Liberalism And Conservatism In An Economic Context

I thought I might take a step back this week from my more purely economic pursuits and say a few words in support of traditional, leftist, American, economic “liberalism.” Not post liberalism, neoliberalism, classical liberalism, European liberalism, or any other sort of liberalism. Just plain, old school, American-style, liberalism.

Why? I did a little online poll on popular interpretations of “neoliberal,” “liberal,” and “conservative” in the realm of economic policy and found, as I suspected I might, that the only readers from the USA who cared enough to register an opinion (three) considered them to be all the same thing. It’s a result that should be interesting at least to relative old timers in the US like me, who may recall the days our entire public conversation about economic issues was characterized as a matter of “liberals” versus “conservatives.” Wasn’t so long ago, really.

Let’s break it down, shall we? Traditional American (leftist, progressive) “liberals” support active democratic government, appropriate regulation, “intervention” in the economy and in particular markets to address issues including “market failures,” but also equity, welfare, fairness, ethics in general. From the liberal perspective, one can think of democratic government involvement in the economy at two levels. First, at the level of establishing the definition, distribution, and use of economic power in markets. Deciding what issues should be resolved on the basis of economic power in markets, the ethics involved, etc. That first level of issues addressed by democratic government is external or exogenous to the normative arguments presented in neoclassical welfare economics, which is an ethical half-theory that holds such issues in abeyance. Second, once those issues have been addressed, delving into the characteristics of market solutions, market structures, “market failures,” information, rationality, the whole nine years of normative or ethical issues endogenous to neoclassical welfare economics. That doesn’t mean voters are constrained to agree with the ethical half-theory of neoclassical welfare economics on ethical issues endogenous to that theory. It’s still an ethical theory subject to evaluation with reference to the subjective moral sense or moral sensibilities of the voters, but something to consider, at least. Traditional, American economic “liberalism” corresponds to what would be called in many foreign countries social democracy, or democratic socialism, or some such formulation, impossible in the USA because of the popular opinion anything even remotely “social” is entirely unacceptable and indeed unworthy of serious consideration.

In contrast, traditional American economic “conservatives” oppose democratic government involvement in the economy, in general, which they characterize as a matter of government “interfering” with the economy. However, there is some variation in what they consider acceptable government activity in that area. Conservatives operating under a form of bad economics closely tracking or mimicking real neoclassical welfare economics often support government activity and regulation addressing “market failures,” addressing the normative or ethical issues endogenous to neoclassical welfare economics. They tend to not associate that activity with what they call “activist” democratic government, presumably because they view such interventions, incorrectly by the way, as issues that can be resolved on a purely technocratic basis, not involving referring ethical issues to the voters, and thus not involving democratic government, in particular. However, they object to democratic government addressing the very significant and controversial normative or ethical issues exogenous to neoclassical welfare economic, which are much more obviously contentious ethical issues voters may have opinions about. Other economic conservatives have views rather more distinct and philosophically distant from neoclassical welfare economics and use alternative, heterodox economic reasoning to establish any “activist” democratic government involvement with institutions or arrangements they call  “the Free Market” or “capitalism” unacceptable, or in some cases not involvement per se, but attempts to revise specifically. A distinction can be drawn in this context between conservatives who follow and promulgate bad economics in the conservative style, at various levels of obfuscation and confusion, and those who present explicit conservative alternatives to neoclassical welfare economics.

Finally, the “neoliberals” were historically simply erstwhile economic “liberals” who adopted conservative economics circa 1980 but perhaps carried on arguably liberal positions on non-economic matters. As far as I know, there is no distinct “neoliberal” theory of economics.

What appears to have happened is that the “neoliberal” turn away from traditional “liberal” economic thinking seems to have obliterated the traditional meaning of liberalism in an economic context for many in the USA, helped no doubt by foreign and often Marxian writers, who use the word differently. Well, helped as well surely by many rhetorically clever conservative writers, who in my experience typically spend just as much time trying to create confusion and sow conflict as more sincere writers spend trying to dispel confusion and resolve conflict. Indeed, conservatives here in the USA are reportedly attracted to a rhetorical technique they call “flooding the zone with ... ,” let’s say, “garbage,” in place of the evocative word they actually use in this context. Fomenting confusion about terminology would, of course, be right up their alley.

Whatever the mechanism or mechanisms at play, it seems for many in the USA now, neoliberalism = liberalism = conservatism, leading them to suppose “all political parties are the same,” etc., and in funny directions like anarchism, fascism, non-democratic communism, etc. Basically, what was once considered the mainstream, moderate, reasonable, centrist view of the relationship of democratic government to the economy and the market system in the USA appears to have gone missing entirely, leading to a great deal of confusion and conflict. Little wonder the public conversation about politics and economics in the USA has become so odd, simplistic, emotional, extreme. It’s like we’ve all agreed to take the most reasonable solutions off the table and consider only the most unlikely, childish, confused, and bizarre.

What’s my point? Well, one is that traditional American economic liberals should step up their game and reclaim their brand, fight bad economic in the conservative style, explain better how they differ from neoliberals and conservatives as far as their economic thinking. Another point is that words change, and although I and old timers like me will likely always consider ourselves traditional liberals in the economic sense, we should be prepared to acknowledge overlapping terminology: progressive, social democrat, democratic socialist, etc. The important bit is not the label but the underlying ethos. If one supports political democracy and understands the role democratic government should, and indeed must, play in market systems and the economy, then one is the equivalent of a traditional American liberal. Call yourself whatever you like, but don’t get confused with funny name games. Don’t waste your precious time railing against liberals because you suppose they’re the same as neoliberals and conservatives. Focus on the underlying theories of government, economics, ethics. 

Ordinal And Cardinal Utility Redux

I talk about “utility” in neoclassical welfare economics often enough, but maybe I should say a few more words about one of the famous scholastic, doctrinal disputes in mathematically formalized neoclassical welfare economics, is it meant to be “ordinal” or “cardinal?”

I find the issue a little comical because, of course, once one defines “utility,” it becomes perfectly obvious whether the concept is ordinal and cardinal, and whether it makes sense, given the available data, to use ordinal or cardinal mathematical functions to describe it. Economists, inept ethical philosophers but passable mathematicians that they are, tend to do things backwards. They start with some mathematical expression or expressions involving “utility,” then try to piece together what they must be talking about. That’s how the definition of “utility,” something everyone should understand is a normative choice based on normative evaluation, if it’s meant to be normatively significant at least, became for many economists a positive, empirical question, something to be discovered based on the evidence. Hmm, what are we actually talking about? It’s an artifact of the risible academic positive approach to normative economics, in which economists don’t take ownership of the essentially normative concept of “utility” but treat it as a given, part of someone else’s ethical theory they found lying on the floor one day, which they need to investigate.

If one is talking about individual preference rank “utility,” the most common explicit definition in modern neoclassical welfare economics, a sort of “utility” that doesn’t correspond to anything that exists, per se, then one can obviously only use ordinal mathematical functions to discuss it. The concept itself is ordinal. In contrast, if one is talking about internal perceptions of satisfaction from preference fulfillment “utility,” the older, more traditional, but no longer really current definition, that’s a cardinal concept, but if one believes those perceptions are inaccessible except for observed choice, it can only be described empirically in ordinal terms. However, moving away from the empirical data one accepts as relating to that sort of “utility,” one can talk sensibly about different levels of amounts of “utility,” adding up “utility” across different people, total social “utility,” social welfare functions, etc. And, of course, in this nexus of the characteristics of mathematical functions versus those of underlying normative concepts enters all the complications of engineering model versus science, positive versus normative, unreal ethical half-theory versus ethical full theory addressing reality, etc., so distinctive of bad economics in the conservative style.

Indeed, there appears to have been a years long dispute within the closed, cloistered Villa of Academic Economics about whether certain mathematical propositions, usually Arrow’s this or that, involve /  require / permit ordinal or cardinal “utility.” Some economists seem quite satisfied to use that as the reason they can happily explain to others how society should maximize “utility” despite not actually knowing what it is. Hey, they’re working on it. Have been for some time. Will be for quite some time yet. They’re scientists, dammit, not ethical philosophers! (Did I use that one already?) But then, they’re talking about a normative or ethical theory, with normative or ethical conclusions and implications, and implying we should pay attention, sometimes all but insisting.

Let’s cut the nonsense, shall we? If academic economists mean anyone to be interested in maximizing “utility,” it’s their responsibility to define exactly what it is, so people can evaluate the proposition. It’s not a math problem; it’s a philosophical, ethical decision. Decide a definition, then enforce it within the profession, or as I’ve suggested before, just stop using the term “utility” and refer instead to individual preference rankings or internal perceptions of satisfaction from preference fulfillment. Or I guess those are just the most common definitions, aren’t they? The ones consistent with neoclassical welfare economics. The “utility can mean anything” crowd has plenty more where those came from including, say, observable indications of human welfare, variously defined. Granted, those definitions are inconsistent with the internal logic of neoclassical welfare economics and all the rigamarole about Pareto optimality, 
“economic” efficiency, revealed preferences, and so on, but if one just does “general welfare analysis,” hey, the sky’s the limit. In the meantime, we apparently have no recourse but parallel normative discussions and evaluations based on the two types of “utility” consistent with the overall normative argument in neoclassical welfare economics, as I do in my blog and my short book. One should lead straightaway to an understanding of neoclassical welfare economics as an ethical half-theory, but comically often doesn’t. The other makes the theory into a very controversial, dodgy full ethical theory functioning as a half-theory in practice. Awkward.

Because if there’s one thing one has to understand about modern, mathematically formalized neoclassical welfare economics, it’s that it appears to have been purpose built to support bad economics in the conservative style, to create confusion and conflict, to obscure and mislead. Overcoming bad economics in the conservative style requires going beyond typical academic presentations of the subject, starting with scrupulous attention to the definition of “utility” and moving on to a proper philosophical evaluation of the ethical proposition society should “maximize” it.

Economists and Purveyors of Bad Economics In the Conservative Style

They say emotion can cloud one’s mind. I wonder if I could take this week to just get something off my chest so I can return to serene equanimity as soon as possible. Mind the vent.

Let me ask a question. How hard is it to say, “individual preference rank” rather than “utility,” if that’s what one means? Or to say, “inaccessible internal perceptions of satisfaction from preference fulfillment” rather than “utility,” if that’s what one means?

Or another, how hard is it to draw out, discuss, evaluate the ethical differences between focusing on individual preference rankings, inaccessible internal perceptions of satisfaction, and other common potential definitions of human “welfare?”

Or another, how hard is it to propose letting other people do what they want to do if what they want to do doesn’t conflict, in specified ways or to some specified level, with what other people want to do, but if there is relevant conflict, addressing it and resolving it using some socially agreed method?

Or another, how hard is it to discuss the ethics of allowing other people to fulfill their preferences in a hypothetical one person (plus observer / economist) world with no interpersonal conflict, if that person doesn’t know what he or she is doing or is not acting rationally versus if that person does know and is acting rationally?

Or another, how hard is it to discuss the ubiquity of interpersonal conflicts of preferences, broadly conceived, and the significance of that conflict for thinking about ethical propositions that apply only in the absence of interpersonal conflict?

Or another, how hard is it to say any given instance of an economically efficient, perfectly competitive market is ethically or normatively optimal if one has no ethical objections to the distribution or use of economic power to resolving the relevant interpersonal conflict?

Or another, how hard is it to say neoclassical welfare economics is indifferent to, cannot evaluate, cannot be used to support or oppose, policies that change the resolution of interpersonal conflicts of preferences, including the distribution or use of economic power?

Or another, how hard is it to say neoclassical welfare economics contains no normative or ethical argument for the superiority of resolving all, or particular, interpersonal conflicts of preferences on the basis of economic power in markets?

Or another, how hard is it to say that since ethics is ultimately subjective, any ethical decision about controversial issues like how to resolve interpersonal conflicts should involve the ethical beliefs of the people involved, addressed via democratic government?

Why do I ask so many odd questions? I’m trying to figure out if there’s some legitimate reason academic economists, who understand very well what I’m talking about, can never seem to rouse themselves to say seemingly simple things that would do so much to clear up bad economics in the conservative style. I’m trying to give other economists the benefit of the doubt. I’m grasping for straws over here. Surely there’s something involved beyond bone idleness, indifference, active complicity. Throw me a bone. “It’s surprisingly difficult to say things like that because X.”

I put old time economists in a different category. No one accidentally comes up with something so prone to misinterpretation, so friendly to bad economics in the conservative style, so opaque, so odd, as an ethical half-theory that plays so many funny word games. Let’s be real, shall we? If the people behind the re-imagining of “utility” as individual preference rankings, who took welfare economics to Pareto optimality, “economic efficiency,” etc., were simple seekers of the truth, then I must be the Queen of England, in which case, let me just say, “We are not amused.” I get it, I think. It was the struggle against the Red Menace, right? Honesty, clarity, sincerity, in economics collateral damage of the struggle against the economic rhetoric of authoritarian, anti-democratic communism? Old time economists did what they felt they had to do. 

But what about economists today? What’s their excuse? The main advocates for authoritarian, non-democratic government now are right wing conservatives closely linked to bad economics in the conservative style. Isn’t it time economists stop playing old rhetorical games? Start talking normally? Spell things out? Fully specify normative inputs? Distinguish positive and normative? Distinguish theoretical conditions from real? Speak out against bad economics in the conservative style? That’s what one might call a rhetorical question. You know what I think. Yes. Obviously. Talk about your unintended consequences. The insincere, tricksy, underhanded, normative double-talk of bad economics in the conservative style isn’t doing us any of us any favors right now. The fancy dress ball has ended. The music has stopped. Isn’t it time we were on our way, drank some coffee, had a little something to clear our spinning, befuddled heads? Let’s head out into the brightening dawn.

So many economists: “Oh, I agree. I understand bad economics implicitly.” Me: “Isn’t that a purveyor of bad economics in the conservative style mask in your hand?” So many economists: “What? This old thing? I must have picked it up somewhere.” Me: “Was it from off your face, five minutes ago?” So many economists: “Maybe.”

We should take the threat of authoritarian, non-democratic government in service to economic power, plutocracy, fascism, as seriously as our forebears once took the threat of authoritarian, non-democratic communism. Not play rhetorical word games necessarily, but just take it seriously. If you’re an economist, you know what I’m talking about. Start taking more effective steps to help others avoid the pitfalls of anti-democratic bad economics in the conservative style. Don’t wait for a memo from above, official authorization, that may never come. Just do it. Now.

Fascism And Bad Economics In The Conservative Style

I find the process by which an ostensible concern over government power generates support for authoritarian government, fascism, rather interesting. It’s a bit outside my normal more purely economic area of concern, but maybe I can talk about that this week?

If one imagines some interpersonal conflict of preferences, say two people want some resource X, one can imagine them resolving it in various ways: the law, discussing sensibly and coming to private agreement, hitting one another over the head with rocks, etc. Let’s consider the solution involving law, that is, the one that doesn’t correspond to either utopian anarchism, where people readily agree whose preferences should prevail, or real world anarchism, where people readily apply violence to settle the matter.

In a practical sense, what makes the law the law is the government monopoly on the legal use of force. Disobey the law, and one faces consequences. There’s no need to argue or fight over it every time. That’s the beauty of the law. Can’t have much a society without it. And where does this law come from? Mother Nature? The heavens? The right honorable Arbiter of Ethics? My back pocket? An ongoing social agreement or pact, based ultimately in the subjective ethical beliefs of the people, delivered via democratic government? Just asking. It’s an important issue because if one supports law but believes democratic government is forever threatening to make so-called laws conflicting with what believes is the One True Law, then one will tend towards anti-democracy, authoritarian government, fascism, theocracy, etc.

Most types of popular and folk political and economic ideology in the USA today fall into the friendly to fascism category. They’re based on various formulations of some One True Law or other that supersedes democratic government and hence focus on the perceived danger of democracy. They are anti-democracy, specifically, but not anti-government, in general. That is, they support the rule of law, property, markets, etc. However, for rhetorical purposes, they often suppress awareness of their vision of government and try to cast themselves as fake anarchists. One can understand the rhetorical difficulty, of course. Not many have the intellectual honesty to say they’re so egoistic, have such hubris, that they suppose their vision of the One True Law should prevail over the ethical views of all others. Confusingly, these people are often cast as representing a “classical liberal” perspective, which of course is inconsistent with another and rather more common understanding of “liberal” in the USA, which is very much pro-democracy.

Why do such people dismiss the dangers posed by the authoritarian government they implicitly support? They suppose that authoritarian government will express, and will always express, their own personal understanding of the One True Law, and will defend it against all others. Law, supported and enforced by a non-democratic, authoritarian government, will not necessarily appear burdensome if what it is doing corresponds to what one supposes it ought to be doing. Such a government will be perceived by some to be not a road to serfdom but freedom. In the past, we saw the same sort of essentially fascist ethics at play in non-economic contexts, as well. The old Nazis were quite concerned they were blocked from expressing their ethical beliefs because of what they considered bullying, degenerate, ethically weak democracy. The Nazis yearned to escape the serfdom of living in a political democracy and gain the liberty, the freedom, to live under a system that expressed what they considered the One True Ethics, which for them famously involved things like murdering children in forests and so on.

So does fascism support freedom / liberty? If one recalls the writings of the old institutionalist economists at all, their inevitable retort to someone banging on about such issues was always to ask, “Whose freedom? Whose liberty? To do what?” The point is if we’re discussing the ethics of resolving interpersonal conflicts of preferences, allocating resources, etc., talking about “freedom” and “liberty” in vague, underspecified ways, is not helpful and, indeed, can be quite misleading. It’s misleading in the way all equivocation on terms is misleading. Everyone is likely in favor of someone’s “freedom” and “liberty,” defined one way or another, to do something or other, but talking in generalities leads to confusion and conflict and gets one nowhere.

Another complication in this area is the tendency of many to think of “fascism” in terms of the “size” of government, defined by function, rather than by its non-democratic authoritarian aspect. Under this theory, a “small” government narrowly focused on expressing particular ethical beliefs relating to defining, enforcing, using economic power, and maybe a few other things, cannot by definition represent “fascism,” no matter how non-democratic it may be. By the same token, a “large” democratic government that is willing to take up policies relating to the welfare of the people, altering the distribution of economic power to reflect the forever changing and evolving subjective ethical views of the voters, setting the extent of the market according to the subjective ethical views of the voters, etc., may be seen as “fascist,” no matter how democratic it may be.

Bad economics in the conservative style plays a role because it downplays the ethical half-theory structure of neoclassical welfare economics, the discussion of the necessary ethical inputs, the subjective nature of those inputs, and the role of democratic government. In bad economics in the conservative style, democratic government is an unfortunate, unhelpful, unethical institution that threatens to “interfere” with economic systems if not held in check or, even better, eliminated. Bad economics in the conservative style supports fascism.