Speaking of apparent economic paradoxes, I’ve been thinking recently about one involving the ethical issue of the extent of the market and its relationship to the ethical issue of the distribution of economic power. Maybe we can discuss that this week.
Let’s go back to the example I’ve been using recently to discuss the ethical issue of the extent of the market, the social decision to allocate vaccines by medical need rather than by economic power in markets. I mentioned before an interesting aspect of extent of the market issues is they can be converted in some sense to distribution of economic power issues. In our example, one could address the same issue by ensuring those with medical need have the requisite economic power to obtain the vaccine first on the market. I’m not suggesting it would be easy, practical, feasible, cost effective, etc. And such difficulties, if present, would generate additional interpersonal conflicts of preferences relating to resource use that would be exogenous to neoclassical welfare economics. However, I’d like to step back from such practical issues to think about the ethics involved at a more fundamental level, so let’s assume the economic power and market approach would be just as practical, easy, costly, feasible to implement as allocating the vaccine directly.
Based on the ostensibly uncontroversial normative propositions in neoclassical welfare economics, limited to attaching value to people attaining higher preference rankings, a purveyor of bad economics might propose the market solution clearly superior to the non-market one. However, that’s not what we actually observe, hence the apparent paradox. I, at least, recall very little serious ethical controversy or debate about allocating the vaccine directly by medical need rather than transferring the relevant economic power to those with medical need. Again, maybe it’s simply the perception of the practical difficulties involved. However, I doubt it. Other examples come to mind. Many support public education without seriously considering giving students the economic power they need to get an education or use as they like. People confronted with a panhandler commonly ask what he or she intends to use the money for, typically getting back a heated “Why do you care?” Why indeed? Are people so dense they can’t see the ethically obvious, uncontroversial solution?
What seems to be going on with this apparent paradox is we’re not really dealing with the normative proposition in neoclassical welfare economics relating to the expression of preferences in the absence of interpersonal conflict but something else a bit more controversial. If we were considering a one person world with that one person finding some vaccine, education, lunch, whatever, or the equivalent resources he or she could use for that or whatever else he or she liked, most would likely agree he or she would be better off in the latter case. However, we’re not. We’re talking about a world with interpersonal conflicts of preferences over scarce resources, and given the competing claims, people do sometimes appear to care how resources are used as part of deciding how to resolve those interpersonal conflicts. With the vaccine, the ethical concern may involve setting aside resources so people can address medical and health issues specifically, not setting aside resources so people with medical issues can maximize their “utility” by having a nice holiday before departing this world. With education, the ethical concern may involve setting aside resources for education for its own sake and so we aren’t surrounded by ignorant, unproductive, unethical simpletons, not setting aside resources so kids can maximize their “utility” by buying some new video games. With the panhandler, the ethical concern may involve setting aside resources to ensure people can at least get a good meal and hang in there one more day, not setting aside resources so they can maximize their “utility” by buying a bottle of Old Rot Gut to ease the pain.
It’s just not very helpful when purveyors of bad economics jump in, ignore the implicit interpersonal conflict of preferences relating to the use of scarce resource, and explain to the subjects, contra de gustibus, they’re making bad ethical decisions. Indeed it’s confusing. As I’m so fond of pointing out, when one is doing ethics for an arbitrarily and artfully defined, restricted, contrived Fairy Land, one can’t simply turn around and apply it willy nilly to reality without making the necessary revisions and adjustments, which may be significant. Both the extent of the market and the distribution of economic power, like the definition of economic power, are ethical issues exogenous to neoclassical welfare economics. They both involve resolving interpersonal conflicts of preferences. However, they’re separate issues. The distribution of economic power involves ethics relating to people directly, often fairness, justice, human welfare, etc. Extent of the market involves ethics relating to resource use and hence indirectly relating to other people, no matter their personal attributes. One can always at least theoretically convert an extent of the market issue into a distribution of economic power issue, thereby increasing the “utility” of the person on the receiving end, but other people are also involved, and depending on one’s ethics, one may not want to. Both issues pertain to resolving interpersonal conflicts of preferences relating to resource use and ethics. Both issues involve at least potentially controversial ethics exogenous to the normative argument in neoclassical welfare economics. But they aren’t the same issue.
