Bad Economics and Real Economics

Seems it’s only been six months since my last “what does neoclassical welfare economics really say” post, but I feel we’ve moved the discussion along sufficiently at this point to warrant another go at distinguishing what real neoclassical welfare economics says from what bad economics loosely based on neoclassical welfare economics says or rather shouts at the top of its lungs at every opportunity. Wouldn’t it be nice to be so smart one could just say something once and consider it apt forever, an eternal monument to one’s perspicacity and expressive power? I said it once, why say it again? Alas, I seem destined to continually revisit, revise, rework, clarify, explain what I said before. I apparently can never leave anything alone. Oh well, I suppose we all have our little difficulties to overcome.

One point I wanted to stress this time around is that the most interesting thing about normative neoclassical welfare economics for me is not what it actually says, which is fine but amounts to precious little really, but rather its relationship to ubiquitous bad economics, that is, how people come to suppose it says something more and other than what it really says. That’s where all the action is, where all the fun is. With that thought in mind, let me start out this week by saying if one has some concerns, based in ethics, about what neoclassical welfare economics recommends in realistic policy situations, one is almost certainly talking about bad economics, not real neoclassical welfare economics. Let’s go over some examples of what I’m talking about.

Are you dissatisfied neoclassical welfare economics appears to oppose concerns relating to the fairness or  justice of our system for distributing economic power via labor and capital markets, inheritance, taxation, government policy, etc., or the results, the economic outcomes, the distribution of goods and services, that result from that pattern of economic power in markets, based on issues involving some form of social ethics that wouldn't really apply to a hypothetical one person world? Real neoclassical welfare economics has nothing to say about distributional ethics and other social ethics and is indifferent to that sort of thing.

Are you confused about the idea we must weigh ethical considerations such as distributional concerns against a peculiar, free-floating “efficiency” that is ostensibly ethically significant no matter how one feels about the associated outcome? Neoclassical welfare economics doesn’t really say that. That’s a result of fake distributional indifference.

Are you concerned neoclassical welfare economics appears to suggest we must distribute everything, such as vaccines for example, by economic power in markets, to avoid the “social welfare cost” of those resources not going to their most valued use according to the market? Neoclassical welfare economics doesn’t really say that. It’s indifferent to the ethical issue of the extent of the market.

Are you troubled by the way neoclassical welfare economics proposes we can accept only impractical, difficult, complicated, expensive, unworkable, but arguably first best solutions to distributional issues and other ethical issues relating to economic systems and markets? Neoclassical welfare economics doesn’t really require that. That’s a result of some confusion involving economic efficiency and “utility.”

Are you put off by the notion “greed” is “good,” or the notion social ethics should always be based on self-interest or must always be based on self interest if they are to reflect reality? Neoclassical welfare economics doesn’t say that. That’s a result of misinterpreting theory possibly combined with equivocation on different definitions of greed.

Are you unsure about the ethical status of the proposition we should allow people to follow their preferences (“maximize” their “utility”) under conditions of ignorance, irrationality, duress, or other complicating factors? Neoclassical welfare economics doesn’t really address that normative or ethical proposition under those conditions, which are eliminated from consideration in the normative argument by false factual premises.

All real neoclassical welfare economics says with respect to evaluating economic systems and outcomes in the real world is that once one has addressed all relevant ethical issues, if multiple market structures are consistent with those ethics, then an economically efficient, Pareto optimal, perfectly competitive market structure looks pretty good. Which relevant ethical issues? All the normative or ethical issues exogenous to economic theory but important for evaluating economic systems and outcomes: the ethics relating to the distribution of economic power, the issue of the extent of the market or when to use economic power in markets to address interpersonal conflicts of needs and desires, how to treat other people following their preferences under conditions of ignorance, irrationality, etc.

In the ethically attenuated, partially unspecified, stridently counterfactual Fairy Land of Economic Theory, one can give copious and precise policy recommendations based only on neoclassical welfare economics, but in the real world, not so much. In the real world, any practical application of neoclassical welfare economics will necessarily involve normative, ethical, value inputs exogenous to that theory, some of which may be quite controversial. Inquiring minds will want to know those inputs came from, why they’re there, who made them. And that’s a good segue to bad economics, because the mark of bad economics is that it has something to say about every real world phenomenon, and it never, ever accurately identifies the exogenous value inputs, explains their origin, or evaluates them properly.

Surely you must have encountered bad economics, the whole right wing world of vaguely economic rhetoric involving themes like “the Free Market” and “The Economy,” addressing market “distortions” from the ostensibly ethically perfect ideal, preventing democratic government “interfering” with ostensibly optimal markets, minimizing democratic government, suggesting technocrats in the form of economists are the only people qualified to make the tough and controversial ethical decisions that necessarily underlie real economic policy, from which the ignorant and unqualified voters must be excluded, etc. Bad economics can be, and typically is, used as a rhetorical tool to support and defend those with economic power and to argue against policies intended to further the interests of those without economic power. It can be, and often is, used to perpetuate material want and human suffering, and depending on one’s ethics, injustice and unfairness as well. The confusion and frustration that attend it create social conflict.

One may, of course, agree with the exogenous ethical content introduced by purveyors of bad economics. One may suppose those inputs represent good ethics. But it’s bad economics because it involves introducing exogenous normative content as though it were part of economic theory. In addition, there are, of course, perfectly sensible criticisms of real neoclassical welfare economics, for example, involving opaque, missing, or contradictory normative elements, a state of affairs that facilitates and supports bad economics. We could and should clarify and address those normative omissions and oversights. However, the real confusion and conflict has to do with bad economics, not real economics.

Economists should be always on the forefront of the fight against bad economics, of breaking the conceptual and intellectual bonds between bad economics and real neoclassical welfare economics, but they so seldom are. In general, they don’t seem to really care all that much. Indeed, sometimes they are themselves the primary purveyors of bad economics. Why? Well, I don’t know. It’s a bit of a mystery, isn’t it? One possibility is lower level economics courses, such as the much derided by economists Econ 101, serve as an ideological filtering mechanism, so that most of those who go on to study the field are predisposed to accept bad economics as a dodgy means to a supposedly desirable end. Another possibility involves the role of money, economic power, in our educational system, and the importance of bad economics as a rhetorical device that can be used to support those with economic power. There seem likely quite strong financial incentives to actively promulgate or at least be soft on bad economics.

Whatever the reason, it’s certainly unfortunate so many economists and especially so many academic economists have proven themselves so ineffective in confronting bad economics. It’s so difficult for others to address the problem when the greater part of the supposed experts are actively working to create the problem or lounge about playing with their little models as though they perceived no problem at all, unless backed into a corner, in which case they case they promptly disavow everything and wonder how such a thing as bad economics could ever exist and how anyone could get the funny idea it’s related in any way to neoclassical welfare economics. But difficult or not, since most economists appear unwilling or unable to fight the baleful influence of anti-democratic bad economics and distinguish it clearly from neoclassical welfare economics, it becomes incumbent on the wider educated public to get involved. We apparently all need to fight bad economics, every one. And again when I say fight bad economics, I don’t necessarily mean dispute the normative inputs that lie behind bad economics. One can make of those what one will. I mean fight bad economics as a rhetorical tool used to complicate or evade criticism, evaluation, debate of those normative or ethical or value inputs, a rhetorical tool to create confusion and conflict and undermine the democratic ethos.

Fake Distributional Indifference Redux

I’ve discussed the important and ubiquitous rhetorical technique from the world of bad economics I call “fake distributional indifference” a few times now, so it may seem unnecessary to go over it yet again. However, I’m always thinking of new ways to express the idea, and to be frank I still see quite a lot of it about, so maybe I can say a few more words about that this week.

Fake distributional indifference is when a purveyor of bad economics, often but not necessarily an economist, supports some policy to generate or maintain a real instance of an economically efficient, Pareto optimal, perfectly competitive market, or an approximation thereof, or even a movement in that general direction, based ostensibly on neoclassical welfare economics alone. I call it “fake distributional indifference” because all such policies lead to real instances of market systems and outcomes that come always and necessarily bundled with distributional characteristics that make them consistent with some distributional ethics and not others. Hence, supporting any such policy necessarily breaks the principle of distributional indifference and goes beyond what one can say based on neoclassical welfare economics alone.

The telltale sign of fake distributional indifference is that a purveyor of bad economics will claim to be indifferent to distributional issues while taking a position that is obviously, albeit usually implicitly, consistent with only one side in a policy debate involving distributional issues. That is to say, fake distributional indifference leads to that stock character from bad economic comedy who smugly purports to rely only on simple, uncontroversial value inputs, math, and logic, but who nonetheless contrives to be always in the middle of distributional or other ethical controversies. According to this well known if not exactly beloved character, anyone who disagrees with him or her on the controversial ethical issues involved must simply be soft in the head.

What generates this result is that a real instance of a market system or outcome is never just the concrete expression of a theoretical type. It’s always more than that. It comes bundled with additional content, not just factual content about the subjects involved, circumstances, contexts, but the ethical or normative content that is self-consciously set aside in the theory of neoclassical welfare economics. One can choose to ignore that additional content or not, address it or not, but it’s there, and if one treats that market system or outcome preferentially in any way relative to alternatives that differ from it along the distributional dimension, or really even other ethically relevant dimensions, such as the extent of the market or the treatment of the situations commonly eliminated through false factual premises like perfect rationality, one is not being indifferent to distributional ethics or the other relevant ethical issues exogenous to neoclassical welfare economics. One may think of one’s policy suggestions as leading toward “any” economic efficient, Pareto optimal, perfectly competitive, market system or outcome, but they don’t. Not really. They lead to particular instances, which is the problem. The partially unspecified and ethically attenuated, interchangeable, “any” doesn’t really exist. It’s an artifact from the Fairy Land of Economic Theory and cannot exist outside that mysterious realm of the imagination. In other words, one cannot do ethical philosophy using the scientific method. One cannot simply apply to reality ethical propositions developed in the the Fairy Land and meant to apply to the Fairy Land. They aren’t close enough approximations to ethical propositions that would be generally accepted, or indeed accepted by anyone, in the real world. That’s not how real ethical philosophy works.

Put differently, the theory of neoclassical welfare economics does not involve the absurdly controversial ethical proposition distributional and other relevant ethics, such as the extent of the market or the treatment of the situations commonly eliminated through false factual premises like perfect rationality, are unimportant or don’t really matter for evaluating real world economic systems or outcomes. That’s a proposition that applies to the Fairy Land of Economic Theory, not reality. That’s a proposition from the world of bad economics, which fails to distinguish the two, not the world of actual neoclassical welfare economics. Neoclassical welfare economics says distributional and other relevant ethics are very important and do matter, but they’re controversial, and for that reason they’re purposefully excluded from the ethical half-theory of neoclassical welfare economics. The implication of the ethical half-theory structure of neoclassical welfare economics is that one can never base real world policy on that theory alone. The missing controversial ethical issues must always be addressed and will always be addressed, either explicitly or implicitly.

The mark of good economics is humility when making real world policy recommendations, a careful accounting of the exogenous ethical inputs involved, a refusal to accept the role of ethical arbiter, and a welcoming of the relevant normative or ethical inputs from democratic government and the people. The mark of bad economics is the notion sensible policy recommendations can be based on neoclassical welfare economics alone; unrigorous sloppiness in the handling of normative inputs including hiding, misstating, and incorrectly evaluating them; a lusting after the post of ethical arbiter for society; and the attempt to exclude others and, in particular, democratic government from the process of evaluating economics systems and outcomes with demands government not “interfere” with markets, and so on.

Sometimes the world seems full of bad economics, which leads always to confusion, conflict, frustration, anger, social instability, suffering, and anti-democracy sentiment. Everyone should fight bad economics, but especially academic economists, who have a social responsibility to do so, given their remarkable laxity to date. Don’t get me wrong. Everyone should feel to argue for any normative or ethical position they like, any social, political, legal, economic system they like, but they should do so honestly and openly, not rely on rhetorical subterfuge and deceit to win the day. There’s nothing wrong with economists being in the business of supporting the interests of the economically powerful because they feel some distribution of economic power is ethically correct, they don’t like forms of social decision making other than economic power in markets, democratic government for example, and they don’t care about the potentially controversial ethical issues that result from allowing others to follow their preferences under awkward conditions like a lack of perfect information or rationality, as long as they’re honest about it. What makes bad economics bad is not the motivating ethics, the underlying ideology, but the dishonestly, the subterfuge, the fakery. Academic economists have a responsibility to respect and represent the truth.

Neoclassical Welfare Economics: Theory Versus Practice

I had a fun conversation the other day with someone who, while not exactly an economist, was clearly quite interested in neoclassical economics and had some definite ideas about what he or she felt constituted the core of neoclassical welfare economics specifically. We disagreed, and I’ve explained my views often enough I don’t think there’s any point in going over that bit of the conversation, which involved some misunderstanding of “utility” as defined in neoclassical economics and some funny notion of “aggregating” it, as it so often does. The more interesting bit for me, and the bit I wanted to discuss here today, is that it got me thinking that if one doesn’t distinguish normative neoclassical welfare economics as a normative theory with defined content, that is, defined inputs and defined conclusions, from neoclassical welfare economics as widely conceived, presented, practiced, applied, one will never really be able to come to grips with bad economics. 

If one doesn’t distinguish the actual theory of neoclassical welfare economics from popular presentations, accepted interpretations, academic conventions and norms, and so on, one will be forever in the position of critiquing what one supposes is “neoclassical welfare economics” only to have some economist suggest whatever issue one is raising does not appear in economic theory. One will end up dealing with an endless procession of baits and switches, whack-a-mole, whatever one likes to call it. One must be clear from the outset whether one is critiquing the actual theory of neoclassical welfare economics, the real normative or ethical theory that purports to establish the optimality of perfect competitive market structures under particular and rather peculiar conditions, or some particular interpretation or rendition or instance or application of neoclassical welfare economics, because all manner of funny business can, and in my experience does, take place between the two.

Of course, as I’ve argued before, some elements of what I call bad economics do, indeed, involve vague or inconsistent bits within the theory of neoclassical welfare economics itself. However, I’ve found that in the world of theory proper, it’s not so much that one finds explicit ethical content objectionable as that one finds bits that are unclear, vague, inconsistent, and seemingly purposefully calculated to misdirect or deceive. The lion’s share of bad economics involves normative or value inputs and ethical propositions that are not properly identified, discussed, or evaluated, in neoclassical welfare economics itself, value inputs exogenous to economic theory that are added on in practice without comment, and various convenient errors and bits of rhetorical nonsense like fake distributional indifference. Bad economics happens on the journey from the actual theory as it exists in its natural habitat, which I call the Fairy Land of Economic Theory, to the interpretation or application of that theory in the real world.

My take on the actual theory of neoclassical welfare economics is that one can certainly critique it for facilitating confusion and error, but it says what it says, and there is even some potential use for it once one clarifies the awkward bits. But let’s be real. No one just stumbles upon something as odd as the ethical half-theory structure of neoclassical welfare economics. No one innocently redefines the concept of “utility” to make it irrelevant to the lion’s share of ethical issues but continues using it anyway. Neoclassical welfare economics seems to have been rather obviously designed with bad rhetorical intent to foster confusion and facilitate bad economics, but that doesn’t mean it can’t be analyzed as an intellectual construct and potentially used for good.

Addressing bad economics is like solving a puzzle. What thought process leads one to suppose A follows from B when really it doesn’t? How could one express B to avoid the false impression it leads to A? It’s fun and interesting. Everyone should enjoy confronting bad economics as intellectual exercise if nothing else. Need some motivation to play the game? Neoclassical welfare economics was ostensibly designed to avoid ethically controversial inputs. If one is deriving normative results or conclusions one finds are not accepted as a matter of course by others, one should wonder how. A logical, analytical argument cannot normally create or generate ethical controversy by rearranging and manipulating ethically uncontroversial inputs. Are other people stupid? Are one’s logical manipulations and arguments too confusing for their puny minds? Other people don’t understand the logical implications of their own ethical beliefs? Or might it be one has misstated the normative inputs or evaluated them incorrectly? Inquiring minds will want to know.

Bad Economics And Interpersonal Conflict

Sometimes when I’m discussing economics with random people online I get the vague or even not so vague impression some people think I’m doing something inappropriate, misleading, blatantly ideological when I talk about our economic system resolving interpersonal conflicts of needs and desires on the basis of economic power in markets. I get it, of course. Issues like interpersonal conflict and power are just the sort of things bad economics is typically most concerned to obscure, which ironically pretty much explains why I feel they’re so important to discuss. Indeed, I really think staying focused on the resolution of interpersonal conflict is the key to unraveling a lot of the rhetorical funny business one finds in bad economics. So let’s go over that this week.

Interpersonal conflict is pervasive, indeed omnipresent. Everyone is always in a sort of conflict with everyone else because everyone needs and desires things, but resources are limited. We only have only the one world. No Star Trek style replicators are in the offing just yet. Scarcity is the order of the day. Everyone can’t get whatever they want or sometimes even what they need, yet resources end up somewhere. How? Why? Well, in markets by whoever has the most economic power, given the requisite level of interest, of course.

Two people want or need the same resource. What does neoclassical welfare economics say about the ethics of who should get it? Nothing.  What if one of the people needs the resources to survive and the other doesn’t? Nope. What if one seems a lot happier to get the resources than the other? Nope. What if getting the resources seems quite high in the preference list or ranking of one person and quite low in the preference list or ranking of the other? Nope. What if one person arguably has the right by nature, the heavens, common sentiment, or any thing else? Nope. The “utility” on which neoclassical welfare economics is based cannot support interpersonal utility comparisons of the type that would be required to resolve that interpersonal conflict. “Utility” is restricted to a sort of relatively inconsequential ethical side show about how we should treat people expressing preferences when there is no such interpersonal conflict or consideration of such interpersonal conflict has been consciously suppressed or held in abeyance, hence very significant in the Fairy Land of Economic Theory, but not really very significant at all in real life. The issue of what to do about interpersonal conflicts of needs and desires is a normative or ethical issue exogenous to economic theory. A failure to appreciate the implications of that fact for what one can say about real instances of markets and more generally economic systems and outcomes is really what underlies the entire rhetorical program of bad economics.

Distributional indifference and indifference relating to the extent of the market, that is, about which interpersonal conflicts should be resolved using markets and which using some other mechanism such as democratic government, are logical consequences of the inability to use “utility,” as defined in neoclassical welfare economics, to determine the ethically correct resolution of interpersonal conflicts. Let’s talk it through. Say two people A and B both want or need resource X. Consider the normative or ethical question who should get it. As I just mentioned, if one supposes neoclassical welfare economics says it should go to whoever gets the most “utility” from it, one would be mistaken. As I just said a moment ago, “utility” in economic theory cannot support statements of that kind, which involve interpersonal comparisons of “utility” that are impossible or undefined in economic theory (depending on that exact definition of “utility” one is using, a point I’ve discussed in previous posts).

Let’s say A has more economic power than B and therefore has the legal ability to claim X on the market if A prefers or desires to do so, and one thinks as a matter of ethics the issue should be resolved on that basis? That’s fine. That’s got nothing to do with “utility.” It’s an ethical judgment exogenous to economic theory based presumably on the ethical status of the mechanism for defining and distributing economic power.

Let’s say A gets X if legal specifications of property ownership, so-called property “rights,” and the other laws supporting a market exist, but B gets X under conditions of violent anarchy, and one thinks as a matter of ethics the issue should be resolved using law? That’s fine. That’s got nothing to do with “utility” as defined in neoclassical welfare economics. It’s an exogenous ethical judgment.

Let’s say A should get X under some particular social welfare function, and one thinks as a matter of ethics the issue should be resolved using that social welfare function. That’s fine. That’s got nothing to do with “utility” as defined in economic theory. That’s an exogenous ethical judgment expressed as “utility” using weights that cannot be justified within economic theory.

That’s what real neoclassical welfare economics says, anyway. But what does bad economics, ubiquitous misinterpretations of neoclassical welfare economics say? Well, some bad economics does an end run around indifference to distributional ethics and extent market to proclaim the existing pattern of economic power not just legally existing at some point in time but ethically justified and socially optimal. But as we just saw, those issues are exogenous to real neoclassical welfare economics. There’s nothing special about existing legal specifications of property ownership, property “rights,” in terms of “utility.” No reason to preserve them, to not alter them. Indeed, there’s no reason on the basis of “utility” or neoclassical welfare economics to even respect them.

Some bad economics portrays itself as normatively empty or neutral given the theoretical availability of social welfare functions. But as we just saw, some ethical conclusions are still endogenous to neoclassical welfare economics, derived within economic theory based on supposedly uncontroversial value inputs, and some are still exogenous and possibly quite controversial indeed. And bad economics typically ignores the implicit social welfare functions associated with any real market outcome, preferring instead to suppose they only become ethically relevant if one designates them as significant in that respect and explicitly introduces them as such. 

Want to understand bad economics and how it works its dark magic? I would suggest concentrating on what someone suggests is the ethically correct resolution of interpersonal conflicts of needs, wants, and desires, on what someone has to say about the thorny and controversial question who should get what, where resources should go, and why. Because everyone has ideas about that, including economists, but whatever their beliefs, they aren’t based solely on normative neoclassical welfare economics under any sensible interpretation of that admittedly opaque theory. Don’t fall for the old switcheroo, the bait and switch, the big con of bad economics that suggests one can address the  controversial ethical issue of how to resolve interpersonal conflicts of needs and desires using only trivial ethical propositions about how to treat people acting in isolation, with false factual premises like perfect information and perfect rationality to boot.

The Extent Of The Market And The Disabled

Want a good example of the obscure ethical issue I’ve been calling the extent of the market in the context of normative neoclassical welfare economics? How about disabled people and the issue of accessibility? For some time now, I’ve been wanting to do a post on the extent of the market in the context of future generations, which I think is another good example, but eventually I realized that example raises some additional issues and maybe this one actually works better as the initial case. 

Recall the issue of the extent of the market is basically what does normative neoclassical welfare economics say about the use of the market mechanism and, in particular, does it express the normative or ethical proposition that markets are always the best, optimal, most ethical mechanism for resolving interpersonal conflicts of needs, and desires, that is to say, to decide who gets what and what goes where. The most obvious potential alternative to the market mechanism in that respect is political democracy, although other decision mechanisms are also possible.

In previous posts, I’ve mentioned the issue of the extent of the market is related to distributional ethics but also subtly different. Distributional ethics are about the distribution of economic power, which directly affects the resolution of interpersonal conflicts of needs and desires based on relative economic power in markets. In contrast, the extent of the market is about the social decision to use markets at all, never mind how economic power is distributed. Extent of the market tends to be more apt when discussing situational ethics, while distributional ethics tend to be more apt when considering personal characteristics ostensibly relating to merit, fairness, material welfare, etc. Extent of the market is more about whether markets are the most ethical way to go, distributional ethics about whether the relative economic power governing market outcomes is ethically justified. However, the dividing line in many cases seems a little imprecise and may depend more on practical issues than any point of logic, per se. The example we’re considering today, the question of whether we, as a society, should use democratic government to promulgate and enforce regulations establishing accessibility requirements for disabled people, seems clearly more aptly discussed in the context of the extent of the market, although disabled people are identifiable by their personal characteristics and can wield economic power and one can at least imagine addressing the issue from the perspective of distributional fixes, so maybe it bears talking through.

Bad economics, of course, says simply if disabled people don’t have the economic power to make accessibility happen on the market now then no, we as a society should not worry about accessibility as a point of ethics. If it’s not here now from market forces alone, then it shouldn’t be. Ethical case closed. In contrast, good economics, reflecting the distributional indifference of real neoclassical welfare economics, doesn’t express that essentially status quo sentiment because the ethical status of the current economic power of disabled people is ethically indeterminate within that theory. Maybe disabled people should have more economic power? So neoclassical welfare economics is silent as far as the question of relative economic power goes, and hence also of the consequences of that economic power in terms of accessibility. 

But is that kind of distributional fix based on adjusting relative levels of economic power even a realistic solution to the problem of providing accessibility for disabled people? What kind of economic power are we talking about? We’re talking about disabled people wielding so much economic power we expect businesses will provide accessibility based on market forces alone? That seems to involve quite a lot economic power changing hands. Not sure that’s an entirely plausible policy option. So should we just bypass market mechanisms and require accessibility via regulation as a point of ethics? What does neoclassical welfare economics say?

Well, that’s an interesting question because neoclassical welfare economics doesn’t say anything explicitly. It just dives into ostensibly optimal market structures assuming the existence of markets at a stage of decision making after the one we’re considering here. However, as I’ve suggested before, it seems inconsistent for neoclassical welfare economics to take such pains to avoid controversy in the area of distributional ethics only to make the absurdly controversial claim using non-market mechanisms is never an ethically acceptable approach to addressing social issues including resolving interpersonal conflicts of desires, or in this case, to make the absurdly controversial claim the only ethically acceptable way of addressing the issue of accessibility is providing disabled people sufficient economic power to make it happen on the market, no matter how difficult or impractical? As in the case of distributional issues, I don’t think neoclassical welfare economics can be properly interpreted as demanding only first best solutions, throwing up roadblocks, blocking policies designed to address controversial ethical issues one supposes it is meant to avoid.

However, the issue at hand runs rather deeper than that. The normative rationale provided in neoclassical welfare economics for using distributional fixes is, of course, to capture potential gains from disabled people choosing to their newfound economic power to move up their preference rankings more generally, thus arguably doing better than simply getting accessibility for the minimum level of resources to achieve that end alone. That seems sensible enough as far as it goes. However, I would suggest it’s quite controversial to suggest people cannot have ethical beliefs centered on particular issues such as accessibility that go beyond moving other people up the personal preference rankings of those other people. Indeed, that proposition seems to me an artifact of the ethical half theory structure of neoclassical welfare economics, basically the extent of the market version of the argument from bad economics that neoclassical welfare economics says distributional ethics are unimportant or irrelevant. One cannot have or evaluate a real instance of a market system without addressing in some way, explicitly or implicitly, controversial ethical concerns that go beyond it’s nice when people move up their preference rankings. One cannot identify an ethically correct way of distributing economic power using legal specifications of property ownership (property “rights”) without going beyond it’s nice when people move up their preference rankings. Indeed, one cannot envision any ethical basis for resolving interpersonal conflicts of needs and desires without going beyond it’s nice when people move up their preference rankings. So if neoclassical welfare economics contains the ethical proposition any such basis is ethically or normatively illegitimate, then the theory would be not only absurdly controversial, but philosophically implausible to anyone who holds ethical beliefs relating to resolving conflicts with other people, which is to say everyone.

No, I contend the only reasonable interpretation of ostensibly uncontroversial normative neoclassical welfare economics is that the choice to use or not use the market mechanism in the first place, as opposed to some other mechanism such as political democracy, is meant to also be exogenous to economic theory, similar to the way neoclassical welfare economics addresses the ethics of the distribution of economic power. That means that although one could  always sit down and calculate a social “welfare loss” if we as a society decide to provide accessibility for disabled people via regulation because resources are not going to their most highly valued (by the market) use and so on, normative neoclassical welfare economics itself is agnostic on the issue of whether anyone should actually care about it.

Note the argument being presented here is entirely distinct from the argument one can always simply reject the ostensibly uncontroversial normative argument in neoclassical welfare economic in its entirety. Even if the normative or ethical inputs to that theory were as uncontroversial as advertised, no one is constrained to hold typical normative or ethical views. One may always decide neoclassical welfare economics is ethically implausible or unacceptable on some basis or other. All the more so when one considers the normative inputs are not really as uncontroversial as advertised once one identifies and evaluates them properly. In this post, I’m taking about what happens when one accepts the normative argument in neoclassical welfare economics and accurately expresses what it says. I’m not talking here about rejecting it at all.

What’s the bottom line here as a practical matter? If, as a point of ethics, one thinks the social cost of providing accessibility for disabled people is not worth the cost, then fine, congratulations, one should certainly always speak up on behalf of one’s own ethical beliefs. However, one should not pretend it’s simply a conclusion from normative neoclassical welfare economics based on ostensibly uncontroversial value inputs. That’s misleading. That’s not real. That’s not what neoclassical welfare economics really says under any plausible interpretation. No, that’s just one’s own normative or ethical belief or value judgment based on whatever ethical theory exogenous to neoclassical welfare economics one is relying upon to make that call. My mission, as always, is not to promote one ethical belief over another but to fight opaque and misleading bad economics, which creates confusion and conflict everywhere.

Let me just end this post with quick shout out to disability rights activist extraordinaire Paula Hardin for raising the issues that led to this week’s post.

Addendum

The laws, including the legal specifications of property ownership (property “rights”) that define economic power, contract law, tax law, inheritance, the provision of government benefits, and other policies used to define the distributional mechanisms that govern market outcomes, come from democratic government in the same way non-market solutions may come from democratic government. It would certainly seem to require some additional explanation or development if neoclassical welfare economics were to contain the normative proposition the former use of democratic government is ethically legitimate but the latter not.