss what I take to be one such thing: a better understanding of the concept of utility. There are several reasons why a better understanding may be useful. First, this concept is commonly found in the writings of social scientists, especially economists. Second, utility is the main ingredient in utilitarianism, a perspective on morality that, traditionally, has been very influential among social scientists. Third, and most important, with a (...) better understanding of utility comes, as I shall try to show here, a better understanding of “personal welfare”. or, in other words, of what may be said to be in people's best interests. Such an understanding is useful to social scientists and philosophers alike, whether for utilitarian purposes or not. (shrink)

This study addresses a fundamental concern of research on economic ethics by examining the values of economics. While other studies have linked the study of economics to the adoption of rational economic behavior, this study goes one level deeper, investigating the values that underpin neoclassical economics and whether they are transmitted to students. We find that the study of economics is associated with an increase in hedonism and power values, a decrease self-direction value, and possibly a decrease in universalism value. (...) We measure value change among economics students using a quasi-experimental research design in accordance with the methodology of research on academic socialization. We discuss the practical implications of the internalization of economic values. (shrink)

Most philosophical accounts of the foundations of economics have assumed that economics is intended to be an empirical science concerned with human behaviour, though they have, of course, differed over the extent to which it has been or can be successful as such an enterprise. A prominent source of dissent against this consensus is Alexander Rosenberg. In his recent book, Rosenberg summarizes and completes his statement of a position that he has been developing for some time. He argues that although (...) economists evaluate one another's work according to shared and rigorous standards of adequacy, these standards are strictly internal, like those of mathematics, instead of being derived from discoveries about contingent relationships between theoretical statements and empirical facts. Economics, that is to say, is essentially conceptual rather than empirical inquiry. In the following discussion, I will provide grounds for resisting Rosenberg's conclusion. The point of this criticism, however, is not mainly negative. Most of the historical preoccupations of the philosophy of economics, like those of the philosophy of science in general, have been epistemological. Careful attention to Rosenberg's argument, however, redirects our attention to ontological questions about the objects of economics, and this redirection, I will maintain, is to be welcomed. I will argue that while the majority of philosophers of economics is correct, as against Rosenberg, in regarding economics as an empirical science, the conventional view as to the identity of its empirical objects should be substantially revised under the pressure of Rosenberg's criticisms. My critical analysis of the implications of Rosenberg's work for the ontological commitments of economics is intended to furnish one line of argument towards my own conception of the objects of economics. This conception, which is still preliminary in many respects, will be briefly sketched toward the end of the present paper; a detailed account of it is given in Ross and LaCasse. (shrink)

The ArgumentIn the minds of many, the Bourbakist trend in mathematics was characterized by pursuit of rigor to the detriment of concern for applications or didactic concessions to the nonmathematician, which would seem to render the concept of a Bourbakist incursion into a field of applied mathematices an oxymoron. We argue that such a conjuncture did in fact happen in postwar mathematical economics, and describe the career of Gérard Debreu to illustrate how it happened. Using the work of Leo Corry (...) on the fate of the Bourbakist program in mathematics, we demonstrate that many of the same problems of the search for a formalstructurewith which to ground mathematical practice also happened in the case of Debreu. We view this case study as an alternative exemplar to conventional discussions concerning the “unreasonable effectiveness” of mathematics in science. (shrink)

This essay argues that shifts in patronage for the postwar behavioral and social sciences were linked intimately to both intellectual and institutional changes. This broad argument comprises two subarguments: first, that there were in fact two distinct, successive patronage systems for postwar social science—not one, as is commonly assumed; and, second, that the first postwar patronage system played a major role in enabling a series of behavioral revolutions and interdisciplinary syntheses across the social sciences, while the second postwar patronage system (...) encouraged the development of specialized concepts, techniques, and technologies within the disciplines. The essay also suggests that the widespread concern among social scientists in the 1970s and 1980s that their fields were fragmenting was at least in part an unintended consequence of the rise of the second system. (shrink)

The paper discusses the sense in which the changes undergone by normative economics in the twentieth century can be said to be progressive. A simple criterion is proposed to decide whether a sequence of normative theories is progressive. This criterion is put to use on the historical transition from the new welfare economics to social choice theory. The paper reconstructs this classic case, and eventually concludes that the latter theory was progressive compared with the former. It also briefly comments on (...) the recent developments in normative economics and their connection with the previous two stages. (Published Online April 18 2006) Footnotes1 This paper suspersedes an earlier one entitled “Is There Progress in Normative Economics?” (Mongin 2002). I thank the organizers of the Fourth ESHET Conference (Graz 2000) for the opportunity they gave me to lecture on this topic. Thanks are also due to J. Alexander, K. Arrow, A. Bird, R. Bradley, M. Dascal, W. Gaertner, N. Gravel, D. Hausman, B. Hill, C. Howson, N. McClennen, A. Trannoy, J. Weymark, J. Worrall, two annonymous referees of this journal, and especially the editor M. Fleurbaey, for helpful comments. The editor's suggestions contributed to determine the final orientation of the paper. The author is grateful to the LSE and the Lachmann Foundation for their support at the time when he was writing the initial version. (shrink)

This paper traces the intellectual trajectories of the first stand-alone theories of action, understood as both axiologically neutral and quasi-scientific from a methodological point of view. I argue that the rise of action theory of this kind corresponds to a particular moment of dissatisfaction within Western thought, and as such, it tells us far more about the history of philosophy than the subject itself. I conclude by explaining why subsequent failures to provide an acceptable theory of action are not accidental. (...) On the contrary, such failures owe themselves probably to the fact that formulating a theory of action is neither propitious nor useful. Thus, the most valuable lesson we can learn from philosophical desires for a theory of action is that we should take co-action as the starting point in our normative investigations, rather than positing action simpliciter as a problem to solve. That is, we should move away from propounding a theory of action, and instead focus on a paradigm shift, whereby we move away from a representational, towards a co-actional, model of action. (shrink)

There are, broadly speaking, two ways to think about rationality, as defined in the following passage: ‘Reason’ for a long time meant the activity of understanding and assimilating the eternal ideas which were to function as goals for men. Today, on the contrary, it is not only the business but the essential work of reason to find means for the goals one adopts at any given time. To use what Horkheimer called objective reason, and what others have called expressive or (...) non–instrumental reason, is to reflect on one's goals, to attempt to determine what preferences one ought to hold. On the other hand, to use what Horkheimer called subjective reason is to ‘be concerned with means and ends, with the adequacy of procedures for purposes more or less taken for granted’, that is, to be instrumentally rational. This contrast between non-instrumental and instrumental reason is at the heart of many contemporary social and philosophical disputes. 1. (shrink)

Although stability is a central notion in several academic disciplines, the parallelsremain unexplored since previous discussions of the concept have been almostexclusively subject-specific. In the literature we have found three basic conceptsof stability, that we call constancy, robustness, and resilience. They are all foundin both the natural and the social sciences. To analyze the three concepts we introducea general formal framework in which stability relates to transitions between states. Itcan then be shown that robustness is a limiting case of resilience, (...) whereas neitherconstancy nor resilience can be defined in terms of the other. Hence, there are twobasic concepts of stability, both of which are used in both the social and the naturalsciences. This congruence in the concepts of stability is of particular interest forendeavours to construct models that represent both natural and social phenomena. (shrink)

The paper explores Islamic morality within labor market realities. It presents Islamic moral axioms that are expected to guide employer–employee relationships. It provides an extensive review of Islamic moral ideals related to fairness in the labor market. Based on survey data from 319 individuals in the Saudi labor market, it tests three hypotheses related to religiosity, secular aspirations, and perception and practice of fairness in the labor market. Using multinomial logistic regression, the findings from several models clearly support all three (...) hypotheses. They show that employers, owners and senior managers were more likely to consider market reality as their reference for describing fairness. Ideally speaking, the regression results confirm that being religious contributes positively to the sense of fairness even in a secular context. However, they also reveal that secular aspirations override religious ideals when it comes to market realities. In other words, when people place great importance on worldly outcomes, religious ideals have almost no impact on their labor market practices even if they ideally support fair practices. The study concludes that religious morality does matter with regard to fairness in employer–employee relationships only if it is not superseded by secular aspirations. Those who have a high-level of religiosity consider themselves to be fairer. However, if they embrace secular aspirations, they are less likely to practice their moral ideals in the labor market. (shrink)

The present note will be concerned only with Sir Partha Dasgupta's recent article in this journal (Dasgupta 2005). What is more, it will concentrate on those parts of the article which contain a serious misreading of Hilary Putnam's position on the entanglement of facts, theories and values. These philosophical matters can perhaps be clarified for economist readers (they should require no clarification for philosophers) by considering, to begin with, Dasgupta's interpretation of the Bergson–Samuelson position. What (Bergson) Burk (1938) and Samuelson (...) (1947) were doing, according to Dasgupta, was to establish ‘the ethical foundations of the subject. . .over five decades ago’ (Dasgupta 2005: 221–2).2 Thus a major theme of the article is heard at once: economics is supposedly based on sound ethical foundations, and these can be traced (it is supposed) to specific work written long ago, and hence needing no augmentation. These ethical foundations, it is claimed, ‘are now regarded to be a settled matter’ (2005: 222). (shrink)