It’s been a while since I talked about fake distributional indifference involving restricting policy choices to those that ostensibly do not “distort” or “interfere” with markets. Let’s do that bit of bad economics in the conservative style this week.
Say A is the status quo. B is some change to which one would be indifferent relative to A on the basis of “utility” in neoclassical welfare economics. C is some change one would prefer to B, but to which one would be indifferent relative to A, on the basis of “utility.” For example, A might be sell a vaccine on the open market to those with the economic power to get it, B might be allocate the vaccine to sick people first using some non-market mechanism, C might be transfer enough economic power to sick people to ensure they can get the vaccine first if they choose. We’re talking about an interpersonal conflict of preferences relating to the allocation of a scare resource, here a vaccine, and the exogenous (to neoclassical welfare economics, to “utility”) ethical decision how that conflict should be resolved.
The example fits the bill because if sick people are ensured enough economic power to obtain the vaccine on the market, then the ethical view that medical need should inform allocation of the vaccine can be accommodated without “distorting” or “interfering” with vaccine markets. The quotation marks are there because using terms like "distort" and "interfere" when discussing policies or mechanisms governing the resolution of interpersonal conflicts, such as economic power in markets, is itself indicative of fake distributional indifference and bad economics in the conservative style, a point I’m attempting to establish in this post.
Let’s discuss fake distributional indifference taking the form of swapping out indifference between A and B for preferring A to B ostensibly because indifference holds between A and C, and C is preferred to B, so B is irrelevant in some sense to the real, underlying choice. It's logically incorrect, of course. If one prefers A to B, one cannot also be indifferent between A and B. The interesting question is how does the rhetoric work? Why does it seem so convincing and lead so many people to bad economics in the conservative style? How might one get the impression preferring A to B does not add normative or ethical propositions that go beyond the “utility” that generates indifference between A and B, that are exogenous to neoclassical welfare economics?
I would suggest this issue involves the relationship between B and C. Not identity; C is preferred to B. But something involving equal availability, feasibility, cost, etc. A factual premise that wherever one might implement B one might just as easily implement C. In the Fairy Land of Economic Theory, this may make perfect sense. The stroke of a pen, a few taps on one’s keyboard, and one can implement C as easily as B, so it may be incomprehensible one would ever talk about B rather than C, a sort of error, having no real significance. In that case, switching out indifference between A and B for preferring A to B, but then being indifferent between A and C, may appear an inconsequential and benign departure from formal logic. Hardly what one might call rigorous thinking, but maybe fine casually, informally.
But let’s consider what’s going on when neoclassical welfare economics is applied in the real world as opposed to theoretical situations, where implementing any policy, A, B, or C, may involve practical issues, costs, the normative views of people other than one’s fellow economists. Is it just as easy, available, feasible, costly, acceptable to voters, to transfer economic power to sick people to ensure they can get a vaccine first on the market if they choose (C) as some other mechanism (B)? Or is that a false factual premise in the real world?
I would suggest it’s a false factual premise. Take cost, for example. Identifying sick people is relevant in either case, but is then transferring the relevant economic power to the relevant people equally as costly, technically feasible as other allocation systems? If costs higher, is it worth it? How would one determine that on the basis of “utility” alone? Or consider feasibility in terms of voter acceptance. Might voters look at the transferring of economic power to sick people to do with as they like a different ethical issue in some respect from ensuring sick people can get the vaccine first, if they like? One ethical issue seems more about the use of economic power in markets to resolve a particular conflict of preferences, in this case vaccines, while the other ethical issue seems more about the distribution of economic power more generally. One is about resources devoted to vaccines, specifically, and the idea sick people should have priority regardless of their economic power. One is about increasing the “utility” of possibly already quite economically powerful sick people. Those are not identical ethical issues. Some economists may suppose they should address the policy option suggested on the basis of “utility,” blithely ignoring the differences in “utility” involved in the two options that should render them indifferent. That’s obviously incorrect. However it’s also beside the point because the issue in this instance is not about economists but voters, the political feasibility of policy options in the real world as opposed to the Fairy Land of Economic Theory. On the point of political feasibility, does it matter why one policy may be politically feasible and another not? What if voters are simply confused, ignorant, irrational, whatever, in such a way B is a politically feasibly policy option but C is not?
If there are differences in ease, availability, practicality, costs, voter acceptance, then insisting those who support B express their values via C instead becomes rather more clearly incompatible with indifference between A and B than in the Fairy Land, surely. Recall the ostensible reason we have distributional indifference is because we’re meant to avoid controversy by holding certain ethical issues exogenous. Supporting A over B by making things difficult for those who prefer B to A on exogenous ethical grounds, when one is meant to be indifferent, is inconsistent with that objective.
Hoops are bad enough, but in some cases, when the issue is presented as restricting policies to those that do not “distort” or “interfere” with markets generally, the issue can be complicated by the role of economic power as an incentive in labor and capital markets. If we implement a tax and transfer policy to get sick people the economic power they need to get the vaccine on the market if they prefer (C), have we “distorted” or “interfered” with any markets? How about labor or capital markets, through incentive effects? One may reasonably wonder, are we just setting up unattainable conditions? Playing funny word games? Giving people the old run around? Telling people who prefer B to A that’s fine, as long as they find the mythical chimera and shake its mighty paw? I’m not just cracking wise. I’ve heard people say things like that. They’d like to be truly indifferent, they just can’t really see how one might possibly change the status quo in the one correct way, jump through the hoops, evade the obstacles, fulfill the exacting conditions.
The icing on the cake is that one can very easily advocate for C as an ostensibly superior option to B without misleadingly and incorrectly preferring A to B, without B blocking, so to speak. One can use neoclassical welfare economics for good rather than bad.
Fake distributional indifference isn’t real distributional indifference. If you’re doing economics with fake distributional indifference, you’re not doing real neoclassical welfare economics, you’re doing bad economics in the conservative style. Did you know? Annoyed? Disappointed? Let me say once again it’s all good as long as one isn’t playing games with neoclassical welfare economics, if one identifies, explains, discusses the added normative propositions so people can evaluate them, think about the controversy involved, vote on them, etc. One needn’t restrict oneself to neoclassical welfare economics. One can do explicit conservative economics with added normative propositions. It’s the misleading, confusing, underhanded nature of bad economics in the conservative style that makes it “bad” for my purposes.
Addendum. To state what is hopefully the obvious, A (and C) preserve the market mechanism for vaccines while B “distorts” or “interferes with” that mechanism. Real indifference between A and B implies indifference to distorting or interfering with that market. Neoclassical welfare economics does not support the fetishization of markets. That’s a characteristic of bad economics in the conservative style, unless the additional normative propositions are made explicit, in which case it’s just some form of conservative economics.
