exacerbated when a significant proportion of the population is caught in a vicious circle of poverty, live in the decayed hearts of major cities, and become prisoners of ghetto pathology, with teenage pregnancy, fatherless households, chronic unemployment, crime and drug use. It may not be possible to solve these problems by making cosmetic changes here and there. It may be necessary to create a caring society – a society where there is justice and brotherhood, and where everyone is willing to make sacrifices for the well-being of others. Is it possible to do this without strengthening the family, the institution that is responsible for the upbringing of children who will become the human input of the market, the society and the state in the future, and thereby constitute the foundation of civilization? Can a civilization prevent its decline once the quality of human beings degenerates, crime and anomie increase, and social solidarity weakens? What this clearly brings into focus is the dire need to create a balance between the material and spiritual pursuits of life by reducing the emphasis on serving self-interest and maximizing wealth and consumption. Schweitzer is absolutely right when he emphasizes that: “If the ethical foundation is lacking, then civilization collapses even when in other directions creative and other intellectual forces of the strongest nature are at work.”49
When welfare economics was first developed in the 1930s, its very name initially kindled hope.50 Prefixing the word ‘welfare’ before economics gave the impression that economics may now explicitly become normative in nature, indicate the kind of well-being that was desired, and recommend policies for actualizing that kind of well-being. However, this hope has proved to be misplaced. Welfare economics could not get rid of the secular trappings of conventional economics. Welfare became defined in terms of the individual’s self-interested preferences with hardly any room for altruism51 or direct interest in the well-being of all. It chose to be as wertfreiheit or free of value judgements as its ‘positive’ counterpart. Consequently, it has become Paretian in outlook and a number of positive economic concepts appear in subtly different guises in both positive and welfare economics.52
A number of economists53 have, therefore, attacked the wertfreiheit approach of welfare economics. Blaug has rightly pointed out that “to speak of positive welfare economics is to revel in paradoxical language”.54 Myrdal, who made the concept of value-impregnated Social Science one of the major themes of his lifetime’s work, asserted that the economist should make value judgements but should declare them boldly at the outset of the analysis: “There is nothing wrong, per se, with value-loaded concepts if they are clearly defined in terms of explicitly stated value premises.”55
What is needed is a welfare economics that defines human well-being not in the value neutral Pareto optimal sense but rather in a way that is consistent with humanitarian goals and which also shows how such well-being can be realized within the constraint of scarce resources, without creating macroeconomic and ecological imbalances. It may not be able to accomplish this task if it insists on maintaining its anathema to value judgements and the positive role of government even when both of these are found to be indispensable complements to the efficient and equitable operation of the market system. It may also have to relax its insistence on taking into account only economic variables even though non-economic and historical variables may be of equal importance.
If economics is unable to gear itself to the task of contributing to the realization of humanitarian goals, it faces the danger of becoming marginalized and atrophied. This danger has been perceived by economists during the entire history of conventional economics and articulated by people like Sismondi (1773–1842), Carlyle (1795–1881), Ruskin (1819–1900), Hobson (1858–1940), Tawney (1880–1962), Schumacher (1891–1971), and Boulding (1910–93). They and many other past and present economists have questioned, and are increasingly questioning the accepted wisdom of neoclassical economics.56 They are stepping out of the ivory tower of their science to explore the territory that lies beyond.
Some economists have even emphasized the need for a new paradigm.57 This is a reflection of the growing realization that reason has its own limitations and the high place given to it by the Enlightenment movement needs to be brought down to a more realistic level, and that positivism and empiricism are not capable of creating any kind of normative knowledge.58 Warnock has, thus, rightly observed that, “to dissent from rationalism as a philosophical doctrine is certainly not to disparage reason; the man who values, and shows that he values reason is not he who merely pitches reason’s claims exceptionally high but, rather, he who attempts, by painstaking reasoning, to determine how high those claims may justifiably be pitched.”59 However, the form that the new paradigm might take is as yet incompletely articulated.60 The new paradigm may, most probably, be less hostile towards religion than was the Enlightenment movement. The editors of Religion in Contemporary Europe admit that they are seeing the beginning of the end of 200 years of hostility towards religion.61
It is also being increasingly recognized that self-interest and competition do not necessarily constitute the main driving forces behind human action. The role of altruism, cooperation, moral values, and a host of social, economic and political institutions in moulding preferences and guiding action in human society are also being emphasized. Need-fulfilment and socio-economic justice are likewise receiving due recognition. The development of different schools which challenge the worldview and method of conventional economics has created a silver lining in its clouds. All these schools are, however, closely related, the difference between them being primarily in their degree of emphasis.
One such School is that of Grant Economics which asserts that altruistic behaviour is not necessarily an aberration from rationality.62 It argues that equating rational behaviour with only self-interested behaviour is unrealistic. According to Hahn: “Economics probably made a mistake when it adopted the nomenclature of ‘rational’ when all it meant is correct calculations and an orderly personality.”63 It is also argued that unrealistic assumptions need not necessarily yield correct theory in spite of Friedman’s assertion to the contrary. It may be more appropriate to state that, if the function of economic theory is to yield reliable predictions about the future course of events, then the assumption of rational behaviour within the framework of both altruism and self-interest may probably yield more meaningful predictions. Hence the ‘Boulding optimum’ has been proposed as an alternative to the Pareto optimum, “bringing within the scope of economic analysis a human flair assumed away in the name of value-free science.”64
A second School of thought is that of the need-based Humanistic Economics designed to “promote human welfare by recognizing and integrating the full range of basic human values.”65 Instead of basing itself on the old psychology of utilitarianism, which emphasized wants and wealth, it looks to humanistic psychology and emphasizes need satisfaction and human development to move towards what Abraham Maslow calls ‘self-realization’ or ‘self-actualization’.66 Consequently, it takes into consideration all human needs, irrespective of whether they are physiological (food, clothing, shelter), psychological (safety, security, love, sense of self-worth), social (belongingness), or moral (truth, justice, meaningfulness).
A third School is that of Social Economics which involves a “reformulation of economic theory in the mould of ethical considerations”.67 Commitment to the imperative of value neutrality, the sacred ideal of the Enlightenment scientists bequeathed by economists, is here considered as both untenable and undesirable – untenable because scientific inquiry is based on assumptions which tacitly involve value judgements; undesirable because scientific inquiry cannot avoid addressing questions of public goals and social priorities in resource allocation. Any discipline committed to value neutrality cannot succeed in evaluating policies and recommendations
