Dual Nature Of Labor, And Capital

Someone mentioned the dual nature of “labor” in neoclassical welfare economics the other day. It’s something I find interesting, as well. Maybe I can say a few more words about that this week? If you’re keeping track and amused by it, we’re back in the core of the onion of bad economics: funny bits of neoclassical welfare economics itself that may lead some people to bad economics in the conservative style.

In neoclassical welfare economics, “labor” can refer to both an input or factor of production, on par with capital, for a mental picture let’s say like a wrench, but also often people, the locus of the “utility” about which the theory is ostensibly about, unlike a wrench. Where this dual nature of labor tends to cause problems is in the context of policies designed to change the distribution of economic power, not as in the Fairy Land of Economic Theory by changing the “initial endowment” of economic power, but in reality.

In a perfectly competitive market, the price of a wrench, as a productive input, should tend to whatever it adds in value (money) during the production process under some pattern of demand based on the distribution of economic power, its “productivity.” If one pays more for a wrench than it adds in monetary value during the production process (setting aside other potential sources of value), one is wasting money, not getting as much from one’s productive resources as one might, not expressing production efficiency. The price of the productive input of labor, the wage, is subject to the same market forces and presumably also tends in perfectly competitive markets to whatever value it adds under some pattern of demand based on the distribution of economic power. The price of labor or wrenches may be less than the marginal product if the labor or owners of wrenches are desperate, need money, competing to get it. And if one productive input is paid less than its productivity, another may be paid more. But let’s keep it simple, shall we? Let’s just suppose all productive inputs are paid according to their productivity.

You see where I’m going with this, right? Ready for the inevitable train wreck? You’ve seen it all before? Well, if something is worth saying once, it’s worth saying a thousand times. That’s my motto. Or one of my several mottos, anyway.

Let’s add an example to keep things simple. Let’s say some laborer, Tom, doesn’t really add much monetary value for one reason or another. Doesn’t matter why. Again, let’s keep it simple and say he’s just not the sharpest tool in the shed. His “productivity” is low. His wage is low. He’s barely scraping by. Let’s say someone else, Jeremy, has some ethical beliefs about the distribution of economic power and supports non-market mechanisms to increase Tom’s economic power, subsidized wages, unions, minimum wage laws, regulations, whatever. Why? Doesn’t matter here. Maybe Jeremy thinks Tom is giving his best effort and defines “merit” in terms of hard work or trying hard. Maybe Tom is suffering from want and Jeremy takes a utilitarian interest in his welfare. Maybe Jeremy thinks Tom has certain rights. Whatever. What does neoclassical welfare economics say about it? Nothing. Because we’re talking about people, and the funny thing about people in modern neoclassical welfare economics is we can’t resolve interpersonal conflict on the basis of “utility.”

If one forgets the person and thinks only of productive inputs, one might suppose neoclassical welfare economics suggests taking manipulation of wages off the table as far as addressing ethical concerns about the distribution of economic power, allowing only so-called direct transfers. That’s meant to ensure the productive input is not misallocated in the production process, that it continues to be paid its marginal product even as the pattern of demand changes with the change in the distribution of economic power. That’s an expression of what I call fake distributional indifference. Mechanisms to manipulate or revise wages may be more feasible, practical, possible, than direct transfers. Neoclassical welfare economics doesn’t limit distributional indifference in that way. Neoclassical welfare economics doesn’t demand first best solutions when addressing distributional ethics. It doesn’t require people to jump through hoops, find the mythical Chimera, perform amazing feats, do the politically or practically impossible.

Does manipulating wages lead to an “economically inefficient” allocation of the productive input of labor relative to the pattern of demand generated by the current distribution of economic power? Doesn’t really matter under the normative argument presented in neoclassical welfare economics. There is no “equity” versus “efficient” tradeoff in neoclassical welfare economics. Did I mention? If one is discussing “economic efficiency” defined in terms of “utility,” and “equity,” normative beliefs relating to ethically optimal outcomes, also defined in terms of “utility,” the fact one doesn’t know what happens to “utility” if one changes the distribution of economic power cannot correctly be described as a “tradeoff.” As I’ve discussed many times now, the notion of an “efficiency equity tradeoff” is false and misleading because it presents “efficiency” as a normative value endogenous to neoclassical welfare economic and “equity” as exogenous, which presents the theory as not being indifferent to outcomes to which it actually is indifferent based on “utility.” 

Might the change also affect “production efficiency” defined in terms of money or goods? Might we have a tradeoff between “equity” and total output? Sure. However, that’s normatively irrelevant in neoclassical welfare economics because it doesn’t say anything about what happens to “utility.” Also, it’s empirically dodgy, given potentially more robust demand. Incidentally, changing the distribution of economic power using direct transfers also changes incentives on the labor market. Do you really suppose Tom is going to risk his life for pennies to make you lunch during a pandemic unless he feels financial distress? Just saying.

Yes. We’re talking about conflation again, in this case “utility” with money or output, “labor” as a factor of production with people, “wages” as a means to distribute economic power with a means to allocate a productive input. And, yes, as I hinted at earlier, the same issues really apply to wrenches, which are productive inputs as well as assets owned by people, with a price featuring in both the allocation of that input and the distribution of economic power. That is to say, one can conceive of labor not as people, as I just did, but as a productive resource, like a wrench, owned by laborers in the same way a wrench is owned by others. But wasn’t it easier, at least initially, to show the issue with “labor” as the people themselves? Shouldn’t I really try to simplify the presentation when I can?

Given the ubiquitous conflation of positive and normative issues in economics, we should probably say a few words about the ethical theory that proposes we distribute economic power according to one’s productivity, the value one adds. The marginal productivity theory of distributional ethics has nothing to do with the normative argument in neoclassical welfare economics about “utility.” Like all other such ethical theories, it’s exogenous to neoclassical welfare economics. It has no significance in the Fairy Land of Economic Theory. But we can say a few words about it. Why not?

As an ethical theory about the distribution of economic power, it seems to be a form of fairness argument, if one adds X amount of value, it’s fair and ethically appropriate one should get X amount of economic power back in return. But, of course, there are a few issues. Potentially relevant issues include why some workers have higher productivity than others, how productivity relates to merit, effort, hard work, trying hard, things under one’s control and not, etc. Basically, ethical considerations relating to fairness, but otherwise conceived. Other potential issues might involve utilitarian concerns about whether we’re getting the most from our limited resources in terms of human happiness or satisfaction, fulling human wants and needs, etc. Yet other issues may involve “rights” of one sort or another, various religious precepts, etc. And what about the ethical beliefs relating to the distribution of economic power as it applies to owners of capital? Oh come on. Yes, there are issues there as well, some the same, some a bit different. Life is a rich tapestry, but I’m already running a bit over this week.

I have ethical beliefs like anyone else, and I’m willing to argue those and sometimes do. All I’m really suggesting here is people refrain from pretending things are part of neoclassical welfare economics when they’re not. It’s bad economics and creates confusion and conflict. Want some hints on overcoming the tricksy rhetoric of bad economics in the conservative style? Be rigorous about words, terms, concepts. Keep firmly in mind what you’re talking about. Talk about one thing at a time. Distinguish normative from positive. Slow down. Simplify.

A Bit Of Context

Maybe I should step back this week and look at the broader context. Does everyone understand why I keep talking about neoclassical welfare economics? Its significance? Why one might care if certain ethical issues are endogenous or exogenous to it?  Not really? Fine. Let’s talk about it.

I won’t bore you with details or history this week, let’s just say neoclassical welfare economics is a normative or ethical theory that purports to establish the social optimality of “perfectly competitive” markets free of market failures. Neoclassical welfare economics is the starting point for most folk economics about “the free market” and “capitalism,” as well as more extreme derivatives like so-called libertarianism, fake market-based “anarchism,” Austrian economics, etc. When one hears people talking about what economic theory declares “socially optimal” or “efficient,” about market “distortions” or people “rigging” otherwise optimal markets, they generally have in mind neoclassical welfare economics.

The reason many consider neoclassical welfare economics an interesting and intriguing ethical theory is that it is ostensibly based on very limited normative inputs about which most people would agree; the implication being most people should therefore be interested in the conclusions. Indeed, sometimes the normative inputs are considered so uncontroversial people forget entirely they’re talking about an ethical theory, with normative inputs and conclusions one might evaluate and accept or reject based on subjective moral sentiment. It’s a problem exacerbated by the ubiquitous and risible positive approach to normative economics associated especially with mid-century logical positivism and the perennial quest of economists to be more like physicists while incongruously maintaining their own normative role in recommending economic policy. Economists working in the tradition of positive normative economics treat the normative inputs and factual premises as arbitrary givens and view the ethical theory being expressed as someone else’s ethical theory, about which they are simply checking the logic and math. In positive normative economics, economists aren’t meant to advocate, recommend, suggest, persuade anyone what is socially “optimal” or “efficient” or anything else. They simply report, as scientists, about what someone else’s random, unevaluated ethical theory says. Don’t like the normative conclusions? Take it up with whoever said we should maximize “utility,” whoever defined “utility” the way it’s defined in economic theory, whoever wrote the theory. Don’t take it up with them. They’re scientists, dammit, not ethical philosophers. But I think we all understand rhetorical claptrap when we see it, don’t we? They’re involved in normative economics rather more than simply checking someone else’s internal logic and math. Economists wrote economic theory, defined “utility” as they found appropriate, and now evaluate policy, recommend people do things on the basis of normative economics. Hardly disinterested scientists confining themselves to logic and math.

To return to the main plot for today, the vaunted ostensibly normatively uncontroversial nature of neoclassical welfare economics, the aspect that makes it of widespread interest, really only applies in a rarefied theoretical context I call the Fairy Land of Economic Theory. When neoclassical welfare economics is applied in the real world, all manner of interesting and controversial things can happen that lead directly to bad economics in the conservative style, a rhetorical artifact or construct based loosely on neoclassical welfare economics. Explaining how bad economics in the conservative style works, why it’s rhetorically powerful, how exactly it relates to actual neoclassical welfare economics, is what I’ve been talking about the past two years or so.

Neoclassical welfare economics is ostensibly about “maximizing” a certain sort of “utility.” I’ve argued before it’s really about some normative propositions relating to people expressing preferences under various conditions but expressed in an awkward, opaque, insincere way. Well, that, and preventing people considering and discussing certain other awkward and controversial ethical issues relating to resolving interpersonal conflicts on markets, like the definition, distribution, and use of economic power, etc. One needn’t attach normative significance to “utility” as defined in neoclassical welfare economics. Ethical philosophers have suggested many potential definitions of “utility.” Economists, as well, in so-called “general welfare analysis.” That’s not neoclassical welfare economics. That’s just the amateur ethical philosophizing of some random economists. It can be moderately interesting, albeit typically not as interesting as ethical theories discussed by philosophers familiar with the relevant methods and issues. The reason it’s an entirely different kettle of fish from neoclassical welfare economics, beyond the conclusions, is that there’s no claim the normative or ethical inputs involved are particularly simple or noncontroversial. It’s just normal, everyday, if typically rather inept, ethical philosophy.

Inquiring whether particular normative or ethical propositions are endogenous or exogenous to neoclassical welfare economics is important for avoiding the classic confidence game of bait and switch typical of bad economics in the conservative style. The bait and switch in bad economics in the conservative style involves portraying one is working with neoclassical welfare economics and its limited normative inputs, then delivering controversial conclusions requiring additional and rather more controversial normative inputs. The entertaining and engaging part of addressing bad economics is trying to figure out how it’s done. Like any good bit of stage magic or rhetorical chicanery, how it’s done can often be quite tricky, clever, even amusing.

If an ethical proposition necessary for some conclusion is exogenous to neoclassical welfare economics, that means one can agree with everything in that theory, but disagree with that normative conclusion. In that case, one’s issue is not inside but outside that theory. If one’s disagreement with bad economics in the conservative style involves ethical issues exogenous to neoclassical welfare economics, there is little point in arguing with purveyors of bad economics in the conservative style about neoclassical welfare economics.

If all the ethical propositions necessary for some conclusion are endogenous to neoclassical welfare economics, that means if one rejects that conclusion one apparently has some issue with supposedly uncontroversial neoclassical welfare economics itself. If one’s disagreement with bad economics in the conservative style involves only ethical issues endogenous to neoclassical welfare economics, then one’s issue is not with bad economics in the conservative style, per se, not with anything added onto neoclassical welfare economics, not with any errors made in the interpretation of neoclassical welfare economics, but with neoclassical welfare economics itself.

The two situations are entirely different. A great deal of confusion and conflict is generated by people taking issue with some aspect or conclusions of bad economics in the conservative style but being unclear about whether they’re talking about issues inside or outside neoclassical welfare economics. My goal is simply to help people differentiate real neoclassical welfare economics, and its normative inputs and factual premises, from bad economics in the conservative style based loosely upon it, with the goal of reducing unnecessary confusion and conflict. Neoclassical welfare economics is an ethical half-theory about what is optimal, efficient, ethically desirable relative to certain missing, exogenous, normative inputs. If one applies it in the real world one must supply those inputs in order to generate conclusions.

Are we good on the broader context of why I talk about what I talk about? Can I just get back to talking about it? Over and over and over again? With no discernible effect on anyone or anything? Because trying is really the thing for me, not the doing, which depends upon many factors beyond my control.

Extent Of The Market And False Factual Premises

This week I’m concluding the simplest, shortest explanation of the basics of bad economics in the conservative style this side of forever. Three easy blog posts. But they’re so long! Fine, I’ll power through extent of the market and false factual premises in one go.  Satisfied?

Recall the first part of my three part summary dealt with some potentially confusing aspects of superfluous and idiosyncratically defined “utility” in neoclassical welfare economics, which contribute directly to bad economics. The second part of my three part summary dealt with a common rhetorical trick associated with bad economics: fake distributional indifference. Unlike “utility,” the rhetorical trick of fake distributional indifference is clearly not part of neoclassical welfare economics proper.

Under my old “onion of bad economics” scheme, we may say part one involved the inner layer or core, potentially confusing bits in neoclassical welfare economics itself, and part two involved the outer layer, issues that are clearly not part of neoclassical welfare economics, per se. This final third installment addresses issues from the difficult to delineate middle layer of the onion of bad economics; issues that are not really part of neoclassical welfare economics, per se, but some knowledgeable people might suppose are.

My first issue today is an ethical issue I call “extent of the market,” the choice of when to resolve interpersonal conflicts of preferences using economic power in markets and when to resolve them using some other mechanism, such as voting in a democratic political system. Does neoclassical welfare economics contain a normative or ethical argument about when we should use economic power in markets to resolve interpersonal conflicts? I would say, no, clearly not. That issue is exogenous to that theory. Why do I say that? The “utility” on which neoclassical welfare economics is based cannot support interpersonal utility comparison and thus cannot be used to resolve interpersonal conflicts. Deciding when to use economic power in markets to resolve such conflicts is no exception.

Supposing neoclassical welfare economics contains such a proposition would mean the theory expresses indifference to the distribution of economic power but not to the proposition interpersonal conflicts should be resolved on the basis of economic power. Why? What ethical theory is that? No, I’m just asking. If that were the case, some of the normative inputs to neoclassical welfare economics would not be based on “utility,” and would be not well identified, analyzed, evaluated, or discussed. That, I think, not only unfairly maligns the theory, but creates confusion and conflict.

Conservative bad economics in this context involves supposing neoclassical welfare economics does contain a normative or ethical argument relating to extent of the market in the case of particular or even all interpersonal conflicts. For example, a purveyor of bad economics may suggest neoclassical welfare economics says a vaccine should be distributed by economic power in markets, not by medical need. That’s an ethical position one might discuss, but it’s not one expressed in neoclassical welfare economics.

One can, of course, calculate a “social welfare loss” predicated on accepting the resolution of that interpersonal conflict based on economic power in markets, but attaching normative significance to that calculation is, in fact, exogenous to neoclassical welfare economics. The “social welfare loss,” when applied to reality, is just another bit of potentially misleading wordplay designed to trip up the inattentive and unwary, along the lines of (economic) “efficiency,” “social welfare” and “optimal” market outcomes. They don’t mean what one might suppose they mean in everyday speech. They mean something rather less than that.

One manifestation of confusion relating to the exogenous ethical issue of the extent of the market involves property “rights.” One can’t resolve interpersonal conflicts of preferences on the basis of economic power in markets without defining economic power (i.e., legally defining property). One often sees purveyors of bad economics trying to slip the necessary normative propositions into neoclassical welfare economics through the back door by saying, well, of course, one needs legal specifications of property to have markets. Yes, of course. That’s not the issue. The issue is whether the relevant normative propositions are inside or outside neoclassical welfare economics, endogenous or exogenous. That is, does the theory contain an argument against anarchy? Does it argue we should resolve interpersonal conflicts on the basis of law? If so, it’s not based on “utility.” If we’re looking at an interpersonal conflict, let’s say between two people over possession of a wallet, we don’t know if the person with a legal claim to the wallet will get higher “utility” from it than the other person, if indeed it even makes sense to ask that question. (Again, it only makes sense to ask that question if one is using the old fashioned internal perceptions of satisfaction from preference fulfillment “utility,” not if one is using the ostensibly standard individual preference rank “utility,” in which case “utility” would be undefined in interpersonal contexts.) The argument one would like to apply neoclassical welfare economics to reality, and one can’t unless one accepts some other random ethical propositions, so those other random propositions must be part of the theory, is not really a serious argument. That’s bad, as in inept, philosophy.

Next, consider false factual premises. When one evaluates the normative inputs relating to “utility,” which are really about how to treat other people expressing their preferences, if there are no interpersonal conflicts to muddy the ethical water, certain conditions are relevant. Like what? Well, does the person know what he or she is doing or talking about? Does he or she seem rational? That sort of thing. If those conditions are met, the proposition one should let him or her do whatever he or she likes is relatively ethically uncontroversial. (Note that for purposes of this blog post I’m setting aside the issue of whether the “no interpersonal conflict” case defined with respect to “utility” has any application to reality, given the variety and ubiquity of interpersonal conflict in real life. I’ve argued before, if one expresses the relevant ethical propositions in terms of how to treat other people expressing preferences under certain conditions, rather than in terms of the rhetorical and misleading “utility,” one can easily enough set parameters on what qualifies as ethically relevant interpersonal conflict.)

So does the ethical proposition in neoclassical welfare economics we should “maximize” total social “utility” involve conditions, like perfect information and perfect rationality, that render it non-controversial in the relevant no conflict case, or does it not? Again, I would say no, clearly not. “Utility” is about choices, observed preference rankings, not people’s knowledge or state of mind. It’s bad philosophy to pretend things are part of an ethical theory that are not actually there because one finds it convenient to imagine they are there.

If one wants to ascribe those conditions to neoclassical welfare economics itself, and say the relevant ethical proposition involves maximizing social “utility” only under particular, unreal conditions, then spell it out so everyone understands it’s not meant to apply to reality. In that context, it may be worth noting that factual premises in normative economics are often conflated with simplifying assumptions in positive economics, leading to the risible notion it doesn’t really matter if the factual premises in normative economics are true or false. Again, that’s just inept ethical philosophy. It would seem conservative bad economics involves not only tacking on controversial normative propositions to neoclassical welfare economics without identifying those exogenous ethical inputs as such, it also involves misstating the level of controversy associated with the inputs that are there, to make the bait and switch that much more effective.

Neoclassical welfare economics is an ethical half-theory that gives conclusions relevant to the real world only if one holds particular exogenous ethical beliefs about the definition, distribution, and use of economic power, and the significance of ignorance, irrationality, etc. It’s fine to supply those exogenous inputs yourself, or to argue they should be decided by the people through democratic government, but be honest about it. Identify, explain, evaluate them. Don’t just pretend they’re part of neoclassical welfare economics. That’s bad economics.

Fake Indifference, In General, Without Economics

Can I just interrupt my own schedule of events this week and do an addendum to my post from last week on fake distributional indifference? I thought of a fun way to say it without reference to economics and wanted to quickly share that before moving on. I meant to do the final installment, part three, of the shortest, simplest explanation of the main elements of bad economics in the conservative style you’ll likely ever see, but maybe I can hold that back until next week? It’s not like bad economics is going anywhere soon, is it? I suppose some may be thinking, “Why is Hansel always banging on about fake distributional indifference? He’s like a broken record out there.” Why? Because apparently there’s some confusion about it. Everyone understands it’s wrong, but one sees it everywhere. Because it’s a big part of bad economics. Because it’s annoying as heck. One minute one is talking about the theory of neoclassical welfare economics, with distributional indifference. Everything is fine, everyone knows what everyone else is talking about, everything is clear, then ... Bam! Fake distributional indifference shows up and everyone falls over.

So let’s do fake indifference in general, without the reference to economic theory. Say there are two possible outcomes under consideration, A and B, and some people have ethics that support A, call them Team A, and some people have ethics that support B, call them Team B. Makes sense, right? However, in addition there are wonky versions of A and B that are nearly but not quite as good, call them Wonky A and Wonky B. Team A thinks both A and Wonky A beat anything on the B side. Team B thinks both B and Wonky B beat anything on the A side. Still with me? Both teams agree as far as the minor issue of wonkiness is concerned. Everyone agrees A beats Wonky A, and B beats Wonky B, no matter what team he or she is on. If you've got all that, you should be all set to see how fake indifference works generally, and in bad economics.

Say we’re currently at Wonky B and we have two policy proposals on the table, two possible things we might do: move to B, move to Wonky A. Joe, the local purveyor of sometimes dubious philosophy, says, “Well, I recommend we avoid ethical controversy and choose to move to B.” Team A gets a tad annoyed. “Hello, we’re standing right here. We’re saying we prefer Wonky A to B. How is choosing B over Wonky A avoiding ethical controversy? Let’s just try to hash out the essential, substantive issues between A and B in good faith and get on with it.”

Joe then begins to adduce all manner of arguments about how moving to B avoids ethical controversy. He explains, “I’m indifferent to A and B. I’m just opposed to wonkiness, as are most of us. Yes, I’m a proud member of the uncontroversial, bipartisan League Against Wonkiness.” Team A responds heatedly, “Yes, that’s fine, but here, in choosing B over Wonky A, you’re not simply delivering an opinion on wonkiness, the relative position of Wonky B and B, you’re also delivering an opinion on the much more controversial ethical issue of Wonky A versus B.”

But Joe’s got plenty more where that came from. “No, I disagree. As soon as we fix the wonkiness problem, the uncontroversial problem I’m concerned with, you’re still free to move from B to A if you like. You will have lost nothing, and you’ll be in a better position than now. In that sense, although it may appear I’m choosing the policy that leads to B over the one that leads to Wonky A, that’s incorrect. What I’m actually saying is that that particular policy question or choice is, or should be considered, irrelevant right now.” Joe continues, “And, honestly, I don’t really understand how you could possibly be in favor of wonkiness, the rejection of which is not very controversial at all. I really think you need to slow down and think about things a bit more carefully.”

Team A responds, “Joe, your reasoning is all wet. We find the policy question relevant and important to address now, and since you’re not suggesting moving toward anything in the A family, which is our main concern, your policy suggestion is, in fact, ethically controversial. Also, we find the idea of postponing discussing serious ethical issues until we attain B peculiar. Will you even ever acknowledge arriving at B? Or will we be forever in the state of trying to move from some Wonky B to B? Chasing an ideal that doesn’t actually exist?” Team A goes on. “And, for the sake of argument, if ever we actually arrived at B, is there really a mechanism to move from B to A without wonkiness? As your argument works now, as soon as we revise B in any way we have Wonky B, which you oppose, or is it Wonky A? We’d basically be stuck at B, forever. And even if you revised your arguments to make it logically possible to revise B, it may well be easier to go from B to A via wonkiness than via whatever specially approved non-wonky route you have in mind, which may be practically infeasible, difficult, costly.”

Joe rejects all such arguments and continues his support for policies leading to B. Team B, which actually has substantive ethical arguments ready about why people should prefer B to A, finds its arguments unnecessary while Joe is around. It kicks up its heels, takes it easy. Jane, from Team A, growing increasingly irate at Joe for sidelining and essentially blocking discussion of A and B, gets tough with him one day. “Joe, didn’t I see you emerging from the Team B clubhouse the other day, laughing, giving everyone high fives, and counting a big wad of cash?” Joe, offended to his core, snaps back angrily, “How dare you, Madam!  How dare you! Are you insinuating I secretly support B for filthy lucre? Why don’t you prove it? I’ve only ever had the best interests of all of humanity in mind.” Joe, in fact, considers himself a very ethical person indeed, who thinks about the ethics of everything he says and does. It’s really rather remarkable he has no ethical opinion on A or B, the great ethical issue of the day that divides Team A and Team B. He prides himself on being always true to his own ethical motto: do no harm.

Team B rejoices. Their ethics prevail. Team A despairs. They feel their ethical views are not even being heard and great harm is being done. They look for ways to get around the stultifying influence of Joe, the local purveyor of sometimes dubious philosophy, but it isn’t easy. Joe and Jane stop working together, but they do sometimes exchange snarky comments on social media sites, where Joe marvels at length on Jane’s supposed inability to grasp the obvious while Jane marvels at length on Joe’s inability to perceive real and significant ethical issues. Confusion and conflict ensue. The calm and reasoned public discussion of ethics, and support for an always temporary and contingent resolution of subjective ethical views through democratic government, begin to lose their appeal. Other ideas appear more compelling to the people. Support for the ethos of democracy begins to wane, democratic society begins to wobble. Anger, emotion, unreason, insults, calls to violence are the order of the day.

And that, my friend, is fake indifference, in general, without economics. It’s a simplified, playful version of fake distributional indifference, and the disputes about it, one can find playing out in discussions of conservative bad economics any day of the week. Did you find it useful? Or not really? So difficult to think exactly how to say things in a way that seems sensible to others. Makes one really appreciate the fascination in the old fairy tales with the idea of “magic words” and “incantations” and so on.

You want the translation to neoclassical welfare economics? Really? Oh, come on. Fine. A and B are (economically) efficient, Pareto optimal, perfectly competitive market outcomes that differ along the dimension of the distribution of economic power. A Pareto dominates (economically) inefficient, non-Pareto optimal, non-perfectly competitive market outcome Wonky A but not Wonky B. B Pareto dominates (economically) inefficient, non-Pareto optimal, non-perfectly competitive market outcome Wonky B but not Wonky A. Team A and Team B are two groups of people with different ethical beliefs relating to the distribution of economic power. Joe is the stereotypical purveyor of bad economics. Jane is a person of generally liberal disposition.

What should Joe be doing? Explaining that the policy choice between B and Wonky A really requires Team A and Team B to discuss the ethical issues involved between A and B and reach some temporary agreement via democratic government on which way to go. 

Next time: The delayed final part of the shortest, simplest three part presentation of the essentials of bad economics in the conservative style one is ever likely to find, addressing the ethical issue of the extent of the market, and false factual premises in ethical arguments.