Theoretical and Practical Reason in Economics. Capacities and Capabilities

Abstract

The aim of this book is to argue in favor of the usefulness of restoring the exercise of theoretical and practical reason in economics. The book presents some of Nancy Cartwright and Amartya Sen’s ideas as instances of this restoration. It sees Aristotle as an important influence of both Cartwright and Sen’s thought, and looks at how we can use their ideas and his along with his to develop an understanding of practical reason that is valuable for solving concrete problems in science and society. Cartwright speaks about “capacities” as real causes of events. When causes are combined in a stable way they produce patterns of behavior in nature that we can explain. She proposes calling this arrangement of stable causes a “nomological machine”. Sen speaks about “capabilities”, as freedoms or possibilities of the human persons. Both Cartwright and Sen relate the terms capacities and capabilities to closely related Aristotelian concepts. Thus, this relation between capacities and capabilities suggests that we can combine these concepts to achieve certain results of interest to us in life. The introduction of capacities and capabilities implies a revision of the epistemological and anthropological assumptions of current economics. Sen’s capabilities are Cartwright’s capacities in the human realm; human capabilities are the real causes of events in economic life and should be seen as the basis of their explanation. Institutions, moreover, are like “socio-economic machines” that allow us, through the use of practical reasoning, to appraise, deliberate upon and guide our decisions about capabilities (Cartwright’s capacities in the human world). Institutions thus embody practical reason and infuse certain predictability into human affairs. The book presents a case study: an index which contributes to generating a “socio-economic machine”, the United Nations Development Program’s Human Development Index. This is an example of how one can combine Cartwright’s capacities and nomological machines with Sen’s capabilities through the use of practical reason to enrich the working of Economics.