Welcome friends!
Hey, looks like this is post number fifty. That’s a small personal milestone for me. You know, when I started this little blog I expected to run out of things to say pretty quickly but it turns out the two headed monster of modern conservatism has a seemingly inexhaustible ability to irritate the living bejesus out of me on a nearly daily basis, so I guess I need to just keep on writing for the sake of my own sanity if for no other reason. Anyway, in honor of the occasion I’d like to do a bit of a special issue and go back to one of my core interests: economics. Yes, sorry to return to economic themes so quickly but I’ve had something on my mind recently and I might as well get it off my chest. (OK, smarty, I suppose that means my mind must reside in my chest, but that’s not important here.) If you’ve read some of my other posts you know I often criticize a certain common presentation of neoclassical microeconomic theory because of what I consider its intellectual dishonesty, which I have argued lies in starting out with an interpretation of utility that is insufficient to support a comprehensive ethical theory about optimal economic or social policy and yet hey presto ending up supposedly managing to do just that. (I’ve tried to explain what’s going on with this apparent miracle of philosophy in a number of ways, most recently in Redistribution and Economic Theory III, July 5, 2012. Take a look if you’re interested.) Now I guess I’ve never been entirely clear in my own mind about whether the problem lies with economic theory, the interpretation of economic theory by certain less than scrupulously careful economists, or the mangled interpretation of economic theory by conservatives who don’t really know that much about it. I guess it doesn’t really matter to me, but I do hold the economics profession at least partly responsible because they are really the ones who should be straightening out this type of stuff, not me, I have a day job. (Well, I suppose I also hold our social and ethical philosophers to blame to some degree because they should be providing critical commentary on this type of thing, but they seem to have become a little distracted in the last fifty years or so.) Anyway, I’ve recently been reading some economic debates that are more macroeconomic in nature (yes, that would be the whole stimulus versus austerity issue) and I’ve consequently been thinking a bit about the differences between macroeconomic and microeconomic theory. Maybe I’m imagining things but I think these differences are related to my previous points about microeconomic theory in isolation. I think what ties them together is a determination within certain presentations of microeconomic theory to eliminate the thorny issues associated with living in a human society from discussions of optimal economic policy. Sounds a little dubious? Please allow me to explain.
I’ve suggested previously the problem with the type of utility used in microeconomic theory is it has nothing to say about social situations in which people have needs or desires that come into conflict with one another, such as happens in any distributional system. Addressing these conflicts involves making so-called “interpersonal utility comparisons,” which is impossible using the type of utility discussed within economic theory. That particular formulation of utility is really only suitable for making conclusions about one person in isolation. Some economists and conservatives have tried to make it appear relevant to broader social situations by an intellectual sleight of hand I’ve discussed previously and probably don’t have to go into again just yet, but just as a reminder it involves fudging what it means to not say something about something. My point this time is that one way of thinking about what is going on within microeconomic theory or within that particular misrepresentation of microeconomic theory (take your pick, doesn’t matter here) is as an attempt to sidestep all the messy philosophical issues that arise from humans interacting with one another to produce and distribute goods, that is, to remove from microeconomic theory the real economic issues associated with living in a human society.
However, I now think you can catch a glimpse of the same sort of phenomenon if you contrast how certain issues are handled in macroeconomic theory with how they are handled in microeconomic theory. What I’m thinking about here is that one of the main goals economists talk about in the context of macroeconomic theory is employment. I understand, of course, it’s a little difficult to actually figure out how to promote high employment, which I’m sure is an interesting question and all but not really what I want to talk about there. Right now I’m just talking about the fact that figuring out how to get people employed is one of the objectives of macroeconomic theory. Now to me this goal seems to acknowledge one of the real economic issues associated with human society, so I give it credit for that. In the broadest possible terms, the fundamental economic issues associated with any human society are coordination for purposes of production on the one hand and then distribution of the product in a way that seems equitable and just on the other hand. In more practical terms, I suspect all successful human societies have at least tried to create a situation in which everyone is able to participate and play a part according to whatever ability they might have and in which everyone who does so is able to make some sort of acceptable living. Heck, I suppose even stone age hunter and gatherer tribes tried to address those issues. That’s what a human society is. I just don’t see them saying to one another, “Ugh. We no need you. Drop dead.” That sounds to me a little more like what a modern conservative might say to someone. No, I think our primitive ancestors probably tried to find some way to accommodate everyone in their tribe. So that raises the issue of how this important social objective is captured within microeconomic theory. The answer, unfortunately, is that it doesn’t really seem to appear at all. In microeconomic theory, labor is conceptualized as an input of production more or less identical in stature to capital along the lines of we need Y people and Z wrenches to produce product X. It’s all very much from the point of view of a plant manager or what have you. But really we know there’s a big difference between people and wrenches, right? If we don’t need the wrenches then that’s great, we can just throw out the ones we have and save some money by not making any more. In contrast, people need jobs and a certain level of income, and people have opinions about what level of income would be just given their activities or lack thereof. In microeconomic models, labor just sort of appears out of nowhere, can happily survive on whatever it happens to get, has no particular beliefs about who should get what, and if not needed disappears into nowhere, presumably to be put to some other good use. So there’s really no problems associated with employment at all. It’s really a rather lovely fantasy world in which there’s no unemployment, no economic distress, no need, no poverty, no distributional disagreements, and so on, basically none of the economic issues associated with real human societies.
Now I realize more responsible economists are fully aware of this theoretical lacuna and tend to cover it with a few blithe lines about economic theory being agnostic about redistribution if one has a value system that involves values that are not captured in the type of utility used in economic theory, such as people having jobs, people making a living wage, people not dropping dead on the pavement, and people having needs and desires that come into conflict with those of other people (that is to say, distributional issues in general). However, they don’t seem very concerned about how that is all supposed to take place or about whether it would even be consistent with their own policy prescriptions based on the drastically limited ethical issues they do consider to be under their purview. You know, in their minds, it’s simply not their job. I get it. But I always get a good chuckle out of it anyway. I feel like saying, “Ohhhh, now I see! We just handle all the difficult economic issues generated by living in a human society by redistributing output in some old way, if that’s what we think we need to do.” And here I thought it was going to be a difficult issue! I know the heart of any scientific modeling is simplification but talk about throwing the baby out with the bath water.
Now I suspect this omission of significant economic issues from microeconomic theory is what has led some otherwise reasonable people who maybe just aren’t paying sufficient attention to the rather important but typically small print caveat about the conceptual role of redistribution in economic theory to the erroneous conclusion that if we just manage to mimic the perfectly competitive market situations described in microeconomic theory then we’ll essentially enter into a sort of magical World of Microeconomic Theory and all the problematic issues associated with real human economic systems will vanish. Now to the extent that is what’s going on it really strikes me as a rather risible example of confusing reality with theory. Unless one actually has a theory about why economic activity will be sufficient to keep everyone employed and to allocate everyone a living wage and one people consider equitable and fair, or one actually has a theory about how we can redistribute to resolve these issues in a way that is consistent with our labor market policies and so on, then I think it’s pretty comical to imagine these issues will disappear because we have chosen not to take them up in a microeconomic model. And of course the problem is really even worse than I’m portraying it here because not only do these conservatives ignore the fine print about redistribution that is really the only link between microeconomic theory and the messy philosophical issues involved in determining what would really constitute an optimal economic system, but the inevitable consequence is they really have no appreciation of the role redistribution (or I guess the possibility of redistribution) plays in making microeconomic theory consistent with any broader and more complete system of social ethics. Thus, they end up being adamantly opposed to even the idea of redistribution, which they ironically present as a sort of socialist plot that fails to appreciate the lessons of economic theory. Holy cow! I wonder, how can one group of people get so freaking confused?
Now I know this is really only one group of economic conservatives I’m talking about. Some other economic conservatives know full well what’s really on their mind is not captured at all within microeconomic theory: it actually involves the complicated moral issue of who should be getting what and they just happen to believe what people get under certain market structures is ethically superior to the alternatives. It’s got nothing really to do with the sort of utility discussed in microeconomic theory. That’s fine. I happen to think that point of view also ignores certain relevant considerations, as I’ve discussed before and will undoubtedly discuss again in the future, but at least it makes a modicum of sense and is something we can talk about. No, what’s always bothered me is this gigantic intellectual red herring of microeconomic theory and utility maximization that seems to flop into view whenever people try to discuss these serious economic issues.
Anyway, after thinking about it, I wonder if this whole issue is part of a larger tendency among many conservatives to confuse reality with our thinking about reality I discussed previously in the context of religion. Some conservatives are clearly attracted to the sort of dumbed down version of microeconomic theory I’ve just been discussing (i.e., microeconomic theory without the fine print covering distributional issues) while some are attracted to the dumbed down theories about humanity and the physical world one finds in religion. But is it possible on another level both heads of the conservative monster are involved in essentially the same type of flawed thought process: the predisposition to confuse reality with simplified stories about reality or in even more general terms the quixotic quest to make difficult and complex real issues appear simpler than they really are? (I guess that would cover even the group of conservatives I just portrayed above as the more reasonable of the bunch: the group that understands what we’re talking when we get into these social economic issues cannot really be addressed within the confines of microeconomic theory. Because I think my issue with them is really also one of oversimplification. In particular, I feel they tend to have a rather stylized and abstract view of what happens in certain market situations that cause the virtuous to thrive and the less virtuous to struggle and I’m not sure they appreciate all the various ways people can actually make a buck in these market situations and all the various ways people can tank.) Maybe that’s what I’ve personally always found so distasteful about much of conservative thinking. Although I think we all appreciate it’s vitally important for our quality of life to maintain a sphere for individual liberty, I think most people also appreciate humans are ultimately social animals and the complicated social, moral, and economic issues associated with people coming together to form a human society are some of the core problems of the whole human enterprise. There’s certainly a role for the isolated pioneer living by his or her wits so beloved by American folklore, but I would suggest the highest expression of humanity is not found in these socially isolated pioneers but in human society and especially in the cumulative intellectual products of human society. To be sure, it’s a bit of a thorny problem to work out the boundary of what should belong to the world of individual liberty and what should fall more under the dictates of social interaction and cooperation but that’s the reality of human society: it’s complicated. However, I would like to add that within that complicated conversation about social issues I do find the traditional conservative focus on the individual can be very helpful, so please don’t say later I have no appreciation for traditional conservative theories and concerns because really I do. I think in its most respectable and reasonable form traditional conservatism has a valuable role to play in any discussion of the relationship of the individual and society. But many modern conservatives seem to me to have taken their position to an absurd extreme in which their apparent desire for simplicity has led them to present the problems and issues associated with human society as irrelevant or even to banish them altogether from their thinking, and that is just not a serious intellectual position to take in my view. I wish more conservatives would regain their senses and join with liberals to discuss these social issues in a serious way. So much more productive and satisfying than the shrill and annoying background noise that passes for political debate today.
