I was thinking the other day about how the focus on relative economic power in the marketplace as a means of resolving interpersonal conflicts of wants and needs and desires, an issue we would otherwise be unable to address in the context of the (partial) ethical theory expressed in welfare economic theory due to the impossibility of making interpersonal utility comparisons, tends often to make economists, such as myself for example, think of the ethical issues associated with resolving all interpersonal conflicts mostly in terms of the distribution or allocation of economic power. However, it occurs to me now it’s probably much more common for non-economists to think of those issues in terms of the appropriateness or advisability of using market mechanisms in the first place. In some ways that’s a rather more sensible and realistic perspective because of course it can quite difficult or perhaps even impossible to work out any real, practical, on-going scheme for distributing economic power that would make all interpersonal conflicts work out in an ethical way based on one’s ethics, an issue economists conveniently sweep under the rug along with basically all other issues relating to the distribution of economic power through the use of their magical be-all and do-all notion of a transfer, a concept lifted from the stylized and unreal world of economic modeling.
It also occurs to me some ethical issues cannot be addressed even theoretically through artful manipulation of the distribution of economic power particularly when those ethical issues involve people or entities unable to exercise economic power or participate properly in market transactions. For example, let’s say one has some ethical beliefs relating to unborn humans (i.e., future generations), or children, or animals, or the environment, or even some regular plain old people who may just not have the wherewithal to understand and effectively participate in market transactions. Really by even accepting the ethical proposition the correct way of resolving all interpersonal conflicts of needs, wants, and desires is through market mechanisms and relative economic power, one is already pronouncing on a great number and variety of ethical issues that often seem to go unrecognized by economists in their zeal to suppose they’ve got it all covered and are dealing with only the most general and non-controversial of value judgments.
In my books, I raised this issue only in the context of the ethical proposition implied by economic theory that one should prefer any formulation of property rights over complete anarchy because of the ability of any system of property rights to sustain markets. I characterized that proposition as fairly innocuous although presumably opposed by a few people, such as anarchists for example (of the real sort, not the fake sort who arrive by the way of misinterpretations economic theory, who are generally just trying to rhetorically isolate and protect certain rules and power relationships). However, I think now I was probably being overly charitable to economic theory in that particular respect. The actual ethical propositions required to conclude it’s better to have a functioning market rather than (real) anarchy take on a rather more serious and potentially controversial flavor if one adds the ethical proposition economic power operating through the market is indeed the only acceptable basis on which to resolve not only the issues associated with interpersonal conflicts of desires but the even more general issues involving one’s relationship to people and entities incapable or currently incapable anyway of effectively wielding economic power on their own behalf. The issue goes well beyond the already very serious practical difficulties associated with addressing ethical issues involving interpersonal conflicts through artful manipulation of the distribution of economic power.
Economists make a big to do about their ostensible indifference to the distribution of economic power based on their inability to make interpersonal utility comparisons; however, to be similarly non-controversial about the various ways that same issue and other even more general but also potentially controversial ethical issues can be expressed, they should really be similarly indifferent to ethical arguments relating to the use of market mechanisms to address particular interpersonal conflicts and even broader ethical issues in the first place. If one has ethical objections to resolving interpersonal conflicts or broader ethical issues using market mechanisms, economists should accept their theory has nothing to offer in such cases and should really be indifferent to the use of market mechanisms. Or I guess they could also finally give up their famous indifference to distributional issues, which addresses the same basic phenomenon in a different way, as just a bit of rhetorical nonsense meant to disguise the underlying ethical issues. So tricky when one tries to do ethics, science, and math at the same time, isn’t it? So easy to neglect or forget to mention important ethical considerations and issues. I guess doing ethical philosophy properly isn’t really so easy after all. Who knew?
It also occurs to me some ethical issues cannot be addressed even theoretically through artful manipulation of the distribution of economic power particularly when those ethical issues involve people or entities unable to exercise economic power or participate properly in market transactions. For example, let’s say one has some ethical beliefs relating to unborn humans (i.e., future generations), or children, or animals, or the environment, or even some regular plain old people who may just not have the wherewithal to understand and effectively participate in market transactions. Really by even accepting the ethical proposition the correct way of resolving all interpersonal conflicts of needs, wants, and desires is through market mechanisms and relative economic power, one is already pronouncing on a great number and variety of ethical issues that often seem to go unrecognized by economists in their zeal to suppose they’ve got it all covered and are dealing with only the most general and non-controversial of value judgments.
In my books, I raised this issue only in the context of the ethical proposition implied by economic theory that one should prefer any formulation of property rights over complete anarchy because of the ability of any system of property rights to sustain markets. I characterized that proposition as fairly innocuous although presumably opposed by a few people, such as anarchists for example (of the real sort, not the fake sort who arrive by the way of misinterpretations economic theory, who are generally just trying to rhetorically isolate and protect certain rules and power relationships). However, I think now I was probably being overly charitable to economic theory in that particular respect. The actual ethical propositions required to conclude it’s better to have a functioning market rather than (real) anarchy take on a rather more serious and potentially controversial flavor if one adds the ethical proposition economic power operating through the market is indeed the only acceptable basis on which to resolve not only the issues associated with interpersonal conflicts of desires but the even more general issues involving one’s relationship to people and entities incapable or currently incapable anyway of effectively wielding economic power on their own behalf. The issue goes well beyond the already very serious practical difficulties associated with addressing ethical issues involving interpersonal conflicts through artful manipulation of the distribution of economic power.
Economists make a big to do about their ostensible indifference to the distribution of economic power based on their inability to make interpersonal utility comparisons; however, to be similarly non-controversial about the various ways that same issue and other even more general but also potentially controversial ethical issues can be expressed, they should really be similarly indifferent to ethical arguments relating to the use of market mechanisms to address particular interpersonal conflicts and even broader ethical issues in the first place. If one has ethical objections to resolving interpersonal conflicts or broader ethical issues using market mechanisms, economists should accept their theory has nothing to offer in such cases and should really be indifferent to the use of market mechanisms. Or I guess they could also finally give up their famous indifference to distributional issues, which addresses the same basic phenomenon in a different way, as just a bit of rhetorical nonsense meant to disguise the underlying ethical issues. So tricky when one tries to do ethics, science, and math at the same time, isn’t it? So easy to neglect or forget to mention important ethical considerations and issues. I guess doing ethical philosophy properly isn’t really so easy after all. Who knew?
Addendum
I’ve gone back and forth on the best way to portray this issue, but my more recent take does not involve attributing additional normative propositions to neoclassical welfare economics but instead holds the line at “utility,” and uses that as the dividing line between the normative issues that are endogenous and those that are exogenous. For example, see my post on Law Over Anarchy In Neoclassical Welfare Economics, from June 2, 2021, in which I argue not only are ethical decisions about when to use markets (decisions relating to what I call the “extent of the market”) exogenous to neoclassical welfare economics, but so is support for a system of law as opposed to anarchy. It’s a way of looking at the issue that suggests one can’t get very far at all on the basis of neoclassical welfare economics alone. That seems superior to the alternative that one can get quite far, or someplace anyway, on the basis of neoclassical welfare economics alone, which inevitably requires one to suppose additional normative inputs beyond “utility.”
