Capstone Paper

Ian Pfeiffer Econ 368

The Economy: A fresh Perspective

Living in a society in which citizens and scholars share the views and beliefs found in Irene Van Staverens The Values of Economics: an Aristotelian Perspective would indeed be quite a sight to see. It can be extremely difficult to imagine especially since the lens we currently use to view the inner workings of the economy is poles apart from the Aristotelian approach weve come to understand in Van Staverens work. There are no doubt many instances where Van Staverens view of the economy runs against the grains of standard economic thought. In keeping with the general theme of Econ 368, the book goes on to observe economics in a very unorthodox fashion. Although it may seem ludicrous at first, especially to those who have been using the traditional framework to view economics for so long, one shouldnt be so quick to judge her slightly abstract views for they provide insight into many areas of economics that have not yet been explored to their fullest potential. Of course one has the right to object to any statements they do not agree with but all I am merely asking is to ponder what it might be like if we were to replace our stereotypical approach to economics with that approach of Irene Van Staveren. In order to do so, it may be worthwhile to point out key differences between the two approaches. While many modern economists are geared towards a utility maximizing mindset, Van Staverens core philosophy revolves around three major value domains: freedom, justice, and care. Traditionally, we see that peoples values and emotions are kept separate from rational thinking while she tends to believe that these same values are what are at the heart of economic analysis. What would happen if policy makers took her approach when deciding how to
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distribute resources to members of upper, middle, and lower classes? If I had to estimate, the impact of this new approach might make politicians take a second look at what it is they are trying to pass for their consciences might not agree with what they are doing or attempting to do. I do not mean to say that every item trying to be passed in a bill would always be present due to pure self-interest or allegiance to a particular party, I am just saying that using her approach might frame a situation in such a way that it would open ones eyes to another possibility that would have been overlooked otherwise. It could create flexibility and opportunity in a situation that would otherwise be strictly focused on finding the point of maximum utility. In Van Staverens opinion, freedom, justice, and care are what really drive economic behavior while being influenced by the process of economic interaction. Having a trifocal to incorporate three different realms of everyday life in my eyes is a very powerful tool, one that may be more useful in certain situations than the single lens used over and over in traditional economics. By using the story of Phineas Gage, we are able to see in her text why it so crucial that we as humans and economists should be aware of the importance of emotion within an economic framework. The rational economic man does not seem to have emotion after an accident that damages his frontal lobe yet is able to engage in rational thought. The traditional implication of this is simple: although one might be emotionless, this does not mean they cannot make rational decisions and continue to succeed in life. However, as Gages emotions cease to exist, so does the rest of his life. Things seem to breakdown; his personal relationships fall apart, he cant find a job to support himself, he moves farther and farther from achieving maximum utility. Viewing this situation, it seems rather clear that economic success has much more to do with emotion and compassion than traditional economic thought likes to acknowledge.

Maybe traditional economic thought is unaware of this crucial link but I believe that if a society were to take Van Staverens view on economics, they might better understand why it is we see some of the market failures occurring today and understand them more fully in human terms. Economics through the traditional lens deals so much with supply and demand graphs yet leaves out everything that allows them to function: the understanding and inner workings of human life. Taking emotion out of the equation yields a significantly different outcome, making economic agents seem more like machines always operating one way and only one way in a given situation. I would like to believe that economic transactions might not always follow a set formula and that depending on ones emotions, maximum utility might still be reached although perhaps not in the same sense of financial success that traditional economic thought employs. If Van Staverens viewpoint were to replace stereotypical approaches to economics, the promotion of society as a whole might very well substitute for a purely self-interest goal. With her approach, true efficiency might be less problematic to attain. I believe it all goes back to the way in which freedom, justice, and care carefully keep each other in check similar to the way our checks and balances system in the government operates. Instead of basing efficiency on maximizing utility (whatever that may be), Van Staverens approach pushes for efficiency with reduced negative externalities. In other words, we might not see multimillionaires getting richer at the expense of rising unemployment and a severe housing market crisis. Through the values of care and justice, decisions that allow unpleasant outcomes for others would simply be refused based upon solid principles. Economic agents would have a clear understanding of the edgeworth box in this sense and decisions that may depreciate the value of social efficiency would be curtailed severely. A succinct quote that portrays this realization of economic actors in Van Staverens text reads, In reality, the economy thrives on actors mutual trust, their

responsible attitudes, their relatedness and loyalty, in short, the social capital that is rooted in their commitment to care about each other. This gives me another reason why using her approach is enticing. Taking a look at the teachings of previous economics classes (every economics class besides econ 368), it was assumed that that the rational consumer would act or engage in economic behavior based solely on the notion of received utility. Similarly, the rational supplier would take a route following a cost minimizing function to eliminate any excess costs within a situation. Van Staverens take on this approach closely follows Aristotles views proposing ethic virtues are expressed in personal relationships appearing within their corresponding domains. These virtues require economic actors to possess emotion, commitment, deliberation, and interaction to make their behavior meaningful, an ideology that cannot be found in any traditionalist approach to economics. With these ethical capabilities being the core elements of an actors rationale, one must note that using this framework to approach economics might contain a significant amount of complexities hindering any quick and easy answers one might be looking for. This might be considered a weakness for Van Staverens model since her method is incommensurable. It makes it very hard to use as a quick heuristic in todays fast-paced lifestyle that wants to find the solution to the problem immediately. Without a doubt her approach analyzes economics with a fine tooth comb but with this comes the problem of timeliness due to its comprehensive nature. In this sense, there is no such thing as a free lunch. It gives a little in order to get a little and society today might not have the patience to use this method at the workplace or elsewhere. When Van Staveren begins to use focus groups as a means to understand why participants think the way they do, her results raise an interesting question about womens roles

in our economy, particularly in the household. While microeconomic bargaining models of traditional economic thought have taught us that a persons position improves with higher bargaining power, one subject of her focus group explains the adverse consequences for women when their economic independence is increased within the household. The woman is named Janet from a village in South Africa named Lesotho and she goes on to explain how a womans position in the household would not improve due to a higher income. She points out that she seeks financial security in lieu of income maximization. More income would cause a lot of dispute according to these women so it must be taken into account that different cultural and gendered contexts play into these economic situations. Van Staverens approach could handle this circumstance in a sense since she allows for these differences to be expressed through her value domain system. Traditional economic thought on the other hand forces the assumption of a profit maximization approach and would never be able to account for all of these extra variables stemming from culture and gender issues. There is something to be said about what is seen as rational by each way of thought. What is rational for one person may not be rational for another, and it would be silly to assume everyone thinks the same and holds the same exact outlook on life. As I have thought more and more about the way I have been taught economics in past classes, I am amazed to realize how narrow the scope of traditional economic thought really is. It leaves out so many other important aspects of life that are crucial to understanding why the economy works the way it does. What would happen if we were to broaden this scope to incorporate Van Staverens view of Aristotelian economic analysis? According to Van Staveren, Much economic policy design is neither rule-bound nor algorithmic but dependent on social, historical and political context and on decision making processes. By using an Aristotelian

approach, we could make use of the value domain system and address each of these areas mentioned, especially the decision making process. We wouldnt be constricted to using just one utility-maximizing approach to problems and instead could work on a case-by-case basis depending on the moral values an individual holds. For policy makers, this could be crucial to furthering specific policy goals depending on what type of values they would like to utilize to produce a worthy end result. This Aristotelian approach is not without its faults but I feel the incommensurability and time consuming nature it operates with are only small prices to pay for the extremely efficient and useful returns it is capable of producing. In any case, taking the time to learn about this alternate outlook on economics can make individuals begin to reframe situations, revealing new solutions that werent present before. Van Staveren as well as economics 368 encourages an approach to economics that is quite outside of the box and this approach seems much more useful to the society in which we live today. With technology advancing at breakneck speeds, we will need more and more individuals who can be innovative in their approach to economics for I predict technology will soon challenge older, traditional economic models. Van Staveren is undoubtedly a pioneer in this emerging field of economics and I expect to see her ideas appear more and more as people come to realize the potential power this approach holds. One thing is for sure, human values undoubtedly shape and guide economic behavior so these same human values should share some of the limelight that neoclassical economic theory has already gotten so much of. This could be quite a breath of fresh air for the field of economics if it ends up gaining the attention it so rightfully deserves.