It occurred to me the other day another potentially useful and visually evocative way of expressing what I said a few posts ago about bad economics is to say it has layers, like an onion. Also like a parfait, which I know everyone loves and is also a perfectly reasonable choice. But let’s go with onion. Seems a more apt metaphor for bad economics.
How many layers are we talking about? Well, I’m counting three right now, but I wouldn’t be at all surprised if I think of a few more later. Seems to happen every time I make a taxonomy of anything. I make a few nice categories that seem to cover everything and then something else crops up in short order to ruin the beauty of my scheme, usually the very next day. Awkward. So let’s just say our onion has three layers, at the moment.
The first layer, or core if you will, of the onion of bad economics is all the funny business associated with the term “utility,” which in contemporary neoclassical economic theory serves no purpose really beyond acting as a red herring to get people thinking and talking about ethical utilitarianism. The actual ethical propositions explicitly expressed through the ostensible objective of “maximizing utility” using the term “utility” in this layer aren’t particularly controversial. We have the implied ethical proposition that economists qua economists will not address the thorny ethical issues associated with resolving interpersonal conflicts of needs and desires, at least not officially on the basis of utility or economic theory. And then we have the rather more substantive ethical proposition that, if someone is acting in isolation and has no effect on anyone else, we should let him or her do whatever he or she prefers to do, or in the fanciful terminology of modern neoclassical welfare economics, we should act in a way that maximizes (social) utility by allowing the person in question to maximize his or her own (personal) utility. Seems fairly innocuous. However, even this most benign layer isn’t entirely devoid of potentially controversial ethical content. One might, for example, be dealing with someone who has preferences involving harming animals, or planet Earth, or some other entity or thing someone might reasonably have ethical beliefs about even when he or she is not around to be directly involved. But one has to do a bit of work to think of potentially controversial ethical situations in this layer. Takes a bit of imagination. In normal situations, most people would probably have no problem with the ethical propositions involved. This layer is, of course, a core part of neoclassical welfare economics even when that theory is properly interpreted.
The second layer of the onion of bad economics is composed of ethical propositions not based on “utility” nor even expressed using that term that are introduced into economic theory by the suggested, implied, assumed use of markets to address interpersonal conflicts on the marketplace, that is, property rights and the use of the market mechanism. There are a few somewhat more potentially controversial ethical issues introduced in this layer. Like what, for example? Well, questions like the following. Should we support the market mechanism as a way to resolve interpersonal conflicts of needs or desires based on economic power in the marketplace in situations where the typical behavioral assumptions associated with economic theory are not met? For example, let’s say one party to a market transaction is not thinking rationally, or doesn’t have full information? There are also situational ethics issues that may not relate directly to explicit behavioral assumptions typically associated with economic theory. For example, should we support the market mechanism as an ethical way to resolve interpersonal conflict on the basis of economic power when one side to a transaction is desperate, or has less bargaining power, or there are power imbalances of any sort, or in the extreme case where one party has no economic power at all, which is the case involving future generations? This second layer also involves ethical issues relating to the property rights that are necessary for a functioning market system, including at least the implied indifference to changing or revising property rights, which seems a logically necessary corollary of distributional indifference but which sometimes seem to go unremarked creating no end of awkwardness. Indeed, as with “utility” the language associated with property “rights” seems a bit odd. A right one is indifferent to changing? Funny sort of right, that. This layer I think must also be considered a bona fide part of neoclassical welfare economics properly interpreted.
The third layer of the onion of bad economics is composed of misinterpretations and errors that make it seem as though the theory says a lot more about distributional issues than it really does. This outer layer is associated with the most ethical controversy and is by far the most offensively pungent of the three layers. Yes, I realize that’s not necessarily how actual onions work, but I’m talking about a metaphorical onion, so please allow me the artistic license to suppose my virtual onion is more pungent on the outside than the inside. Honestly. What difference does it make? This third layer includes various bits of nonsense like fake indifference, references to nonexistent means to address distributional issues, and various other rhetorical tricks of the trade. I talk about them all the time and will undoubtedly go over them again, many times, during the course of this blog series, so if you’re not sure what I’m talking about you have that to look forward to. Or you can read my little book on the subject, which probably needs some revising by now, but anyway the biggest and most annoying bits of rhetorical nonsense are there in rather scattershot fashion. This layer, unlike the others, is not really a part of neoclassical welfare economics properly interpreted but consists of commonly seen and commonly accepted or at least uncommonly refuted add-ons, which is a feature of bad economics that creates a great deal of ambiguity and confusion on its own. Indeed, I suppose the difference between what economic theory actually says and what many people, including many economists, pretend it says may be the feature of bad economics that has done the most to confound its critics and allow bad economics to carry on unchanged and unperturbed for as long as it has. In many way, bad economics is like one of those shape shifting creatures of myth; hard to pin down or get a firm grip upon. Fine, too many metaphors. It’s an onion.
It helps when addressing the opaque, inconsistent, and just bad ethical philosophizing commonly associated with bad economics, flawed popular presentations of neoclassical welfare economics, if one tries to keep in mind which layer of the onion of bad economics one is dealing with. Otherwise they’ll have you going in circles. I may just try to do that in this blog series to add some method to the madness. I mean keeping in mind which layer I’m talking about, not going in circles, although I’ll probably end up doing that as well. So, if you hear me later referring to layers of bad economics, this is the scheme I have in mind. And by the way, just for the record, I have no problem with actual onions. They’re delicious and healthy. Who doesn’t enjoy a nice onion? The virtual onion of bad economics is something else entirely.
Addendum
I’ve lately moved away from the idea of implicit normative propositions not based on “utility” being a legitimate part of neoclassical welfare economics in favor of the line we should treat as exogenous any normative proposition going beyond what we can say based on “utility.” However, it should be noted taking that line implies neoclassical welfare economics expresses indifference to whether we choose to use markets to resolve any particular interpersonal conflict of preferences, or any such conflicts at all, or indeed whether we even have the legal framework to create or sustain such a market. I think it clarifies the normative content of neoclassical welfare economics, but at the expense of removing much of the normative relevance of that theory for the real world. For example, see the post Law Over Anarchy In Neoclassical Welfare Economics from June 2, 2021.
