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This chapter argues that the art of phronesis is central to doing the right thing as an economist. Phronesis, or practical wisdom, is what we practice when we deliberate, weigh values, take into account our feelings and those of others, consider the circumstances, and grope for the right thing to do. Central to phronesis is figuring out the goods to strive for and the appropriate means to realize those goods. We argue that the goods can be categorized into personal goods, social goods, societal goods, and transcendental goods. An important choice that any economist faces is which conversation to join, to which part of economics he wishes to contribute. We argue that situating ourselves in a university department, in the search for truth and truth only, is an important moral choice, with consequences for the goods we can realize.

Over time, the fields of economics and ethics have become more distinct with economics focusing on the rationality of actors, the incentives they face, and the outcomes of interacting within an amoral market setting. However, in the real world, economics and ethics are more interconnected. Humans are social and ethical beings regardless of setting. Recent studies have shown that individuals reward trustworthiness, punish dishonesty, and can develop meaningful social bonds within markets. Economists, seeking to better understand the world, should incorporate ethics into their economics. We argue that Adam Smith is an exemplar of pursuing a fuller approach to social science, and utilize his arguments on both economics and ethics to advance a study of ethical markets.

This introductory chapter presents the objectives of this volume and discusses the challenges of producing relevant knowledge. It starts with an exploration of the reasons why Africa has remained neglected in economics, despite its important contributions to the discipline. It then highlights Africa’s enduring intellectual influence on some of the world’s leading economists. It discusses the traditional reasons why that deep positive influence is little known and rarely acknowledged in mainstream economics. It also offers a different explanation of the neglect of Africa as a rich source of economic knowledge, highlighting the fact that economic thinking on Africa has generally mirrored the general evolution of macroeconomics and the dominant frameworks of analysis of the continent’s low-income countries have always been fraught with analytical sins and mimetic choices.

Anabaptists have moved from a position of separatism to a call for faithful interaction with the world even if ambiguities lead to some compromises. Anabaptists can improve the secular order on the margins by joining with non-Christians who share some of their values and by providing in their businesses and consumer practices an alternative model of what faithful stewardship might look like for the Christian. For some, this is movement down a slippery slope to worldliness and for others this increased involvement in existing social institutions is light and salt to the world. This chapter examines the origins of Anabaptist social thought and then follows the trend toward constructive engagement with the social order by examining the work of key Anabaptist thinkers and practitioners from the last century. There is not a unified theoretical approach to economic systems in recent Anabaptist thought, but the historical contextual methodology of American institutionalism may be the most appealing economic school of thought for Anabaptism today.

Earlier Anglican approaches to economics were influenced by its historical position as an established church with considerable political influence. This position has changed in the past half century, and Anglican economists since the pioneering post war work of Denys Munby in Britain and Paul Heyne in North America are moving toward a position of practical neutrality of theology with respect to economic science. Anglicans like Geoffrey Brennan correspondingly defend the economists’ scientific model of the atomistic agent as a legitimate tool for Christian economists. By the same token, Anglican thinking gives a role to theology in motivating economic enquiry and assessing the operation of a virtuous market economy, with the work of Donald Hay and historian Anthony Waterman representing examples of this. To date, arguably, Anglican ethical critiques are yet to convincingly dislodge the classical proposition that markets raise the net supply of positive behaviors congruent with moral sentiments, doing so more predictably and at lower cost than any feasible alternative. Equally, observed short run moral deviations still occur in practice, and Anglicans have shown interest in the ordained role of government and how theology might guide remedial economic policy, with much room still left for further calibration of this question.

Austrian business cycle theory (ABCT) is a body of hypotheses embodying particularly Austrian insights and assumptions. The canonical variant associated with Ludwig von Mises and Friedrich A. Hayek is particularly well suited to the Great Depression. However, it is an inadequate account of the recent US recession and financial crisis. This chapter develops a suitable ABCT variant that explicitly incorporates not only the economy’s time structure of production but also (1) its structure of consumption and (2) its risk structure. The continuous input–continuous output nature of the housing market is highlighted, along with the Treasury and the Federal Reserve’s roles in externalizing the risk associated with government-sponsored entities’ (GSEs’) debt. The chapter then extends Roger Garrison’s graphical framework to illustrate this ABCT variant.

This chapter discusses the challenges raised by the inclusion of evolutionary elements in the theories of Carl Menger, Joseph Schumpeter, and Friedrich Hayek. Each adopted an idiosyncratic position in terms of method of inquiry, focus, and general message. The breadth of the topics and phenomena they cover testifies to the great variety of interpretations and potential uses of evolutionary concepts in economics. Menger, who made no reference to Darwin’s theory, advanced an “organic” view of the emergence of social institutions. Schumpeter elaborated an original theory of industrial development based on the recurrent emergence and dissemination of innovations. Hayek adopted the biological notion of group selection and made it the central element in his theory of cultural evolution and the rise of the free market. The chapter concludes with a preliminary evaluation of the possible role that evolutionary theorizing might play in the future development of Austrian economics.

This chapter offers a synthetic account of the key methodological ideas espoused by prominent Austrian economists. It focuses on the contributions of Carl Menger, Ludwig von Mises, Friedrich Hayek, Ludwig Lachmann, and Donald Lavoie, arguing that epistemological concerns fail to encapsulate their overlapping but distinctive and complementary methodological arguments. Their methodological positions are better explained as flowing from a shared and distinctive social ontology that underlies Austrian economic theory. Austrian social ontology is distinct because of its commitment to three key concepts: radical subjectivism, sheer ignorance, and spontaneous order. The chapter then presents a stylized schema of social processes that embodies these key concepts and shows that the schema both accommodates distinctively Austrian theories and allows for a synthesis of the key methodological contributions of all the Austrian economists discussed earlier.

Austrian school economists have long been interested in monetary and financial operations that characterize modern capitalism. With a few exceptions, this interest was confined, at least until the late twentieth century, primarily to the aggregate effects of these operations on the workings of the economy at large, focusing on the overall outcomes of human action rather than specifics of how the decision to engage in those actions comes about. In other words, Austrian theorists emphasized the role of business enterprise but not the conduct of business. The last thirty years of development in the Austrian school have seen a profound change in this regard, with notable contributions emerging in all areas of business education. This chapter demonstrates the development of Austrian theory with respect to finance and makes the case that this development is sufficient in scope to qualify as a distinctive Austrian theory of finance.

In this chapter, the position of market socialists is critically analyzed from the Austrian point of view. First, the definition of socialism is introduced, based on the concept of institutional coercion acting on Kirznerian entrepreneurship. Second is a review of the different aspects of the theorem of the impossibility of socialism, as it was originally developed by Mises and Hayek. Then market socialism is defined and studied, along with the main contributions of its sponsors. A special analytical treatment is provided on the classical model of market socialism from Oskar Lange and its main perpetuators during the twentieth century. Finally, the chapter analyzes the implicit contradiction of market socialism which also affects its most modern varieties and authors. The conclusion is that the position of market socialists is naive and paradoxical.

The increasing use of randomized evaluations in economics has brought an increase in discussion about ethical issues. We argue that while there are ethical issues specific to randomization, most important ethical challenges are not unique to this methodology. The rise in direct researcher involvement with antipoverty programs that has accompanied the rise in randomized evaluations has made ethics issues more salient and raised complex regulatory questions. Though the principles of respect for persons, justice, and beneficence outlined by the 1978 Belmont Report continue to provide a useful ethical framework, we note a number of challenging tradeoffs in applying them including those around data confidentiality, informed consent, and misleading research subjects. We conclude by discussing how ethical guidelines are applied in practice, noting a number of gaps, ambiguities, and areas where we believe practice is diverging from the underlying principles. These issues apply with equal force to all empirical methodologies.

This chapter concerns the behavioral economics of religion. Themes considered include how religion potentially shapes individual preferences, the possible implications of religious affiliation for interaction within and between social groups, and the religious institution as a unit of the economy at large. This chapter is written with three main purposes in mind. The first is to consider different ways by which religion and economic behavior are potentially related. The second purpose of this chapter is to consider the research methods employed, especially issues regarding the identification of motives, and in turn the interpretation of results. The third purpose is to contemplate significance of results from behavioral studies for economic theory and religious practice, including ways by which different dimensions of religious background, such as religiosity and religious affiliation, relate to pro-sociality and group processes.

This chapter reviews and assesses the genesis and development of the Cambridge post-Keynesian school of income and wealth distribution, the foundations of which were laid in particular by Nicholas Kaldor, Richard Kahn, Luigi Pasinetti, and Geoffrey Harcourt from the middle 1950s onward. The focus of their analysis was to investigate the relationship between the steady-state rate of profits on the one hand, and the saving propensities of the socioeconomic classes and the growth rate of the economy on the other. During half-century and more about 200 scholars have published in this area no fewer than 500 scientific papers and book chapters, as well as thirty volumes. This post-Keynesian school of economic thought has gained a safe entry into the history of economic analysis. In order to evaluate this vast scientific literature this chapter has divided it into eight specific lines: (1) the introduction of a differentiated interest rate on the wealth of the classes; (2) the introduction of the monetary sector and of portfolio choice; (3) the introduction of the public sector, and the Ricardian debt/taxation equivalence; (4) the inclusion of other socioeconomic classes; (5) the introduction of microfoundations; (6) the analysis of the long-term distribution of wealth and of the income share of the socioeconomic classes; (7) the overlapping generation model and the intergenerational transmission of wealth; (8) other general aspects, in particular the applicability of the Meade-Samuelson and Modigliani Dual Theorem.

The recent revival of boom-bust business cycles and the worldwide slow recovery from 2009–2012 has renewed interest in the analysis of a money-production economy developed by Keynes and capital-structure-based Austrian macroeconomics developed by Hayek, Mises, Rothbard, and, most recently, Garrison. Both approaches identify time, money, banking, financial markets, interest, and investment as the major sources of coordination failure leading to recession or depression. When compared with single-aggregate modern macroeconomic models, both Keynes’s and the Austrians’ models, with their lower level of aggregation, provide a better understanding of how an economy goes wrong, However, the chapter argues that Keynes’s model is flawed because it lacks a capital-structure foundation. Keynesian macroeconomic policy is generally unnecessary and, if applied consistently, destabilizes the economy. Austrian economics and its capital-based macroeconomics provide better guidance on cause, recovery, and, more important, prevention.

Capital theory is fundamental to everything else in Austrian economics. It lies at its core, implicit in discussions of monetary policy, the business cycle, the entrepreneur, and the subjectivity of value and expectations. Prior to the Keynesian revolution, it was capital theory for which the Austrian school was most known among mainstream economists. With the advent of Keynesian macroeconomics, interest in capital theory all but disappeared. But it has recently been the subject of increasing attention. After a brief overview of the main ideas in Austrian capital theory (ACT) from its origins and extensions through the middle of the last century, this chapter notes this rekindled interest and surveys recent applications, including its connection to complexity studies, management studies, entrepreneurship, and macroeconomic policy.

Christianity and global capitalism are both religious systems. Historically, Christianity was important in the formation of capitalism and continues to have strong affinities with it, though some of the strongest criticisms of global capitalism come from within Christianity. Comparing them as religious systems, they are both confidently progressive, though Christianity offers a clearer and more attractive view of the end, which is connected to a view of human nature. The Jubilee principle reveals much about the Christian vision, as it resists the concentration of wealth and power, with the associated damage to relationships and community. It also resists the limitless accumulation of debt, a feature of contemporary capitalism that is connected to its nihilism.

There are two key facts about development that are obvious yet often overlooked: the solution to material poverty is material wealth and the only sphere of society that generates such wealth is business. From these two foundations, the argument in this chapter is that Christianity can be, and often is, conducive to the kind of environment that business needs to flourish and for business to contribute to the well-being of society. It is remarkable the extent to which the role of religion and business are ignored in mainstream development thinking. One reason this is generally overlooked is that the development community tends to focus on definitions and causes of poverty, rather than what causes wealth. This chapter discusses the role of the Evangelical-Pentecostal-Charismatic Movement in promoting wealth through a sense of calling, a positive mind-set, delaying gratification, stimulating entrepreneurship, rationalization, and nurturing voluntary associations.

This chapter adopts a pluralist approach to addressing issues raised by the idea of a code of ethics for economists. Though it might be possible for economists to agree on some abstract standards of ethics, it is argued that the implementation of such standards would founder on the different views held about the nature of economic knowledge, stemming partly from different views of the subject matter. These differences color what may be identified as competence, what may be identified as personal rather than social interest, and what may be identified as the consequences of economic advice. Recognition of such differences of view is at the heart of a pluralist approach to economics. The chapter concludes with alternative, rather demanding, suggestions for a pluralist approach to ethics for economists.