Studies at the Intersection of Philosophy and Economics

 

Rationality, Markets, and Morals: RMM Band 4 (2013)

Most meta-ethical theories fail either for lack of real content or because they fail to make needed distinctions, or to give sufficient account of what a moral theory is about. Positing that values are intuited is useless or worse, since the very problem that gives rise to the need for morals is that people’s values vary, greatly, from one to another, thus leading to conflict, and intuition‘ is no basis for interpersonal agreement if we have initial disagreement–as we surely seem to do. Conflicts can, of course, be steamrollered when the philosopher proposes that everybody should do things his way. But the trouble is that people may not (almost certainly will not) have motivation to conform to what the philosopher proposes. Yet motivation is of the essence. A moral theory that everyone is free to recognize with no discernible effects on his behavior is useless. The Social Contract‘ idea is, very simply, to account for morals by starting with the actual motivations and deliberations of individuals, then considering the effect of placing such individuals in a society of other, especially differing ones. We play our cards right if, in some relevant and useful sense, everyone can expect to do better by embracing moral constraints than not. Then the motivation problem is squarely faced from the start. The idea is that it will transfer to morals by virtue of the relations we can expect to have in society, given our various interests. This essay explores these issues, explaining why there is simply no alternative to the social contract idea.
Political philosophy relies on three alternative types of theory to explain social order. The first, is order anarchy, built on the system of spontaneous Humean conventions. They are equilibria, self-enforcing or enforced by the participants‘ own contingent strategies and involve no central, specialised enforcer. The second type is contractarianism. This paper contends that its name is a misnomer hiding a redundancy. The third type is social contract theory, where there is unanimous commitment to submit to non-unanimous collective choices of certain kinds or reached by certain rules. The paper suggests that social contract theories serve mainly to render acquiescence in political obedience more palatable.
Sen’s critique of the homo economicus conception of choice asserts that agents who displace‘ their goals, and instead choose on the basis of others‘, are not therefore irrational. I first defend Sen against the objection that violations of „self-goal choice“ undermine coherent deliberation. My critique of Sen then introduces the notion of negative goals‘ and shows that the process of adopting others‘ aims remains constrained by those `goals‘ that determine the spectrum of actions that an agent considers permissible. Only on rare occasions are we pushed to violate even these negative goals that play a central role for our identities.
Contrary to communitarian market criticism institutions relying on money and bidding can strengthen faculties of self-governance‘. Securing procedurally egalitarian bidding on the basis of declared monetary evaluations guarantees that all realized changes of a status quo are in an objective‘ (pecuniary) sense equally advantageous for all members of the community. We show how to use this idea in the context of Elinor Ostrom type common(s) projects. Empirical evidence on procedurally fair bidding‘ is presented. The practical scope and limits of procedural egalitarianism need further empirical exploration but money may be the best means to express moral values in communitarian consent‘.
I begin with two simple, similar interactions. In one, maximizing agents will reach a Pareto-optimal equilibrium, in the other, they won’t. The first shows the working of the Invisible Hand; the second, its limitations. Using other simple interactions in which equilibrium and P-optimality are incompatible, I argue that the rational outcome of interaction answers to optimality rather than maximization, and requires agents to cooperate in realizing an agreed outcome, rather than to seek their best reply to their fellows. The terms of cooperation are set by a social contract, which coordinates choices to achieve a Pareto-optimum when the Invisible Hand is absent.
The recent renaissance of work on conventions, informal institutions, and social norms has reminded us that between the state and individual choice is a network of informal social rules that are the foundation of our cooperative social life. However, even those who appreciate the importance of social norms are reluctant to say that they are about real morality. The first part of the essay examines why this is so. The problem, I suggest, is a widely-embraced view according to which moral judgment is an individual decision about a type of truth that is largely independent of social facts. I show that this popular conception undermines effective social norms and moral conventions. The second part of the essay analyzes the conditions under which effective conventions can be made consistent with diverse individual judgments as to what is morally acceptable–and so conventions can be understood to concern what is genuinely moral. The key, I argue, is the idea of a publicly justified morality as modeled by a hypothetical social contract.
The idea of external validity, which is well-known in the social sciences, has recently also been emphasized in experimental economics. It has been argued that external validity is an important criterion in experimental research, which has been neglected by philosophy of science. In connection with this criterion, a methodology has been advanced in which inductive generalization and analogical inference play a central role. The hypotheticodeductive methodology is said to be untenable, or at least insufficient. In this paper, hypothetico-deductivism is defended. The idea of external validity, and the new plea for inductivism, is critically discussed. It is pointed out that the fundamental problems of inductivism are still unsolved. The criterion of external validity is superfluous and misleading. And the problems in experimental research associated with external validity can well be solved on the basis of deductivism.
The article systematically explores the compatibility of Hume’s political philosophy and contractarianism by reconstructing Hume’s criticism of the idea of a social contract. In a nutshell, the dispute concerns the theoretical reconstruction of the establishment and maintenance of normative institutions by individual behavior. At the center of the dispute are questions concerning the philosophical analysis of the normative force of obligatory norms, and the theoretical reconstruction of individual persons‘ reasons–or motives–for following them. The main part of the article is dedicated to the reconstruction of the philosophical motivations behind the different positions. I will contrast contractarian idealism as a theoretical approach for the study of normative phenomena with Hume’s empiricist approach. I will also spell out the metaethical differences between the idea of a hypothetical contract and Hume’s rule-consequentialist reconstruction of the source of social and political obligations. Returning to the question of whether one can be both a contractarian and a Humean, the different implications of the two approaches for the theoretical understanding of normative rule-following will be presented. The conclusion is that one cannot be both a contractarian and a Humean. The article ends with a defense of the foregoing analysis against two objections.

Journal Information

RMM is an interdisciplinary open access journal focusing on issues of rationality, market mechanisms, and the experimental method of reasoning into moral subjects. It provides a forum for dialogue between philosophy, economics, and related disciplines, encouraging critical reflection on the foundations and implications of economic processes.

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