The philosophy of economics intersects with several different areas of philosophy, including the philosophy of science, ethics, and social philosophy. (Dan Hausman is the leading expert in the philosophy of economics. His The Inexact and Separate Science of Economics is a recent contribution.) The field is concerned with methodology, values, and substance.
The primary focus of the field is on issues of methodology and epistemology—the methods, concepts, and theories of economists. What kind of knowledge is provided by the discipline of economics? How is economic knowledge justified or confirmed? How does it relate to other social sciences and the bodies of knowledge contained in those disciplines?
Second, philosophy of economics is concerned with values—the values of human welfare, social justice, and the tradeoffs among priorities that economic choices require. Economic reasoning has implications for justice and human welfare; more importantly, economic reasoning often makes inexplicit but significant ethical assumptions that philosophers of economics have found it worthwhile to scrutinize.
Finally, the philosophy of economics is concerned with substance—what might be called the ontology and theoretical space of economics. Here philosophers have expressed interest in the institutions and structures through which economic activity and change take place, and have turned a critical eye to the assumptions economists often make about institutions and social processes. Are there alternative institutions through which modern economic activity can proceed? What are some of the institutional variants that exist within the general framework of a market economy? What are some of the roles that the state can play within economic development so as to promote efficiency, equity, productivity, and growth?
In thinking about the philosophy of economics it is worthwhile dwelling briefly on the intellectual role played by philosophy of economics. Philosophers are not empirical researchers; and on the whole they are not formal theory-builders. So what constructive role does philosophy have to play in economics? There are several. First, philosophers are well prepared to examine the logical and rational features of an empirical discipline. How do theoretical claims in the discipline relate to empirical evidence? How do pragmatic features of theories such as simplicity, ease of computation, and the like, play a role in the rational appraisal of a theory? How do presuppositions and traditions of research work to structure the forward development of the theories and hypotheses of the discipline? Further, philosophers are well equipped to consider topics having to do with the concepts and theories that economists employ—for example, rationality, Nash equilibrium, perfect competition, transaction costs, or asymmetric information. Philosophers can offer helpful analysis of the strengths and weaknesses of such concepts and theories—thereby helping practicing economists to further refine the theoretical foundations of their discipline. In this role the philosopher serves as a conceptual clarifier for the discipline, working in partnership with the practitioners to bring about more successful economic theories and explanations.
In this aspect philosophers can serve as intelligent critics of the coherence and empirical and theoretical credibility of the theories and approaches that economists put forward. In order to accomplish this goal, the philosopher of economics has a responsibility that is parallel to that of the philosopher of biology or philosopher of physics: he or she must attain a professional and rigorous understanding of the discipline as it currently exists. The most valuable work in the philosophy of any science proceeds from the basis of significant expertise on the part of the philosopher about the “best practice,” contemporary debates, and future challenges of the discipline.
So far we have described the position of the philosopher as the “underlaborer” of the economist. But in fact, the line between criticism and theory formation is not a sharp one. Economists such as Amartya Sen and philosophers such as Daniel Hausman have demonstrated that there is a very constructive crossing of the frontier that is possible between philosophy and economics; and that philosophical expertise can result in significant substantive progress with regard to important theoretical or empirical problems within the discipline of economics. The cumulative contents of the journal Economics and Philosophy provide clear evidence of the productive engagements that are possible when philosophy meets economics.
One issue stands out for special philosophical attention -- the role of values in economics. Economists often portray their science as “value-free”—as a technical analysis of the demands of rationality in the allocation of resources rather than a specific set of value or policy commitments. On this interpretation, the economist wishes to be understood as analogous to the civil engineer rather than the transportation policy maker: he or she can tell us how to build a stable bridge, but not where, when, or why to do so. It is for citizens and policy makers to make the judgments about the public good that are needed in order to decide whether a given road or bridge is socially desirable; it is for the technical specialist to provide design and estimate of costs. But philosophers doubt that economics is in fact value-free, or that it should aspire to being so. Here is an earlier post that considers recent thinking about this issue.