Philosophy of African Economics

Chukwudozie J. Chukwuokolo

Outline

  1. Introduction
  2. Methodological Problems in Economics
  3. Economics, Econometrics and Causation
  4. Social Scientific Naturalism
  5. Strategy and Structure of Economics
  6. Economics and Ethics
  7. Game theory
  8. Welfare
  9. Efficiency
  10. Making Rational Choices
  11. Conclusion
  12. Endnotes

1. Introduction

The gap between Africa and the West in terms of development has attracted the interest of many scholars. Much has been said about the causes of this yawning gap. Though many have ended up presenting Africans as objects of history, yet others have taken a holistic survey of these problems defining what Ali Mazrui has called the African Condition: political, economic, technological and scientific. Recent governments in Africa have attempted reforms in the economic sector as an aid to the turning around of the polity. In the face of this seemingly patriotic economic revivalism, it is time philosophers of economics reflected on the rational choices of the governments in order to offer a prolegomena to any future rational economic choices. Certain questions can be asked about economic development. What is the nature of economic development? And what could be done to enhance it? This work surveys the various forms of economic policies in Africa and the alternatives to them. The primary concern here is on what should guide our choice of options. But what is philosophy of economics?

Although these inquiries overlap in many ways, it is useful to divide philosophy of economics into three areas which include branches of action theory, ethics (or normative social and political philosophy and philosophy of science. Economic theories of rationality, welfare, and social choice defend substantive philosophical theses often informed by relevant philosophical psychology and social and political philosophy. Economics is of particular interest to those interested in epistemology and philosophy of science because of its detailed peculiarities and because it possesses many of the over features of the natural sciences while its objects involve social lphenomena1. Since one of the main thrusts of philosophy of economics is the application of rationality to enhance choice and efficiency, rationality should be at work when a whole country wishes to operate with peak efficiency. Ellul says, “organization and managerial action is technique applied to economic and administrative life”2. This technique is a culmination of rationality. Agbakoba equally extols reason when he observes:

The application of reason (and of course a matching will) to efficiently organize humans and non-humans has resulted in the sort of society we have today in the East and West. These societies are not uniform and the have their problems, but they are better in many ways than most if not all African countries…3

This work seeks to establish that future economic choices in Africa should follow what I call Humano-Utiliarianism which will be explained later.

2. Methodological Problems in Economics

The different branches of economics raise some methodological issues. We can group these issues into six:

Normative and Positivistic Economics
Economics guide policy makers in their professional activities and it seems inescapable that even the most abstract issues in theoretical economics may impinge on some people’s material interests. The extent of this impingement as influenced by normative concerns raises methodological questions about facts and values or what ought to be. Economist makes a clear distinction between facts and values; they believe that most of economics should be regarded as a positive science that assist policy makers choose how to actualize their goals, though it does not bear on the choice of the goals themselves.


Rationality versus Causation
Theoretical microeconomics is both a theory of rational choices that explains and predicts economic outcomes. Since nearly all economic theories that focus on individual choices take for granted that individuals act nationally, issues of the role of reason in economics are centrally important. Hausman puts it thus: Economists are typically concerned with the argument results of individual choices rather than with particular individuals, that their theories in fact, offer both causal explanations for why individuals chose as they do and accounts of the reason for their choices4

Though explanations in terms of reasons have several features that distinguish them from explanations in terms of causes, reasons justify the phenomena they explain. Reason can be analyzed and subjected to criticism. Unlike causes, reasons must be explicit as grounds for what they support. However, some philosophers have doubted whether explanations of human action can be in the form of causal explanations. Ineffective reasons can never explain an agent’s action. Davidson observes rightly that what distinguishes the reason that explain an action from the reasons that fail to explain it are that the former are also causes of the action.

3. Social Scientific Naturalism

These sets of questions arise as to the fundamental distinction between natural and social sciences. Hausman states these questions:

(1) Are there fundamental differences between the structure or concepts of theories and explanations in the natural and social sciences?
(2) Are there fundamental differences in goals? Philosophers and economists have argued that in addition to or instead of the predictive and explanatory goals of the natural sciences, the social sciences should provide us with understanding5.
Philosophers who think in this direction as Weber have argued that the social sciences should provide understanding “from the inside”, to enable us empathize with the reactions of the agents and to find what happens understandable. Of course, this view and the fact that explanations cite reasons rather than just causes seem to introduce an element of subjectivity into the social sciences, which is not found in the natural sciences.

Abstract Ideas and Ceteris Paribus Clauses in Economics
Economics raise questions of the legitimacy of some abstractions and idealizations found in their discourses. Many economics ’schools’ claims tend to be exaggerated and false. Though other solutions may not favour extreme idealizations, but there is hardly anyway to do economics without the willingness to simplify drastically and abstract from many complications. The issue is how much of simplification, idealization, and abstraction is legitimate? Again, since economists attempt to study economic phenomena as constituting a separate domain, influenced by causal factors, the claims of economics are thus true only ceteris paribus (this means that they are only true if there are no interference or disturbing causes). In this regard, certain questions have to be noted: what is the status of the ceteris paribus clauses, and when, if ever, are they legitimate scientifically? Ceteris paribus clauses are closely related to questions of simplification and idealizations. One way to simplify is to assume that the various disturbing causes or interferences are inactive and survey the consequences of causal factors. Of course, these issues and the related questions of how well grounded economics is by the evidence of ceteris paribus have been cardinal in economic methodology.

4. Economics, Econometrics and Causation

Central and cardinal in economic generalization are causal claims Hausman argues in this direction:
Econometricians have also been deeply concerned with the possibilities of determining causal relations from statistical evidence and with the relevance of causal relations to the possibility of consistent estimation of parameter values. Since concern about the consequences of alternative policies are so certain to economics, causal inquiry is unavoidable6.

It is noteworthy that prior to the advent of the anti-metaphysical era, economists were employing casual language literally and explicitly irrespective of the conflict between casual analysis of economic changes and comparative static treatment of equilibrium states. But the anti-metaphysical intellectual atmosphere of the 1930s made the mention of causation by economists suspect, thus making economists tendentiously to dodge causal concepts. Consequently, they stopped to reflect carefully on the casual concepts they continued implicitly to invoke. However, rather than establishing price variation for quantity demanded, economics restricted themselves to the analysis of mathematical function connecting price and quantity demanded. However, this state of affairs has undergone evaluation in the past few years. Kevin Hoover, posited feasible methods for investigating causal questions. He argues that historical inquiry, supported by statistical studies, can substantiate the conclusion that some particular change in money supply or inflation have been exogenous. Causal determination becomes determinable by analyzing the stability of the conditional distributions. Conclusively econometricians have made notable contribution to the revival of philosophical interests in the notion of causation.

5. Strategy and Structure of Economics

The last methodological problem to be examined concerns the awareness and interest in the theoretical structure that unifies and guides researches within research traditions. Kuhn and Lakatos argued that since many theoretical projects in economics are unified systematically, they raise questions of the motives of research and this led many economists to apply the result of these works to make explicit the overall structure of economics. However, the extent of success of this claim is controversial though the comparison of the structure of economicsby the authors’ (Kuhn and Lakatos) scheme has at least served to highlight distinctive feature of economics. Since the success of research approaches in economics is interminable controversial understanding their global structure and strategy may clarify their pitfalls and their importance.

What we have done is to highlight methodological problems that are central to economic, with a view to showing the enormity of considerations that are involved in actually making any policy choices.

6. Economics and Ethics

Most Economists would no doubt insist that positive economics be distinguished from normative economics. This is because they insist that economics is cardinally important to policy because of the facts it provides concerning the consequences of policies. This distinction reflects different approaches on how to fix the economy. Economic outcomes, institutions, and processes may portend better or worse consequences in different ways. Those outcomes that make people better off are highly commendable. There are other outcomes that make for inequality and those that restrict individual freedom more severely. What then does ethics do for economics? Ethics as a normative science helps economics policy makers to add human face to policy formulation. We shall discuss the relevance of ethics to economics under the following headings – game theory, welfare and efficiency.

7. Game Theory

When economic outcomes depend on what several agents do, one agent’s best choice may depend on what other agents choose. Although the principle of rationality governing individual choice is central, arguably there are other principles of rationality governing expectations of the actions of others and their expectations concerning your actions and expectations. It is obvious that game theory is centrally important in economic inquiries concerning ethics and rationality. But what then is game theory and how does it help in making rational economic choices? Eboh’s view in this respect is apt:
Game theory, as an ideology or a way of thinking refers to thetransfer of the concept of game to the way human life is organized and lived out in society. It seems life in society as a game in which everyone strives to be the winner. It likens life and human relationship to any competitive game. It mirrors the interpersonal relationships in society between person; citizens and states; and states and states in the light of moral principles8.

Thus this theory predisposes us to the understanding that at both the personal, state and global levels of relationships, be they political =, religious, social or economic, the various agents’ desire is to corner things to their personal advantages over the other agents.

Hence, at the global level of economic relations between Africa and the West, that depicts the struggle for and against crass exploitation, game theory has to be at the back of our mind. Against this backdrop, it is pertinent to note that any economic choice made by Africa in this period of globalization, has serious consequences that cannot be neglected. Game theory brings to the fore the consequences of individual or state rational choices. It is pertinent at this to note that since certain persons or groups have shown elements of altruism in their endeavour (as heroes and saints) game theory emphasizes the need to play fair in the game of life. There is the need for reciprocal altruism for optimal outcome in any economic choice Africa makes. Howard Kehano captures this vividly:

When cooperation is required to reach a goal, a fair arrangement is the one which divides the fruits of that combined labour according to each reciprocator’s share in the efforts so that the mere arrangement itself, as opposed to the relative amount of productivity of each party, yield no competitive advantage to any party9

Kehane posits ideally how to maintain this reciprocal altruism:
The theory of fair reciprocity requires us to keep fair reciprocal arrangement even when cheating would be more profitable and is not tempered by feelings of affection or friendship10
The import of game theory for us is to beef up Africa’s strategic thinking in making national economic choices. This requires that we cross-check our cards well before we enter into economic relationship with any country.

8. Welfare

One cardinal issue in ethics is determining what things are intrinsically good for human beings. This is so because all plausible ethical views assign a pride of lace to individual welfare or well-being. Utillitarianism (which holds rightness in choice as the maximization of total or average welfares) and non-utilitarians must be concerned with welfare. This is because, on their various considerations, they recognize the virtue harm to individuals. Prevailing economic theories should shift from hedonism to welfarism as the basis for satisfaction of preferences, Hausman captures this vividly:

Unlike hedonism, taking welfare to be the satisfaction of preference specifies how to find out what is good for a person rather than committing itself to any substantive view of a person’s good….equating welfare with satisfaction of preference is not equating welfare with satisfaction. If welfare is the satisfaction of preferences, then a person’s better off if what he or she prefers comes to pass, regardless of whether that occurrence makes the agents feel satisfied11.

Economics attributes a consistent preference system to all agents, and since more specific models take agents to be well-informed and selfish, it is easy for economists to admit that an agent G will prefer A to B if and only if A is factually better for G than B. At least this is an instance of where positive theory is in tandem with normative theory. Furthermore, the equation of welfare with the satisfaction of preferences is attractive to economists, because it prevents questions about the justification of paternalism (to which most economists are averse). At this stage, it is important to note that objections to the view that well-being is the satisfaction of preferences abound. Sometimes, preferences may be based on mistaken beliefs. Sometimes, too, individuals may prefer to sacrifice their own well-being for some purpose they value more highly. Preferences might reflect past manipulation of psychological influences. This makes it very difficult to make interpersonal comparisons of well-being. Additionally, basing policies on the identification of welfare with the satisfaction of preferences entails making one better off by moulding one’s wants rather than providing one with goods and services. This is more so, when one considers the unreasonablility of making social policies on the basis of extravagant preferences. There is hardly any view that is not problematic. Rather than react to these objections and defend the theory of welfare. I feel that the satisfaction of preferences a good empirical proxy whatever it is that welfare really is.

9. Efficiency

Economists have explored the possibility of making welfare evaluation of economic processes, institutions, outcomes, and policies without making interpersonal comparisons. Lets consider two economic outcomes A and B. Suppose that some individuals prefer A to B and that no individual prefers B to A. In this case A is pareto superior B or B is a pareto improvement over A, one can conclude without making interpersonal comparisons that individuals’ preferences are better satisfied in A than B. When there is no state of affairs that is pareto superior to A, it is said that A is pareto optional preferences rather than reducing the inputs needed to produce a unit of output. If economics state or choices are not pareto efficient or optional, society misses the opportunity to costlessly satisfy some individuals’ preferences better.

Though there are objections to this view, especially as economic policies always have both winners and losers but our contention is that the winners should outweigh the losers in any given circumstance. Economists have observed some usefulness in this theory. Two theorems concerning the properties of perfectly competitive equilibria were propounded: that perfectly competitive equilibrium are pareto optimal and that any pareto optimal allocation can be achieved as a perfect competitive equilibrium so far one has the right distribution of endowments amongst economic agents. Hausman noted wisely that:

These theorems go some way towards explaining why mainstream economists, whether they support laissez-faire policies or government intervention to remedy market imperfections, think of perfectly competitive equilibria as ideals. But the significance of the theorems is debatable, since actual markets differ significantly from perfectly competitive market….12

The other relevance of pareto efficiency tends towards cost-benefit analysis which is a veritable tool for economic analysis. Cost-benefit analysis posits that, among eligible policies, one should ceteris paribus, chose the one with the largest net benefit. However, critics have noted rightly the pitfalls of cost benefit analysis. Firstly, if A is a potential pareto improvement over B, the fact that A is a potential pareto improvement over B does not imply that there is a larger economic utility in A than in B and vice versa. Again, ones attitude to the policy, is a consequence of the willingness to pay for some policies and the amount one will need to pay kin compensation for opposition against such policies. Nonetheless, any economic policy that takes cost-benefit analysis into account will enhance rational economic choices for any society. Let’s now turn to how we can make rational economic choices.

10. Making Rational Choices

Since economic explanation and prediction of phenomena are results of individual choices, which are explainable in terms of reasons, agents must, be seen, to a certain extent, as rational. Rationality enhances evaluation and just as the rationality of individual choices can be assessed, so also is the rationality of social choices. This results in examining social rationality and how it ought to be related to the preferences and judgments of individuals. Since intricate questions concerning rationality strategically exist kin which outcomes depend on the choices of multiple individuals, rationality is central in making serious choices in the society. But what is rationality? Agbakoba, following Walter Brugger, noted rightly that “Methodical utilization obviously implies reason, rigorous application of reason…the totality of methods rationally arrived at and having absolute efficiency (for a given state of development in every field of human activity”13. Rationality must possess certain properties, namely, transitivity, objectivity, and austerity.

Recently, African societies have increased their craze for cultural , ideological, political, economic, and social optimization. Thus, in some cases, has led to assimilation into western civilization. This has divided scholars into two major groups: modernists and Marxists. The modernists are liberal thinkers who insist that the African model of economic development should be amenable to western styles. They argue that “the development of capitalism in Europe, given its peculiar global reach will hasten the development of pre-capitalist societies by drawing them into the capitalist orbit”14 Countries which have accepted this view have allowed the Bretton Woods institutions to model their economic policies. The Maexists/neo-marxists derive their theory from Karl Marx’s view on social change and the laws governing kit. Marx took a linear conception of the evolution of a state as heading towards an end-state.

Man should employ himself physically, mentally and creatively in the labour process to meet his various needs. But the history of man is replete with exploitation by those in power. This has been the source of class struggle for supremacy between the working class and the powers that be. According to this theory, capitalist nations struggle to draw all nations into their orbits without the development of the indigenous productive forces as they purport. Neo-marxists, such as Rodney, Gunder Frank, Chinweizu, etc, advocates an outright boycott of any relationship with this band of exploiters, who under-develop and stultify development in emergent developing countries. The question is should we boycott these people or follow their pace?

In order to effectively answer this question, we have to explore the issue of why Africa has remained backward. Jared Diamond and Bert Hoselitz have in separate studies argued that environmental factors have contributed to the differences in world history. Hoselitz, for instance, posits that there are environmental circumstances which determine the degree of development. These “environmental conditions must be sought chief in non economic aspects of the society… in the institutional arrangements in the legal, educational, familial, or motivational orders”15.
However, Agbakoba did a seminal work on the reasons for African backwardness. He traced this to the particular and subjective nature of his basic and secondary ideologies. Like Afigbo, he refused to accept that all the blames for our unimpressive development rate should be placed on colonialism. Afigbo states it thus:

Why is it that almost major situation so far known in our own history appears to have placed the black man, his historians, sociologists and other cultural interpreters to invest him with responsibility for what happens to and around him. The central peg in which many scholars … have hung the black man’s history is …, “a race under perpetual siege”… it means he is “effect” rather than cause, that he is an object on which things act rather than a subject that acts on things.16

Agbakoba presented the problem most lucidly when he posited that it was the African materialist ideology associated with a poor psychology that gave way to amore superior materialist ideology when we came in contact with the whites. He states the attendant problems:

Water Rodney, ….Chinweizu ….. have tried to account for the black man’s state by pointing to the external influence and factors such as the evil maltreatment of the white man, the unequal and exploitative trade relations with the west etc but the first question to ask it: what is the quality and strength of the Blackman’s reaction to the white man’s visit? This is what will determine our assessment of ourselves, our internal state. Why do blacks engage in a trade that doesn’t favour them? … is it that he cannot or did not organize his society… to develop his own resources and to drive a hard bargain with the west? (No one will certainly come to trade with a person and first teach such a person how to drive a hard bargain)17

Societies, like individuals, make rational and irrational choices. Though it is not very clear what principles of rationality should govern the choices and evolutions of society, transitivity and humano-utilitarianism appear to me as important conditions, Humano-utilitarianism is the pragmatic humanization of our economic choices in rational life by making them reflect the principles of utilitarianism. In effect, human face should be given to economic policies. The point is: we have to explore the consequences of the principles of rationality coupled with explicitly ethical constraints in entering any economic relationship. We should bear in mind the consequences of game theory as enunciated earlier and organize our society economically in line with those principles discussed earlier. We should consequently, internalize the values of universality, objectivity, rationality, austerity and hard work in order to insulate ourselves in any future engagement with the west or no economic matters, If we accept Agbakoba’s typology as I observed earlier the question is whence Africa? Again, Agbakoba’s view is seminal:

The simple answer is that we need to have appropriate basic and secondary ideology. ART/T is obviously inadequate and we need to fully internalize the substitute ideology as quickly as possible. We have the option of developing a basic ideology ourselves or employ a received one. I see no trouble in our fully internalizing a received one… This is not however to say that we must throw away all our traditions and customs, it is rather to say that we should have a focus in adapting tradition to a newideology.18

I quite agree with Agbakoba that there should be no problems in entering into any relationship with the West, but such a relationship should take into cognizance all the principles of rational choices noted earlier.

11. Conclusion

We have noted the interface between economics and philosophy in the areas of methodology, rationality, ethics and normative socio-political philosophy. We have equally seen how some economic principles can aid the pragmatic search for viable economic choices in Africa. We insist therefore that a reliable philosophy of economics for Africa should be one that is rationally chosen after considering importance of having basic and secondary ideologies that can insulate us against crass exploitation. These ideologies should be a product of revivalism in line with Agbakoba’s typology.

Endnotes

  1. D. M. Hausman, “Philosophy of economics” The Stanford Encyclopaedia of Philosophy: http:/Plato. Stanford. Edo /archives 2006 summer entries/ economics, p. 1.
  2. Jacques Ellul, The Technological Society (New York: Alfred Aknor 1964) p. 11.
  3. J. C. A. Agbakoba, “Towards a Philosophy of Technology and Development” in Africa in J. O. Oguejiofor, African Philosophy and Public Affairs (Enugu, Delta Publications (Nig) Ltd 1998) p. 218.
  4. D. M. Hausman, “Philosophy of economics”, p.6
  5. D. M. Hausman, “Philosophy of economics”, p.7
  6. D. M. Hausman, “Philosophy of economics”, p.7
  7. D. M. Hausman, “Philosophy of economics”,p.20
  8. Ben Okwu Eboh, “Game Theory and Moral Absolute” in J. O. Oguejiofor, African Philosophy and Public Affairs (Enugu: Delta publication Nig. Ltd 1998) p. 303.
  9. Howard Kahame – “Making The World Safe For Reciprocity” in Reason And Responsibility: Readings in Some Basic problems in Philosophy Joel Feinberg ed. (California: Wadsorth Publishing company, 1985) p 499.
  10. Howard Kahame – “Making The World Safe For Reciprocity” p. 500
  11. D. M. Hausman, “Philosophy of economics”, p. 21
  12. D. M. Hausman, “Philosophy of economics”, p. 22
  13. J. C. A. Agbakoba, “Towards a Philosophy of Technology and Development”,p. 218
  14. Karl Marx “Communist Manifesto” in Selected Work (Moscow: Progress Publisher 1976 p. 55-56.
  15. Bert F. Hoselitz, “Economic Growth and Economic Development” in Political Development and Social Change, (New York: John Wiley 1971)
  16. A. F. Afigbo, “History and Responsibility” ( Keynote address delivered at the meeting of American Studies Associated or Nigeria hold at the University of Nigeria Nsukka on 24th February 1993) p. 11.
  17. J. C. A. Agbakoba, “Towards a Philosophy of Technology and Development” p.238
  18. C. A. Agbakoba, “Towards a Philosophy of Technology and Development”p. 234

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