Social Contract and Introspection. A Proposal for an Austrian Welfare Economics

Abstract

considerable part of research in economics deals with issues of a normative character. Economists are supposed to know better than the average lay people, for example, when the central bank ought to expand the quantity of money, how an employer ought to make his hiring decisions, or even which health care services the government ought to provide to the poor. All these problems should presumably be solved so as to make the well-being or welfare of the human beings involved as large as possible. This individualist emphasis is even so strong that economists regularly term "welfare economics" the whole body of their prescriptive inquiries. Economists are conspicuously eager to give their scientific advice and tell how things ought to be done in an endless number of various situations. This might seem at first sight unexpected as normative statements always depend on moral valuations and the scientific status is thus less secure than in positive statements. The enterprise of welfare economics has retained its fascination because the permission to convey one's own recommendations gives the individual practitioner more scope to do something clearly useful and, to concede the brutal fact, to find good jobs in the labor market. The members of the Austrian school of economics are often mentioned as strict adherents of valuefree economic reasoning. For example, Kirzner (1976, p. 75) maintains that "the tradition within Austrian economics has been strongly in support of Wertfreiheitas a cardinal precept of scientific propriety." In so far as the practice of scholarly work is concerned, the striving for valuefree economics seems often little more than fine rhetoric. Austrian economists appear to be much as enthusiastic as the rest of the profession to insert personal opinions in their scientific treatises and to blur the distinction between positive and normative statements. Austrian economists are particularly known for their assured belief in the superiority of the market order in solving social problems. The praise of free markets and the antago- nism toward government action is in fact so pronounced that in the eyes of some observers Austrian economics is, rightly or wrongly, mere capitalist apologetics worthy of little scien- tific attention. The Austrian theorist with perhaps the most unqualified views in this regard is Ludwig von Mises, who may argue inside the covers of one and the same book that the scientific character of an economic inquiry "precludes all standards and judgments of value" and that such inquiry proves "the market economy is the only feasible system of social cooperation" (1933, pp. 36, 196). Hutchison (1981, p. 221) avails himself in full of the tempting opportunity and, prior to citing a similar pair of phrases from the book, says that "there would seem to be a considerable contrast, not to say contradiction, between the following two statements of Mises".