I go on and on every week happily doing whatever I can to unravel the rhetorical mysteries of bad economics assuming always at least a few others must be as interested in the issue as I am myself, but every now and then I suspect most people may not even really see the issue or have any real notion what I’m talking about and that, consequently, I may be making my fascination observations mostly to myself. Nothing particularly wrong with that, of course. I’ve had some rather fascinating conservation with myself over the years. To be honest, much more interesting than the lion’s share of conversations I’ve had with other people. Nonetheless, this week I thought I’d step back, take a little breather, and try to provide some basic intellectual motivation for my agenda. What perceived puzzle, exactly, have I been laboring so strenuously to straighten out for everyone? Well, in a nutshell, neoclassical welfare economics is meant to avoid ethical controversy, that’s the ostensible rationale behind the way it defines “utility” and the Pareto concepts and so on, but practical policy recommendations ostensibly based on neoclassical welfare economics are quite often highly controversial ethically speaking. Isn’t that weird? How does that happen? Well, let me explain.
A common conceit among devotees of neoclassical welfare economics is that the normative or value or ethical inputs involved in that theory are so fundamental and non-controversial we needn’t think about them too much or, indeed, at all. That is incorrect. That’s one of the ways it happens. The ethical controversy associated with normative policy recommendations in realistic contexts is actually entirely consistent with that of the normative inputs, as one would expect in a logical or mathematical system, once one identifies and evaluates the normative inputs properly.
In particular, there is more ethical or normative controversy associated with the ethical proposition we should “maximize” total social “utility” as defined in economic theory, or in plain English, with the ethical proposition we should not interfere with other people expressing their preferences if there no interpersonal conflicts involved, than economists acknowledge. In addition, there are additional controversial normative or ethical inputs involving the assignment of economic power in the form of legal specifications of property ownership (so-called “property rights”) and when to resolve interpersonal conflicts on the basis of economic power in markets, that are unrelated to the proposition about “maximizing” total social “utility.”
The evaluation of these controversial normative or ethical inputs, both the commonly acknowledged and commonly unacknowledged ones, is complicated by the ubiquitous concomitant use of false factual premises, which are, of course, perfectly acceptable as simplifying assumption in positive, predictive, scientific theories, but are entirely inappropriate in normative or ethical theories that are meant to be relevant to the real world. The presence of false factual premises in the normative theory of neoclassical welfare economics serves to hide some of the controversy associated with the normative or ethical or value inputs.
To top it all off, there are certain controversial normative or ethical propositions that are commonly albeit informally and typically surreptitiously added on to neoclassical welfare economics in practice to make the theory appear more relevant in real world contexts than it really is in its pure non-augmented form. The typical example I’ve discussed in previous posts, and will no doubt discuss in future posts, is fake distributional indifference, in which additional normative or ethical propositions are slipped in to tip the metaphorical scales to certain preferred outcomes in situations in which the pure theory actually implies indifference.
Purveyors of bad economics shouldn’t flatter themselves that those opposed to the normative policy prescriptions they present, based ostensibly purely on neoclassical welfare economics, simply can’t comprehend the simple logic and math involved. That’s not the problem. The problem isn’t other people being unable to comprehend simple math and logic, it’s purveyors of bad economics being unable to comprehend, or unwilling to acknowledge, the ethical or normative content of neoclassical welfare economics and their own creative additions, and to evaluate them properly under realistic conditions by carefully analyzing potentially problematic cases and so on. The solution to the conflict and controversy caused by bad economics is not to dismiss the concerns of others, to smirk, pose, proselytize, make ostensibly witty mathematical comments, but to go back to the fundamentals: identify, understand, explain, and evaluate the normative or ethical or value inputs in both neoclassical welfare economics proper and those added on in practical applications. Bad economics creates conflict and confusion. We need to fix bad economics.
