Earlier I argued that self-interest was not the fundamental ordering principle operating in society. This was in response to the argument from many economists that social norms and social groups could be explained as a result of a voluntary contract between self-interested individuals who made a rational calculation that cooperation was in their long-term interest. Rather it was claimed that human beings have always been social animals drawing their identity from their social relations and from their culture. Consequently, neither the self nor society had explanatory priority. As a result, the methodological individualism inherent in the social contract idea could not be sustained. It was also argued that our moral and legal infrastructures were essential to the social and economic system—the economic system being seen as a subsystem of the social system. An evolutionary account was given of the development of that social system. The neglect of the social underpinnings of economic activity by contemporary economists is surprising given the weight of earlier discussion. An account was provided in the previous chapter of the various ways in which that relationship has been described.

Chapter 4 developed a critique of the foundations of economic fundamentalism, examining a number of closely interrelated themes. The chapter has examined, firstly, the historical emergence of the intellectual basis of modernity and economic fundamentalism, recounting the waning of the medieval idea—inherited from Aristotle through Aquinas—that human beings are social and political beings necessarily involved in a network of social relations. This view was replaced by what was termed the natural-law outlook, in which the divine underpinnings of the inherited idea of natural law were gradually secularised. This was a trend associated with the developments of science and a desire to find a scientific and increasingly more natural explanation of the social order. Therefore, appeals to reason and nature—both increasingly divinised—provided a source of meaning and justification as comprehensive as the religion they had replaced. Social-contract theory emerged to provide a Newtonian and individualistic account of the social and political system. Gradually, the concept of contract replaced law and custom as the source of law and social obligations. Locke’s account—with its emphasis on pre-social property rights—was particularly agreeable to the propertied classes. While the various theories recounted did not add up to a coherent whole, they reflected the Enlightenment’s ambition to produce a secular, naturalist and rational justification for our moral allegiances and social arrangements.

Economics is the inheritor of this tradition of scientific discourse. This leads directly to the question of what kind of discourse is economics. Is economics a positive science or is it a moral discourse? Notwithstanding the ambitions of Hobbes and Locke and their successors to found our moral institutions on science, in the past century economists have generally made a distinction between positive and normative economics—a distinction traced to Hume’s distinction between facts and values. Normative economics involved the application of the positive science of economics to policy problems in which the choice of ends was seen as normative, with positive economics addressing the best way of achieving those ends. It has been argued that it is a mistake to think that explanatory theories occupy a privileged epistemological position compared with normative theories. There is no value-free vocabulary. It was concluded, therefore, that the distinction between positive and normative economics could not be sustained, and that economics was a moral discipline.

The question then arises as to what can be said about the status of economics as a science. It is clear that the positivist pretensions of science—in which scientific progress is viewed as the inclusion of more and more phenomena under natural laws of greater and greater generality—have themselves been undermined. While there is not complete agreement among critics of the positivist view of science, there is broad agreement on essential points. The belief that scientific knowledge is an accurate representation of ‘reality’ needs to be abandoned. Accuracy of representation is not achievable. Rather, science is a social practice in which knowledge is constructed socially to produce coherence—a social practice that in the physical sciences has just happened to work so far. Consequently, the empirical sciences cannot claim an essential grasp of reality and thus a privileged status.

This is no minor quibble but a fundamental attack on the whole Enlightenment project. What is involved is a decisive break in our world-view. In particular, the Newtonian mechanistic world-view—which has dominated Western thought since the sixteenth century—has been undermined along with any sense of objective certainty in the physical sciences or the political-cultural sphere. As a consequence, we have to live with a profound sense of historical relativism and the belief that there can be no overarching absolute principle that can reconcile all the relativities of human thought and experience. In particular, the possibility of demonstrating the truth of ethical propositions has been undermined. This critique has also undermined the credibility of much economic theorising, particularly its use—at a high level of abstraction—to support arguments for a minimalist government, arguments that have their origins with Locke.

Within the economics profession there are those who are taking this hermeneutical view of science and economics seriously. Others have sought refuge in moral philosophy as a means of supporting their policy recommendations. As might be expected from the critique of rationalism, moral philosophy is itself in disarray. In any event, it is where economists have been all along. Furthermore, the idea that we already possess the moral vocabulary necessary for determining whether we are doing justice for others is disputed. It is the ability to wield a sophisticated moral vocabulary that counts, along with the awareness that we are creating—rather than discovering—morality.

It is against this background of deep scepticism about the claims of economics to moral neutrality that I turn in the next chapter to critique the content of mainstream economic theorising—or what is known as neoclassical economics.