Irene Van Staveren

Economists use a variety of normative empirical concepts because the economy and morality are intertwined. Often, this normativity is intended and widely acknowledged, signaling the relevance and meaning of research. Sometimes, the objectivity of research and the findings obtained by using normative concepts is problematic. Written from the perspective of a practicing economist, the article offers a practical guiding tool to economists, suggesting how to be responsible in developing and using normative empirical concepts. It is based on valuable insights from the philosophy of science and codes of conduct. It illustrates the use of the guiding tool with the example of a normative empirical concept that is widely used in development economics: ‘ethnic fractionalization’. The conclusion is that applied economists should be more involved in being accountable for the normativity in our work and that we should ensure that, by using the tool, the normative concepts that we use are acceptable.

The paper argues that the notion of Pareto efficiency builds on two normative assumptions: the more general consequentialist norm of any efficiency criterion, and the strong no-harm principle of the prohibition of any redistribution during the economic process that hurts at least one person. These normative concerns lead to a constrained and static notion of efficiency in mainstream economics, ignoring dynamic efficiency gains from more equal allocations of resources. The paper argues that a weak no-harm principle instead provides an endogenous efficiency criterion, which shifts attention away from equilibrium analysis in hypothetically perfect markets towards an evolutionary analysis of efficiency in real-world, non-equilibrium markets. Moreover, such an evolutionary notion of efficiency would be less normative than the Paretian concept.