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.
