Economics and the Good: Part I

How does the discipline of economics approach ethical issues?  A standard answer goes something like this.  We can separate economics into two categories.  Positive economics concerns itself solely with explaining the social world.  Normative economics deals with moral concerns in a way that may build upon, but cannot be reduced to, positive economics.  In other words, positive economics deals in statements of is; normative economics, of ought.

 

An important concept that acts as a bridge from positive to normative economics is economic efficiency.  In reality, economic efficiency can mean several things.  The strictest definition of efficiency is that no individual can be made better off without making at least one individual worse off.  An alternative way of phrasing this is that all potential gains from exchange have been exhausted.  Another definition of efficiency, one not so strict, is that the dollar value of society’s scarce resources has been maximized.  Frequently these criteria go together, but they do not have to.

 

But we are getting ahead of ourselves.  We still need to explore how efficiency is operationalized.  Positive economics can say whether a given situation is efficient or not.  It cannot recommend efficiency as a value, of course, without losing its purely positive status.  Normative economics frequently invokes efficiency as a standard against which economic outcomes are judged.

 

However, economists frequently get into trouble when they make statements about efficiency that contain both positive and normative elements without realizing it.  Consider the following thought experiment.  Allan is auctioning off an apple.  Bob and Charlie both bid for the apple.  Bob bids $1, and Charlie bids $2.  Allan gives the apple to Charlie.  Note that this is an efficient result, in both the strict and the loose sense.  (Instead of letting the results of the auction stand, we could take the apple won by Charlie and give it to Bob.  That would make Bob better off, but would make Charlie worse off.)

 

What if Allan knowingly gives the apple to Bob instead of Charlie, voluntarily accepting $1 instead of $2?  This situation seems inefficient in the looser sense.  But as long as secondary bargains are not forbidden, Bob can always sell the apple to Charlie.  Since Bob bid only $1, whereas Charlie bid $2, at any price for the apple above $1 and below $2 there is room for a mutually beneficial exchange.  Either way, the apple will end up with the person whose valuation of it is highest in dollar terms.

 

Why is this dangerous territory?  Because economists themselves frequently forget the boundaries of each kind of efficiency.  If Allan gives the apple to Bob, economists will often say something like, “That’s inefficient; the apple should go to Charlie.”  Furthermore, they frequently would support something like a redistributive policy that reallocates the apple from Bob to Charlie.  Even if they don’t support that particular policy, they would endorse efficiency as a valid metric for determining public policy, asserting that such policy “merely helps people get what they want.”  And economists will do so thinking they are still doing purely positive economics.  Clearly any issue pertaining to the distribution of goods and services beyond the purely descriptive is normative, in that it involves value judgments.  The problem is the concepts economists work with, and the way they apply those concepts, makes it hard for even careful economists to know where descriptive economics ends and prescriptive economics begins.

 

You may have noticed two controversial statements in the above explanation.  The first is that efficiency should be a criterion for crafting public policy.  The second is that promoting efficiency, because it means giving people what they want, is not controversial.  But both of those statements are in fact normatively loaded.  I will explore further how and why economists overlook these issues in subsequent posts.

 

 

Learned Ignoramus

It’s normal for political debates to quickly take an *interdisciplinary* turn; topics spanning from climate science, net-neutrality to macro-economics will be seamlessly engaged. And it’s also normal to express very specific and forceful policy positions on all these massive problems. We conveniently forget these are actual areas of specialization. Just imagine a set of cafe intellectuals expressing specific solutions to problems in microbiology, nanotechnology etc! But, when it comes to public policy, any such diffidence is rare, instead curiously strong opinions on complex topics is the norm.

Political opinions are also a lot about voicing our ideology. We enthusiastically state our position to signal who we are, not to debate or reconcile. In that sense, opinions are like badges. Quite like how a savage might use face paint to signal his tribe, we use policy prescriptions to signal our political leanings. Actually, many pick their tribe, and then adopt all the interdisciplinary policy positions wholesale. The surprising aspect is, college educated individuals are equally, or sometimes relatively more tribal in their opinions.

José Ortega y Gasset thought this was a relatively novel phenomenon, and closely related to the age of specialization.

“For, previously, men could be divided simply into the learned and the ignorant, those more or less the one, and those more or less the other. But your specialist cannot be brought in under either of these two categories. He is not learned, for he is formally ignorant of all that does not enter into his speciality; but neither is he ignorant, because he is “a scientist,” and “knows” very well his own tiny portion of the universe. We shall have to say that he is a learned ignoramus, which is a very serious matter, as it implies that he is a person who is ignorant, not in the fashion of the ignorant man, but with all the petulance of one who is learned in his own special line.

And such in fact is the behavior of the specialist. In politics, in art, in social usages, in the other sciences, he will adopt the attitude of primitive, ignorant man; but he will adopt them forcefully and with self-sufficiency, and will not admit of — this is the paradox — specialists in those matters. By specializing him, civilization has made him hermetic and self-satisfied within his limitations; but this very inner feeling of dominance and worth will induce him to wish to predominate outside his speciality.” — José Ortega y Gasset

Ortega y Gasset’s Revolt of the Masses (excerpt)

Sort of ironic that civilization might have made us more tribal, at least in certain ways.

“Wake, Awake! For Night Is Flying!”

On the Last Sunday of the Church Year — or the Last Sunday in Ordinary Time, depending on your liturgical calendar — there’s no better musical commentary than Johann Sebastian Bach’s cantata #140, Wachet auf, ruft uns die Stimme (Wake, Awake, For Night Is Flying)!  In this vividly dramatic work, written for the Divine Service at Leipzig’s Thomaskirche, Bach sets all three stanzas of Philipp Nicolai’s Lutheran chorale from 1598, along with recitative and aria texts based on Matthew 25:1-13, Christ’s parable of the ten virgins.

Enjoy a performance of the complete cantata by the Amsterdam Baroque Orchestra & Chorus, directed by Ton Koopman, below.   For the German text and a parallel English translation, click here.

— Rick Krueger

 

 

Aldous Huxley on TIME

Time, as we know it, is a very recent invention. The modern time-sense is hardly older than the United States. It is a by-product of industrialism–a sort of psychological analogue of synthetic perfumes and aniline dyes.

Time is our tyrant. We are chronically aware of the moving minute hand, even of the moving second hand. We have to be. There are trains to be caught, clocks to be punched, tasks to be done in specified periods, records to be broken by fractions of a second, machines that set the pace and have to be kept up with. Our consciousness of the smallest units of time is now acute. To us, for example, the moment 8:17 A.M. means something—something very important, if it happens to be the starting time of our daily train. To our ancestors, such an odd eccentric instant was without significance–did not even exist. In inventing the locomotive, Watt and Stevenson were part inventors of time. [Please go to page 2]

Propaganda as Mechanization

“What caused the disturbances in people’s minds [in the 1920s and 1930s] was that we were all subjected to propaganda of a kind the human race had never before experienced; we were subject to two deliberate scientifically-organised lie-machines, the Nazi one and the Soviet one, operated in the interests of two tyrants who were also demagogues. 

What made things unique is the they told opposite lies. 

It was like having two anti-Christs contradicting one another. 

The machines plunged on whatever anyone said, however young or unauthoratative that person might be.”

—Bernard Wall, Headlong into Change (London: Harvill Press, 1969), 79.

The Vatican obfuscates even while preparing for February meeting on abuse – Catholic World Report

As I read more and more about the abuse scandals of and within large segments of the Catholic Church, I am often struck (in a humbled way) by how little people understand about the nature of sexual abuse.

Abusers almost ALWAYS work in packs. They are predators, and they exchange information with one another. One of the main goals of their abuse is to bring new members into the pack. They are, essentially, grooming.

Please don’t forget this: all abusers are predators. Individuals in terms of lust, yet, part of a tine-mind when hunting.

Thus, it’s hyper critical that even the well-intentioned do NOT cover for these abusers, even out of a) ignorance and b) lack of diabolical imagination.

I believe the current pope is innocent of any direct wrong doing, but he is, nevertheless, encouraging abusers by his very ignorance and lack of diabolical imagination.

Thus, today’s news is even more shocking for those of us who want so desperately to love our Church.–Brad

The Vatican obfuscates even while preparing for February meeting on abuse – Catholic World Report
— Read on www.catholicworldreport.com/2018/11/23/the-vatican-obfuscates-even-while-preparing-for-february-meeting-on-abuse/

Four invincible libertarian geniuses — do you know them?

For questions pertaining to the U.S. Constitution, I ask Kevin Gutzman (author of James Madison and the Making of America and The Politically Incorrect Guide to the Constitution) or Brion McClanahan (author of The Founding Fathers Guide to the Constitution).

On economics I ask Jeff Herbener (I’ve asked him probably hundreds of questions over the years) of Grove City College, and Bob Murphy, author of many books. On anarcho-capitalism, again I ask Bob. (He wrote a very creative book on the subject called Chaos Theory.)
— Read on mailchi.mp/tomwoods/two-sentences-318861

And, of course, add Tom Woods and Jason Jewell. Six amazing scholars.