Handbook of Economics and Ethics
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Handbook of Economics and Ethics

Edited by Jan Peil and Irene van Staveren

The Handbook of Economics and Ethics portrays an understanding of economic methodology in which facts and values, though distinct, are closely interconnected in a variety of ways. From theory building to data collection, and from modelling to policy evaluation, this encyclopaedic Handbook is at the intersection of economics and ethics.
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Chapter 49: Positive versus Normative Economics

Eric van de Laar and Jan Peil


Eric van de Laar and Jan Peil Introduction Since its beginnings economics has been criticized for intermingling science with ethicopolitical discourses. Substitution of the worldview of modern science for the moral philosophical perspective made obsolete the old unifying approach to understanding economic life. This change in perspective raised questions about how to draw a demarcation line between science – that is, the search for positive knowledge of the world out there – and non-science – that is, discourses about politics and opinions, values and beliefs. How economics accommodated the criticism in the nineteenth century is illustrated by John Stuart Mill’s reinterpretation of Adam Smith, after Ricardo’s twist towards an abstract-deductive approach. Smith discussed problems of production and distribution of wealth in a unifying framework of moral philosophy, while Ricardo understood the economy as governed by fixed, immutable laws. Mill tried to disentangle these parts, referring to the distinction between positive economic analysis – science – and normative judgements. Mill ([1844] 1874) shared Ricardo’s view that science was about universal laws, but he opposed the idea that both production and distribution of wealth were determined by rigid laws. Mill did conceive the production of wealth as law-governed, but he understood the distribution of wealth as governed by rules embedded in customs and institutions. So, in his approach the production of wealth became the domain of positive economic analysis, while discussions about the distribution of wealth were conceived as exchanges of normative judgements, labelled ‘normative economics’.1 Mill saw no problem in economists dealing with both wealth production...

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