Is this a good time to review how utopian beliefs related to markets (as in “free” markets) are generated by the rhetorical program of anti-democracy bad economics in the conservative style? Seems like it’s been a while. This post might require some familiarity with real neoclassical welfare economics and the normative arguments made in that theory relating to “utility,” “social optimality,” and so on. If you’ve never heard of it before, maybe catch you next time? In a couple of weeks?
Real neoclassical “welfare” economics is a normative argument based on individual preference rankings (confusingly called “utility”) discussing the normative optimality of certain market structures under certain conditions. Sound familiar? Perfect competition, that sort? The theory famously explicitly sets aside, ignores, ethical issues relating to resolving interpersonal conflicts of preferences, allocating scarce resources, which make up the lion’s share of ethical philosophy. That’s why I call it an ethical half-theory (at most). When one applies normative neoclassical welfare economics in realistic contexts, one must step outside that theory to think about the difference between the factual premises used in that theory and reality, but also about the exogenous ethical issues set aside in that theory. Certain normative results are specific to the theoretical world of neoclassical welfare economics, that is, specific to particular factual premises and the setting aside or ignoring of certain ethical issues most or all individuals care about, every society must and does address. One of those results is famously a proposition about any “perfectly competitive market” result being normatively optimal relative to the normative consideration of individual preference rank (only), and being normatively indistinguishable from any other such result.
Setting aside the very real and significant issue of the relation of the factual premises required for that normative or ethical result and reality, the main issue here is that that result does not hold when one re-introduces the exogenous normative or ethical content. When one re-introduces the exogenous ethical content, any person may view any instance of such a market result normatively inferior to any result that differs from it along the dimension of the resolution of interpersonal conflict of preferences, allocation of resources. This includes not only different perfectly competitive market results, but other market or non-market results. Nor is it the case that attaining any one such result necessarily makes it easier or more feasible to attain any other, and indeed may complicate it. For example, it may complicate it if the distribution of economic power is linked conceptually to some component of such a market, for example, labor and capital markets. Indeed, such complications may logically rule out such change, not just make it more costly or difficult. Thus, the ethical half-theory of real neoclassical welfare economics implies normative indifference to attaining or maintaining any particular real instance of a perfectly competitive market, as well as to the use of markets, economic power, to allocate resources in any given case.
Bad economics in the conservative style uses rhetorical techniques including what I call “fake distributional indifference” to give a different result, basically by treating reality like the world of economic theory, or equivalently treating the ethical half-theory as a full one. In bad economics, economists are cast as expressing their own full ethical theory resting on very simple, uncontroversial premises, with which others may disagree, saying we should strive always to establish or maintain any real instance of a perfectly competitive market. This places economists in the role of ethical arbiter, taking sides on ethical issues relating to the resolution of interpersonal conflicts of preferences, the allocation of scare resources, jumping into the ethical fray while pretending otherwise. It’s rhetorical chicanery. It leads to utopian beliefs about markets because it generates the idea economists propose any real instance of a perfect competitive market is ethically or normatively optimal based on very simple, relatively uncontroversial normative or ethical inputs or propositions. This then leads to anti-democracy sentiment because it portrays no useful role for activist democratic government in market systems, for example, to transmit the ethical views of voters relating to the relevant exogenous normative or ethical issues involved. It leads to bad economists presuming to call the ethical shots, lambasting other people, voters, democracy, for daring to “interfere with” or “distort” what they deem ethically correct results, supporting anti-democracy fascists wanting technocratic control of economic policy. It’s not real neoclassical welfare economics, which presents no argument for preferring any real instance of a perfectly competitive result to any other market or non-market result that differs from it according to how interpersonal conflicts of preferences are resolved.
Of course, there are normative or ethical arguments one can make for any given real instance of a market result being normatively optimal based on ethical beliefs relating to the definition, distribution, use of economic power to resolve interpersonal conflicts of preferences. Those arguments are not utopian per se, and if they’re explicitly made they have the same status as any other ethical theory of that sort, something for voters to evaluate according to their subjective moral senses. However, it’s not real neoclassical welfare economics. It’s also not what I call bad economics in the conservative style, because as I’m fond of saying, what puts the “bad” in bad economics is not that I personally disagree with the normative propositions involved but the fact they’re hidden, implicit, opaque, unclear.
Bad economics in the conservative style creates confusion and conflict, presents as normatively or ethically uncontroversial things that are controversial, obscures ethical issues and the role of democracy in market systems. It’s cynical, insincere, corrosive, and anti-democracy.
