B31 - History of Economic Thought: IndividualsReturn

The article discusses utilitarianism in the form elaborated by John Stuart Mill. Although utilitarianism has been variously employed by philosophers and economists, Mill is the figure most closely associated with this theory. His ideas deeply influenced economists of the 20th century and continue to shape the postulates of contemporary economics and other social sciences. We demonstrate how seminal utilitarianism was to Mill's work, explore what influenced his thoughts on it, and place our analysis in the socioeconomic context of the time Mill was writing. We argue that utilitarianism has eclipsed Mill's other contributions to economics, yet is often oversimplified and has unjustly served as a platform for a more general critique of homo economicus.

It has been widely accepted that philosophers of science wrote a "swansong" for positivism during the second half of the 20th century. Milton Friedman and Paul Samuelson, major contributors in the field of economic methodology at the time, the argument goes, never reflected the demise. Therefore, positivist roots are still to be found in influential theoretical concepts developed by mainstream economists. Specifically, I present the hypothesis of rational expectations and the theory of efficient markets as two significant outcomes of a "high tide" of positivist thinking in economics. However, quite a large number of scholars currently share the view that the two concepts contributed in a non-negligible manner to the development leading to the financial crisis culminating in 2008 and 2009 and should be replaced by behavioural or other approaches. The article thus asks, in quite a novel way, if the crisis - seen by many as an empirical rejection of both the concepts - can also be seen as a milestone in the development of methodology of economics.

The article deals with Mill's views on methodology. The place taken by political economy in the general classification of knowledge is shown. This includes: natural distinction between physical and moral sciences (including non-reducibility of mental phenomena to physical phenomena) and definition of political economy as a separate science. Further, the concept of economic man as introduced by Mill is presented. Two methods, which Mill saw as appropriate for studying social phenomena - i. e. concrete deductive method and inverse deductive method - are examined. Finally, marginalist reinterpretation of Mill's methodology is suggested. This reinterpretation retains the major features of Mill's approach.