I feel lately I’ve been getting away from discussing economic theory, per se, so maybe this week we can talk about something that occurred to me the other day about the individual preference rankings that form the normative basis of neoclassical welfare economics.
I’ve discussed before how neoclassical welfare economics is based on a distinctive take on “utility” that defines it to be, or makes it equivalent in practice to, individual preference rankings. That sort of “utility” is undefined or inapplicable in interpersonal contexts. The particular issue I was thinking about the other day involves a normative proposition about individual preference rankings meant to apply to economists qua economists generally expressed rather facetiously in Latin as de gustibus non est disputandum. If your ancient languages are a bit rusty, it just means economists qua economists are not meant to dispute, evaluate, delve into the normative significance of their subjects’ individual preference rankings, second guess them, discredit them, whatever.
Within the Fairy Land of Economic Theory, the proposition presents no particular normative difficulty or controversy. Cipher X has preference rankings A > B > C. Do you dispute it? No? Me neither. Seems fine. Whatever. Not very controversial, is it? But, of course, things get a bit more normatively, ethically complicated, controversial in the real world. Why? For one thing, real people, possibly unlike the ciphers of the Fairy Land, may be misled, confused, manipulated, tricked, and the normative significance of those preferences is unclear. I say “possibly” because the famous assumptions of perfect information, rationality applied in the Fairy Land are often introduced as requirements for the normative argument relating specifically to perfectly competitive markets, not necessarily generally to the Fairy Land. Therefore, it’s not entirely clear if the theoretical ciphers populating the Fairy Land are meant to uniformly have perfect information, be all knowing, perfectly reasonable, immune from manipulation and error, when analyzing the normative or ethical arguments presented. This is where confusion within economic theory between ethics and science or maybe engineering modeling, positive and normative, is and ought, kicks in. In a normative or ethical argument, one needs to know the factual premises meant to apply to an argument to evaluate it.
Anyway, to return to the plot, the preferences of real people, as opposed to theoretical ciphers, may clearly be affected by external forces, other people, and in real market systems vast amounts of money are spent on advertising, marketing, to dispute, indeed alter preferences. Attending to the issue I call “actors and roles” clarifies that behavior is consistent with profit maximizing behavior on the part of firms, but of course the de gustibus normative principle was never meant to apply to them as such, only to economists qua economists. As far as voters, the real subjects of economists proposing to discuss reality, voters dispute preferences indirectly by supporting laws placing boundaries on, or prohibiting, false and misleading commercial speech designed to manipulate preferences. It’s awkward because real people, voters, are the people economists qua economists are meant to be talking to (unlike the Fairy Land, where economists are meant to be talking not to the subjects, the theoretical ciphers, but an implied third party also outside the system). Of course, again, de gustibus is not a normative principle meant to apply to everyone, subjects, only to economists qua economists in the context of the ethical half-theory of neoclassical welfare economics. That’s where it’s uncontroversial, not in reality.
Why would voters care if, say, preferences were manipulated by lies, fakery? If only some individual were involved, one assumes many voters might not care. No matter how foolish the preferences, that individual is still satisfied in some way when they’re met. It’s hard to avoid the suggestion the reason voters care is again this issue of other people being involved, scarce resources going to arguably foolish, fabricated preferences based on lies, that might otherwise go to other more normatively significant preferences. Considering the interpersonal context, real people spend a great deal of time, effort, money to dispute, challenge, change other people’s preferences affecting others in any number of ways: law, ethics, religion, literature, popular culture, political debate, and so on.
Why do I bother saying all this? The normative content developed within real neoclassical welfare economics is restricted to individual preference rankings, no interpersonal conflicts can be addressed, and the preferences ranked by individuals are unevaluated. It’s a normative, ethical argument that has little relevance to the real world, where the lion’s share of ethical controversy relates to resolving interpersonal conflicts, including of preferences, as allocating scarce resources, and involving disputing preferences. Attempts to apply the normative or ethical reasoning in neoclassical welfare economics to the real world are generally expressions of bad economics in the conservative style, in which the necessary controversial ethical content is slipped in one way or another. If one wants to dispute the normative argument in neoclassical welfare economics applicable in the Fairy Land, that’s fine. If one wants to dispute the normative argument in bad economics in the conservative style applicable to reality, that’s fine. Two different things. Watch for the rhetorical game of jumping back and forth between the arbitrary, contrived conditions and ethics of the Fairy Land and reality, between the ethical half-theory of neoclassical welfare economics and more complete full ethical arguments relevant to the real world. Watch also for a rhetorical bait and switch between the normative concepts and arguments in neoclassical welfare economics, on the one hand, which relate to bad economics in the conservative style, and more open-ended “general welfare analysis” on the other.
