From Justice to Efficiency: On a Shift in the Normative Focus of Economics

The main hypothesis of this dissertation is that there has been a shift of focus in the history of economic thought: from normative questions, in particular the issue of justice, to the problem of efficiency; that is, optimisation in the sense of maximisation and minimisation under constraints. This thesis pursues a relativistic approach, since it sees the nature of the economic science and the economic theory itself as culturally and historically embedded. Therefore, this analysis follows on the one hand a historical approach and on the other hand, it constitutes a methodological exploration, scrutinising the nature of economic science. So far, a comprehensive analysis of the shift from justice to efficiency is lacking in economics. Therefore, this dissertation fills a gap in the fields of economic methodology and the history of economic thought. There are two main sections: The first section (chapters 3-4) deals with the concept of efficiency. In this context, chapter 3 discusses the historical development towards a focus on efficiency. Besides identifying this trend in the economic literature, several influences and reasons for it are discussed: especially the imitation of the methods of the natural sciences by economists, and the emergence of modern modes of production, for example in the course of the separation of household and firm. Chapter 4 analyses the concept of efficiency. It juxtaposes the three main aspects of efficiency to the three main functions of an economic system, namely: technical efficiency vs. ‘how’ to produce, distributive efficiency vs. ‘for whom’ to produce, and the efficiency of the output mix vs. ‘what to produce’. Subsequently, I discuss the role of the concept of efficiency in market economies and centrally planned economies. In the section on justice, I begin with the reconstruction of the history of the concept of justice in chapter 5. Then, chapter 6 identifies several reasons for the disappearance of justice from the focus of economists. Again, the changing methodology of economics towards an adaption of methods from the natural sciences is of major significance. This phenomenon is closely connected to an emphasis on the scarcity postulate. One might object that it is the utility functions of individuals that changed over time, rather than the individuals’ tendency towards pursuing an optimum. This counterargument is addressed in chapter 2, in which I justify the relativistic approach underlying my dissertation. As a result, I could identify the assumed shift of focus in the economic literature and put forth a range of reasons for this particular development, especially the imitation of the natural sciences and the stress on the scarcity postulate. I argue that the sole focus on efficiency constitutes an impoverishment of economics. This effect is even intensified by the ‘outsourcing’ of parts of economics into neighbouring disciplines, such as historical sciences, sociology, and political sciences. The ability of economics to make decisive contributions to complex real life problems is thereby impaired. In addition to the increasing use of mathematical, statistical, and econometric methods in economics, I argue for a new emphasis on the interpretive-, historical method, and on philosophical, and ethical approaches to economics.