The confusion of utilitarian and “great person” ideas in economics,

or why contradictory axioms are a weak foundation for deduction.

Many economists believe their social science eschews philosophy, and resembles a hard science like chemistry or physics.

It was an economist who pointed out that when people believe they’re not following a philosophy, it usually means they’re in thrall to a particularly outdated one.

Economics routinely uses utilitarian concepts. The distribution of goods, finance, materials, and ideas is managed by an “invisible hand”, or the conscious and unconscious decisions by all who participate in the “market.” Firms and people save, spend, lend, borrow, and work, choosing levels and efforts commensurate with their desires and goals. It some people seem bedazzled by snake oil, it’s because it serves their physic needs. Production and consumption, credit and interest, sum up these goals and desires.

It’s routinely assumed that whatever this total economic picture sums to, it’s the best the market can do at the time. This is the utilitarian ethos. Economists are not fond of believing that people should aim to do what’s best for the most people, the utilitarian creed. Instead they believe the market does this for them. Call it selfish utilitarianism. If everyone does what’s best for themselves, it turns out this is what’s best for all.

This is an ideology, rather than a philosophy. But it leans heavily on a version of utilitarian philosophy. At the same time, economists believe that economic development, which they hope to explain usefully, requires free, assertive, creative, dynamic individuals called entrepreneurs. It’s for this reason that economists often dislike taxation, for it weighs down the so-called prime movers of the economy.

Henry Ford brought forth modern mass produced automobiles. To economists, there would not be a mass market car without an entrepreneur like Ford. But was Ford so unique? Had he not existed, would another have taken his place? And had that person also not existed, how many more were waiting in the wings? We don’t know, but ideas often spread as if in the air. Entrepreneurs may have an edge, an insight, that gives them a head start. But by definition that means others will also run the same race.

It’s appealing to imagine that “great people” determine economic fates. But this is just an assumption. Historians haven’t found the idea particularly parsimonious, and they’re they ones who study it.

The trouble for economics is that the “great people” concept contradicts utilitarianism. Entrepreneurs almost never aim to satisfy the greatest number of people with the most of anything. Even a particularly utilitarian entrepreneurial effort, Google, seized an opening to exploit. They applied a standard from academia, the citation index, to web pages. Instead of other scholars citations, they calculated other web pages that cited one. With a lot of information migrating online, Google’s founders claimed they would catalog all the world’s data. This was a convenient untruth. They became gatekeepers to a lot of the world’s information, just as universities use citations to determine which academics get jobs.

Most new technology is developed for a market niche, and only expands when kinks are worked out and costs drop. A business sector is usually dominated by companies that serve a large audience. They are customer focused, managing output to meet existing expectations. New technology that isn’t immediately serviceable is often dismissed, because it’s unwanted by customers. New technology usually needs a fringe customer base, who aren’t on a major company’s radar.

This isn’t utilitarian. The invisible hand’s deployment of financing, of expertise, is supposed to serve the most people. That’s what the big company does. Why should money and talent be siphoned off for fringe efforts that new technology serves? Because, of course, the economist believes entrepreneurs will build the future. It’s worth the risk.

No one involved in entrepreneurial efforts believes there’s anything utilitarian about them. They routinely claim to upend the existing order.

Economics uses two hypothesis, utilitarianism and “great person” history, to base a lot of its other hypothesis on, as well as policy prescriptions. But these two guiding lights are mutually inconsistent. “Who cares,” many economists would respond.

Who cares? Science, whether social or natural, advances by making explicit one’s assumptions as hypothesis, and testing them. Contradictory hypothesis can’t begin to be a basis for testing, unless one’s goal is to select among them. Economists use their contradictory assumptions as initial axioms, as first order beliefs to deduce other ideas from. On such a weak foundation, there’s little chance that really meaningful deductions will be found.