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A Reassessment of Aristotle’s Economic Thought

Author(s):Crespo, Ricardo F.
Reviewer(s):Halteman, James

Published by EH.Net (July 2014)

Ricardo F. Crespo, A Reassessment of Aristotle’s Economic Thought. New York: Routledge, 2014. xix + 145 pp.  $120 (hardback), ISBN: 978-0-415-82057-8.

Reviewed for EH.Net by James Halteman, Business and Economics Department, Wheaton College.

For several hundred years rational choice maximizing models have dominated economic methodology. However, there is increasing interest in a richer more comprehensive view of economic behavior that will include interdisciplinary perspectives with ethical considerations related to purpose of life.  In A Reassessment of Aristotle’s Economic Thought, Ricardo Crespo (Professor of Philosophy of Economics at IAE Business School, Universidad Austral, Argentina) suggests that Aristotle’s approach to economic concerns of his day can change and enrich modern economic thought and practice.

Part I considers the ethical and social interactions that form a holistic understanding of what economics might be.  A highlight of this part is the way Aristotle’s thought is formed in relation to the time and place he lived. This hermeneutical perspective, often overlooked in other sources, adds context and helps clarify how Aristotelian thought might be adapted today.  The true nature of everything lies in the purpose for which it was created and the social setting of human existence makes the group (polis) a key reference point for human activity.  This leads to a critique of unlimited desires, exchange without reciprocity considerations, money as a store of value, and any unnatural use of things. The corrective of these problems is the cultivation of virtues like temperance and justice. Crespo elaborates all these issues by digging deep into primary and secondary sources exploring the nuances of language and translation to explain how Aristotle viewed economics as an inescapable part of life subject to human choice but conditioned by moral and social norms.

An entire chapter is given to economics as a science. For Aristotle, economics is a practical science dealing with specific situations with action-oriented goals. This implies significant input from all the humanities and liberal use of case studies.  Crespo sums up this topic by claiming that “a consequence of Aristotle’s conception of economic science is that as long as the economy functions in a free and virtuous society, economics will be more precise in its predictions. Liberty is a necessary precondition for virtue and virtue is ultimately necessary for the survival of liberty” (p. 49). One need not abandon predictability or liberty to have a values-oriented economics.

From this Aristotelian framework Crespo explains how true happiness (eudaimonia) and ethical theory are related. Some debate exists as to whether Aristotle considered happiness to be an ultimate end or both an ultimate end and a second-order end, but Aristotle is clear that people can only be happy if they live a virtuous life. Virtue is a habit that combines intellectual and moral considerations to produce practical wisdom by which one can live well achieving their natural end or purpose in life.

The final chapter in Part I considers how economics and politics are prioritized. Contemporary economics sees politics as subordinated to economics while Aristotle sees the relationship reversed. The goal of the political sphere is to cultivate the environment in which individuals can thrive. With needs prioritized and laws appropriately structured, citizens will be free to develop the virtues required for true happiness. Crespo suggests nine principles for politics today that might fulfill Aristotle’s design for the political sphere. The list includes guaranteeing basic needs without fostering dependency.  Also mentioned are the promotion of full employment, healthcare, education, and encouraging relevant supporting intermediate organizations.  While this may seem like familiar rhetoric, contemporary political and economic goals are usually not framed as guides to the moral life from which true happiness is achieved.

Part II begins with an extended, though a bit redundant, discussion of what true happiness involves.  Achieving one’s potential regardless of the circumstances is quite different than having the emotional response of happiness from the acquisition of things or fame.  Recent literature on the psychology of happiness may approximate Aristotle’s view except that social relationships may be less prominent or they may be seen only as instrumental tools for personal benefit. Next, the capabilities concept of Amartya Sen and Martha Nussbaum is compared with Aristotle’s view of potentiality.  For Aristotle, one’s potential is achieved by practical reasoning that uncovers the ingredients of true happiness helping a person reach the capabilities discussed by Sen and Nussbaum.

After extensive philosophical discussion of the incommensurability and practical comparability of things and ideas, the claim is made that economics has ignored this topic because economists tend to see their subject as constant and homogeneous.  However, Crespo concludes that with the capabilities approach in economics there is hope that Aristotelian practical reasoning and a capabilities-based economics can complement each other to deal more effectively with incommensurability and comparability issues.

The final chapter considers causation and its relevance to Aristotelian economic understanding. To truly know something is to understand its cause, but due to indeterminism, science can only arrive at generalizations in a local context.  Therefore, economic knowing must be a blend of empirical data and subjective values with the goal being practical action.

This book packs more of Aristotle’s philosophy relating to social science than most other books its size. If fully digested it will provide an excellent framework for dialogue on current economic methodology. However, it is wise to take the author’s advice and read the introduction and conclusions of each chapter and the concluding chapter before delving into the details within the chapters. To help explain complex concepts, examples like “Why did the student study?” and John Lennon’s comment about the Beatles and Jesus are effectively used to illustrate important concepts, but more examples along the way might help readers with little philosophical background. Documentation is extensive with a bibliography covering twelve pages. Perhaps the most important takeaway from the book is the persistent theme that economics is a social science and it should not wall itself off from ethical and interdisciplinary considerations. Anyone seeking to transform rational choice methods or better understand those involved in that project would do well to read this book. Those who wish to maintain the value-free instrumentalist approach in economic methodology will also benefit from this book when they contribute to the normative side of the methodological divide.  The wisdom of Aristotelian philosophy is still relevant.

James Halteman is Emeritus Professor of Business and Economics at Wheaton College.  His most recent book, coauthored with Edd Noell, is Reckoning with Markets: Moral Reflection in Economics.

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Subject(s):History of Economic Thought; Methodology
Geographic Area(s):General, International, or Comparative
Time Period(s):Ancient