Can I take another look at what I understand as the “methodological individualism” critique of neoclassical welfare economics, or a part of that critique anyway, this week? I discussed it before, but it’s been a while, and I’m still thinking about it. I probably mentioned but for the longest time I couldn’t make heads or tails out of this critique. Focusing on the individual seems sensible enough for both social science and ethics. Individuals ultimately think, decide, do, maybe as a part of a group, maybe not. However, under the principle of sympathetic interpretation, sensible at least when one supposes one’s interlocutor sincere at all, I’ve kept thinking away, and now I think I might understand at least a part of what people have in mind in this area. The key for me involves an issue I call actors and roles, in this case, the distinction between the economist / observer and, on the one hand, the ciphers of the theoretical Fairy Land of Economic Theory, and on the other, real people. Also, a bit of the issue of the extent of the market.
The Fairy Land is an interesting place because the interplay of normative propositions and factual premises is not always very clearly developed, as one might expect with armchair philosophy done by people who would rather obviously be doing something else. One notable feature of the Fairy Land I suppose I might never have noticed without thinking about this particular critique is that the ciphers don’t seem to have preferences relating to social ethics, equity, politics, economics, how to resolve interpersonal conflict, etc. If the ciphers themselves have preferences relating to social ethics to supplement or compete with those of the economist / observer, then, for example, the argument about the normative equivalence of all perfectly competitive, Pareto optimal markets seems to break down. We might attain such an ostensibly special market outcome only to find the preferences of all the ciphers imply it stinks on the grounds of, say, distributional ethics, and rank even some non-perfectly competitive, non-Pareto Optimal outcome superior to the one we attained. We might find the ciphers prefer to reject even the supposedly non-controversial ethical propositions about preferences in the absence of interpersonal conflict that serve as normative inputs to the argument relating to economically efficient, perfectly competitive outcomes. Indeed, the ciphers may well decide they prefer not resolving some or all interpersonal conflicts of preferences via economic power in markets, that is, they may have preference rankings relating to the extent of the market for some or all particular goods or services. And if we allow heterogeneity of the relevant ethical beliefs and preferences, well that’s a whole lot of interpersonal conflict of preferences, and a whole lot of implied indifference on the part of the economist / observer, right there. We can’t resolve interpersonal conflicts of preferences including about ethics on the basis of “utility.” So if interpersonal conflict is omnipresent with respect to the ethical or normative significance of any arrangement we might suggest, well ...
So how do we avoid the ciphers discussing social ethics, deciding on a forever temporary and contingent basis what they intend to do to create an ethical society? How do we prevent democracy breaking out in the Fairy Land? It would seem we could either arbitrarily limit what we allow the ciphers to have preferences about, or I suppose we could make some ad-hoc decision certain preferences can’t be expressed in terms of “utility,” although that seems a bit dodgy as far as terminology. If we just said something like, “We’re not going to allow the ciphers to discuss ethics or democracy in the Fairy Land, so while they might have preferences, they’re never going to express them, at least while I’m in charge,” it doesn’t make the preferences disappear. So the ciphers in the Fairy Land are presumably meant to be “individualistic” in the very specific sense they’re not meant to have preference rankings about things like the resolution of interpersonal conflict, ethics, fairness, equity, justice, human welfare, etc. Interestingly, that implies the ciphers have as an aspect of their own full ethical theory a feature of the ethical half-theory of the economist / observer designed to hold controversial ethical issues relevant to reality in abeyance. That’s weird, isn’t it? Conflation alert!
This again raises the question whether the normative argument and conclusions of neoclassical welfare economics are meant to apply only to, and be evaluated only in, an arbitrarily constructed Fairy Land populated by ciphers, or also reality. Let’s think about it. If we’re also talking about reality, real subjects and not just ciphers, we’d be talking about either a factual premise relating to the ethical views of the subjects, or an additional ethical proposition subjects should be amoral with respect to those exogenous ethical issues. As an ethical proposition, it would run afoul of the de gustibus non est disputandum principle, an element of the normative argument in neoclassical welfare economics that says the economist / observer is meant to not second guess the preferences of the subjects, tell them their ethics are wrong, for example. The perspective of neoclassical welfare economics involves economists and other observers looking in on society the way an entomologist studies a colony of ants. The observers are talking among themselves about ethics at one level, the subjects another. Don’t get it twisted. It would also make neoclassical welfare economics absurdly controversial. The proposition no one should care how interpersonal conflicts of preferences are resolved, the core of ethics in general, and the basis of human society, is controversial. As a factual premise it seems clearly false. Most people do, in fact, appear to have ethical preferences relating to the proper resolution of interpersonal conflicts of preferences, allocation of resources, etc., often quite strongly held ethical preferences. Some people exposed to neoclassical welfare economics may aspire to emulate the ciphers, may profess amorality in an apparent effort to merge the Fairy Land with reality, but not everyone, and even some of those falsely or insincerely. One can’t simply apply a normative or ethical argument meant for the Fairy Land to reality. One must address any exogenous ethical issues relevant to reality that were left out, and consider what happens when one eliminates any false factual premises. And when we say we must address the ethical issues left exogenous in the ethical half-theory of neoclassical welfare economics, we’re not talking just about observers who are not economists, or economists not wearing economist hats, but the subjects’ views as well, the relevance of their views, if any.
What does it all mean? Neoclassical welfare economics, in isolation, has little to say about reality. It’s about a severely attenuated, limited, artificial world. It must be revised and combined with exogenous normative content to be applied at all in realistic contexts. Neoclassical welfare economics as an intellectual artifact is not “wrong,” per se. As a sort of thought experiment, it says what it says. It can be useful to show the limits of a certain train of thought in ethics, to establish the significance of democratic government, etc. Real, limited, neoclassical welfare economics is very different in that respect from expansive bad economics in the conservative style, which pronounces definitively on all real world economic issues, ostensibly and risibly based only on neoclassical welfare economics. It’s also very different from so-called “general welfare analysis” involving mental gymnastics around “utility,” variously defined and manipulated, with all the confusion and paradox that exercise often entails, which can be similarly expansive, but sometimes less underhanded.
