It’s a bit of a special week for me because my recent discussions of the ethical issues of the extent of the market and law over anarchy, which I now contend are exogenous to neoclassical welfare economics because they go beyond what one can say on the basis of “utility,” have prompted me to fix up my little ebook take on what I call the “onion of bad economics.” I thought for a moment the onion had passed away, but then I realized that notion was predicating on following the well trodden path of conflating bad economics with the neoclassical welfare economics on which it is loosely based. Ironic, isn’t it? Given my concern to help others avoid that fate? No, the onion lives on, although I did find it sensible to do some major revising to better explain what the onion is all about. It’s the onion of bad economics, not the onion of neoclassical welfare economics. Maybe we can use this opportunity to review that whole side of my project. I’ve found summaries and recaps rarely go amiss.
Why am I always on about what I call bad economics? It may help to remember what I have in mind by bad economics is not any old form of what anyone might consider bad economics, but anti-democracy “government should not interfere with markets” forms of pseudo-economic reasoning posing as conclusions derived from neoclassical welfare economics. I’m always talking about it because it’s false and creates confusion and conflict. We have real neoclassical welfare economics, the specific, defined, normative theory developed in, and relevant to, what I’ve taken to calling the Fairy Land of Economic Theory, and we have bad economics typically associated with inappropriately invoking that theory under the rather different conditions one finds in the real world. The tricky bits of bad economics derive from the unique ethical half-theory structure of neoclassical welfare economics, in which some normative issues are in and some out, or to put it another way, from the tricky relationship of the Fairy Land and the real world. It encourages people to play games, fudge things. What’s in? What’s out? No, What’s on third! (If the allusion eludes you, don’t even worry about it, it’s an expression of confusion from an old comedy routine, but that’s not important now.)
Opaque normative or ethical content arrives in bad economics in three ways. First, it arrives from the opaque normative propositions in neoclassical welfare economics itself, typically involving “utility” or the conditions under which propositions involving “utility” are analyzed in the Fairy Land. I call that the inner layer or core of the onion of bad economics. Second, it arrives via opaque normative propositions exogenous to neoclassical welfare economics, that is to say, not based on “utility,” but involving using or establishing markets, and often incorrectly associated with neoclassical welfare economics. I call that the middle layer of the onion of bad economics. Third, it arrives via simple errors or misinterpretations of neoclassical welfare economics that can occur when one attempts to relate that theory to the real world, so things like fake distributional indifferences and references to nonexistent distributional mechanisms. I call that the outer layer of the onion of bad economics. The developments that have prompted the recent revisions of my book involve the second pathway, the middle layer of the onion. That’s where the ethical issues of the extent of the market and law over anarchy create problems.
What I’ve determined somewhat recently is the only sensible approach when thinking about the normative or ethical content of normative neoclassical welfare economics itself is to draw the line at what we can say using the relevant definitions of “utility.” That means any attempt to apply the conclusions of neoclassical welfare economics to reality necessarily involves exogenous normative or ethical content. One simply can never really get there on the basis of “utility” alone, even as far as choosing to use markets or indeed choosing to have the conditions necessary for markets to exist. Any attempt to portray a real world policy recommendation as resting on neoclassical welfare economics alone is bad economics, the only real issues are what manner of bad economics is it, how does it work, what are the exogenous ethical propositions involved?
That’s really what I was trying to demonstrate in my ebook on bad economics. I wanted to delve into the sort of opaque normative content one typically finds in bad economics and discuss how it evolves from, or is at least related to, applying neoclassical welfare economics in realistic settings. I really do hope there’s no confusion on that point. The book is not about supporting bad economics or advocating for the type of normative or ethical content one finds in bad economics. The perspective may be different, a little odd, like most things I write, but I still suspect it may be potentially useful for some people. I think it’s interesting, anyway. However, in the previous version of my book, I bent over backwards a bit as far as giving neoclassical welfare economics some relevance for the real world by suggesting certain simple exogenous normative inputs might reasonably be viewed as implicit in that theory. Which ones? Extent of the market and law over anarchy. However, that approach is untenable. It leads to ambiguity and confusion when it comes to the ethical half-theory of neoclassical welfare economics and the relationship of the Fairy Land of Economic Theory to the real world. It also leads to the sort of funny, contradictory results I’ve been discussing these past several weeks. No, the only sensible solution is to draw the line at “utility” when identifying normative content endogenous to neoclassical welfare economics.
Looking for answers? I’m afraid you’re looking in the wrong place, my friend. But I might come up with some interesting questions now and again, if that helps at all. I’m trying to raise awareness of issues, start discussions, dispel confusion and conflict, fight bad economics. Do you think it a modest goal? I don’t. You know what I find truly comical, no matter how many times I hear it? Listening to a discussion in which one person presents a form of bad economics as neoclassical welfare economics, another criticizes what he or she supposes is neoclassical welfare economics on that account, and an economist then refutes the criticism based on real neoclassical welfare economics. Let’s simplify, differentiate, define, draw some boundaries. For my economist friends and associates, let’s look behind the criticisms of neoclassical welfare economics in a sincere way instead of clawing desperately at some excuse, any excuse, to dismiss them. Let’s take the problem of bad economics seriously.
Fixing instances of bad economics is all very well, but the potential for bad economics will remain as long as economists work with neoclassical welfare economics and try to apply it in realistic setting by adding their own variable, exogenous, subjective normative propositions. Want to know how to eliminate the potential for bad economics of the sort I mean occurring? Remove the normative content from neoclassical economics, all of it, and make economics a positive science at long last. Fulfill the childhood dream. Perhaps economists can show where normative inputs are required to evaluate economic systems and outcomes, but as long as they feel their role is to supply those inputs, we will never be rid of the potential for confusing, conflict generating bad economics. When it comes to normative or ethical theorizing, the substantive intellectual discourse belongs with ethical philosophers, who understand the issues and the methods of philosophy, while the decisions lie with voters and their democratically elected representatives. Economists should stop doing what they shouldn’t be doing, confusingly supplying the world with their own subjective and idiosyncratic ethical stylings as though it were economics, and start doing what they should be doing, addressing bad economics.
