On the problematic link between fundamental ethics and economic policy recommendations

Abstract

This paper provides a systematic survey of major simplifying assumptions that economists make, and often have to make, in order to obtain a useful theory for policy recommendations in practice. The aim is to consider the whole chain of assumptions with an emphasis on such simplifications that economists sometimes tend to ignore (at worst), or at best often tend not to take very seriously. The paper concludes that the link from fundamental ethics to economic policy recommendations is often very fragile, but that this is neither a convincing argument for economists to ignore normative issues, nor a reason to pretend that policy recommendations can be derived without value judgements. In order to improve the link it is recommended that welfare economists sometimes move beyond reductionist individualism and learn more from other social sciences regarding preference formation, decision behaviour, and the creation of values, institutions and social norms.