Level Issues, Economics, And Democracy

I thought I might have another go at anti-democracy sentiment in the USA as it relates to bad economics in the conservative style and its sequelae this week. How about them level problems?

As I mention, often, neoclassical welfare economics is an ethical half-theory (at most) because it does not address the ethics of resolving interpersonal conflicts. In economic contexts, those ethics relate to economic power: the definition, distribution, use of economic power.

The definition of economic power concerns laws relating to property, ownership, legal property “rights,” who owns what and why, under the law. Neoclassical welfare economics does not contain an ethical theory of who should own what or why. If one imagines the results of any set of laws about who owns what and why and changes it around so rich become poor, poor become rich, neoclassical welfare economics will not be able to rank the two outcomes as far as normative or ethical superiority.

The distribution of economic power concerns laws governing the pattern of economic power and includes all those legal arrangements, mechanisms that play into that, as labor markets (with or without unions, market failure, etc.), capital markets, inheritance, policies, etc. Neoclassical welfare economics does not contain an ethical theory about how economic power should be distributed, for example, it does not present an ethical theory proposing one’s economic power should correspond to one’s productivity or contribution to profits or what have you. If one imagines the results of any set of distributional mechanisms and then changes it around so rich become poor, poor become rich, neoclassical welfare economics will not be able to rank the two outcomes as far as normative or ethical superiority.

The use of economic power concerns whether, in any given instance of resolving an interpersonal conflict of preferences, allocating some good, society goes with markets or something else. For example, in the case of scarce vaccines, we allocated by medical need not via markets. Neoclassical welfare economics does not contain an ethical theory that says given the choice between resolving some conflict of preferences, allocating some good, via economic power in markets versus some other system one should choose markets. If one imagines the resolution of any particular interpersonal conflict of preferences using markets, then changes it around to give a different resolution, neoclassical welfare economics will not be able to rank the two outcomes as far as normative or ethical superiority.

What neoclassical welfare economics does is set aside all or most of the thorny ethical issues addressed by democratic government, law, then discuss some typically relatively trivial issues that apply once those more significant issues are off the table. This structure has created a great deal of confusion over the years. One common idea is that because neoclassical welfare economic theory does not take up the ethics of economic power, those issues are unimportant for evaluating real economic systems, outcomes, policy. So, for example, one may find bad economists saying it doesn’t matter who owns what, as long as someone owns it, or economic power plays no role in market outcomes, or that market solutions are inherently superior to non-market solutions, and so on.

The segregation and suppression of the role of economic power and the ethics of economic power lead many to view markets as peculiarly free of power interactions and examples of simple voluntary cooperation. Everyone agrees the poor kid may buy a crust of bread, etc. The illusion is obviously helped if one agrees the laws relating to the ethics of economic power one is attempting to suppress awareness of, push into the background, segregate. If one sees problems or issues, the ethics of economic power does tend to become rather more visible. The segregation and suppression of the role of economic power is what gives the rhetorical power to more stridently anti-democracy forms of bad economics and sequelae, such as “libertarianism,” in which markets are meant to be “freedom” and democratic government “tyranny.” It also informs the form of fake anarchism that, rather than taking certain laws for granted, proposes once democratic government, law, is out of the way, people will naturally and organically agree all the ethical issues democracy, voting, law were meant to address. (There’s an unrelated form of utopian anarchism which neither takes laws for granted nor supposes laws relating to economic power will arise naturally but welcomes the violent struggle over resources that accompanies real anarchy as a sort of social Darwinist test of merit.)

What’s happening is they’re trying to push the role of government, law, in resolving interpersonal conflict, allocating resources, the ethics of economic power, into the background, take if off the table, segregate it as different in kind from government, law at later stages. Basically, they’re trying to reproduce in reality the presentation of markets in the ethical half-theory of neoclassical welfare economics as transmitted via false, misleading, anti-democracy bad economics in the conservative style. In reality,  there is no essential conceptual difference between addressing ethics relating to economic power, resolving interpersonal conflicts, allocating resources, at one point in law or another. One may allocate vaccines by medical need without overhauling markets generally. It’s basically a form of what I call a “level issue” in which the same concept, here laws relating to economic power, resolution of interpersonal conflicts, allocation of resources, may appear at different points of an argument, theory, system, creating confusion.

If one accepts laws relating to economic power are based ultimately in democratic government, there is no obvious rationale for rejecting later revision by democratic government. Not accepting that basis of law suggests anti-democracy sentiment that may well imply criminality. When some discover in a democracy laws may be generated affecting economic power they don’t personally approve, it becomes clear that although at one level acceptance of democratic government may be voluntary, at another level the laws produced may not be always to one’s liking. This makes some propose democracy a form of tyranny in which others may use state power to enforce their will on one. They dream of a system more like their false image of markets, in which interactions are ostensibly purely voluntary, power irrelevant. However, there is no such system. The ethics of resolving interpersonal conflicts of preferences, allocating scarce resources must be addressed, and will  be, one way or another, in any economic system. It’s simply another level issue, where and how is it done and by who? Thus may one be led either to fascism, the hope a like-minded authoritarian despot will support only laws relating to economic power one personally approves, or to utopian anarchism, the notion without democracy everyone will naturally agree those ethics, laws on economic power.

Fighting anti-democracy sentiment means first and foremost fighting anti-democracy bad economics in the conservative style and its sequelae, differentiating them from neoclassical welfare economics, addressing the confusion and conflict academic economists have so long promoted.

Equity and Efficiency, Again

I read someone blathering on about efficiency and equity recently, and it made me wonder if I should do another extended storm on the whole issue of “utility” and “economic efficiency” and so on. Sure, why not? Too soon? Who cares? Alrighty then. Let’s do it.

Equity relates to a class of ethical issues to which “utility” as defined in neoclassical welfare economics cannot be applied. In that theory, one never gives up “utility” to get equity. If one may discuss a tradeoff involving the two ethical considerations, it’s not about that. Indeed, as a corrective, one may note it makes just as much sense to propose an increase in “utility” as a decrease when revising market arrangements in pursuit of equity. (Both are nonsense if talking about preference rank utility, both sensible if perception utility.) Just to briefly review that whole issue, if “utility” is defined as preference ranks of any given individual, it obviously doesn’t make sense to talk about how overall or total “utility” changes when some move up their individual preference ranks and others down theirs. However, if one thinks of “utility” as, say, inaccessible internal perceptions of satisfaction from preference fulfillment that one may only empirically infer via preference ranks as revealed by choices, then it may make sense. However, in that case, it’s inherently unknowable. Those two interpretations of “utility,” preference rank utility and what I call perception utility, are really the only sorts that work with neoclassical welfare economics and preserve the prohibition against “utility” being used in interpersonal contexts. One or the other. Outside neoclassical welfare economics there’s a whole universe of ethical philosophy in which one may define “utility” any way one finds appealing and sensible. Just beware potential equivocation on the term “utility” when discussing neoclassical welfare economics.

Given its significance for economics, one may wonder why academic economists can’t simply decide and talk consistently about either preference rank utility or perception utility accessible only through individual preference ranks. The ethical arguments in the two cases differ. Carrying along two possibilities complicates discussion and evaluation of the ethical reasoning involved and the demonstration of ethical half-theory status. Why the indecision? One supposes it just doesn’t matter for their own ethical program or indeed advances it. It’s yet another indication economists aren’t real or sincere ethical utilitarians. Frankly, my dear, they don’t give a damn what utility is, as long as it’s eliminated from interpersonal ethics and economics is thus rendered an ethical half-theory. Why? Why indeed. I suppose they may do that to create confusion by then fostering the error of supposing neoclassical welfare economics a full ethical theory, thus allowing the sly introduction of exogenous interpersonal ethics as in anti-democracy bad economics in the conservative style. Academic economists may be unrigorous or incompetent ethical philosophers and at the same time clever, sly rhetoricians. It just depends on one’s goals, how one conceives of one’s intellectual responsibilities, one’s attitude toward sincerity of intent and presentation.

To return to our main issue, we have two distinct ethical issues: 1) Is some result equitable (ethical, fair, just, etc.)? 2) Is some result economically efficient defined with respect to “utility” (can someone move up his or her preference rank without someone else moving down)? The exogenous nature of the first issue is why, in careful explanations of neoclassical welfare economics, one will always find equity broken out as a legitimate reason within that theory to revise any real iteration of a market, in addition to and separate from market failure. Note here the distinction between equity issues being exogenous to the ethical half-theory of neoclassical welfare economics and the proposition that theory contains an argument against equity as suggesting it’s baseless or one must give up “utility” to get it. A great deal of confusion often occurs at this junction involving failing to appreciate neoclassical welfare economics as an ethical half-theory. Economists, qua economists, to the extent they base their recommendations on neoclassical welfare economics, are meant to be indifferent, have no opinion, on market interventions based on equity concerns, not to oppose them because the basis is undeveloped in economic theory. Neoclassical welfare economics is a normative theory that sets aside a certain class of ethical considerations relevant in the real world. It’s not a full ethical theory recommending amorality in interpersonal contexts. That would be philosophically, ethically absurd.

Deciding the merits of an equity argument is exogenous to neoclassical welfare economics, and in that broader philosophical context, external to economic theory, one may propose a sort of tradeoff between different ethical considerations, including economic efficiency. However, in that context of general ethical reasoning, the issue of equity, that is, fairness, justness, ethics applicable to resolving interpersonal conflicts is clearly vastly more significant than the issue of economic efficiency. Not much of a tradeoff, if we’re being honest. I suppose few would seriously propose it more ethically significant to know if individual X might have attained a somewhat higher preference rank under some random ethics relating to resolving interpersonal conflicts of preferences than to assess, evaluate those ethics. It’s like saying one finds the issue of whether an impoverished slave can indulge his slight preference for corn pone over grits a much more significant ethical issue than slavery, the ethical basis of economic power, if he can indulge a much greater preference for other foods. I’ve argued before attending to “economic efficiency” in general seems ethically unobjectionable, but if one is setting aside on that account the lion’s share of ethics, which relates to interpersonal conflict, that seems very much a case of the tail wagging the dog. It’s not the job of economists, even those acting in their role as economists and not simply providing their own normative or ethical views under cover of their economic credentials, to recommend or give policy advise on the basis of such an absurd ethical proposition as that.

I propose an economist per se fretting about equity efficiency tradeoffs suggests bad economics in the conservative style, calculated to promote amorality (that equity shouldn’t matter) or the equity arrangements associated with an instance of an economically efficient outcome.