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.
