Review of Austrian Economics, 12: 5–24 (1999)
1999 Kluwer Academic Publishers
Social Contract and Introspection.
A Proposal for an Austrian Welfare Economics
considerable part of research in economics deals with issues of a normative
character. Economists are supposed to know better than the average lay people,
for example, when the central bank ought to expand the quantity of money,
how an employer ought to make his hiring decisions, or even which health care
services the government ought to provide to the poor. Alltheseproblemsshouldpresumably
be solved so as to make the well-being or welfare of the human beings involved as large
as possible. This individualist emphasis is even so strong that economists regularly term
“welfare economics” the whole body of their prescriptive inquiries.
Economists are conspicuously eager to give their scientiﬁc advice and tell how things
ought to be done in an endless number of various situations. This might seem at ﬁrst sight
unexpected as normative statements always depend on moral valuations and the scientiﬁc
status is thus less secure than in positive statements. The enterprise of welfare economics
has retained its fascination because the permission to convey one’s own recommendations
gives the individual practitioner more scope to do something clearly useful and, to concede
the brutal fact, to ﬁnd good jobs in the labor market.
The members of the Austrian school of economics are often mentioned as strict adherents
of valuefree economic reasoning. For example, Kirzner (1976, p. 75) maintains that “the
tradition withinAustrianeconomics has been strongly in support of Wertfreiheit as a cardinal
precept of scientiﬁc propriety.” In so far as the practice of scholarly work is concerned,
the striving for valuefree economics seems often little more than ﬁne rhetoric. Austrian
economists appear to be much as enthusiastic as the rest of the profession to insert personal
opinionsintheir scientiﬁc treatises and toblur the distinction between positiveand normative
Austrian economists are particularly known for their assured belief in the superiority of
the market order in solving social problems. The praise of free markets and the antago-
nism toward government action is in fact so pronounced that in the eyes of some observers
Austrian economics is, rightly or wrongly, mere capitalist apologetics worthy of little scien-
tiﬁc attention. The Austrian theorist with perhaps the most unqualiﬁed views in this regard
is Ludwig von Mises, who may argue inside the covers of one and the same book that
the scientiﬁc character of an economic inquiry “precludes all standards and judgments of
value” and that such inquiry proves “the market economy is the only feasible system of
social cooperation” (1933, pp. 36, 196). Hutchison (1981, p. 221) avails himself in full
of the tempting opportunity and, prior to citing a similar pair of phrases from the book, says
that “there would seem to be a considerable contrast, not to say contradiction, between the
following two statements of Mises”.
Department ofEconomics, Turku Schoolof Economics and BusinessAdministration,FIN-20500Turku, Finland.