Last week I went over the false “economic efficiency (defined with respect to “utility”) versus equity tradeoff” and looked briefly at the “production efficiency (defined with respect to output) versus equity tradeoff.” Let’s look at the latter again this week.
First, let me just make a general comment about tradeoffs. One can have a positive tradeoff, or one can have a normative tradeoff, but one can’t really have a tradeoff where one argument is positive and the other normative. A positive tradeoff is an inverse relationship between two empirical phenomena or two logical / mathematical results. A normative tradeoff is an incongruity between two normative or ethical values such that one must be weighed against the other. Two different things. It follows that for something like a “total output (or equivalently, production efficiency) versus equity tradeoff” to be sensible as a tradeoff, we must either interpret “equity” as an empirical phenomenon, or we must attach normative value to “total output.”
Let’s first consider the positive tradeoff. Some person or other may suppose distribution of economic power X “equitable,” so the potential positive tradeoff is between economic output and distribution of economic power X, not the concept of “equity,” in general. Equitable means fair, not necessarily equal, but let’s say X is some distribution of economic power more equal than the status quo distribution, and someone feels that result more ethically justified or fairer on some basis and hence more equitable. Common enough view. In that case, we’re talking about a potential positive tradeoff between total output (or production efficiency) and more equal distribution X, not between total output and “equity” or distributional concerns in general, possibly involving fairness, human welfare, rights, etc. The answer to a positive question like that is to scientifically investigate the potential tradeoff to see if the relationship holds and what the tradeoff actually is. If economic power is more equally distributed, does output go up or down and, if so, by how much? Why might it go down? Incentive effects? Sabotage? Why might it go up? Possibly more robust demand, fewer human resources lost to poverty and an inability or restricted ability to express ideas, talents, effort, etc. Interesting positive question. Not dispositive normatively, of course. We pay for a number of things we think make our society more ethical. We spend resources on police, our justice system, prisons, etc. If we do indeed need to pay something for distribution X, we as a society may decide to do it or not. And, of the course, total output may not be the only empirical phenomena that might vary with the distribution of economic power X and be normatively relevant to this issue. We may need to consider effects on crime, health, resources, happiness, etc. Just saying, positive effects and tradeoffs may be relevant to normative issues, but they aren’t the normative issues themselves. Don’t suppose when you solve some positive issue you necessarily solve potentially related normative issues.
Next let’s consider the normative tradeoff. What normative content might we attach to total output that would make sense of a proposed normative tradeoff with the ethical concept of “equity,” in general? Might the relevant normative value really involve just total output? Consider this funny counterfactual, what if “total output” went to no one? What if we put it on a rocket ship and just distributed it to outer space? Does that matter? If so, then the normative value is not really about abstract, disembodied “total output,” it’s about people. In that case, the normative tradeoff involves the value of enhancing at least one person’s material situation in some way and the value of living in a fair, just, ethical, equitable society. Doesn’t seem much of a dilemma to me to be honest. The normative value of living in a fair, just, ethical society seems a big issue to me. Some unknown person or people, ethically deserving or not, needing it or not, being materially better off, isn't really in the same league. But some may think differently, of course.
One suspects some confusion may occur here involving evaluating normative tradeoffs in the unreal, arbitrary, attenuated conditions of the Fairy Land, where a variety of ethical issues, including distributional ethics, are held in abeyance, and in the real world. In the Fairy Land, the resolution of the tradeoff becomes a bit of a non-issue as well, but in the other direction. If distributional ethics, fairness, justness, etc. are meant to not exist, what values are we trading off against the value we attach to total output and production efficiency? It’s why the use of arbitrary, unreal models with false factual premises creates so much more confusion in normative economics than the superficially similar use of arbitrary, unreal models with false simplifying assumptions creates in positive economics. Are we talking about ethics for reality or the Fairy Land? Normative tradeoffs in reality or the Fairy Land? All ethical issues relevant to reality or just one or a few? Real people or theoretical ciphers? Serious ethical philosophy or a funny little side show?
A final wrinkle relates to the issue of actors and roles. Thus far, I’ve been talking about normative tradeoffs in the context of a particular person weighing the values involved. However, the economist / observer versus subject distinction allows a different interpretation. If one adopts the perspective of an observer looking at subjects supporting different positive outcomes, one may suppose the relevant “tradeoff” is not the conceptual dispute between ethical propositions, per se, but a tradeoff involving the two groups of subjects. One may discuss a positive tradeoff involving the numbers of subjects satisfied with one or the other resolution, or a sort of second order normative tradeoff for the observer involving weighing the normative values leading him or her to support one group or the other. The latter normative issue may or may not equate to the observer simply thinking through the conceptual tradeoffs on his or her own. There are two levels of ethical philosophizing going on in that situation, don’t get them twisted.
Economists are funny sometimes. They’re always quite eager to give others life lessons about tradeoffs, but one is never entirely sure they actually understand the tradeoffs they’re meant to be explaining. Gets a bit murky sometimes. Case in point, there is no “(economic) efficiency versus equity” tradeoff, and the “(production) efficiency versus equity” tradeoff is either a rather badly described potential positive tradeoff or a badly described nod to a rather opaque ethical issue. It’s the kind of thing that happens when one casually mixes positive and normative, science and philosophy. One might just make a hash out of both, leading to intellectual monstrosities like anti-democracy bad economics in the conservative style. Maybe do one thing at a time?
