I feel it’s been a while since I discussed terminological equivocation on terms like “neutral” and “neutrality” in the context of bad economics in the conservative style and neoclassical welfare economics. Seems always a lot of it about. Maybe we can review that issue this week?
One sense of neutrality I’m talking about here is neutrality relative to maintaining the status quo resolution of some interpersonal conflict of preferences. The other sense of neutrality is neutrality relative to the resolution of that interpersonal conflict itself. To state the obvious, those are two different things. When the latter sense of neutrality is relevant, but one swaps it out for the former sense, one gets what I think of as “fake neutrality,” closely related and analogous to the “fake distributional indifference” I often discuss. Of course, it’s real neutrality in some sense, just not the relevant one. It’s similar to equivocation on the term “efficiency” relating to different goals or objectives. Much as one must always ask efficiency with respect to attaining what goal, one must always ask neutrality with respect to what consideration.
Say two people, A and B, both want, desire, need some scarce input X, and we’ve set up laws to define economic power, distribute economic power, and set the mechanism for allocating X to be economic power in markets, in such a way that X goes to A. Fake neutrality in the context of neoclassical welfare economics involves having as one’s goal or one of one’s goals preserving that resolution of that conflict, making sure A is not harmed and still gets X, on the grounds doing so is “neutral” in the sense of “neutrality” relevant to that theory. It isn’t really.
It’s rhetorically powerful because, of course, another potential way to define “neutrality” is defending the status quo whatever it may be, so neutrality relative to the specifics of the status quo and to the ethical rationale used to support the status quo. Neutrality in defense of the status quo is ethically controversial because it does not evaluate the status quo resolution of that interpersonal conflict. Confusingly, that way of defining neutrality is partially, but not entirely, consistent with the neutrality relevant to neoclassical welfare economics. Obviously, if a theory sets aside the relevant ethical issues, the rationale for supporting the status quo becomes exogenous. However, it’s quite different from neutrality defined with respect to the resolution of the interpersonal conflict itself, which avoids ethical controversy on that point. Economists will recognize this second sense of neutrality as the one relevant to neoclassical welfare economics, as famously expressed in distributional indifference and the less commonly acknowledged indifference with respect to the ethical issue of the extent of market. The type of neutrality or indifference relevant to neoclassical welfare economics is simply the logical consequence of the way “utility” is defined in that theory. We cannot determine on the basis of that sort of “utility” the ethically best or optimal way to resolve any interpersonal conflict.
Of course, the cost of choosing to talk about some but not all the ethical issues one accepts as relevant to a real life situation, to avoid controversy, or for any other reason, is that one converts one’s theory into an ethical half-theory that cannot be applied to reality on its own. If one is evaluating some change that affects how interpersonal conflicts are resolved, who gets what, the allocation of scarce resources, then logically one must go beyond the limited normative content of neoclassical welfare economics. As I often point, the interpretation of neoclassical welfare economics as a full ethical theory containing the proposition no one, rather than simply economists qua economists, should care how interpersonal conflicts of preferences are resolved is ethically implausible and would render it very, very controversial indeed.
One way to think of fake neutrality is that it introduces an exogenous normative proposition into neoclassical welfare economics suggesting there’s something ethically significant about the status quo that cannot be established on the basis of “utility.” One sees this sometimes in connection with the concept of Pareto improvement in the context of neoclassical welfare economics. The concept says what it says, it plays a certain role, but like much of neoclassical welfare economics, one can easily get the wrong end of the stick. The ethical or normative proposition one should only consider Pareto improvements from any given starting point is not part of neoclassical welfare economics, it goes beyond what one can say on the basis of “utility,” it’s meant to preserve elements of the status quo, it’s exogenous. If one restricts oneself to real neoclassical welfare economics one will be indifferent to changes that make at least one person worse off and at least one better off because one doesn’t know what happens to “utility” under those conditions or the question is undefined, depending on which of the two interpretations of “utility” relevant to neoclassical welfare economics one has in mind. One will not reject out of hand, fail to consider, take off the table, changes to which one is meant to be indifferent. One will simply express indifference to them.
Of course, supporting the status quo doesn’t require fake neutrality or fake indifference. One can simply explicitly say one supports the status quo based on some specified ethical theory or other and clarify one is not talking about neoclassical welfare economics. Some economists working in the neoclassical tradition are purveyors of bad economic in the conservative style. They deliver misleading and essentially undefended subjective judgments relating to exogenous normative or ethical issues typically in loud, blustery voices. However, some neoclassical economists are careful with their words, express the underlying normative or ethical issues properly, understand the limitations of their theory, exhibit professionalism and intellectual humility. One can find good economics, if one looks for it.
One’s impression of what neoclassical welfare economics says shouldn’t be a matter of who one hears it from. Economists should help people recognize and avoid anti-democracy bad economics in the conservative style, and good economists, real economists, will.
