I probably mentioned before but I’ve become quite interested recently in the distinctive and unusual structure or form of normative neoclassical welfare economics, which is what I call an “ethical half theory.” I call it that because there are clearly some normative or ethical bits meant to be included in the theory, which support the normative conclusions that take the form of an evaluation of market systems, structures, outcomes, and so on. Those normative or ethical propositions are ostensibly included because of their non-controversial quality. So that would be the ethical propositions about what we should do or not do with respect to other people expressing their preferences, or “maximizing their utility” if you insist upon that bit of misleading terminology and rhetorical fakery. There are some others as well involving resolving interpersonal conflicts using economic power in markets; however, those are sometimes a bit less obvious. Let’s keep it very, very simple right now and just discuss the normative propositions involving preferences or “utility” that I think everyone must agree are a bona fide part of neoclassical welfare economics. However, there are also some normative or ethical issues that are explicitly excluded, which as what might expect are ostensibly excluded because of their controversial quality. That would be distributional issues and, again, should really include some other similarly controversial ethical issues associated with resolving interpersonal conflicts on the basis of economic power in markets, as I’ve discussed in previous posts. This unusual form or structure, ethical half theory, generates a great deal of confusion and conflict relating to economic matters.
Purveyors of bad economics, including alas a great many economists, would clearly like to fudge it and suggest the ostensibly non-controversial normative or ethical quality of the normative content that is included means it doesn’t really count as normative or ethical content, per se, and hence it’s sensible to suggest the normative conclusions of neoclassical welfare economics are the result of positive economics alone, the idea being that if there’s any controversy involved it can’t be derived from the non-controversial normative content and hence must derive from some sort of confusion relating to the positive content. Ah, the perils of sloppy, non-rigorous, amateur philosophizing. If only the situation with respect to neoclassical welfare economics were that simple. There’s nothing very confusing or difficult about the normative versus positive distinction. Basically, one cannot derive an “ought” solely from an “is.” If that’s all that was going on we’d be golden. Draw a graph, write a couple of equations, done! Alas, no, what we actually have is that rare and remarkable beast, the ethical half theory.
The ethical half theory structure generates certain distinctive problems in the context of neoclassical welfare economics. One issue is that the special, ostensibly non-controversial normative or ethical elements or components that are explicitly included may actually be more controversial than one supposes, but presented in a misleading way to makes them appear less controversial. In the context of an ethical half theory, what’s in and what’s out become of paramount importance at least in a practical rhetorical sense. It’s akin to agenda setting in a political context. If one is only going to cover certain ethical issues and one has any rhetorical intent at all it becomes very important to determine what gets discussed and what not. As one might expect, in practice games will be played. This is what happens in neoclassical welfare economics when the ostensibly non-controversial normative or ethical proposition we should let other people follow through on their preferences, at least if no interpersonal conflict is involved, which is the most basic of the normative propositions in that theory appearing before even those normative propositions supporting resolving interpersonal conflict on the basis of economic power in markets, is combined with false factual premises involving things like perfect information and rationality. It’s one thing to say it’s ethical to allow someone who wants to eat an apple (that let’s say no one else wants or needs or claims) to eat the apple; it’s another thing to say we should allow the person to eat an apple if we happen to know the apple in question has been poisoned but the prospective eater does not. One statement is rather more ethically controversial than the other. It’s also what happens in neoclassical welfare economics when certain inconvenient situations are simply ignored, such as the ethical evaluation of the normative proposition we should resolve issues on the basis of economic power in markets even when considering the interests of future generations who have no current economic power with which to express their interests and arguably don’t have yet even have interests of their own, per se, only other people’s assessments of their likely interests. It’s significantly less controversial to think about resolving issues on the basis of economic power in markets if one simply ignores future generations, which is generally what happens in conventional treatments of neoclassical welfare economics.
Another very significant and distinctive problem generated by the ethical half theory structure of neoclassical welfare economics is that applying that theory in realistic situations involving the ethical issues not covered in that theory will, of course, be inappropriate. Obviously, one would need to augment the normative content of the ethical half theory to convert it into a complete ethical theory covering all relevant ethical issues, or simply dismiss the ethical issues not covered, which may be quite controversial indeed and really constitutes a type of complete ethical theory anyway, just one that proposes certain ethical issues conventional considered relevant are actually irrelevant. This is what happens in the context of neoclassical welfare economics when purveyors of bad economics incorrectly interpret it either directly or indirectly as favoring the status quo distribution of economic power, or the distribution of economic power resulting from certain markets such as labor and capital markets, or as an ethical argument that distributional ethics are unimportant or irrelevant, rather than interpreting it correctly as expressing indifference to such issues.
It appears manifestly difficult for many people, including many economists, to perceive or accept the limitations of the normative half theory structure of neoclassical welfare economics. Their desire for practical relevance appears to get in the way of their intellectual acuity or honesty. Not especially surprising, I suppose. They want to be relevant in a practical sense, to proffer advice, to present themselves as experts on economic matters in general, even when those matters plainly involve normative or ethical issues external to the neoclassical welfare economics they’re meant to be using to inform their recommendations. The ethical half theory structure of neoclassical welfare economics leads directly to the distinctive pattern of ubiquitous errors and misinterpretations I call bad economics. To a great extent, bad economics is simply an attempt to bridge the gap between what neoclassical welfare economics actually says and what some people would rather obviously like it to say.
An entirely different but interesting issue is whether the economists who originally developed neoclassical welfare economics understood bad economics would be the likely result. One can’t help but wonder if that is indeed why they chose the rather unusual form or structure of normative or ethical half theory in the first place. Was the entire edifice of neoclassical welfare economics developed specifically to deceive and misdirect? That’s the million dollar question as far as ill intent goes, isn’t it? Just how false and intellectual insincere were the people who came up with neoclassical welfare economics, people like the Italian social Darwinist, elitist, and proto-fascist Vilfredo Pareto, whose name appears all over the project? Not sure, but it’s certainly an intriguing historical issue. I have my suspicions, of course, but that’s really neither here nor there right now. What we need to do now is to fix bad economics by explaining the real normative content of neoclassical welfare economics, all of it, as well as the normative limitations of the theory, the rhetorical tricks and stratagems used to informally add normative content to the theory in practice, and, hopefully, finally fix it entirely by removing the normative content, all of it, and putting it back with democratic decision making bodies where it belongs.
