Truth in Economic Subjectivism

Munich Personal RePEc Archive Truth in Economic Subjectivism Zuniga, Gloria L. October 1998 Online at https://mpra.ub.uni-muenchen.de/5568/ MPRA Paper No. 5568, posted 04 Nov 2007 UTC Journal of Markets & Morality 1, no. 2(October 1998), 158-168 Markets & Morality 159 Copyright © 1998 Center for Economic Personalism The first is an epistemic sense of ‘subjective’ that provides an acco unt of choice given the constraint of limited resources despite unlimited wants. The second is an ontological sense of subjective that describes the economic character of things as dependent on human acts of valuing. Truth in Economic Subjectivism Carl Menger advanced this account of the subjective theory of value in his Principles of Economics, first published in 1871. The significance of his co ntributio n lies in the transcatego rical description of social phenomena. Gloria L. Zúñiga While most accounts reduce value either to the mind or to some intrinsic Doctoral Candidate in Philosophy pro perty o f things, Menger demo nstrated that all so cial phenomena was State University of New York at Buffalo composed of varying combinations of beliefs and entities, judgments and facts, mind and matter. In order to achieve such a transcatego rial acco unt of value, Menger first provided an epistemic account of economic valua- tion by grounding his analysis on the experience of the valuing individual. Second, he provided a description of exact laws of economic phenomena, The Problem of Subjectivism thus advancing an ontology of economic objects. The achievement of such The notion of ‘subjectivism’ has a significant place in the body of eco- a theoretical account of value could not have been reached without the nomic theory, most notably in the theory of subjective value.1 There is, reco gnitio n that, barring exact laws, there co uld not be any science of eco- however, one concern that some philosophers have raised about truth in nomics, and without any sort of empirical realism, economics could not normative judgments that puts economic subjectivism seriously into ques- rightfully be called a social science. What will be useful, then, in the task of tion.2 This concern can be articulated as the following questio n: Is there tackling the question of truth in economic valuatio n is to explore how truth regarding economic value judgments? The answer to this questio n is Menger employs the notion of subjectivism both epistemically and pertinent not only for an improved understanding of economic value ontologically.3 theo ry but to such philo so phical investigatio ns as realism, epistemology, ontology, and ethics. Nonetheless, the answer is no t readily available in Epistemic Sense of Subjective the body of economic theory. The ensuing discussion will explore the is- When considering the epistemic sense of subjective economic value, sue of whether the truth of economic judgments can be settled objectively we must keep in mind two features of the economic species o f value. First, and, if so, how truth is made known. the economic judgments that individuals make indicate the extent to which they believe an object may satisfy their needs. According to Menger, an What Is Subjective Economic Value? individual makes an economic judgment on the basis of the causal con- Subjectivism is commonly predicated on normative expressio ns o f nection he perceives between a thing and the satisfaction of a mediate or beliefs, attitudes, and emotions by a judging subject. In economics, how- immediate end. Accordingly, an individual’s judgment directed at a thing ever, the meaning of subjectivism is more complex. When economists has an interested nature since his evaluatio n o f the thing involves an ex- speak of the value of economic goods as subjective, they not only refer to pectation of what the thing will fulfill for him. a judgment by an economic agent but also to the status of the object to Second, the judgment is called ‘economic’ because it invo lves an evalu- which the judgment is directed. There are, then, two senses of subjective: ation directed at making a choice among known alternatives. Every cho ice 1. The evaluation of an object perceived by an individual as having a invo lves impo rtant elements o f scarcity, such as limited time, income, pro- causal connection with the satisfaction of an end. ductive resources, physical and intellectual limitatio ns, levels o f satiety, 2. The subject-dependent status of objects in their role as economic and so on. Coping with scarcity is a fundamental feature of the human go o ds. condition that involves the allocation of means to meet ends. Menger was 158158158 160 Truth in Economic Subjectivism Markets & Morality 161 the first to ground the analysis of economic value on the notion of scar- people in the same way that subjective values help the individual to coor- city.4 If there is no perceived scarcity, the judgment is not an economic dinate the parts of his plan.”7 judgment.5 Yet, suppose that there is counterfeit money in an economy. Economic Since an economic judgment of value is subjective, its truth o r falsity agents might be fooled by the token objects they believe to be genuine cannot be settled by an objective appeal to facts o bserved by a third party. members of the type-category “money.” One way to analyze this problem This does not imply, however, that we may never be wrong in our eco- is to attribute the cause to subjectivism. In o ther words, the criticism would nomic judgments. Menger acknowledged error as the mo st fundamental be that any token object is arbitrarily designated to be a member of a type- epistemological problem.6 If we can err, there must be judgments that are category such as “money” by simply believing it to be so. This criticism, false. Parenthetically, it is also wo rth mentio ning that the discovery o f er- however, is mistaken since it misconstrues the notion of subjectivism in ro r in o ur judgments suggests that the fulfillment of expectations corre- economic judgments. A better way to view this problem is to consider that sponds to putative features of the object toward which our judgment is an error in a judgment directed at an object does not modify the object directed. It may be the case, then, that the truth of an economic judgment such that the object becomes what we believe it to be. As we shall see in can be settled objectively by facts about the object that co rrespo nd to the the ensuing discussion of the ontological sense of subjective economic individual’s expectations. Clearly, no one but the acting subject could make value, universal catego ries such as “mo ney” are objectively describable by this determination. exact laws such that a counterfeit dollar bill is not a genuine instance of The problem with erroneous judgments, to return to the issue of error, the catego ry “mo ney.” What is impo rtant to this epistemic analysis is that is that we o nly discover o ur mistakes ex post, sometimes immediately after instances of error in our knowledge of objects do not alter the object by and sometimes long after a choice has been made. However, we must also shaping it according to our mistaken beliefs any mo re than a false to ken co nsider the case that the agent remains fo rever fo oled by an apparent o f a type-catego ry alters the catego ry itself. We have thus come to the thresh- fulfillment of his expectations. Suppose, for example, that Oedipus dies old of the second sense of subjective in Menger’s theoretical account of before finding out that Jocasta, the woman he loved and married, was his economic value. mother. In this case, Oedipus never learns of his error, so he dies convinced that his expectations of love have been fulfilled. Objectively speaking, how- The Ontological Sense of Subjective ever, there are facts in the wo rld, such as the identity o f Jocasta as his mo ther, Menger developed a complex ontology of social objects that have a that are no t in agreement with his expectatio ns. unique nature. According to Menger, economic objects are not merely de- The question that immediately comes to mind is this: If agents are no t scribable by their physical properties since, for example, money is not re- likely to find out whether their economic judgments are true, at least in ducible to the paper, metal, plastic, or electronic components that comprise time to make corrections, can any kind of individual economic planning the various kinds of currency we acknowledge as money.8 In fact, there is ever be po ssible? This questio n addresses a central problem in economics no single physical property that is common to all the members of the regarding the dispersed nature of knowledge. The problem is not that class of objects we call money. But what makes a do llar bill money or, knowledge is dispersed but, rather, that there might be systemic o bstacles more generally, what makes any one thing an economic good, is a combi- to acquiring knowledge of the facts relevant to the economic activity of nation of two things. First, the views we hold about things as economic individuals. Such systemic o bstacles are always the result o f the co nstraints objects.9 Seco nd, the exact laws governing the catego ries o f economic ob- imposed by economic systems that do not allow for unfettered exchange. jects. Each of these requires some careful elaboration.

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