Social Welfare Functions, Again

I know I discussed it relatively recently, but I feel I should say a few more words more about the rhetoric of so-called “social welfare functions,” mostly because so many dismiss the baleful effects of bad economics in the conservative style by waving their hands at it. It’s meant to be a way to introduce interpersonal ethics, equity issues, into neoclassical welfare economics, to make it a full ethical theory rather than an ethical half-theory. In reality, it’s a rather daft, misleading bit of bad ethical philosophy, rhetoric, mostly about deflecting criticism.

If you recall my previous discussion of the odd way the term “utility” is used in neoclassical economics, you may recall the dominant modern interpretation is that it has no content beyond indicating preference ranks for a given individual. There’s nothing “behind” it, only the fact of the ranking. This interpretation is often called “preference rank utility,” although what the word utility is meant to add to that formulation is anyone’s guess and it should simply be “preference rank.” Under that definition, “utility” is undefined in interpersonal contexts. That is to say, it’s grammatical nonsense to talk about how the “utility” of person A compares to that of person B. One has a “utility” defined relative to A, and a “utility” defined relative to B, but there is no “utility” defined relative to both at the same time. Despite this, it’s not uncommon to see economists who profess to be using modern preference rank utility then move on without skipping a beat to adding up “total” utility by using a “social welfare function.” One cannot avoid the implication they simply don’t know what they’re talking about.

If a “social welfare function” is to be sensible, one must use an interpretation of “utility” in which something lies behind individual presence ranks and so exists in interpersonal contexts, as in the older “inaccessible inner perceptions of satisfaction from preference fulfillment” definition. You may recall that older definition, related to utilitarian ethical philosophy in which “utility” typically related to usefulness for an implied end as satisfaction, happiness, well-being, was also formerly used to shut down interpersonal “utility” comparisons to produce an ethical half-theory. The earlier approach to achieving that end was based on interpersonal utility comparisons not being undefined, as under the modern preference rank definition, but being technically and scientifically impossible, there being no way to obtain information on these inner perceptions of satisfaction. Later economists developed a desire to be viewed more as scientists, despite their philosophical and ethical concerns, leading them to want to shed the non-observable “nonsense” of their older definition of “utility” and adopt the new observable preference rank one. In a practical sense both approaches led to the same conclusions because although the “inaccessible inner perceptions of satisfaction from preference fulfillment” was not defined only relative to individuals, individual preference ranks were the only observable information meant to relate to it. 

The funny thing about the “inaccessible inner perceptions of preference satisfaction” utility is that, as ethical philosophy, it’s complete garbage, in the sense few would likely agree with it if they could actually implement it. Say one had a dream where one could access these postulated inner perceptions and one found they were greatest with someone, oh heck let’s say Adolph Hitler, whose perceptions were so much stronger they dwarfed all others. So the ethical thing to do would be to let Mr. Hitler victimize everyone? Would anyone seriously accept maximizing that type of “utility” as sound ethical philosophy if they could implement it? Unlikely. As I like to say, it’s an ethical theory whose utter implausibility is masked by it utter impossibility. It’s not a real ethical proposition but a rhetorical maneuver. However, if one starts with “utility” defined in that way, and has no actual idea the size or intensity of the relevant inner perceptions, one might want to “weight” them according to some formula in order to add them up and get a total “utility” or inner perception across people.

It’s garbage. Bad philosophy. One claimed implausibly to want to maximize a peculiar sort of “utility,” then one basically ignored it and introduced unrelated ethical thinking (ironically possibly involving other takes on utility), and made up conclusions having nothing really to do with it.

It introduces the ethical stylings of philosophically clueless economists, the ones making these social welfare functions, based on who knows what ethical thinking, and sets economists up as ethical arbiters. Why? What does your average economist know about ethical philosophy? 

It does nothing to address the problems introduced by bad economics in the conservative style, as that rhetoric remains untouched. The ethical rationale for interpersonal ethics and equity issues remains external to neoclassical welfare economics, which remains an ethical half-theory.

The odd formulation supports rhetorical arguments in some forms of bad economics in the conservative style in which interpersonal ethics, equity issues, are viewed as irrational, unjustified, arbitrary, mere “virtue signaling,” nothing that should be taken seriously in economic evaluation.

If one is serious about addressing the dodgy normative rhetoric of anti-democracy bad economics in the conservative style, one won’t be distracted by the essentially mathematical issue of economists potentially using “social welfare functions” to rank perfectly competitive market outcomes. 

 

The Establishment Elite

I saw a story of two boys trashing their school library and it made me want to revisit the concept of an “establishment elite” and how and why the meaning of the term differs between conservatives and right wingers on the one hand, and liberals and other leftists on the other.

Liberals, concerned as they typically are with real economics, suppose the establishment elite are those with economic power, particularly vast economic power, who have done very well for themselves under status quo economic arrangements, so rich people, CEOs, bankers, Wall Street types. When liberals voice opposition to the establishment elite, it typically involves the notion the economically powerful are busy looking after their own interests to the detriment of others, for example, by promoting anti-democracy bad economics in the conservative style and conservative fascism. 

In contrast, conservatives, right wingers see the world through a different lens. They worship the “establishment elite” as the economically powerful because they follow normative arguments in anti-democracy bad economics in the conservative style and suppose the rich superior and special. Following the rhetoric of bad economics in the conservative style, conservatives typically resolutely ignore issues relating to resolving interpersonal conflict of preferences, as over scarce resources, and the potential roles of economic power and democracy in that area.

No, conservatives define the “establishment elite” primarily along an intellectual axis as smart people, educated people, experts, anyone who might challenge their own hubris and ignorance. The oppression conservatives, right wingers feel, that they’re concerned about, is not economic or material oppression but a sort of perceived intellectual oppression, an underlying suggestion they should talk more sensibly, read, think, learn, respond to criticisms, stop lying, that sort. 

As democracy is ideally about voters having reasonable, rational, informed conversations, conservatives tend to despise democracy as a venue, much like academia, where their oppressors, relatively glib, educated, intellectual voters wield power, so they come to despise democracy as well. Indeed, when conservatives talk about opposing the “establishment elite” they quite often mean simply opposing democratic government, that realm in which they, the simple, are savaged and put upon by the other, the clever and glib. So they support politicians who mock and play with that system. Much like any fool who feels a need to be involved in a conversation over his or her head without having anything relevant or useful to say, they randomly blurt out various whoppers, tall tales, jokes, insults, bits of rhetorical chicanery, then suppose they’re winning a “debate.”

It’s why, although I spend much time working on the rhetoric those I recognize as the establishment elite use to pursue power, which I call anti-democracy bad economics in the conservative style, I recognize by doing so I mark myself as part of what conservatives see as the establishment elite. But I do it anyway because my goal is to draw attention to some tricky bits of misleading conservative economic rhetoric for those who care to know, not to appeal to conservatives by carefully ignoring it or pretending to also be confused by it. Yes, I follow the Way of Philosophy. 

Utility Is Not Money

I did a storm on “utility” in neoclassical welfare economics recently so maybe don’t need to have another go at that just yet, but maybe this week I can talk about the peculiar habit of conflating “utility” with money or economic power in bad economics in the conservative style?

“Utility” in neoclassical welfare economics does not equate to money. One can compare money across individuals. One person has $5; one has $10. Interpersonal “utility” comparisons are either undefined or impossible in neoclassical welfare economics depending on the interpretation of utility used. This means an argument of the form, person X must get more “utility” from good G than person Y because person X is able and wiling to pay more for it, is incorrect in real neoclassical welfare economics. That’s an external ethical proposition relating in part to economic power. It’s fine to add such an argument as an external ethical proposition relating to so-called “equity” concerns, that is, addressing the ethical issues relating to resolving interpersonal conflicts of preferences as over scarce resources; however, it should be explicitly stated as such. If one tries to introduce it on the sly, associating it with the relatively less controversial issues associated with the sort of “utility” used in neoclassical welfare economics, a peculiar, idiosyncratic sort that cannot rightly be used in interpersonal ethics, one is doing a bait and switch. A rich man building a castle on Mars while a poor man starves in a forest is not justified on the basis the rich man gets more “utility” (as defined in neoclassical welfare economics) from his castle than the poor man gets from a nice dinner. That’s an interpersonal utility comparison.

Much of bad economics in the conservative style involves rhetorical stratagems and devices, word play, equivocations and conflations, designed to suppress honest expression, discussion, evaluation of the ethical propositions needed to go beyond “utility” as used in neoclassical welfare economics. If you can’t take the time to study actual neoclassical welfare economics or the rhetoric of anti-democracy bad economics in the conservative style, extensively used on the right, at least understand neoclassical welfare economics can never tell you if any resource should go to person A or person B. To decide that sort of thing, one must go beyond the normative argument presented in real neoclassical welfare economics. One must introduce external, exogenous normative or ethical propositions relating to interpersonal ethics, and the question then becomes whose ethical views should matter? If one can understand that much, then one may come to understand one important rationale for democracy in the proposition such controversial issues should be decided by the people, the governed, not handed down from on high by technocratic or theocratic Ethical Arbiters, even those one agrees.

Liberalism versus Conservatism in the USA

Can we talk a bit more this week about liberalism, classical liberalism, neoliberalism, and conservatism in the context of US political discourse? I know I do it a lot, but not sure I’ve done a storm recently, and I have a few additional thoughts on the matter.

One thing that might help is to consider that 18th century anti-monarchical “classical liberalism” had a political component, democracy, and an economic component, markets. Equivocation on the term “liberal” as it applies to those two components is I suppose a common source of confusion. We’re not fighting monarchism again just yet. We have a democracy of sorts. And we commonly use markets of sorts. Political discourse in the USA has long been about the interaction of those two: democratic government and markets. It’s no longer about the historical artifact “classical liberalism.” The economic, markets, element of “classical liberalism” is what leads some modern US conservatives to call themselves “classical liberals” or “true” liberals or what have you. That’s a rhetorical word game that seeks to suppress the real issues between modern US liberalism and conservatism.

In terms of real issues, modern US liberalism is all about the political component of “classical liberalism,” democracy, and specifically how it interacts with economic policy, markets, and so on. US conservatism is all about the economic component of “classical liberalism,” all about markets. US liberals see economic systems as created by and properly responsive to democracy, so responsive to voters providing normative inputs on economic values, objectives, goals, evaluation, policy. US conservatives see markets as sacrosanct and are all about keeping voters, democracy out of it. Formerly, both sides accepted democracy as the political mechanism, so the debate between liberals and conservatives was all about economics, markets. In general, liberals perceived some issues with our economic system conservatives did not, and the wanted to use democracy to address those issues. By “economic systems” I mean here broadly speaking the resolving of interpersonal conflicts of preferences as over goods, services, scarce resources, so systems for allocating or distributing resources, which might involve the use of economic power in markets or various other systems. Liberals argued for activist democratic government expressing voters’ normative, ethical, moral views on economics including via regulation, market interventions, alternatives. Conservatives argued for “small” or “inactive” democratic government that did little or nothing beyond setting up markets.

Recently, of course, their views have diverged to a greater degree. Liberals have remained where they have long been, arguing voters should be able to use democracy to express economic values, and expressing their own typically “left” values as well. However, conservatives have moved to the right. Whereas formerly conservatives were willing to make their case to voters, accept the results, modern conservatives have taken the anti-democracy sentiments latent in their market utopianism and moved on to trying to undermine, manipulate, or end democratic government. Modern conservatives have various views giving rise to anti-democracy sentiment running from activist “crony capitalist” fascism with a deal making boss to authoritarian conservative government that does little but enforce conservative economic values and keep other people out of it. Modern conservatives play a lot with utopian anarchism (rhetorically useful for ending democracy) and fake anarchism / crypto-fascism / “libertarianism” as far as promoting the idea small, inactive government that does nothing but express conservative economic values is like no government at all. Then, of course, there are conservative theocratists as Christo-fascists who go beyond secular market utopianism to imbue markets with divine attributes or provenance and profess to want to keep democratic government out of it on that account.

The final wrinkle, which I’ve discussed before, and often, but let’s do it here as well just to complete the set, is this business about “neoliberalism,” which creates problems because of the ambiguous nature of the “neo” playing off the formerly mentioned issues with the word “liberal.” One take on the “neo” in “neoliberalism” is that it is new as in resurgent, which makes it resurgent (classical) “liberalism,” which if one focuses on the market component makes “neoliberalism” into “resurgent US conservatism.” An entirely different take on the “neo” in “neoliberalism” is that it means new as in changed, revised, reformed, in which case it becomes revised liberalism and specifically US liberalism revised to become, as far as economics at least, conservatism, US liberalism revised to become its opposite. In both formulations, “neoliberalism” ends up meaning US conservatism; however, agreement at that level masks underlying confusion at the level of the term “liberal” by which for some a “neoliberal” is also a “liberal,” while for others a “neoliberal” is the opposite of a “liberal.” I have long argued interpreting “neo” to mean revised, reformed, changed US “liberalism” makes a great deal more sense than interpreting it to mean “resurgent” because it was historically first applied to erstwhile US liberals circa 1980s, while economic conservatism long pre-dates that era. Also, of course, because the resurgent interpretation of “neo” brings up the issues I mentioned earlier relating to trying to apply the historical combined political and economic concept of 18th century anti-monarchical “classical liberalism” to modern political issues and controversies.

My own views? I’m a (US) liberal. I support democracy including the right guaranteed by the US Constitution of voters to register their normative views on economic values, objectives, policies. I myself have what would likely be generally considered “left” economic values and I argue for those. However, I’m not trying to set myself up as ruler of the world, and if voters use democracy to demand something else, then so be it. I’ll continue to argue my positions, of course. I oppose conservatism formerly for its flawed take on economics and now especially also its opposition to democracy.

Roadblock Arguments in Bad Economics

I know I’ve made reference to what I call “roadblock” arguments in the context of the rhetoric of anti-democracy bad economics in the conservative style before, but I don’t recall doing a proper storm on them, at least recently. How about that this week?

I discuss “fake (distributional) indifference” often enough, which involves conceits like economists ostensibly as a matter of proper professional conduct applying neoclassical welfare economic arguments to reality without accounting for relevant differences between reality and the Fairy Land. Just to clarify, the Fairy Land here is the Fairy Land of Economic Theory, an odd place in which interpersonal ethics have been banished, the inhabitants are not real people but cyphers who have preferences over only a restricted range of issues, have perfect information, are perfectly rational. “Roadblock arguments” use the fact any set of interpersonal ethics will theoretically have some associated “economically efficient,” that is, “Pareto optimal” outcome, to propose one should go to any Pareto optimal outcome, or if at one maintain it, then go to whichever such outcome one prefers. The “roadblock” refers to the arbitrary restriction of getting to some ethically irrelevant Pareto optimal outcome first, which may be theoretically impossible except as an approximation of some undefined degree, and then going to another in only particular, difficult, impossible ways. Roadblock arguments have similar effect to fake indifference because one can never be at a close enough approximation to a Pareto optimal outcome of a theoretical purely competitive market to consider pursuing another and if close enough, one finds it difficult to move from it.

There is nothing in real neoclassical welfare economics to support roadblock arguments. Others are not closer to their preferred Pareto optimal outcome if they go to any other random Pareto optimal outcome rather than a non-Pareto optimal outcome that better reflects those ethics. Not is it easier, more practical or feasible, less costly to go from one Pareto optimal outcome to another, never going through a non-Pareto optimal outcome. Indeed, given typically expansive definitions of the markets involved, it’s not entirely clear that’s logically possible. In ethical arguments relating to the Fairy Land, one may take one’s little pen and change “initial endowments,” which allows one to arrive at any Pareto optimal outcome one likes. There is no counterpart in reality. Anything one does in reality will have certain effects. Specifically, anything one does may be cast as interfering with whatever market is producing the Pareto optimal outcome, so changing anything to go to another without leaving Pareto optimality may be basically cast as logically impossible. Even if one concedes that let’s say taxes or other (re)distributional policy are consistent with a “free market” (an approximation of a perfectly competitive market?) meant to generate a Pareto optimal outcome, they’re not necessarily the easiest or least costly approach to change. Those issues seem to depend on the form the relevant interpersonal ethics take. Are they about people one can identify, verify, and so on? Or also about contexts, particular goods, say housing, food, education? What policies do voters think makes sense, support? How costly are they to implement? Again, there’s no justification in real neoclassical welfare economics to throw up random roadblocks to addressing equity concerns. If others prefer some non-Pareto optimal outcome to some Pareto-optimal one based on interpersonal ethics, economists have no business trying to block them.

Do typically philosophically clueless economists not understand the issues associated with their own peculiar, idiosyncratic ethical half-theory? Or do they understand them but cynically try to use that theory rhetorically to mislead and manipulate others? I don't know. Some of both? You tell me. Don’t know what any of that means? Never heard of “economic efficiency” or “Pareto optimality” or maybe even models of “perfectly competitive” markets? Well, then I suppose one is in no fit state to address the rhetoric of anti-democracy bad economics in the conservative style. Maybe if one resolutely ignores it others will too? Or maybe one might take a few moments to learn enough about the normative argument in neoclassical welfare economics to make sense of the rhetoric of anti-democracy bad economics in the conservative style and be able to address it? 

Amoral Egoism and Egoistic Morality

I had a thought relating to egoistic morality versus amoral egoism the other day, an issue that often trips me up when thinking about conservative values of the sort expressed by Republican voters. Maybe just a short one today? It’s summertime? When the living is easy?

Imagine person A gets the drop on person B and steals B’s wallet. If B is an amoral egoist, he or she would surely object. However, if B subscribes to egoistic morality, he might find the result ethically acceptable. It’s fair. Person A got the drop on B, did what he should have done. Some may suppose conservative, Republican voters are simply amoral egoists looking out for number one, maybe supporting economic establishment elite power and fascism because they suppose once democracy is gone, they’ll get more gold from the deal via market utopianism, trickle down, etc. However, another possibility is some, many, all conservatives, Republicans are actually moral egoists who suppose as long as economic establishment elite power acts in a thoroughly egoistic way, then whatever results flow from it are ethically correct and optimal. It’s about egoism writ large. Some conservatives simply might some not care their lack of power makes their own egoism impotent. They’re greedy as hell; they just can’t get much. It’s fine. Their greed abides. But they would never criticize or object to anyone else seeking power any old way to further his or her own greed. 

If one considers the arch way self-interest and profit maximization is handled in anti-democracy bad economics in the conservative style, one may readily see how familiarity with that sickly rhetoric and loosely related neoclassical welfare economics may generate confusion in that area. How often have you seen people equating individuals choosing things higher in their own preference rank (“utility maximization” in econo-speak) to self-interest? How often profit maximization equated to self interest or indeed “utility maximization?” How often “utility” equated to money? How often have you heard the conservative faux economics mantra, “greed is good,” with no reference to the theoretical limitations, requirements in neoclassical welfare economics relating to when people expressing preferences or firms maximizing profits may be considered ethically, morally good? It’s confused, dodgy ethics to be sure, but hardly spontaneous, more like carefully manufactured, created. One suspects many conservative suppose they’re displaying a knowledge of economics by proposing as long as everyone is as greedy, self-interested as possible, in every context, all is well.

Just something to think about. However, I will say this much: one important basis, I suspect the most important basis, of anti-democracy sentiment in the USA right now is bad economics in the conservative style, a false, loose, confusing rhetorical gloss on neoclassical welfare economics. If anyone cares to really address anti-democracy sentiment in the USA and elsewhere, one might learn about the rhetoric of anti-democracy bad economics in the conservative style, how it works, where it draws its power, how it relates to neoclassical welfare economics. Also, it’s a lot of fun.

Economic Efficiency

Someone got me going the other day on the supposed “efficiency” of markets, which made me realize I haven’t actually done a storm on that yet this cycle, so how about that this week? “Economic efficiency” in models of perfectly competitive markets and in reality?

“Efficiency” in economic contexts relating to the supposed advantages of markets generally means so-called “economic efficiency,” that is, “Pareto efficiency,” defined with respect to individual preference ranks (or “utility,” as uniquely and rather oddly defined in neoclassical economic theory). Don’t know what any of that means? Never heard of old Italian fascist Mr. Pareto? You just suppose “free markets” are good because they’re “efficient?” That’s funny. Maybe don’t ape the language of economic theory without knowing what it actually means? For the rest of us, let’s get into it a bit.

“Economic efficiency” or “Pareto efficiency” is about a situation where one cannot move one person up his or her individual preference ranking without moving someone else down their own preference ranking. The kernel of truth is it seems a nice thing to have, unless other issues. Why not? That’s not the tricky bit, although someone was recently arguing to me against placing normative significance on economic efficiency, an argument I’m not really familiar with and won’t be going into today. No, for me the tricky bit is how the concept is used or let’s say misused in real situations.

Economic efficiency has great significance within the confines of the ethical half-theory of neoclassical welfare economics because interpersonal ethics are purposefully excluded, so the only issue left is individuals and their preferences. In reality, the significance is rather different. The typical context this is discussed in the Fairy Land, as I call it, is to compare some random market outcome which is not Pareto efficient to one that is and, as one has no other normative basis to distinguish the two outcomes, to declare the Pareto efficient outcome “socially optimal.” Another typical context in the Fairy Land is to consider two Pareto efficient outcomes, wonder which to choose, remember there is no basis in that ethical half-theory to choose because all relevant interpersonal ethics issues are exogenous, and to be indifferent, say either will do just fine.

The significance of Pareto optimality is quite different in reality, of course. In real contexts, people may have ideas relating to interpersonal ethics, equity, fairness, justice, welfare, and so on, and those may well take precedence over considerations of Pareto or economic efficiency. When interpersonal ethics, so-called equity issues involving issues like fairness, justice, welfare variously defined, that sort, are added back in, one may prefer not only one Pareto efficient outcome to another, but one may prefer some non-Pareto efficient outcome to some Pareto efficient one. For example, given existing arrangements, Pareto optimality may mean ensuring the Tsar can buy a jeweled Easter egg, which he prefers to a jeweled cigarette case. However, in the presence of interpersonal ethics, one may not really care very much, at least until certain other issues are addressed.

In the context of bad economics in the conservative style, this calls forth various misleading rhetorical arguments to get around the obvious ethical limitations of real neoclassical welfare economics when applied in reality, typically involving fake indifference or what I call roadblocks. I discuss those often enough, and if I did again now I’d probably go over, so this time let me just observe there is nothing in real neoclassical welfare economics that justifies economists qua economists telling other people they should not distort or interfere with markets. That’s bad economics.

More generally? Surely “efficiency” doesn’t always mean “economic efficiency” or “Pareto efficiency?” No, indeed. Just keep in mind nothing is efficient for every possible goal or objective. Things are efficient for one thing, not another. Ask always, efficient with respect to what? A joke I like to tell about efficiency is to answer the question of what’s the most efficient way to the bottom of the cliff by saying jump off it. Oh ... you mean while remaining alive? That’s a different issue. You didn’t say that the first time. Different answer, of course. When you hear something like “markets are efficient,” and you don't think you’re talking about “economic efficiency” or “Pareto efficiency,” ask yourself, efficient for what? Maximizing human welfare? Addressing material want? Generating human happiness? Maximizing production? Making a just society?

Market Utopianism

Can we talk this week about market utopianism, a notable feature of anti-democracy bad economics in the conservative style that underlies fascist sentiment, and also about utopianism in general, as utopian anarchism or utopian communism? Seems a lot of it about these days.

What got me thinking about it was a quote from some random conservative, Republican voter opining things going south, that is, to hell in a hand basket, didn’t really bother him because, echoing Mr. Musk’s sentiments, things have to get worse before they can get better. Interesting idea. I wrote a storm previously on how, for conservatives, Republicans, failure is their path to success because when faced with difficulties of any sort, most US voters will move reflexively to the right, toward conservatism and the Republican Party. So the worse they can make things, the better. However, I suspect a different and independent mechanism that may play into the conservative, Republican quest to fail is the belief, possibly promoted by them, that things must get worse before they can get better, so the worse they make things, the more on track we are for better things to come. It’s an interesting rejection of what one supposes the more typical thought process, self correcting in the sense if one tries something and it fails, one doesn’t normally carry on heedless, convinced one day it will work, barring solid factual, historical, scientific reasons to think so.

Utopians have an unshakable belief their preferred system leads to good results, even though the evidentiary basis of that belief may be unclear at best, or let’s just say more typically missing entirely. It’s a conviction born and sustained in the mind with no real reference to evidence or fact. So for example, utopian communists suppose communism an ideal system, never mind the documented history of the many nations, brilliant minds, talented and hard working people who tried for so long to make it work. To a utopian communist, they all just didn’t get it right, but he or she surely will. One must wonder the rational basis for the belief. What great genius or insight does that person suppose he or she has that all who previously tried to make it work did not? What changes in technology, modes of production, patterns of ownership suggest different results now? That was a rhetorical question, not an invitation to talk rot. Let’s just say, it seems a bit unlikely to me, leave it at that. Similar for utopian anarchists, who despite the horror of every real anarchy, suppose it will all be different when they do it, create what they see as a “real” anarchy. But of course the most common form of utopian thinking in the USA is surely conservative, right wing, market utopianism, the belief something they call the “free market” will allocate goods and services in the normatively or ethical optimal way and generate the best outcome for everyone in society. No recounting of historical experience, no recitation of facts or figures, no international comparisons, no theoretical explanations, can shake the market utopian’s belief in the importance of preventing voters using democracy to “distort” or “interfere with” markets and market outcomes. Indeed, I would suggest market utopianism and its primary rhetorical justification, bad economics in the conservative style, is the main cause of the rise of anti-democracy, pro-fascist sentiment in the USA today, followed closely by bad religion and racism. 

But what manner of belief is utopianism anyway? It has the form of a positive statement predicting objective fact, “this will (in fact) happen,” but the evidence seems dodgy or missing and there is no sense in which the proposition may be refuted in any factual, objective, scientific way. I would suggest utopian thinking is fundamentally a subjective normative, ethical, moral, value mode of thought expressed in a superficially but not really positive, objective, scientific form. It’s not a sincere belief the utopia will appear; it’s the expression of a desire it appear, a wish.

Why would one be content with utopian pipe dreams? Just mind-numbing opiates? No, I propose because of some normative, ethical attraction to the system meant to produce it. One wants to imagine utopian results because one likes the ethics of conservatism, fascism, anarchism, communism, whatever. We arrive back at my overall contention the truly significant issues in economics, the issues that really divide us, do not concern positive economics so much as normative economics. It’s not a question of best policy in the context of shared goals; it’s a question of goals, objectives, values. The response to utopianism must go beyond simply challenging the ostensible factual basis. That will be shrugged off, any possible fact will be found inapplicable or irrelevant. It must involve addressing the normative aspects of the system associated with that form of utopian thinking. In order to address the root causes of our current movement toward fascism, one must go beyond facts, figures, statistics, history to address philosophy, normative beliefs, values, ethics, morals, as those found in anti-democracy bad economics in the conservative style and its sickly sequelae.

Actors and Roles

Can we talk a bit this week about an issue I call “actors and roles” in neoclassical welfare economics? I’ve mentioned it in passing but let’s just do a proper storm on it, shall we? Briefly, economic theory has different actors doing different things. Did you know?

Usually, when one hears people speak disparagingly of the representation of humans in the form of simplified, unreal ciphers in neoclassical welfare economic theory, they mean the portrayal of consumers of good and services in markets expressing their preferences. A great deal is often made of the false factual premises the ciphers have perfect knowledge and perfect rationality, also of the fact they seem to have preferences only about goods and service, not ethics, values, legal and political systems, economics, etc. Because that expression of preferences is sometimes tautologically, fatuously, and rather misleading presented as “maximizing utility” in neoclassical economics, that representation of humans often generates inapt criticisms of ethical utilitarianism as relating to simple self-interest, etc. However, not that, as “utility” carries no content beyond “preference” in modern economics, nor does it imply simple self-interest, nor is it meant to even exist or be relevant in the interpersonal context that makes up the lion’s share of any full ethical theory as utilitarianism.

Moreover, that same economic theory postulates producers qua producers, businesspeople, who maximize something rather more specific than their own preferences: profits, money, economic power. Just to stress the point, consumers aren’t meant to be maximizing some monetized equivalent of firm profits. Maybe they prefer more expensive goods. When it comes to consumer cipher preferences across goods and services, a great deal may be involved beyond money, the cost of one good or another. In that sense, nothing in modern economic theory precludes a cipher from preferring to pay more for some good or service for reasons related to interpersonal ethics, say fair wages and so on. The analysis stops at the level of preference, so the sky is the limit in regard to that sort of thing. That is to say, the theory does not involve any general normative argument “greed is good” in the context of consumer cipher preferences, nor does it even really utilize a false factual premise consumer ciphers are “greedy” in any conventional sense. 

Profit maximizing producer ciphers may be seen as “greedy” and that may be cast as good in certain contexts, but not generally. The greed of producers under conditions of market failure, certain non-competitive market structures, or to the extent it involves criminality, is not presented as good. Interestingly, producers in neoclassical economic theory are given less leeway to express their own preferences than consumers. For example, producers are meant to maximize profit even when choosing products to introduce. They can’t really trade lower profits for expressing their own preferences. However, these cipher actor categories overlap in the sense a producer maximizing profit in his or her official capacity may also be a consumer expressing preferences over attributes of goods and services beyond price. If one looks at the two ciphers, one might see one actor in different roles. Surely “greed” has no normative significance in economic theory for producers in roles other than as producers, for example, in their roles as consumers, citizens, voters. Basically, outside a very specific context, there is no real argument anyone is or should be greedy.

Next consider the actor that is the economist himself or herself, looking in from on high on what markets and society are doing, providing normative advice to someone on how to arrange things under certain normative views, values, objectives. Is the economist qua economist meant simply to be a consumer expressing preferences relating to a virtual good corresponding to the role and status of a professional economist? Or maybe as a producer of economic material and instruction he or she is meant to be simply maximizing his or her profit? Or rather is the economist qua economist meant to be in yet a different category, not simply expressing preferences he or she may not dispute, possibly another person’s, nor again maximizing his or her own profits, but doing something like making ethical arguments, philosophizing? And the audience for economists’ normative theorizing? Where are they in the theory? Are they too outside it? Consumer and producer ciphers in other, exogenous roles as thinkers, citizens, voters, who may also have preferences over normative views including interpersonal ethics?

Do you get where I’m going with this? Don’t get bogged down in false issues with neoclassical welfare economics. There is no general “homo economicus,” no “greed is good.” When considering the theory, think of theoretical ciphers, explicit and implicit actors and roles, real or unreal contexts. What’s in and what’s out as far as normative content, interpersonal ethics in particular, the context and factual propositions under which it is meant to be evaluated, its relation to reality, are the tricky bits. Think always, real person or cipher? What actor and role? In reality or fairy land? If one is interested in the loosely related rhetorical enterprise of anti-democracy bad economics in the conservative style, well, that’s a whole other kettle of fish, isn’t it? One will find “homo economicus” there, surely, and “greed is good,” and much more rot beyond. Different issue.

Conservatism Two Ways

The rhetoric of anti-democracy bad economics in the conservative style straddles and harnesses two strands of conservative thought: conservative socialism and conservative egoism. However, it doesn’t do it properly but falsely as a sort of grift. Let’s discuss that this week.

May we revisit the 18th century for just a moment? Wigs, clay pipes, breeches, that sort of thing? Why not? Fine. A popular theological and philosophical movement of the day was Deism, which sought to establish the beneficent nature of, basically, nature, including human nature. The basic idea was the good lord had carefully engineered the world for the benefit of mankind, and if one thought, for a moment, some element of nature wasn’t as beneficial as all that, the challenge was to show how, no, actually it was, once one truly understood how it was meant to work. It was this creed, characterized to humorous effect by Voltaire in the character Pangloss, that motivated and informed early economist / moral philosopher / theologian Adam Smith, who struggled to show how greed and egoism were beneficial to mankind, if we could create the proper context.

Flash forward to the early 19th century and we have the classical economists, who by then had taken Mr. Smith’s careful but rather fanciful ideas and simplified them by taking out not only the divine but also nuance, context. In their theory, greed and egoism increased the welfare of all.

Flash forward to the late 19th century / early 20th century and classical economics was increasingly criticized as clearly flawed. In response, economists developed “neoclassical” economics, an artful bit of rhetoric designed to maintain the conclusions of classical economics via clever word play. To be specific, they took concepts like “utility,” “welfare,” “efficiency,” “socially optimal,” previously social-based concepts typical of classical economics and increasingly untenable within that system, and redefined them to refer to individuals only, taking out interpersonal, social concerns. This rhetorical sleight of hand, or let’s just say grift, solved the practical problem of how economics could continue to promote certain conservative normative views on economic power, allocation of resources, in the face of withering criticism. However, it came at a price. The falseness and unreality of the project created two types of “conservatism.” 

One was what one might call “conservative socialism” (to avoid less relevant here “social conservatism”), which focused on what was ostensibly best for society, the individual’s responsibilities in that area. That is the strain of conservatism that was successfully captured by fascists in Europe during the run up to WWII. Their rhetoric was all about what was best for society, the people, even if in reality their policies were rather more about what was best for the wealthy establishment elite. Because of local conditions, fascist rhetoricians were unable to maintain the 18th and 19th century unity of conservative egoism and conservative socialism in classical and neoclassical economics. They also supported conservative values on economic power, property, markets, but differently. Their justification was all about supposed natural differences in the component individuals that formed society in which some, the economic establishment elite, rich people, their friends in the Nazi Party elite, were meant to be superior and more important than others, but all had a proper place.

The other branch of “conservatism” was conservative egoism, which latched onto the supposed significance of egoism and greed rather than the laudable social outcomes meant to follow. They upheld neoclassical welfare economics and associated anti-democracy bad economics in the conservative style. Conservative egoists, understanding the misleading rhetorical nature of normative neoclassical economics, were all too happy to continue to profess concern for society, utility, welfare, social optimality, all that, understanding implicitly it was all now fakery and not to be taken literally. At the same time, expressing the true normative or ethical values promoted by bad economics in the conservative style, conservative egoists were also happy to sometimes lambaste, repudiate any concern for social welfare, caring about other people, one’s society, the nation, ethics, morality.

Because of the correspondence of the real underlying normative values of conservative socialists and conservative egoists, if not always of their rhetoric, they got along quite well. American conservative egoists back then were soft on European fascism, supposed it quite good for business. But a grand conservative axis wasn’t in the cards. To the Nazis’ surprise, the USA joined forced with communist USSR to end fascism in Europe. Conservatives were thwarted, for the moment. It was an age of increasing liberalism, New Deal policies, social welfare policies and regulations, all that. 

However, the ensuing struggle against anti-democracy communism provided US conservative egoists with new rhetorical opportunities. They would play up anti-social egoism and their rejection of social welfare state thinking to equate the latter with communism, then democracy, then fascism. Conservatives’ sometime egoism and opposition to welfare state thinking was the basis of US conservative rhetoricians proposing their vision of conservative, right wing, authoritarian government was not fascism and risibly proposing instead fascism was in fact a liberal or leftist creed. At the same time, they famously upheld the misleading social welfare arguments of neoclassical welfare economics as seen through the lens of bad economics in the conservative style, promoted their economic ideas as best for everyone, America, society in general.

And that’s basically our context today. Some US conservatives talk about what they suppose is best for everyone, America, the nation. Others emphatically reject that sort of thinking entirely as socialistic, leftist, welfare state thinking. Others talk from both sides of their mouths. Neoclassical welfare economics abides, as does anti-democracy bad economics in the conservative style and assorted sequelae. It’s all a grift now, but possibly accepted by some as real, not only by the obvious marks but even by some innocent minds in academic economics, themselves played by others. Voters victimized by conservative grifters don’t know which way is up. They dutifully ape the language of market utopianism, conservative socialism, conservative egoism, but one suspects some have doubts. Yet they fear and loathe alternatives, seem to prefer wallowing in delusion and self-harm. In this sad, false, poisoned environment, voters may laud any populist gas bag, no matter how crackpot and disproven by history the ideas involved: fascism, anarchism, theocratism, communism. The people don’t seem able to grasp or consider the real issues in economics, politics, or philosophy. 

We have work to do. We must address anti-democracy bad economics in the conservative style and sequelae as “Austrian” economics, fake anarchism / “libertarianism.” We must clarify the real meaning and limitations of neoclassical welfare economics. It’s time to wake the hell up and get real.

Methodological Individualism

Ready for more real economics? Ever hear of the “methodological individualism” critique of neoclassical economics? I struggled to make heads or tails of it for some time, but I think I get it now, or part of it, anyway. Want to hear my take? Fine. I’ll tell it. 

Let me mention first why I couldn’t make heads or tails of it for some time. The word “methodological” made me think it was mostly about positive economics, the false but simple engineering models of neoclassical economics that ostensibly allow one to predict economic events. I didn’t understand the critique because in that positive context there is no presumption any particular element of an engineering model is real or true or factual. It’s not a description of reality, nor is it accretive or accumulative science eschewing elements known to be factually false. As far as I know, anything may appear in false but simple engineering models. If we’re going with assumptions like perfect knowledge, perfect rationality, who cares if it’s based on individuals in isolation? Criticisms of it seemed to me taking the conceit of economics as science far too literally. However, it eventually dawned on me both positive and normative economics have methods and methodologies, and the critique may involve the methods of normative economics and ethical philosophy rather more than the methods of predictive engineering models or of accretive scientific inquiry. Sure enough, I found that if I thought of the “methodological individualism” critique as a critique of the method used in normative economics, neoclassical welfare economics in particular, it made rather more sense. Let’s discuss why.

The ethical argument in modern normative neoclassical welfare economics concerns the preference ranks of individuals. These preference ranks are meant to be not questioned within the ethical half-framework of neoclassical welfare economics: people just prefer what they prefer. However, although one may find discussions of individual preference ranks over apples, oranges, widgets, what have you, in neoclassical welfare economics, one doesn’t find discussion of individual preference ranks over interpersonal ethics, equity, economic and political systems, etc. Why do you suppose the ciphers of economic theory are restricted in that way? I mean, real people have preferences relating to those things, surely, and one supposes associated preference ranks, and we could talk oddly and express those individual preference ranks in terms of “utility.” Nothing jumps out at me from the definition of preferences; however, I can think of some practical reasons, for example, economists want to present themselves as arbiters of the normative or ethical issues relating to political and economic systems, arrangements, outcomes. Obviously, things get a bit awkward if economists, looking down from above, busy themselves telling everyone what sort of economic arrangements are normatively optimal if at the same time the ciphers themselves have preferences over those same issues which are not to be challenged by economists. Indeed, the entire argument in neoclassical welfare economies begins to break down if the ciphers have preferences over resolving interpersonal ethics, allocating resources, reintroducing the very ethical issues at that level economists are supposedly making exogenous, setting aside at their level. Everything works out much better if the ciphers meant to represent people in the ethical theory of neoclassical welfare economics are simply conveniently considered to have no preferences about interpersonal ethics, fairness, justness, equity, aping what economists are meant to be doing.

But what are we to make of an ethical theory involving not real people under real conditions, but arbitrarily restricted ciphers in a fairy land of fanciful assumption? The purported significance in reality of the ethical argument presented in normative neoclassical welfare economics is unclear. Is the argument people should not, in fact, have preferences about interpersonal ethics? They should strive as a point of ethics to imitate the ciphers of economic theory? So neoclassical welfare economics, rather than an ethical half-theory is an ethical full theory opposing interpersonal ethics? Rather than viewing exogenous interpersonal ethics, equity, resolution of interpersonal conflicts of preferences, allocation of resources, as something that must be added to get normative conclusions, they’re viewed as something that must be kept out to get normative conclusions? Is the point of the normative argument in neoclassical welfare arguments the only normative, ethical issues that matter are intrapersonal, and interpersonal issues as justice, fairness, equity, welfare, the resolution of interpersonal conflicts of preferences as say over resources, are irrelevant? I would suggest that interpretation is bad economics. It’s not real neoclassical welfare economics. It’s a purposeful, rhetorical, misleading misinterpretation of it that, frankly, doesn’t pass the laugh test. Everyone wants an ethically justifiable society including interpersonal ethics. Once one gets one’s head out of the lazy positive engineering model of anything goes because it can all be false anyway, and into the rigor of concepts, language, factual premises required for serious ethical arguments applicable to reality, the situation suddenly becomes more rather more complex.

Conclusion for today? Just be aware of the sort of rhetorical stratagems, omissions, logical lacunae, neoclassical welfare economics and even more so anti-democracy bad economics in the conservative style rely upon for effect. It’s just one example among many, but an interesting one.

Social Welfare Functions

Maybe this week we can talk about the rhetoric of “social welfare functions” in anti-democracy bad economics in the conservative style and real neoclassical welfare economics. Might be good for a laugh or two.

To understand what’s going on with social welfare functions, one must return to the peculiar, idiosyncratic, suspiciously odd definition of “utility” used in neoclassical welfare economics. The most common modern definition is it’s just another way of talking about individual preference ranks. So if person A prefers good X to Y, we can say “A gets more utility from X than Y,” but it’s meant to add no content beyond that. It’s simply a funny way of talking about individual preference ranks. As such, it is linguistically incorrect to invoke it in an interpersonal context. It doesn’t make sense to say something like "A gets more utility from X than Y and we want to compare that to the utility B gets from whatever.” It’s really a form of equivocating on terms. One is invoking two different "utilities," one defined relative to A, the other defined relative to B. If one is going to talk about “utility” interpersonally, one needs a definition of utility that goes beyond preference ranks of given individuals as say the older “inaccessible internal perceptions of satisfaction from preference fulfillment,” meant to exist in an interpersonal context.

In their zeal to be positivists, some economists dealing with normative economics propose it doesn’t really matter which definition of “utility” one uses, it’s either defined to be individual preference rank or it’s only inferable by individual preference rank, but of course that’s incorrect. Not only does what one can sensibly say about “utility” depend on how it is defined, but the philosophical arguments in favor of why anyone should care about maximizing it in a social context, indeed what that even means, change depending on the definition. One can’t simply switch back and forth. If we’re talking about preference rank utility, the normative proposition society should strive to “maximize utility” is about how one should act with respect to individuals moving up their own preference ranks with no implications for resolving interpersonal conflicts of preferences. If we’re talking about inaccessible internal perceptions of satisfaction, we’re attaching normative significance to those perceptions so, for example, if one particular person had very strong such perceptions, maximizing “utility” implies that person’s preferences take precedence over all others. Critics will argue the problem doesn’t exist in reality because the whole point is we can’t access inaccessible perceptions, but one can hardly take seriously as an ethical theory we should do something with the proviso we can’t actually do it, and if we could, then we shouldn’t. It’s misdirection.

All that was just to review where the prohibition against making “interpersonal utility comparisons” in neoclassical welfare economics comes from, which informs the whole theory about perfectly competitive market outcomes that is taken up and misused in bad economics in the conservative style. The “social welfare function” is meant to get around that restriction, reintroducing interpersonal ethics, thus changing the entire argument in neoclassical welfare economics that informs arguments in bad economics in the conservative style about not interfering with or distorting market results. However, and perhaps less obviously, discussions of “social welfare functions” can happily co-exist with the rhetoric of bad economics in the conservative style and indeed even be used to support it. Not sure how that works? Allow me to explain.

First, social welfare functions allow the expression of interpersonal ethics, but only in an awkward way unjustified within neoclassical welfare economics itself. As noted earlier, one cannot really even talk about “utility” in an interpersonal context under the usual economic definition. The result is to make interpersonal ethics appear unjustified, arbitrary, a matter of preferring some mostly identical theoretical ciphers over others, suspiciously similar to the notion from bad economics in the conservative style that interpersonal ethics are empty virtue signaling, nonsense. But of course the actual ethical justification has nothing to do with that “utility.” Let’s have an example. Say one supposes A should not murder B. There is no rationale in neoclassical welfare economics to not allow that as we can’t compare the individual preference ranks of the two individuals. However, we could make up a “weight” based on our ethics and express our objection to murder by attaching a greater weight to the preference rank (or really again the strength of the internal perceptions) of the intended victim. But of course, that expression doesn’t express the ethical rationale.

Second, given the ethics of economic power may be context specific, for example, one may accept most goods being allocated on markets if acceptable distribution of economic power but exempt others, say vaccines or housing or whatever, defensible social welfare functions may be quite complex. In that sense, social welfare functions may be used rhetorically as “roadblocks,” a common stratagem of throwing up of technically difficult or perhaps practically impossible demands meant to make changes from some preferred situation difficult, costly, or indeed impossible.

Third, social welfare functions can be used in conjunction with fake indifference to present objections to the status quo based in social welfare functions as less ethically justified in economic theory than the status quo because someone needs to write up, defend social welfare functions. Of course, the same objection could be made to defending any particular status quo, or even The Status Quo in general, no matter what it is. There will always be an implied virtual social welfare function supporting the resolutions of interpersonal conflicts of preferences actually taking place. One might retort, sure, but that’s not why anyone supports any given status quo or even The Status Quo in general, no matter what it is. Indeed. And the proposing of explicit social welfare functions is similarly not the real reason anyone might object to any status quo. One can also find weird hybrid road block arguments, as trying to maintain the policy recommendation from bad economics in the conservative style one should first concentrate on attaining some approximation of a perfectly competitive market and only then introduce a social welfare function. 

Did I break the bank on this one? Sorry. Just trying to make people aware of the sorts of rhetorical games one may find not only in real neoclassical welfare economics but especially in anti-democracy bad economics in the conservative style. Keep your critical faculties close if you venture there.

Two Types of Neutrality

Let’s discuss two types of indifference or neutrality that sometimes get muddled, one supposes not entirely by accident, in anti-democracy bad economics in the conservative style and neoclassical welfare economics. 

First, we have indifference or neutrality with respect to resolving interpersonal conflicts of preferences. This is the indifference or neutrality relevant to real neoclassical welfare economics and is based on way “utility” is defined only in terms of a given individual's preference ranks.

Second, we have indifference or neutrality defined as accepting, defending, supporting, favoring, defaulting to whatever resolution of interpersonal conflicts of preferences is implied by current laws, and thus government, so a sort of neutrality to the ethical basis of those laws. That latter sort of indifference or neutrality is the one often featured in dodgy normative arguments from anti-democracy bad economics in the conservative style. 

Note that these two expressions of indifference or neutrality are not equivalent. If one accepts, supports, promotes, favors, defaults to existing resolutions of interpersonal conflicts of preferences due to indifference or neutrality with respect to the ethical basis of the resolution, one is no longer indifferent or neutral with respect to resolving those conflicts. I generally call the version or form of indifference inappropriate to real welfare economics that often features in normative arguments from bad economics in the conservative style as “fake indifference.” It’s not literally “fake,” of course. It’s one form of indifference, just not the form relevant to neoclassical welfare economics. When the term “indifference” is equivocated upon in bad economics in the conservative stye it becomes “fake” relative to the relevant form. It’s the sort of false, misleading rhetoric one associates with conservative discourse in general. It’s basically a rhetorical way for bad economists to support exogenous existing laws relating to the definition, distribution, use of economic power in markets without theoretical justification.

Now of course it would be perfectly acceptable for conservative economists to declare themselves supporters of the status quo, explicitly add a proposition to that effect, unrelated to “utility,” to the normative argument in neoclassical welfare economics. Normative or ethical argument is fine. What makes it objectionable, as with the rest of anti-democracy bad economics in the conservative style, is that it’s not done explicitly, openly, honestly. It’s done in a clever, indirect way obviously meant to deflect consideration, evaluation, criticism, debate. It’s intellectually dishonest. But as I’ve noted before, intellectual honesty is not what conservatives are about, even conservatives in academia who have a professional and social responsibility in that area. Conservatives are sly tricksters, grifters, rhetoricians; they’re not serious or sincere interlocutors.

Equity And Economic Power

Ready for more real economics? Not really? Let’s give it a go anyway. Consider this proposition: economic power used in markets is one way but not necessarily the only way to express interpersonal ethics or “equity” concerns. Let’s discuss.

If one sees interpersonal conflicts of preferences being resolved in ways one finds unethical, say resources not going where one supposes they ought to go, one may address it by changing the definition or distribution of economic power still using markets or not using economic power. For example, if one supposes a scarce medical vaccine should go to those in medical need of it, one may have some system for identifying those people and allocating it to them outside markets or, alternatively, some way to ensure they have the money to obtain it on the market. However, those alternatives are only equivalent ways to get certain people vaccines, per se, if economic power is manipulated, regulated, in such a way those who need the vaccine use it to buy the vaccine. Otherwise it’s simply a transfer of resources more generally.

If the increment in economic power is not restricted to vaccines, recipients may use it for goods higher up their individual preference rankings so for those uninterested in health, let’s say a case of whiskey. Does neoclassical welfare economics argue that is the ethically superior approach? No. Because providing economic power, here through taxes, to people to buy cases of whiskey or whatever has an opportunity cost for others. Those resources might be used for something voters find more ethically compelling. It involves an equity issue exogenous to neoclassical welfare economics. If one considers the case in which resources not spent to move one person up his or her preference ranking may instead by allocated to moving another person up his or her preference rankings for whatever reason one finds ethically compelling, then one is in the realm of interpersonal ethics, equity. During the covid pandemic, we allocated scare vaccine first to those in medical need. It did not seem particularly ethically controversial. No one argued we should instead provide the relevant economic power in case those in medical need preferred a case of whisky. Interesting to think why. Just to spell it out, one infers many voters may have interpersonal ethics involving getting vaccines to people in medical need that do not carry over to providing crates of brandy to possibly wealthy people in medical need if they prefer that to vaccine. Go figure. Is it controversial? Wrong?

My point here is simply to indicate the theoretical equivalence in neoclassical welfare economics of ethics expressed in terms of the definition and distribution of economic power, regulating the use of economic power, and the choice to use economic power versus alternative allocative systems. It’s about resolving interpersonal conflicts of preferences, as over goods, services, scarce resources. That normative or ethical issue is exogenous to neoclassical welfare economics. If you think you're finding the answers there, you're doing bad economics in the conservative style. 

Rejecting Ethical Theories

Ready for a rather more serious topic in normative economics? How about the difference between rejecting a full ethical theory and rejecting a particular application of an ethical half-theory? I've seen lots of rhetorical nonsense in that area over the years. Let’s discuss. 

Ever hear an argument of the following form? “Economic theory says do X in particular realistic context Y, but of course one needn’t agree the normative argument in economic theory. If one rejects it, one may ignore that advice.” The argument is misleading rhetoric; bait and switch.

When one is dealing with a full ethical theory meant to apply to the real world, and one rejects the conclusions when the theory is applied in realistic contexts, then one may suppose one must disagree with some element of that full ethical theory. One may disagree a normative proposition or suppose one missing, or one may disagree a factual premise, that is, a positive proposition used in that theory; or indeed one may disagree some point of logic. But one clearly can’t agree the entirety of a full ethical theory yet reject the conclusions. 

However, the normative argument in economics, at least in standard neoclassical welfare economics, is not a full ethical theory. It’s a very self-consciously defined ethical half-theory that excludes important and relevant interpersonal ethics, so-called equity issues. These ethical issues include the factors governing the resolution of interpersonal conflicts of preferences, so the definition of economic power (as property rights), the distribution of economic power (as markets, unions, inheritance, taxes), and even the use of economic power in markets. Those types of issues are not taken up in neoclassical welfare economics, as seen in the restriction of “utility” and “welfare” to questions about the preference ranks of individuals, which cannot support resolving interpersonal conflicts of preferences as needs, wants, desires, etc. There’s nothing clever or special about this observation and any competent economist will gladly tell you equity issues are a perfectly acceptable reason within economic theory to ignore any conclusions of that theory in any realistic context involving laws relating to those equity issues. In addition, the normative argument in neoclassical welfare economics contains false factual premises, the awkward shadow of false but simplifying assumptions in positive economics, that make the normative argument not directly applicable in realistic contexts. Corrections must be made. These issues, exogenous ethical issues relating to the resolution of interpersonal conflicts of preferences (equity issues) and the presence of false factual premises, means rejecting the conclusions of economic theory in realistic context Y does not imply rejecting that theory. That is to say, there is no contradiction in agreeing the normative propositions in neoclassical welfare economics in the unreal context specified, but disagreeing the conclusions of simplistically applying that theory under real conditions while ignoring the presence of exogenous ethical issues. No? One more time and we’ll move on. One may understand and agree everything in neoclassical welfare economics but oppose in realistic contexts the policy prescriptions of those operating under bad economics in the conservatives style, such as market utopianism. There is no contradiction.

Now let’s discuss why I propose this false argument may be viewed as a very typical conservative rhetorical move designed to mislead or manipulate people into taking a certain position on false pretenses, that is to say, explain how it functions as a very typical conservative grift. The normative content of neoclassical welfare economics considered in the abstract theoretical context in which it is meant to be considered, one that sets aside important issues of interpersonal ethics, and uses false factual premises to simplify complex cases, is not particularly controversial. Thus, if that content is presented as the only thing required to agree the application of normative neoclassical welfare economics in realistic contexts, then it may appear one is rejecting some pretty uncontroversial normative propositions if one rejects it. But that’s a bait and switch. In realistic contexts, one is taking up the limited content of arbitrarily restricted and factually false neoclassical welfare economics, correcting for the false factual premises, plus acknowledging a role for the missing interpersonal ethics, surely the lion’s share of ethical thinking. If one confines oneself to only the normative content in that ethical half-theory, then one can say nothing about reality, or if only that after correcting for false factual premises, then one must be indifferent to any policy changing the resolution of interpersonal conflicts of preferences.

When it comes to anti-democracy bad economics in the conservative style and its academic enthusiasts, keep in mind always they’re playing a rhetorical game with many elements designed to defend conservative, right wing values in clever ways. It’s not real neoclassical welfare economics. Neoclassical welfare economics, and those who came up with it, are not blameless, of course. Full of clever word play and philosophical maneuvering, it seems rather obvious the intent was never an academic parlor game but an intellectual framework to support bad economics in the conservative style. But intent is one thing, literal content another. Neoclassical welfare economics says what it says. It checks. But it might not say what one supposes it says, particularly if one sees it through the lens of its monstrous twin: anti-democracy bad economics in the conservative style.