I was thinking the other day a good way to avoid certain common types of confusion when addressing the normative or ethical arguments in bad economics, popular and ubiquitous misinterpretations of purposefully opaque normative neoclassical welfare economics, is simply to keep track of the various actors and roles. That’s because neoclassical welfare economics portrays different actors and even the same actors in different roles differently. Keep track of who one is talking about and what role they’re playing and one will avoid equivocating on actors and roles. To understand what I’m talking about here, let me go over a few possibilities.
Orthodox economists qua economists are meant to accurately express and follow the normative argument of neoclassical welfare economics, explain how to maximize total social “utility,” be indifferent to controversial distributional ethics (and by extension other controversial ethical issues not always clearly identified in opaque neoclassical welfare economics). They are not meant to maximize their own utility. That is to say, normative neoclassical economic theory is not a theory about how economists themselves can best create monopolies, set themselves up as kings and queens of the world, screw people over, etc. Orthodox economists qua economists are meant to take a social perspective, talking ostensibly about normative matters that involve and appeal and apply to everyone. Orthodox economists qua economists are not meant to interpret the normative bits of economic theory however they like, adding things and leaving things out, misleadingly portraying their own personal and potentially controversial exogenous value judgments as a part of neoclassical welfare economics, playing the old bait and switch. Incidentally, the fact that neoclassical welfare economics involves the use of an oddly defined and indeed idiosyncratic notion of “utility” that removes it from the lion’s share of ethical issues involving resolving conflicts of interests, needs, wants, desires between people does not make that theory a utilitarian ethical theory, and economists qua economists are not proponents of potentially controversial philosophical “utilitarianism” in any serious way beyond a superficial sharing of some terms, a point I’ve discussed frequently in previous posts. Orthodox economists qua economists are not meant to pretend they can evaluate real instances of market system or outcomes based on neoclassical welfare economics alone without acknowledging the need for input on exogenous distributional ethics and other controversial ethical issues.
Regular folk in the role of voters in a democratic political system, including orthodox economists in their role as regular folk, are meant to supply the rather more controversial exogenous normative or ethical inputs required to evaluate any real instance of a market system or outcome and transmit their preferences and ethical judgments by voting for politicians promoting different economic policies. As such, orthodox economists qua economists are not meant to oppose the influence of regular folk and their political representatives or oppose political democracy by suggesting regular people are not qualified to register an opinion on the relevant exogenous, controversial normative issues; should not participate in the assessment or evaluation of real instances of market system and outcomes; and should not use democratic government to “interfere” with the economy. Although neoclassical welfare economics does not explicitly assign this role to the people or their political representatives and implies merely that some decision maker or other supply the required normative or ethical inputs, a logical lacuna leading to a sort of intellectual free for all in which various actors including unscrupulous orthodox economists have attempted to seize the much coveted crown of ethical arbiter for themselves, a charitable reading of neoclassical welfare economists suggests that power can only reasonably reside with the people and their democratic political representatives. As a general point of philosophy, these potentially controversial ethical issues cannot be resolved by experts, technocrats, scientists, politicians, priests, philosophers, orthodox economists, or anyone else on objective, positive, scientific grounds because of the fundamental subjective nature of ethics. To respect the subjective nature of ethical belief, the ethical proposition derived from the democratic ethos that an economic system should reflect the will, and the ethics, of the people, and the practical advantages of a flourishing, stable, peaceful society that addresses controversial ethical issues via public discussion and voting rather than brute force, the potentially controversial ethical inputs required to evaluate market system and outcomes can only be based on the ethical beliefs of the people delivered via democratic government. The exogenous normative or ethical inputs added by the mysterious decision maker, or in my gloss regular folk and their political representatives, to the conclusions of neoclassical welfare economics when evaluating economic systems and outcomes can express any form of ethical theory or no form. They needn’t express philosophical utilitarianism in style or substance, nor any other particular ethical theory including those based on fairness, justice, “natural law,” “natural rights” or anything else.
Moving from people using or adding normative content to neoclassical welfare economics for the purposes of evaluating real instances of economic systems and outcomes to people portrayed within neoclassical welfare economics, the real subjects of applied neoclassical welfare economics, the people applied neoclassical welfare economics is meant to be about, in their various roles as consumers, workers, business people, and so on, have the attributes of real people, that is to say, they are potentially ignorant, confused, irrational, emotional, prone to manipulation, etc. They may base their preferences on narrow self interest or ethical principle or emotion or any other motivation.
The abstracted ciphers that represent people in the models of positive or normative economic theory may have all manner of counterfactual qualities, that is to say, they may be portrayed as having perfect information, perfect rationality, whatever one likes. However, when applying to real people normative propositions derived with respect to these theoretical, abstracted ciphers, one must account for any differences that may involve the normative or ethical evaluation of inputs or conclusions. In other words, one shouldn’t perform what is known in the vernacular as the old bait and switch.
Consumers of both the real and theoretical cipher variety, including businesspeople in their role as consumers, tautologically “maximize” their own personal “utility” by expressing preferences through revealed choices. Consumers making choices and tautologically “maximizing” their “utility” doesn’t mean, on the one hand, that they follow utilitarian ethical philosophy or, on the other hand, are amoral and follow only their narrow self interest or lower level appetites, etc. In the context of neoclassical welfare economics, the use of the word “utility” is just a way of talking about individual preference rankings.
Workers similarly tautologically “maximize” their own “utility” when making decisions about employment. Normative neoclassical welfare economics does not entail the factual premise that workers care only about pay or express the normative proposition they should care only about pay. Their function or role is not constrained to be “maximizing” money. Although it may seem a little less obvious, the same situation applies to private investors of capital. Neoclassical welfare economics doesn’t imply private investors necessarily concern themselves only with returns and cannot or should not reject investments if they find the business unethical, inappropriate, or unacceptable in some way.
In contrast, business people qua business people of both the real and theoretical ciphers variety maximize profit, that is to say, money. They don’t maximize “utility.” Money does not equate to “utility” in neoclassical welfare economics. The function or role of business people qua business people in a market system is to maximize profit, and if they fail to do that they will not survive as business people in a competitive business environment.
The ostensibly socially beneficial economic function of business people acting in their role as business people, as entrepreneurs, planners, coordinators, and so on, lies behind the adage sometimes attributed to neoclassical welfare economics that “greed is good.” However, neoclassical welfare economics does not claim or recommend business people maximize money or be greedy in their roles as consumers, regular folk, voters evaluating economic systems and outcomes, etc. For example, business people acting in their alternate role as consumers tautologically maximize their own personal utility like anyone else, and as voters they participate in the normative evaluation of economic systems and outcomes like anyone else. Nor does neoclassical welfare economics portray any and every expression of greed on the part of business people qua business people as good or socially useful. The “greed” that is ostensibly “good” is the sort expressed by business people qua business people in certain controlled conditions. Greedy monopolists are not portrayed as “good” in neoclassical welfare economics. Greedy criminals and shady business people are not portrayed as “good” in neoclassical welfare economics.
How does neoclassical welfare economics address human behavior in both the positive and normative sense? Well, that depends on who and in what role. Are we talking about economists qua economists, decision makers, real subjects of applied economic theory, theoretical subjects of economic theory, consumers, workers, private investors, business people qua business people, business people in other roles? Decide first what actor and in what role, because it matters. One will want to keep a handle on that or one might just end up going in circles forever, as I’ve observed is quite commonly the case. Bad economics is an intellectual artifact built upon the studiously opaque normative program of neoclassical welfare economics with copious amounts of additional confusion, misdirection, conflation, equivocation, and rhetorical subtleties of all types painstakingly added on. One can fight bad economics by simply speaking clearly and carefully when discussing neoclassical welfare economics, and clarifying and keeping track of the various actors and roles is as good a place to start as any.
