In Marshall's Tendencies, John Sutton provides a wide-ranging and thought-provoking set of reflections about economic modelling and the relationship between theory and data. With a handful of suggestive examples and a transparent and elegant style, he manages to maintain a clarity of presentation that makes his thoughts accessible to a large audience while leading the reader into the heart of the difficulties of economic theory in matters of empirical testing.

Over the last 40 years or so, economics has become a modelling science: a science in which models have become one of the main epistemological tools both for theoretical and applied work. But providing an account of how models work and what they do for the economist is not easy. For the philosopher of economics like me, struggling with this question, John Sutton's views on the nature and design of economic models and how they work is indeed thought provoking. Because of my own interests, my review of Sutton's book: Marshall's Tendencies: What Can Economists Know? will focus on three related issues that I found especially intriguing in his treatment of the role of models in modern economics. The first is the way that Sutton's account fits with my own reading of the history of twentieth-century economics, namely that the focus of economic explanation has moved during the last century from ‘theories’ and ‘laws’ to ‘models’ and ‘mechanisms’. The second is to understand the epistemological connotations of Sutton's ‘class of models’ view. The third is to explore what Sutton means when he says a model ‘works’. These three questions roughly coincide with the material presented in Chapters 1, 3 and 2 respectively of the book. As we shall see, Sutton gives us a practitioner account of applied economics which can fit within the standard terms used by philosophers of economics on theory-testing, but which reveals a number of novel elements for philosophical analysis.

In Marshall's Tendencies (Sutton, 2000), John Sutton poses some fairly deep questions for economists, especially for empirical work. In particular, when (if ever) is it safe to behave as though the ‘standard paradigm’ applies? In that paradigm, we are attempting to extract and estimate the ‘true’ model from the data and are only kept from doing so because, while economic analysis captures the main ‘tendencies’, there are many small influences that we cannot exactly take into account. That paradigm, which Sutton traces to an analogy of Marshall's likening economic predictions to predictions of the tides, leads to the econometric estimation of economic relationships, taking statistical account of the unincluded small influences by placing them in a random disturbance term. Sutton states (p. 5), ‘if Marshall's analogy were valid, we would have seen spectacular progress in economics over the past fifty years’.

Professor Sutton's thought-provoking book is directed principally to the question: ‘Are simple mathematical models helpful in economics, or are they misleading?’ His answer, baldly stated, is that if they are made right they are helpful, but if they are made wrong they are misleading.

He has in mind an ideal reader: someone who already knows from other fields how a successful theory based on formal mathematical models works, but who has only recently stumbled on economics, and is skeptical about formal mathematical models here. I am not quite an ideal reader now, but I was once, because I studied and worked in physics before going into economics.

Professor Sutton opens his lively monograph on the nature of economic theory with the following question: is it possible to find economic models that work? He uses the question to guide us on a methodological tour with Marshall's characterization of economic theory as the point of departure. I must say I enjoyed the trip. Along the way, the animating issue of what works in economics could hardly have been addressed without dealing with issues in verification, and the author's arguments include an appraisal of what he considers as standard econometric methods. In these comments, I will revisit at some length one of the key sites on John Sutton's tour bringing along a view of modern econometrics which is somewhat different from his and which affords a different perspective on the Marshallian paradigm.

Through most of the history of economics, the most influential commentators on methodology were also eminent practitioners of economics. And even not so long ago, it was so. Milton Friedman, Paul Samuelson, Trygve Haavelmo, and Tjalling Koopmans were awarded Nobel prizes for their substantive contributions to economics, and were each important contributors to methodological thought. But the fashion has changed. Specialization has increased. Not only has methodology become its own field, but many practitioners have come to agree with Frank Hahn's (1992) view that methodology is a distraction to the practitioner, best left to the professional methodologists and philosophers, and of little practical import even when delivered from their pens. John Sutton's lectures, Marshall's Tendencies: What Economists Can Know, is a welcome return to the older fashion, for Sutton is an eminent practitioner of game theory and industrial organization. One of the main themes of these rich and nuanced lectures – and the one on which I shall focus – is the relationship of economic theory to econometric evidence. Sutton's reflections on econometrics appear to arise from the darker recesses of his practitioner's soul. While he affects a sunny disposition and ends on a hopeful note, his analysis articulates the lurking fear that econometrics is a hopeless project and that economics has little to learn from the interaction of theory and econometrics. Sutton's book is like a play in which virtue triumphs, but the villain gets all the good lines.

In her opening contribution to this symposium, Mary Morgan has provided a critical evaluation of Marshall's Tendencies in which she reviews a series of methodological issues. She characterizes my views quite accurately, while pinpointing the gaps in my account (most notably in relation to pinning down what is meant by a ‘mechanism’). I am therefore going to leave this aspect of things on one side, and turn to other matters.

When modern economists use the notions of sympathy or empathy, they often claim that their ideas have their roots in Adam Smith's Theory of Moral Sentiments (1759/1976), while sometimes complaining that Smith fails to distinguish clearly enough between the two concepts. Recently, Philippe Fontaine (1997) has described various forms of sympathy and empathy, and has explored their respective roles in Smith's work. My objective in this paper is to argue that Smith's analysis of how people's sentiments impinge on one another involves a concept of fellow-feeling that is distinct from both sympathy and empathy. Unlike sympathy and empathy, fellow-feeling does not fit into the ontological framework of rational choice theory – which may explain why it tends to be overlooked by modern readers of Smith.

Suppose that the members of a certain group each hold a rational set of judgments on some interconnected questions. And imagine that the group itself now has to form a collective, rational set of judgments on those questions. How should it go about dealing with this task? We argue that the question raised is subject to a difficulty that has recently been noticed in discussion of the doctrinal paradox in jurisprudence. And we show that there is a general impossibility theorem that that difficulty illustrates. Our paper describes this impossibility result and provides an exploration of its significance. The result naturally invites comparison with Kenneth Arrow's famous theorem (Arrow, 1963 and 1984; Sen, 1970) and we elaborate that comparison in a companion paper (List and Pettit, 2002).

Increasingly in the modern world, incentives are becoming the tool we reach for when we wish to bring about change. In government, in education, in health care, between and within institutions of all sorts, incentives are offered to steer people's choices in certain directions. But despite the increasing interest in ethics and economics, the ethics of the use of incentives has raised very little concern. From a certain point of view, this is not surprising. When incentives are viewed from the perspective of market economics, they appear to be entirely unproblematic. An incentive is an offer of something of value, sometimes with a cash equivalent and sometimes not, meant to influence the payoff structure of a utility calculation so as to alter a person's course of action. In other words, the person offering the incentive means to make one choice more attractive to the person responding to the incentive than any other alternative. Both parties stand to gain from the resulting choice. In effect, it is a form of trade, and as such, it meets certain ethical requirements by definition. A trade involves voluntary action by all parties concerned to bring about a result that is beneficial to all parties concerned. If these conditions were not met, the trade would simply not occur. And as inducements in a voluntary transaction, incentives certainly have the moral high ground over coercion as an alternative.

James Griffin (1986, 1997, 2000) and Ruth Chang (1997) have argued that alternatives (and values) can be comparable when it is neither true that one is better than the other, nor true that they are exactly equal in value. The relation which holds between them has gone under various names: the alternatives are ‘roughly equal in value’ (Griffin) or ‘on a par’ (Chang). In this paper, I give a formal analysis of this relation. This analysis allows us to distinguish between two slightly different notions of ‘at least as good as’. It is argued that the distinction between these notions is important for discussions of rationality, as is the distinction between ‘rough equality’ or ‘parity’ and incomparability.

Irrational people create problems not only for themselves and those around them, but also for those who study them. They cause trouble for social scientists because their actions are inexplicable, at least according to generally accepted models of explanation. Explanations in the social sciences normally assume the form of rationalizations: actions are explained by showing that, relative to what the subjects believe and desire, the actions were done for good reasons. Conversely, when good reasons cannot be found for why someone acted as they did, their behavior remains inscrutable. Irrational people, therefore, stymie social scientists because their actions do not reveal the rationality needed to produce adequate explanations.