I wasn’t sure I even wanted to do a storm this week because of the holidays, but then I saw some bigwig economist had delivered a funny policy pronouncement on Twitter and I thought maybe we should do one on what it means to evaluate a policy solely on economic terms. (If you really insist upon knowing the details, it was Larry Summers talking about some policy or other relating to student debt, although that’s not really important here. Might just have easily been any one of many such economists talking about any one of many such policy issues. I classify Mr. Summers as a bigwig economist because he’s a former Secretary of the Treasury, former director of the National Economic Council, and former president of Harvard U, but I don’t mean it like that. I’m just saying we’re not talking about Dr. Joe Blow, assistant professor of economics who teaches Economics 101 down at the local community college, if that’s what you had in mind. That would be an entirely different issue.)
The bigwig economist began his string with a rather obvious oxymoron in which he claimed to base his policy evaluation “purely in terms of economic impacts,” which would be quite a trick given the latter are conventionally considered positive phenomena. It’s an oxymoron because, of course, one can’t really derive an “ought” from an “is,” normative is different from positive, etc. Although positive facts about reality may be important and relevant, one must have some normative or ethical content in there somewhere if one is to make an evaluative statement. I don’t really want to make a big deal about it here because a casual attitude to the positive / normative distinction is hardly an unusual problem in academic economics, is it? Interpreted benignly, it’s an occupation hazard generated by trying to be jack of all trades, master of none. A common culprit is simply assuming everyone has the same goal in mind, maximizing “utility,” welfare variously defined, fairness variously defined, output, employment, whatever, without really identifying, analyzing, or evaluating those normative goals, or considering how they work with one another. A common result is delivering some policy prescription or other with enormous levels of normative controversy without identifying, understanding, or addressing the controversy at all or transferring it to a question about some positive issue that might also be involved.
Although evaluating anything “purely on the basis of economic impacts” is risible nonsense, there is some explicit normative content in neoclassical welfare economics, a component of “economics” surely, so a sympathetic reading might convert the phrase to something like “purely on the basis of economics” or “purely on the basis of economic theory.” Unfortunately, the bigwig economist’s policy evaluation also obviously went beyond the normative content of neoclassical welfare economics, as he delved, in part, into issues like whether the policy in question was regressive or progressive, who it helped, who it hurt, etc. Although those issues are perfectly acceptable positive issues for economists to study, the normative significance of such positive information for policy evaluation, per se, is famously exogenous to the normative content of neoclassical welfare economics. But I don’t really want to make a deal about that right now either because supplying one’s own personal normative inputs while claiming they’re part of economic theory is also hardly an unusual problem in academic economics. Another occupational hazard, similar to the first, perhaps, or perhaps something else.
No, I’m rather more interested in a somewhat more advanced, or perhaps simply rhetorically cleverer, version one sometimes encounters that may appear less obviously peculiar than the version that particular bigwig economist provided in that particular string. According to the advanced version, if one is evaluating some policy or other “strictly from the perspective of economic theory” or “purely in economic terms,” or “purely as an economist,” etc., then one will ignore distributional ethics and issues.
What’s wrong with that? Distributional issues and ethics are famously exogenous to the normative content of neoclassical welfare economics, are they not? Of course they are. The difficulty involves the meaning of evaluating a policy involving those issues. What exactly does that mean? This is where the ethical half-theory structure of neoclassical welfare economics can cause problems. If it were a full ethical theory, one could simply evaluate the policy under the ethical theory presented, similar to how one might evaluate any policy under any ethical theory. However, when it comes to ethical half theories, one has a choice of how to present the situation. On the one hand, one might simply say one cannot really evaluate the policy in question under the ethical half-theory because doing so involves exogenous ethical issues. Easy peasy. On the other hand, one might say one can evaluate the policy with respect to the limited ethical issues covered by the ethical half-theory, but such an evaluation has no particular significance in a broader context involving the excluded considerations as well.
Why so complicated? Although an ethical half-theory may choose to not take up certain issues, those issues are still there and still relevant in reality, barring an explicit, endogenous argument one should not consider them normatively or ethically significant, of course. If neoclassical welfare economics contained an explicit argument we should place no ethical or normative significance on how to resolve interpersonal conflicts of preferences, neoclassical welfare economics would be an absurdly controversial full ethical theory. It would be absurdly controversial because most people likely have ideas about the ethical resolution of interpersonal conflicts of preferences, whether it be by welfare, need, strength of preference, fairness, justice, rights, or any other basis.
Purveyors of bad economics in the conservative style play games in this area. They deliver policy evaluations “as economists,” or “from the perspective of economic theory,” without explaining the significance of such evaluations in the peculiar context of ethical half-theories. It’s hard to avoid the suspicion they’re playing rhetorical games, hoping those reading or listening will confuse neoclassical welfare economics with an oddly simply and uncontroversial full ethical theory, and thus attach exaggerated significance to what one can say solely on that basis. In a sense, one can think of the issue as equivocating on terms such as “evaluating policy X on purely economic terms” between the sense relevant to the context of an ethical half-theory and the sense relevant to a full ethical theory.
As a nice example of the sort of rhetoric typically involved, the bigwig economist’s string ends with noting politicians may be unable to act according to his sage policy evaluation because they may need to “compromise” with “important constituencies” and “political imperatives.” He couches the statement in the faux or mock humility so typical of economists of a certain type, proclaiming he “can not judge the overall wisdom of the decisions made,” or to paraphrase, he supposes we must accommodate the unethical idiots of the world in some old way. By now you must recognize the language of anti-democracy bad economics in the conservative style when you see it, right? The issue under consideration involves conflicting ethics, not objectively correct or even uncontroversial ethics versus exigencies posed by important constituents and political imperatives. If we’re talking about neoclassical welfare economics, it’s an ethical half-theory that cannot be used to evaluate policies on its own. Exogenous and controversial ethical inputs are involved, and there’s nothing suspect or illegitimate about voters delivering them via democratic government. We’re not really talking about wise technocrats / ethical arbiters delivering uncontroversial normative or ethical prescriptions only to have clueless democratic government unethically and unfortunately “interfere” with them in practice to accommodate the ignorance of voters. That’s bad economics in the conservative style, not real neoclassical welfare economics.
Have you made out your new year’s resolutions? If not, may I suggest adding addressing anti-democracy bad economics in the conservative style? Good time for it. Just saying.
