Saturday, March 05, 2011

It's Time to Read Amartya Sen's Work

Angus Sibley writes in Spero News (HERE): on Amartya Sen, On Ethics and Economics (Blackwell, Oxford, 1988):

Made in India: Amartya Sen's good economics”

“My readers may recall that a year ago I quoted two present-day English writers, according to whom most economists deny that justice has any bearing on economic transactions.3 More than a century ago, the French historians Gide and Rist blamed three of the founding fathers of ''classical'' economics: Adam Smith, Jean-Baptiste Say and David Ricardo consider that man is motivated only by his own interests. They imagine him totally absorbed in the pursuit of gain.4 That is less than fair to Smith, who was in fact far more concerned with the morality and humanity of economic behaviour than is generally acknowledged. But posterity has neglected this aspect of Smith''s thought, preferring to focus its attention on the ''invisible hand'', whose infallibility was never claimed by Smith himself. As Sen observes, while some men are born small and some achieve smallness, it is clear that Adam Smith has had much smallness thrust upon him.5

Thus, even from its early days, economics has all too often been blind to the moral implications of its theories and policies. It has based itself largely on three assumptions:

(a) that human beings are primarily concerned with rational action designed to maximise their personal economic gains; that other motivations, leading to altruistic or non-rational actions, are of minor importance and can be ignored;

(b) that individual self-interested actions, carried out in the freest possible markets, are normally (not merely ''frequently'', as Smith put it,6) conducive to the general good;

(c) that the sole purpose of economic activity is to maximise the output of consumer goods and services with minimum input of human labour.

Sen, by contrast, is one of the rather few modern economists who have striven to involve economics with morality and justice, not merely with how to maximise capitalist wealth and consumer-pampering efficiency. In his view, there are two contrasting approaches to economics. There is the ''ethical'' approach which considers how to manage the economy so as to deliver ''economic justice'', an acceptable distribution of available resources. And there is the ''engineering'' approach, which considers how to generate goods and services as efficiently and profitably as possible. Sen accepts that both are necessary, but he deplores the inordinate dominance of economic ''engineers'' in the Western world ever since the eighteenth century.
My readers may recall that a year ago I quoted two present-day English writers, according to whom most economists deny that justice has any bearing on economic transactions.3 More than a century ago, the French historians Gide and Rist blamed three of the founding fathers of ''classical'' economics: Adam Smith, Jean-Baptiste Say and David Ricardo consider that man is motivated only by his own interests. They imagine him totally absorbed in the pursuit of gain.4 That is less than fair to Smith, who was in fact far more concerned with the morality and humanity of economic behaviour than is generally acknowledged. But posterity has neglected this aspect of Smith''s thought, preferring to focus its attention on the ''invisible hand'', whose infallibility was never claimed by Smith himself. As Sen observes, while some men are born small and some achieve smallness, it is clear that Adam Smith has had much smallness thrust upon him.5

Thus, even from its early days, economics has all too often been blind to the moral implications of its theories and policies. It has based itself largely on three assumptions:

(a) that human beings are primarily concerned with rational action designed to maximise their personal economic gains; that other motivations, leading to altruistic or non-rational actions, are of minor importance and can be ignored;

(b) that individual self-interested actions, carried out in the freest possible markets, are normally (not merely ''frequently'', as Smith put it,6) conducive to the general good;

(c) that the sole purpose of economic activity is to maximise the output of consumer goods and services with minimum input of human labour.

Sen, by contrast, is one of the rather few modern economists who have striven to involve economics with morality and justice, not merely with how to maximise capitalist wealth and consumer-pampering efficiency. In his view, there are two contrasting approaches to economics. There is the ''ethical'' approach which considers how to manage the economy so as to deliver ''economic justice'', an acceptable distribution of available resources. And there is the ''engineering'' approach, which considers how to generate goods and services as efficiently and profitably as possible. Sen accepts that both are necessary, but he deplores the inordinate dominance of economic ''engineers'' in the Western world ever since the eighteenth century.


Comment
This presentation of Amartya Sen’s thinking on contemporary economic theory is so good, I urge readers to follow the link and read the full article.

You should find much of what Sen was saying with which you agree, especially if you come at him with some prior knowledge of Adam Smith’s moral philosophy and political economy, and, most interesting, if you are willing to learn about that philosophical background from Amartya Sen’s presentation of his critique of the ideas and assumptions of modern economics as taught in most universities and as the result of the spread of it to political discourse, media commentary, and, probably more serious, into the behaviour and decision-making in the financial world and corporate governance.

Any comments on Amartya Sen’s ideas are most welcome.

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2 Comments:

Blogger Lorenzo said...

It is hard to get past the woefully one-sided presentation of mainstream economics (which includes von Mises since when?) and the appalling misdiagnosis of present problems in Angus Sibley's gloss. (The influence of Friedman and Hayek on EU and European policy would be what, exactly?) The systematic destruction of prudence by successive government interventions would have horrified all of them. (Indeed, Friedman was a harsh critic of the IMF's "welfare for Wall St".)

I am not really a libertarian, but the notion that there is no moral dimension to libertarianism, or Friedman's own thought, is nonsense. This is the man who proposed the negative income tax and school vouchers. Hayek himself accepted aspects of the welfare state.

Saying poverty or starvation is bad is not the interesting moral point: you will not find a mainstream economist who will defend either. Much of Friedman's interest in monetary economics was motivated by avoiding another 1930s Depression. The question is how to stop them and different policy prescriptions for that are very worth considering but that is not the same as claiming some monopoly of moral concern.

I am a cautious admirer of Sen's work, but his failure to grapple with mass famines in Leninist states is not to his credit.

As for democracy versus markets, the question is much more complicated than that. See, for example, this analysis of how housing regulation works.

6:11 a.m.  
Blogger Gavin Kennedy said...

Lorenzo,
Thank you for your thoughtful comment.

I didn't meant to imply that Mises, etc., were identical to modern (neoclassical) economics, but they are allied with the one-dimensional rational model presented in the same (without the arid maths). They too buy into the so-called invisible hand mysticism (David Freidman, Daniel Klein, in debates with me in Lost Legacy, wholly invented by neoclassical economists), (though Donald Boudreaux has a wider perspective at the Mercato Centre).

Smith's, and Amartya Sen's, approach os much, much wider. The social context is considered to be important - not all market economies are identical and nor are early forms of them.

Picking out elements of a lifetime's work (famine, etc.,) does not do justice to Sen's later work. Feminism - not unimportant in the developing countries; freedom too, and the absence of them in richer economies, is a handicap to diminishing inequality gaps.

There is no moral dimension to mainstream 'self interest' economics that appears in its equations. Redistribution is denounced as 'theft', but so is the continuation of mercantile political economy across the globe, continued since Adam Smith's day and in both old and new forms.

Approving of Sen's writings is not to make him into a Saint. It is aimed only at making him read more widely.

Gavin

4:10 p.m.  

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