I thought this week I might return to the concept of “equity” as it appears in neoclassical welfare economics and in loosely related anti-democracy bad economics in the conservative style. Seems always quite a lot of confusion in that area.
“Equity” is a normative, ethical concept that means fairness or justness. In the context of neoclassical welfare economics, it’s used to refer generally to all interpersonal ethics purposefully excluded from that theory. That is, in neoclassical welfare economics, “equity” refers also to questions of observable welfare, well-being, often associated with traditional definitions of “utility” but excluded from the definition used in that theory, arguably always but certainly in interpersonal ethics.
If one reads competent accounts of neoclassical welfare economics that acknowledge the limited, ethical half-theory structure of the theory, you will find equity concerns raised as a perfectly legitimate reason to reject any normative conclusions made in that theory. In careful accounts of neoclassical welfare economics, regulatory “interference” with real markets may be justified either because of “market failure” (that is, the failure of real markets to correspond to false but simple engineering models) or equity. Two issues. Addressing those two issues may imply very different policies. For example, one may address “market failure” by trying to make a real market more similar to the perfectly competitive engineering model, but equity concerns may suggest revising or not using markets at all. In such cases, equity concerns dominate. For example, one may detect “market failures” in the market for a scarce vaccine during a pandemic, but if one supposes vaccines should be allocated by medical need rather than economic power in markets, that will take precedence.
However, despite equity concerns being a legitimate reason within neoclassical welfare economics to reject the normative conclusions of that theory that would hold in the absence of those equity concerns, those concerns are not meant to be discussed or evaluated in the theory. That’s the specification of the ethical half-theory status of neoclassical welfare economics that seems to present such difficulties for some, including conservatives who want neoclassical welfare economics to say something different and more than it does, for rhetorical reasons. Briefly, the ethical half-theory of neoclassical welfare economics does not actually tell one how to allocate scare resources, how to resolve interpersonal conflicts of preferences, or rather, it does, but only if no one has “equity” objections based in interpersonal ethics. Thus, when talking to a competent economist speaking from the perspective of neoclassical welfare economics, one will never end up in an ethical dispute about the normative conclusions of that theory relating to allocating scarce resources or resolving interpersonal conflicts. If one has any equity concerns, that is, concerns relating to interpersonal ethics, those are perfectly legitimate reasons within that theory to revise or ignore those conclusions, and there is no basis within that theory to dispute those reasons.
Those promoting bad economics in the conservative style play with the peculiarity of equity issues appearing in neoclassical welfare economics as an abstract concept while the identification, discussion, evaluation of equity arguments are exogenous to that theory. In their subtly incorrect, false interpretation of neoclassical welfare economics, they propose an economist speaking from the perspective of that theory should ignore or even oppose equity concerns and provide normative advice assuming the absence of equity concerns. In their telling, neoclassical welfare economics does tell one how to allocate resources, resolve interpersonal conflicts of preferences, although if one chooses to reject neoclassical welfare economics by introducing equity concerns, one may of course disagree. Thus, indifference to equity arguments transforms to fake indifference and opposition to equity arguments, and neoclassical welfare economics transforms from accepting equity objections as normatively legitimate to opposing equity objections. In that case, neoclassical welfare economics becomes cast as a full ethical theory and rejecting any of its conclusions based on equity concerns becomes equivalent to simply rejecting all of it, as rejecting any other full ethical theory because one disagrees it. This is rhetorically significant because the explicit normative, ethical inputs to neoclassical welfare economics are relatively uncontroversial, at least under the false factual premises with which they are commonly bundled, so rejecting it is a big deal. It’s a bait and switch. And on the flip side, the presenting of neoclassical welfare economics as a full ethical theory that recommends ignoring equity concerns, promotes amorality in interpersonal context, transforms it into an absurdly implausible and controversial ethical theory. This leads to a whole line of dodgy conservative rhetoric in which equity concerns, interpersonal ethics, are cast as bad, unnecessary, unreal, empty virtue signaling. Obviously, people support interpersonal ethics, want to live in a moral, just, fair, ethical society. Indeed, every real instance of a market will express and be consistent with some set of equity beliefs, which is a rather more plausible explanation of conservative support for those instances than unlikely or at least rare support for interpersonal amorality.
The underlying issue is whether equity, interpersonal ethics, is “in” or “out” of the normative or ethical theory of neoclassical welfare economics. The answer is clear but quirky, odd, tricky. It’s in, but only in a general conceptual way, not fully in, but certainly not out. The issues may then be further complicated by efforts of some economists to bring equity concerns, interpersonal ethics, back into economics via so-called “social welfare functions,” particular economists’ ethical views, in the context of “general welfare analysis.” That enterprise creates its own set of issues, as an awkward, incongruous mix of “utility” as individual preference ranks, undefined in interpersonal contexts, and economists’ personal stylings on ethics in interpersonal contexts. But that’s not really the issue here. The issue is not “economics,” writ large including general welfare analysis, but the theory of neoclassical welfare economics and how it’s misused to support anti-democracy bad economics in the conservative style, a sort of folk economics.
Neoclassical welfare economics says what it says, no matter how limited or attenuated its findings. It can’t be faulted for that. But what it says can easily be mischaracterized, misinterpreted, misused, and it can be criticized for that. Indeed, sometimes it seems purpose built.
