Economics’ Wisdom Deficit and How to Reduce It

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As is well understood, the values inherent in the dominant neoclassical economic paradigm are self-interest and optimization.  These are the values that guide individuals and policymakers in advanced capitalist economies in their economic decision making.  As a consequence, the economics discipline, arguably, is insufficiently oriented to helping people and organizations make wise choices, choices about what is really and truly in people’s best interests.  In other words, there is strong reason to believe that economics has a wisdom deficit.

This paper draws on great philosophers such as Aristotle to explain what wisdom is and why, although economics is concerned with the normative aspect of decision making, economics has too infrequently been used to help people or their societies make wise decisions.  This paper is also concerned with how a society’s economic decision-making processes can be improved in order that these processes incorporate a much greater dose of wisdom.  One relevant question here is: can we learn with the help of philosophers, psychologists, and organization researchers how to make economic decisions that apply the practical wisdom that Aristotle advocated?

This paper’s overall purpose is first to point the way toward greater decision-making wisdom, and second to propose one method for improving the wisdom of important economic related decision making.  Hopefully, this paper will serve to put the issue of decision-making wisdom higher on the agenda of economists and, as a consequence, lead to wiser decisions in the economic sphere, thereby reducing the wisdom deficit.

Posted for comments on 13 Feb 2019, 4:12 pm.

Comments (2)

  • Geoffrey Harcourt says:

    I think John Tomer’s paper is challenging and interesting and should be in the public domain to create discussion. I do think the author should make clear that it is expected utility that is to be maximised in orthodox economics.

  • Khandakar Elahi says:

    I have some difficulties in understanding the meaning of Professor Tomer’s article posted on the OPD page. The title, “Economics’ Wisdom Deficit and How to Reduce It,” seems to suggest that modern economics has been suffering from ‘wisdom deficit,’ and the purpose of this paper is to recommend measures or ideas that might help ‘reduce’ that ‘deficit.’
    I know that economics is a social science, which creates ‘knowledge’ that concerns causal relations among economic variables. This knowledge refers to the body of theories and laws that are taught in our schools and colleges and used in economic research, which ultimately contributes the policymaking. For example, the law of demand says that under the ordinary situation, an inverse relationship exists between the quantity of a commodity or service demanded and its price. Thus, if the price of the commodity increases, its demand is supposed to decline. This information is a matter-of-fact knowledge that has been deduced from experience. There is no moral judgement attached to this knowledge, meaning knowledge, which some people prefer to call information, cannot be good or bad, right or wrong.
    Now, the words, knowledge and wisdom, although they are intimately connected, do not signify the same ideas or notions. The Cambridge English Dictionary defines wisdom as ‘the ability to use one’s knowledge and experience to make good decisions and judgments.’ Thus, in modern welfare states, the general policy of the government is to keep food prices low, while pushing up narcotic prices by imposing taxes. This policy decision is a matter of wisdom on the part of the public authority, while the theory it uses to formulate this policy is knowledge created by the science of economics.
    The point that emerges from the above paragraphs is that economics, as a science, cannot deal with the issues of wisdom. This is perhaps the reason why economists in general belief that value-judgement is not permissible in economic research.
    There is another difficulty in the title of the paper that demands Professor’s Tomer’s sincere attention. Only humans can make moral judgement. Since economics is a science, how can this body of knowledge make moral judgement?

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