Have you noticed the same fundamental issues with bad economics in the conservative style can be discussed in different but equivalent ways leading critics to suppose they’re at loggerheads when they actually agree on substance? I was thinking about that the other day, so let me just say a few words about that this week.
To understand the different ways of criticizing bad economics in the conservative style, first consider two different but equivalent perspectives on the neoclassical welfare economics on which it is based. Neoclassical welfare economics is a full, complete, stand alone, ethical theory for the arbitrary, artificial Fairy Land of Economic Theory, where certain realistic conditions and certain ethical issues have been banished. However, it’s a partial ethical theory in reality, where those conditions and ethical issues cannot be so banished.
One may say neoclassical welfare economics (applied) has hidden, unstated normative premises. One may say neoclassical welfare economics (theoretical) cannot be applied to reality without exogenous normative content. Do mind the potential equivocation on terms, won’t you? One will criticize bad economics in the conservative style one way if one starts with neoclassical welfare economics (applied) and another way if one starts with neoclassical welfare economics (theoretical). The former line of criticism will talk about how bad economics in the conservative style obscures, fails to identify, discuss, evaluate the additional normative content required for neoclassical welfare economics (applied). The latter line of criticism will talk about how bad economics in the conservative style incorrectly attempts to apply neoclassical welfare economics (theoretical) to reality, about confusing the Fairy Land of Economic Theory with the real world.
What is this hidden or missing or surreptitiously supplied normative content? Normative or ethical propositions relating to the definition, distribution, and use of economic power in markets to resolve interpersonal conflicts of preferences, and possibly in the no-conflict case the significance of things like ignorance and irrationality. If the hidden or missing normative or ethical content is assumed expressed in politics or law, we have purveyors of bad economics in the conservative style ignoring “embedded” politics and law or “losing the political element of the old political economy,” etc.
One may try to fix bad economics by converting the ethical half-theory of neoclassical welfare economics into a full ethical theory by playing with the definition of “utility,” introducing explicit exogenous normative inputs such as social welfare functions. One may attempt to fix bad economics by establishing the limits of the constrained ethical half-theory of neoclassical welfare economics and the need to combine the results of neoclassical welfare economics with exogenous ethical inputs in applied contexts.
What’s going on? Seems mostly a matter of equivocating on the term “neoclassical welfare economics” in the theoretical and applied senses, leading to different perspectives on the relationship of bad economics in the conservative style to neoclassical welfare economics.
Want an example not involving resolution of interpersonal conflicts of preferences? Does neoclassical welfare economics propose we “maximize” total social “utility” in the no-interpersonal conflict of preferences, one person (plus observer) case, even if that person is ignorant of the facts or irrational? Do ciphers with those characteristics exist in the world of neoclassical welfare economic theory, that is, the Fairy Land of Economic Theory? Or are they part of that world, excluded only in one particular region or village, when it comes time to specify the conditions of the “perfectly competitive market?” No, I’m just asking. It can be a little tricky to determine what exact normative propositions are expressed in neoclassical welfare economics, the conditions under which “utility” is meant to be ethically significant in that theory.
One view is neoclassical welfare economics (theoretical) proposes we “maximize” total social “utility” under the conditions that exist in the Fairy Land of Economic Theory, where people know what they’re doing and are rational. That’s the ethically uncontroversial version. Another view is neoclassical welfare economics (theoretical) proposes we “maximize” total social “utility” under the conditions that exist in the Fairy Land of Economic Theory, where people may be ignorant or irrational. That’s the ethically controversial version. I would argue the second view is the correct one because I’ve only ever encountered conditions relating to information and rationality in the context of market structure, not in the context the proposition it’s nice if we maximize total social “utility” or the definition of “utility.” But maybe that’s just me? It’s not like we’re dealing with a carefully documented ethical theory put together by a rigorous ethical philosopher. We’re talking economics right now.
Does bad economics in the conservative style misuse a noncontroversial normative proposition from neoclassical welfare economics (theory) meant for the Fairy Land by applying it to the real world where the necessary conditions relating to perfect information and rationality are not met? Does bad economics in the conservative style add controversial normative content to neoclassical welfare economics (theory) to handle the difficult or potentially controversial cases of the normative significance of social “utility” maximization under conditions of ignorance and irrationality? Or did I say it wrong and does bad economics in the conservative style actually get it right in the no-conflict case? Does neoclassical welfare economics (theory) itself contain the ethical proposition we should always strive to “maximize” total social “utility” in the real world, that is, even when preferences are based on ignorance and irrationality?
So many questions, right? What’s my point? Don’t get hung up on superficial differences in perspectives or presentations. Look to what ties them together, the underlying issues. Don't sweat the small stuff. It’s not complicated. It might be a little odd, strange, awkward, but it’s not complicated.
