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.

The Establishment

I thought I might discuss another facet of our modern political discourse and rhetoric this week. I was talking to a southern conservative, briefly (what?), who thought it odd I would describe Musk and Trump as "establishment billionaires." Let's discuss why one might say so.

It obviously wouldn’t seem odd to liberal, progressive, democratic leftists to call them “establishment billionaires.” They’re billionaires with ties to the highest echelons of business and finance, while their elite social status makes them contemptuous of laws, voters, political systems. But for conservatives of the sort one commonly finds especially in the southern USA, it does. Why? I suppose it’s due to our mixed economic system with markets and non-market regulations, programs, policies giving people the opportunity to associate the “establishment” with either. Liberals tend to associate the economically powerful and their market utopian ideology and rhetoric, hatred for the poor, hatred for democracy and for law they don’t control entirely, with the “establishment." In the liberal view, the “establishment" would be rather happier without democracy, law. Conservatives, in contrast, especially southern ones, are under the influence of the market utopianism of anti-democracy bad economics in the conservative style and still follow the Reagan-era mantra that democratic government is the ultimate evil and the source of all social, economic problems. Conservatives seem to like the liberal left notion of being opposed to the “establishment,” like to be rebels, bad boys, agents of change, but to make it work with their ideology they must then re-define the “establishment” to mean political democracy, the US Constitution, US law, voters. Following fascist ideology, conservatives don’t see authoritarian conservative government as shoring up the (economic) establishment, the status quo, but as a revolutionary agent of change against a political “establishment” of fusty old democracy, constitutions, law, voters, that sort. So where liberals see figures like Musk and Trump as representing all the worst features of establishment power, likely to perpetuate and accentuate all the worst elements of the status quo, many conservatives see them as anti-establishment rebels changing the status quo in positive ways. Conservatives see plutocrats, oligarchs, mobsters, fascists in a positive light as “anti-establishment” rebels, want to help them take control of the USA, reasoning that if democratic government is evil, incompetent, inefficient, ineffective, then non-democratic government must be the way to go.

Of course, a funny point I've mentioned before is that only some conservatives oppose democracy because they view it as an “establishment” that supports the status quo. Other conservatives oppose democracy for the opposite reason: they’re concerned voters can use it to change the status quo. Conservatives, Republicans manage to appeal to both by rhetorically focusing on their shared hatred for democracy, their love of fascism / gangsterism (in so many words) without dwelling on whether it’s meant to change or perpetuate the status quo, make struggling people better off or worse off. Although in the liberal perspective, and I suppose in common understanding, the “establishment” is meant to prosper under and thus support the status quo, I suppose one adept at conservative word play may propose an “establishment” that is trying to inappropriately change a laudable status quo. It’s the sort of seemingly outlandish but possibly effective rhetoric one sees also in Republican politicians, who having control of the White House, the Congress, and the Supreme Court, continue to talk rhetorically about a liberal, progressive, Democratic “regime” they must struggle against.

A more general point is to just appreciate that the thinking of liberals and conservatives, Democrats and Republicans, pro-democracy and anti-democracy sorts, anti-fascists and fascists, is so different in the USA right now even common term and expressions may have wildly different interpretations. It’s no reason to stop talking and reach for the nearest bomb, gun, knife, stone, stick. However, it is a good reason to slow down, talk carefully, watch for terminological equivocations where people seem to be talking about the same thing but really aren't. Say it differently, when in doubt. If you’re interested at all in trying to communicate with conservatives, right wingers, Republicans, don’t assume any common ground as values, morals, ethics, words, language. Talk to them as though they had just dropped in from an alternative realm, some other plane of existence. And take it slow.

The False Equity Efficiency Tradeoff

Let’s do a more serious economic topic this week, shall we? Have you heard about an “equity efficiency tradeoff?” Then you’re familiar with anti-democracy bad economics in the conservative style. Because that’s not real neoclassical welfare economics. Let’s discuss. 

Modern neoclassical welfare economics is an ethical half-theory that self-consciously sets aside the lion’s share of ethics, interpersonal ethics, to investigate what results one can derive from some simple normative propositions about individual preference ranks under certain unreal conditions. “Equity,” a term referring to interpersonal ethics as justice, fairness, weflare, that sort of thing, is external or exogenous to the normative argument in neoclassical welfare economics. There is no “tradeoff” discussed within that theory involving equity and other values. In particular, so-called “economic efficiency,” a certain result relating to individual preference ranks (under the confusing name “utility”), is not presented in that theory as something that is “traded off” for “equity” as interpersonal ethics. Rather, equity issues move one beyond what one is able to express based on individual preference ranks (the prevalent definition of “utility” in modern economics) or can say on the basis of inaccessible internal perceptions of satisfaction from preference fulfillment (an older legacy definition). It is nonsensical (or in the older form of “utility” impossible) to say what happens to “utility” when one changes interpersonal conflict resolutions based on equity or interpersonal ethical concerns. In the latter case, it may go down, stay the same, go up. It’s exogenous. There is no tradeoff. So what’s with this notion from bad economics in the conservative style we’re discussing a “tradeoff” between equity and (economic) efficiency? It’s an elaborate and intentionally misleading play on words designed to disguise or misstate the ethical argument in neoclassical welfare economics. It’s meant to obscure the ethical half-theory structure of neoclassical welfare economics by suggesting one must make a “tradeoff” between conclusions from its limited ethical arguments and conclusions from full ethical arguments that take up interpersonal ethics.

There are an infinite number of (economically) “efficient” outcomes corresponding to every possible set of beliefs about equity or interpersonal ethics. There is not just the one “efficient” position consistent, implicitly or explicitly, with one set of beliefs about equity issues. Nor is there anything very ethically significant about any particular (economically) “efficient” solution defined relative to some distribution of economic power if one objects to the underlying distribution of economic power or associated outcomes on markets and thus interpersonal ethics. For example, there is an (economically) “efficient” outcome defined with respect to individual preference ranks under equity beliefs A relating to the definition and distribution of economic power, and one corresponding to set B. But a tradeoff of “efficiency” A for equity B? If one is at (economically) inefficient B, theory suggests it may be uncontroversial to try to get to efficient B under certain unreal conditions, but choose efficient B over even inefficient A, if one supports A, because efficient B is “efficient” in some general sense? That’s not the argument. It’s the equivalent of saying something like, “I oppose gangsterism on ethical grounds, but the evil boss seemed happy or anyway did whatever he wanted, so …” I mean, probably, but is one seriously putting that forward as an ethical argument for gangsterism? Nor is one necessarily closer to efficient A by being at efficient B rather than inefficient B or A, nor is it necessarily convenient, easy, even feasible to move from efficient B to efficient A without passing through inefficient B or A. 

So how do people get pulled into that sort of thing? By thinking indifference or neutrality to exogenous interpersonal ethics translates to rejecting its significance or relevance, so that one is being indifferent or neutral if one supports an existing or particular distribution of economic power. But that’s not true neutrality or indifference in the context of neoclassical welfare economics. It’s favoring and supporting the status quo allocation of economic power, whatever it may be, or maybe some other allocation, and expressing “neutrality” only in rejecting all alternatives to it. It’s in that duplicitous, uni-directional, fake indifference or neutrality one sees the hand of conservative rhetoricians. Rather than argue for a particular distribution of economic power, more generally equity propositions, they would have one support it indirectly by ostensibly being “neutral.” Another version of this sort of fake indifference is to present it as a stand-alone full ethical theory but just for economists, so one is just giving ethical recommendations “as an economist (and bad philosopher),” and others may disagree, of course. In that case, the false equity versus efficiency tradeoff becomes something like a “conclusions from the ethical theory of neoclassical welfare economics” versus “conclusions from other ethical theories that include equity” tradeoff.

The old economists who came up with neoclassical welfare economics, like the Italian fascist Signore Pareto, seemed intent on coming up with a theory that others might mistakenly suppose replicated conclusions from untenable classical economics but with convenient dodges. Don’t fall for it. Neoclassical welfare economics is not a full ethical theory proposing we ignore equity, interpersonal ethics, in favor of pursuing (economic) “efficiency” defined relative to individual preference ranks under a particular distribution of economic power (and consistent with certain equity beliefs). Don’t confuse the limited, constrained, unreal, ethical half-theory of real neoclassical welfare economics with the expansive conservative, right wing, rhetorical program of anti-democracy bad economics in the conservative style. They’re two different things. Wise up or be played for a fool.

Freedom, Liberty, And Bad Economics

Tough to decide between fun political issues or more significant albeit drier economic issues like the limitations of real neoclassical welfare economics and how it differs from ubiquitous bad economics in the conservative style. Maybe politics this week? The rhetoric of liberty?

The element of liberty versus tyranny rhetoric I find interesting is the bit dealing with political versus economic power. The definition, distribution, use of economic power rests on law, property rights, contracts, decision to use markets, etc., which come from government, hence political power. In that sense, one may say political power is logically prior to economic power and defines, establishes, distributes, enforces, and provides parameters for using it to allocate resources. So one element of the liberty versus tyranny rhetoric is the definition, distribution, use of political power. In that context, one may say nothing is logically prior to political power beyond the normative views of various people about political power including the governed. So one may say in that context, the “liberty” of the governed involves them having a say in politics, government, law, and so on. “Tyranny” in that context might be the governed being unable to get a word in edgewise because someone or some group of bigwigs posing as ethical arbiters for society is dictating the necessary normative inputs underlying laws relating to economic power, etc. That’s how liberals might define it.

Conservatives put it the other way around. They start with favored laws relating to the definition, distribution, use of economic power as fundamental to their “liberty” and perceive changes to their preferred legal arrangements generated perhaps by voters, democratic government, as “tyranny.” That’s how so many conservatives end up talking about the ostensible “tyranny of democracy” or “tyranny of liberalism” while lauding the liberty or freedom conferred by laws consistent with conservative views on the definition, distribution, use of economic power. This is also what leads conservatives into their muddled support sometimes for explicit fascism, with the right sort making the correct laws, sometimes for fake or real anarchism, with the correct laws ostensibly arising spontaneously or the people naturally obeying correct virtual laws.

Reject misleading rhetoric involving words like “liberty” or “freedom” or “tyranny” in general, vague, ill-defined, simplistic terms. Those are manipulative straw man arguments. The question always is whose liberty and freedom to do what, exactly, and how are others involved. Pay no attention to simplistic, manipulative, tricksy, false conservative, Republican political rhetoric cooked up by sleazy advertising types and fascist propaganda outfits. Think about real issues in a serious way. The world already has plenty of hot air to go around. Don’t worry about that.

Normative and Positive

Can we take a step back this week and discuss the normative versus positive distinction? I hardly know what’s necessary to discuss these days, but I have noticed a certain amount of confusion relating to normative and positive propositions, so maybe worthwhile?

Positive propositions are about what is, in a factual sense, not what one supposes ought to be the case or what one ought to do. So a statement about observable reality, or at one step removed science depending on empirical verification, or what the heck, maybe also formal systems as math. The point of a proposition being called positive is it is capable of being refuted with reference to some objective standard. So statements of fact, science, are meant to be assessed relative to shared reality, while statements in formal systems relative to some agreed definitions, rules. Everyone around the world can discuss proposed facts, scientific theories, mathematical or logical problems, and agree on their proper mode of evaluation or assessment. 

Normative propositions are about ought rather than is. They’re humans expressing their own personal judgments about what they or others ought to do based on their subjective moral senses or sensibilities. They’re not really refutable per se, although one may evaluate, discuss, dispute them. Now in a normative context one may attempt to create a false criterion for objective evaluation by simply declaring some theory, book, creed to be dispositive in a normative sense, write it into law, enforce it, etc. However, that’s not agreement of criteria in the philosophical sense. No breaking of prior agreements relating to arbitrary terms or definitions, no bit of illogic, no affront to shared factual reality is involved if someone says he or she thinks it should really be some other theory, book, creed that should be normatively dispositive. It’s subjective opinion.

A while back, a great deal was made of interactions between positive and normative in generally positive or normative theories. For example, ethical theories are normative theories but if they’re addressed to the real world they will involve factual premises about the world, which are positive. Or again, ethical theories typically have some logic to their arguments. Do the positive elements mean ethical theories are not “normative theories?” I wouldn’t say so. The conclusions are normative propositions about one ought to do and must involve normative evaluation at some point. On the positive side, a great deal was made about potential normative influences on the conduct of positive science as far as motivations, interests, imagination, resistance to findings and theories, and so on. I recall a great deal was said about in the philosophy of science circa 1970s. Does it suggest we can’t really call scientific theories as positive? Again, I wouldn’t say so. At the end of the day, they’re about reality and intended to be evaluated on that basis. They’re positive theories, but they can interact with normative propositions via bias, motivations, etc.

The culmination of that bad philosophy was the contention there is no difference between positive and normative propositions, which the scientifically illiterate embraced as justifying their anti-science views and the philosophically illiterate embraced as suggesting ethics are objective facts. One still sees the influence of that bad philosophy especially in the philosophically clueless field of academic economics, in which some suppose neoclassical welfare economics is not a normative theory because it involves math or logic, others conflate it with predictive modeling. A typical example of such confusion in the context of normative and positive economics is conflating “false simplifying assumptions” in the predictive engineering models of positive economics with “false factual premises” in the ethical arguments of normative economics.

My primary concern is normative economics, the normative or ethical arguments made in neoclassical welfare economics about socially “optimal” economic arrangements, policies, what people ought to do, and how that is twisted in normative anti-democracy bad economics in the conservative style. I contend that is the bit of economics that accounts for most of the controversy, confusion and conflict relating to real economic issues and policies, the bit academic economics typically fail to adequately address, the bit fueling anti-democracy sentiment and dodgy ethical thinking. I’m not very interested in positive economics, predictive modeling mostly, although I have some residual interest in the difference between predictive engineering models (and related storytelling) and real cumulative science, from a youthful brush with the philosophy of science. In the old days, if a student expressed any interest in normative economics, they were shuttled into philosophy of science under the conceit economics is a science, so the only normative content must be potential interactions with normative propositions as discussed in the philosophy of science. I didn’t know enough at the time to object, so chalk that up as one more intellectual mugging at the hands of academic economists in the devious old men versus naive teenagers division. But I do now. That’s not the “normative economics” I mean to discuss. I mean the other one: the ethical theory.

Utility

Maybe we can start reviewing some topics in neoclassical welfare economics and associated misinterpretations in anti-democracy bad economics in the conservative style this week. How about “utility,” am I right? Utility is a fun one because it’s the focus of a great deal of idiosyncratic oddness in neoclassical welfare economics and unsurprisingly a great deal of misleading, manipulative rhetoric, word play, equivocation, conflation of issues, in anti-democracy bad economics in the conservative style. An academic economist once told me to not worry what “utility” means because it can mean anything one likes. I thought that funny. To assess the concept in a normative or ethical context one must know the definition and no, not every possible definition fits with neoclassical welfare economics.

In classical economics, “utility” was handled in a fairly conventional way as one might find in the ethical theory of utilitarianism in proper philosophy, so some notion of human welfare that policies might have some “utility” in terms of advancing, so “utility” morphed into “welfare.” Classical economics came under fire as critics wondered if human welfare was being advanced as advertised, and in response conservative economists did what they do best, played word games, in this case re-defining welfare, utility, to ignore commonly accepted observable indications of welfare.

An intermediate formulation translated “utility,” still as welfare, into a sort of internal sensation of satisfaction from preference fulfillment. In that context, “utility” was meant to exist but be inaccessible by definition, so external indications, technology, brain scans, etc., irrelevant. This was the initial context in which a very important principle in neoclassical welfare economics was formulated, which was that the relevant definition of “utility” cannot be applied in interpersonal contexts, that is, no “interpersonal comparisons of utility.” At that point, “utility” as a sort of internal “welfare” was still meant to be defined in interpersonal contexts, it was meant to exist and theoretically be subject to interpersonal comparison, it’s just that there was meant to be no practical, scientific, real way to do it. The point was to remove “utility” from the lion’s share of ethical thinking, which is about resolving interpersonal conflicts of preferences, allocating resources, etc. For that reason, neoclassical welfare economics became only trivially “utilitarian,” really more about opposing utilitarianism. This is the reason I tend to call references to “utility” in neoclassical welfare economics as fake utilitarianism, or another way I often say it is that unlike what is typically meant to be the full ethical theory of utilitarianism, it’s an ethical half-theory (really less than half surely). Comically, it’s not uncommon at all to hear confused critics inappropriately lambasting serious ethical utilitarianism on the basis of rejecting the conclusions of bad economics in the conservative style’s incorrect take on the fake utilitarianism in neoclassical welfare economics. Who said what?

Later and now conventionally “utility” in neoclassical welfare economics came to be seen as simply an indication of preference ranks of a given individual, so indexed by individual. Thus, it is not really defined in an interpersonal context, so a utility(A) and a utility(B), but no just “utility.” Comically, economists seem often confused about which definition of utility they’re using, awkward because the fundamental arguments in favor of socially “maximizing” it differ depending on which definition one is using, which tellingly seems a matter of utmost indifference for most of them. Specifically, one often hears economists who profess to be using preference rank utility discussing the impossibility (rather than the undefined nature) of interpersonal utility comparisons, or even more notably providing schemes to “weight” preference rank utility, add it up across people. Again, it’s indicative of an insincere, unserious use of “utility” as an ethical concept in a philosophical sense. Really, they’re just using the term to express a rather different ethical argument about respecting preferences of individuals, and both definitions get the job done well enough. One understands the waffling. Inaccessible internal “utility” cannot support a plausible ethical theory (imagine dreaming the preferences of a super conductor of “utility could be measured), but preference rank “utility” makes it painfully obvious they're dealing with an ethical half-theory.

Bad economics in the conservative style then plays off the effective removal of utility and welfare from interpersonal ethics by underhandedly promoting certain ethical views on economic power, resolving conflict, allocating resources in realistic conditions, in rhetorically clever ways. Needless to say, the peculiar quality of “utility” in neoclassical welfare economics and the ample opportunities to equivocate on the term as used in serious ethical philosophy and to conflate issues relating to preferences and welfare are of great use in bad economics in the conservative style. I’ll talk more about it in the future, don’t worry about that. 

Perhaps one last indication of the insincerity of academic economists? I suggested some time ago a Don’t Say Utility Challenge, in which I challenged economists to replace the fraught term “utility” with what they meant by it. I assumed for most that would mean replacing “utility” with “preference rank of individual X,” although in some cases I suppose with “inaccessible internal sensations of satisfaction from preference fulfillment.” I suggested it to avoid equivocation, conflation. Do you suppose many took me up on the offer? Have you heard many expressing themselves in those terms? Why do you think not? Perhaps because they often rely a lot on misleading word play to express their own normative or ethical views, to promote bad economics in the conservative style?