I’ve taken up the issue of the legal specifications of property ownership that define economic power, so-called “property rights,” in a previous post (Property Rights As An Element Of Bad Economics, June 24, 2020); however, given their importance for bad economics maybe it’s sensible to have another go at the issue.
A common conceit in bad economics is to try to slip in random value judgments, that is, ethical or normative propositions, in some cases possibly because one believes they are so noncontroversial they needn’t be discussed or even recognized as such. One area where this seems to happen quite frequently is with legal specifications of property ownership or as sometimes confusingly called, “property rights.” If we don’t have legal specification of property ownership to define economic power then we can’t have markets, and purveyors of bad economics in general are prone to skip the part of their normative argument that involves establishing and relying upon markets to resolve interpersonal conflicts often preferring instead to simply assume the existence of markets, and assume also that everyone agrees the application of economic power in markets is the most ethical way to resolve interpersonal conflicts of needs and wants, and moving directly on to assessing particular market structures and outcomes. But if the argument is that certain market structures are the ethically optimal way of resolving interpersonal conflicts of needs and wants, one really needs to start at the beginning, not just jump in half way to one’s conclusions.
The controversy associated with the decision to have or not have any sort of specification of property ownership or “property rights” at all is that between utopian anarchists (the real sort, not the fake market sort) and pretty much everyone else. There is some ethical controversy there that should be acknowledged, but perhaps not a lot.
The bigger problems in terms of unstated normative or ethical premises start when one begins to overstate the conceptual or logical requirements of neoclassical welfare economics. The normative conclusions of that theory logically requires a normative proposition supporting the existence of some sort of legal specification of property ownership to support the existence of markets, but it doesn’t require one to conceive of those legal specifications in terms of the broader notion of an ethical “right.” In particular, it doesn’t involve any particular notions of whether one can change those legal specifications, why, how, when, under what conditions.
A related problem is minimizing the ethical controversy associated with particular legal specifications of property ownership based on the relatively noncontroversial notion one should support existing laws in the sense of abiding by them, assuming one endorses the system that produces those laws. One may support the enforcement of existing legal specifications of property ownership while also believing they are somewhat lacking on an ethical basis and should really be revised in some way. They’re really two different issues. Thus, the actual legal property specifications themselves may be associated with more ethical controversy than simple support for law abiding behavior at any particular moment suggests. One’s ethical assessment of legal specifications of property ownership may be complex. For example, one may think an existing pattern or mechanism of legal property specifications is generally reasonable, yet still support changing them in certain ways, such as revising inheritance laws, changing tax rates, adopting redistributional policies, etc. Similarly, one may support legal property specifications as an important determinant of the most ethical way of resolving interpersonal conflicts using economic power in markets in most situations, but not in certain ethically distinctive or unusual ones, such as let’s say health care or issues involving future generations or environmental concerns.
If one’s attempt to apply neoclassical welfare economics involves additional value premises that are not expressed in the theory itself, such as that existing legal specifications of property ownership are special, ethically correct, cannot be revised, or should be considered expressions of philosophical “rights” of one sort or another, then one needs to say so. If one endorses the normative or ethical proposition that resolving interpersonal conflicts of needs, wants, desires, on any basis other than economic power so defined on markets is always ethically unacceptable, then one needs to say so. Because those sorts of beliefs belong to the world of distributional ethics (and really even more general ethics) and thus contradict the distributional indifference in neoclassical welfare economics (in additional to the indifference on other controversial ethical issues that should be treated the same as distributional issues for consistency in neoclassical welfare economics but are often simply ignored instead). To avoid confusion and conflict, to accurately characterize the level and type of ethical controversy associated with the normative conclusions one ostensibly derives from neoclassical welfare economics, one must accurately and clearly specify all one’s value inputs.
Of course, on the other hand, if one associates no particular normative status to particular mechanisms for generating legal property specifications or to particular patterns of legal property specifications, if one is indifferent to retaining them or revising them in particular contexts or generally, if one is indifferent to resolving interpersonal conflicts on some basis other than economic power so defined in markets, if one wishes to avoid the controversy associated with distributional ethics (and with the other controversial ethical issues associated with resolving interpersonal conflicts on the basis of relative economic power in markets), then I suppose one doesn’t really have to say that, because that’s ostensibly what neoclassical welfare economics already says. However, to avoid confusion one should probably say that as well.
Economists seem rather more interested in, and indeed one might say fascinated by, the level of ethical controversy associated with the normative propositions relating to “utility,” that is, propositions about how we should think about an individual expressing his or her preferences in the absence of interpersonal conflicts requiring ethical resolution, than with the level of ethical controversy associated with the entirely distinct and really inconsistent or incompatible value inputs or normative propositions related to legal specifications of property ownership and the proposition interpersonal conflicts of needs and desires should always be resolved on the basis of economic power in markets. Indeed, economists generally manage to mis-state and minimize even the relatively modest level of ethical controversy associated with preferences in the no conflict case, that is, “utility” as they’ve defined it, in realistic situations, by evaluating it in conjunction with false factual premises such as complete information, rationality, etc., which are typically and confusingly only explicitly introduced much later in the context of the conditions required for perfectly competitive markets in particular.
It’s rather difficult for a serious reader to suppose purveyors of bad economics including alas many economists are not trying to actively hide or misrepresent the normative or value or ethical inputs required to apply neoclassical welfare economics in realistic contexts, that is, to ignore some value inputs, ignore inconsistencies in the philosophical bases of those inputs, and hence misstate the level of ethical controversy involved with the value inputs taken as a whole and hence with the normative conclusions. But, of course, economists are famously bad ethical philosophers. They’re not trained in philosophy, and many or perhaps even most are happy to explain they’re just not very interested in such matters anyway. So the attribution of intent isn’t as clear as one might suppose, at least not now. However, one thing seems clear, we should not continue to use neoclassical welfare economics to derive bogus normative results based on bad ethical philosophy, but use it in a sensible way to identify where value inputs in the form of normative or ethical propositions are required for the evaluation of economic systems and outcomes, so they can be referred to democratic processes for temporary and continually revisited and potentially revised resolution according to the subjective ethical beliefs of those involved.
Addendum
More recently, I’ve argued the ethical issue I now call “law over anarchy” is more sensibly considered exogenous to neoclassical welfare economics, which is a step back from the argument presented here, which follows my old “onion of bad economics” model to portray neoclassical welfare economics as containing implicit normative or ethical arguments meant to establish we should use economic power in markets to resolve interpersonal conflicts of preferences, needs, and desires, and hence also implicit normative or ethical arguments addressing creating or sustaining the legal conditions for markets to exist. See the post Law Over Anarchy In Neoclassical Welfare Economics from June 2, 2021.
