Theoretical and practical reason in economics : capacities and capabilities

115 Pages·2013·2.25 MB·English

by  Crespo

Sprin ger Briefs in Phi los o phy
For fur ther vol umes:
http://www.springer.com/series/10082
Ri cardo F. Cre spo
The o ret i cal and Practical
Reason in Eco nom ics
Capac i ties and Capa bil i ties
1 3
Ri cardo F. Cre spo
Depart ment of Eco nom ics
IAE, Uni vers i dad Aus tral
Pilar, Bue nos Aires
Argen tina
ISSN 2211­4548 ISSN 2211­4556 (electronic)
ISBN 978­94­007­5563­5 ISBN 978­94­007­5564­2 (eBook)
DOI 10.1007/978­94­007­5564­2
Springer Dordr echt Hei del berg New York Lon don
Library of Con gress Con trol Num ber: 2012946757
© The Author(s) 2013
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Preface
Eco nom ics and Phi los o phy have been the two acad emic loves of my life. Hav­
ing two loves in this case is not a sign of inf del ity. A phi los o pher is “a lover of
wis dom”. The philo soph i cal per spec tive is the love li est per spec tive of any sub ject
of knowl edge. Thus, far from com pet ing, phi los o phy rein forces love. Through the
philo soph i cal lens I came to love econ om ics more and more. These two loves have
led me to the reflec tions con tained in this book.
Eco nom ics was born as a practical or moral sci ence about the best way of using
what is needed for the sake of the “good life”, i.e., a ful flled life. Over the long
course of twen ty four cen tu ries, eco nom ics lost this practical or moral approach
and the object ive of the good life. It became a techn ique for maxi miz ing resources
in order to attain given subjective ends.
My ultim ate claim in this book is that econ om ics must revert to being a moral
sci ence. It must return to being conc erned with ends and with a cons id er ation
of the means embed ded in these ends. Renounc ing this con cern is not a sign of
mod esty but of a likely uncon scious will to avoid dif f cult prob lems. In effect,
the choice of ends is indeed a dif f cult task. Howe ver, a lack of delibe r a tion about
them sup poses the accep tance of whatever ends with out a rational dis cus sion
about them. Tech ni cal ratio nal ity is indeed a pow er ful tool for the advance ment
of human knowle dge but it is not enough. We only grasp the comp lete pic ture of
any real ity thanks to the most human use of reason, the o ret i cal reason, and we can
only reason about ends through practical reason. Econ om ics deserves the cont ri bu­
tion of the three uses of reason. This is the the sis that I want to defend here. I hope
to be con vinc ing.
This book is an abridged and simp li fed ver sion of the doct oral the sis prepared
at the Facu lty of Econ om ics and Busin ess of the Uni ver sity of Amsterd am, under
the super vi sion of John B. Davis and Marc el Bou mans. My acknowl edge ments go
frst and fore most to them. Their ded i ca tion to this work and their patience with
me went far beyond what I would have expected. I am also deeply thank ful for the
work of the mem bers of the Doc toral Com mit tee, Mary Mor gan, Esther­Mir jam
Sent, and Ewald Engel en. They cons ciously read, comm ented, and asked quest ions
that went to the very heart of the thes is. Then, to my teache rs, coll eagues, and stu­
dents of the Facu lty of Phil oso p hy of Uni versi d ad Naci ona l de Cuyo, Mend oza,
espe cially Car los Ig na cio Mas sin i Cor re as, Jor ge Martí nez Bar re ra, Mig uel
v
vi Preface
Ver stra e te and Héc tor Pad rón, and to my coll eagues at IAE, Uni vers i dad Aus­
tral’s busi ness school. Also to Fern ando Tohmé and Mar ce lo Vil lar, for their con­
tin u ous encour age ment on this pro ject. I received the advice of Mig uel Alfonso
Martí nez Ech e varría about the topic of my two doct oral the ses. I bene fted from
the com ments of an anon y mous ref eree and from the advice and work of Neil
Oliv ier, Diana Nij enhuij zen and the pro duc tion team at Springer, to whom I am
greatly grate ful. I also acknowl edge the fnan cial sup port of the Cons e jo Nac ion al
de In ves ti gac i ones Cient íf cas y Técn i cas (CON I CET). Finally, in all fair ness, my
great est thanks go to all the memb ers of my fam ily.
Men doza
Argen tina, July 2012
Con tents
1 Intro duc tion ................................................ 1
Ref er ences .................................................. 13
2 Nancy Cart wright, Capac i ties and Nomo log i cal Machines:
The Role of The o ret i cal Reason in Sci ence ....................... 15
2.1 Intro duc tion ............................................ 15
2.2 The Cart wright–Aris totle Con nec tion ........................ 20
2.2.1 The Con nec tion ................................... 20
2.2.2 The Ontol ogy of Capac i ties .......................... 22
2.2.3 The Epis te mol ogy of Capac i ties. . . . . . . . . . . . . . . . . . . . . . . 25
2.3 Cart wright’s Skept i cism About Capac i ties in the Social Realm .... 26
2.3.1 Cart wright’s Skep ti cism ............................. 26
2.3.2 Julian Re iss’s Inter pre ta tion and Pro posal ............... 29
2.4 Socio­Eco nomic Machines ................................. 30
2.5 Con clu sion ............................................. 34
Ref er ences .................................................. 35
3 Sen’s Capa bil ity Approach: The Role of Practical Reason
in Social Sci ence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.1 Intro duc ing the Capa bil ity Approach ......................... 41
3.2 Some Prob lems in Sen’s CA ............................... 46
3.2.1 Iden ti f ca tion of Valu able Capa bil i ties: The Debate
Over Lists of Capa bil i ties ............................ 47
3.2.2 Het er o ge ne ity and Incom men su ra bil ity ................. 50
Ref er ences .................................................. 52
4 The Con tri bu tions of Aris totle’s Thought to the
Capa bil ity Approach ......................................... 55
4.1 Aris totle on Lists ........................................ 56
4.1.1 The Sup pos edly Aris to te lian List ...................... 57
4.1.2 The True Aris to te lian List ........................... 59
4.1.3 Back to Sen ....................................... 63
vii
viii Con tents
4.2 “Practical Com pa ra bil ity” as a Way of Over com ing
Incom men su ra bil ity ...................................... 64
4.2.1 The Aris to te lian Con cep tion .......................... 64
4.2.2 Back to Sen ....................................... 68
4.3 Some Con clu sions Regard ing the Aris to te lian
Con tri bu tion to the CA .................................... 70
4.4 Capa bil i ties and Capac i ties ................................ 71
4.5 Con clu sion ............................................. 76
Ref er ences .................................................. 77
5 Socio- Eco nomic Machines and Practical Mode ls
of Devel op ment: The Role of the HDI ........................... 81
5.1 Socio­Eco nomic Machines ................................. 82
5.2 The HDI ............................................... 86
5.3 Some Prob lems with Index Num bers and the HDI .............. 88
5.4 The o ret i cal and Practical Reason in the HDI ................... 92
5.5 Con clu sion: The Role of the HDI for the Con struc tion of a
Nor ma tive Socio­Eco nomic Machine of Human Devel op ment ..... 97
Ref er ences .................................................. 102
6 Con clu sion: The o ret i cal and Practical Reason in Eco nom ics ........ 105
Ref er ence ................................................... 109
Sum mary
The aim of this book is to argue in favor of the use ful ness of restor ing the exer­
cise of the o ret i cal and practical reason in econ om ics. The book presents some
of Nancy Cart wright and A mar tya Sen’s ideas as instances of this rest o ra tion. It
views Aris totle as an impor tant influ ence of both Cartw right and Sen’s thought,
and looks at how we can use their ideas to develop an under stand ing of practical
reason that is valua ble for solv ing con crete prob lems in sci ence and soci ety.
Cart wright speaks of “capaci ties” as real causes of events. When causes are
com bined in a sta ble way they pro duce pat terns of behav ior in nature that we can
explain. She prop oses call ing this arrange ment of sta ble causes a “nomo log i cal
machine”. Sen refers to “capa bil i ties”, as free doms or pos si bil i ties of the human
per sons. Both Cartw right and Sen relate the terms capaci ties and capab il i ties to
closely related Aris to te lian con cepts. Thus, this rela tion between capac i ties and
capa bil i ties sug gests that we can comb ine these con cepts to achieve cer tain results
of intere st to us in life.
The intro duc tion of capac i ties and capa bil i ties implies a revi sion of the epis­
te mo log i cal and anthro po log i cal assump tions of cur rent eco nom ics. The book
main tains that Sen’s capa bil i ties are Cartwright’s capac i ties in the human realm;
human capa bil i ties are the real causes of events in econ omic life and should be
seen as the basis of their expla na tion. Insti tu tions, more over, are like “socio­
eco nomic machines” that allow us, through the use of practical reasoning, to
appraise, delib er ate upon and guide our deci sions about capa bil i ties (Cart wright’s
capac i ties in the human world). Instit u tions thus embody practical reason and
infuse cer tain pre dict abil ity into human affairs.
The book presents a case study: an index which part ially con trib utes to gen­
er at ing a “socio­eco nomic machine”, the United Nations Devel op ment Program’s
Human Devel op ment Index. This will be prop osed as an examp le of how one can
com bine Cartwright’s con cepts of capac i ties and nomo log i cal machines with Sen’s
capa bil i ties through the use of practical reason to enrich the work of Eco nom ics.
ix
Chap ter 1
Intro duc tion
Abstract In this rfi st chap ter the main hypothe s is of the book are pres ented. It
argues that econ omi cs today requires the theo r eti c al and practical uses of reason.
These uses are rfi st denfi ed and char act eri zed. Then, the conc epts of “capaci ty” of
Nancy Cartw right and of “capab ili ty” of Am art ya Sen are introd uced as examp les of
the ses uses respec tively. The book will argue that Sen’s capa bil i ties—oppor tu ni ties
which are the goals of human develo p ment—are like Cart wright’s capac i ties—
sta ble real causes—of the pro cess of human develo p ment.
Key words The o ret i cal reason • Practical reason • Instru men tal reason • Ends 
in eco nom ics • Nancy Cart wright • Capac ity • A mar tya Sen • Capa bil ity
As civi li za tion has evolved to an increas ing degree, and an increas ing num ber of
people in the world have reached a level of develo p ment beyond the sat is fac tion of
mere mate rial basic needs, econ o mists have also begun to refine their con cepts of
pov erty, equal ity and devel op ment, to include more ele ments than per capita GDP. 
Nev er the less, as Sen (1987, p. 3; 1993, p. 47; Sen 1999, p. 14, 2009, p. 253) notes,
the idea of income as an incomp lete and thus inade quate way of judgi ng devel­
op ment is not new, but some thing already stated 2400 years ago by Aris totle in
his Nic o mach ean Eth ics. Still, the usual way of evalu at ing devel op ment has been
through dif fer ent mon e tary indi ca tors of income or expen di ture. Sen’s capa bil ity
approach prop oses a fun da men tal shift in the focus of attent ion from those indic a­
tors to actual opport u ni ties or freed oms. This is prog res sively more acknowle dged
(see Sen 2009, p. 225). This refine ment implies greater comp lex ity in the tools
for mea sur ing of devel op ment, and an increas ing focus on the tech ni cal aspects of
these tools.
At the same time, an extens ive dis cus sion about the rele vance, con struc tion,
mer its and weakn esses of indexes such as the Human Develo p ment Index (HDI)
has taken place. Much of this disc us sion, how ever, goes beyond the issue of tech­
nique; the issues dis cussed con cern pru den tial deci sions such as, for exam ple,
what are the dimen sions that should be taken into account in eval u at ing devel­
op ment and what weights should be assigned to each of these dimen sions. These
deci sions assume a de fi ni tion of con cepts such as devel op ment and a reflec tion
R. F. Cre spo, The o ret i cal and Practical Reason in Eco nom ics, 1
SpringerBriefs in  Philosophy, DOI: 10.1007/978-94-007-5564-2_1, © The Author(s) 2013