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.
