The Crazy And The True

Welcome friends!

I was listening to a little talk by a psychologist at my workplace the other day on managing stress and anxiety.  Not because I feel particularly stressed or anxious although one might reasonably suppose I might be given the enduring damage American conservatives in rural areas of the country are doing to the USA just now.  But no, not really.  That’s how life goes sometimes.  Our unfortunately rather large block of less informed voters clamor for something they don’t really understand and once they get it start clamoring for the opposite in an endless cycle of ignorance that with any luck tends slowly toward the positive but which threatens of course to go spinning wildly out of control at any moment landing us all in the proverbial ditch of history.  One does what one can but honestly one can’t expect too much.  That’s the way democracy works.  We try to keep everyone on board by being willing to take one step back for every two steps forward.  We obviously took a really big step back this last time around.  No, I’m talking about a step of truly prodigious proportions.  Maybe this time we’ll need to take quite a few more conventionally sized steps forward to get back where we were in the not so distant past.  Might take a while.  But it’s a difference of size rather than kind.  No, I attended the talk in question not because I felt stressed thinking about the long-term prospects of the USA or other western democracies but for general knowledge.  As fate would have it the very first point the fellow made, the old saw about the importance and value of appreciating the difference between things one can control and those one cannot and the proper mental and emotional response to both, got me thinking of a very fundamental disagreement between conservatives and liberals relating to just that point.  From the liberal perspective conservatives habitually assign a great many things to the category of things under one’s personal control that truly are not while one supposes from the conservative perspective liberals must be viewed as doing just the opposite, assigning a great many things to the category of things not under one’s personal control that truly are.  The psychologist in question mentioned he had worked in mental crisis situations and with criminals and so on and in his considered opinion this issue was the single most helpful issue to address when attempting to resolve the psychological component of such cases.  It got me thinking it makes a lot of sense people may need a bit of help sometimes sorting this out given our very fundamental social disagreements on this issue.  But I wonder if we really disagree or if conservatives are just talking funny as they do sometimes.  Maybe it would be worthwhile to spend a few moments to talk it out.

What makes me suspect conservatives might simply be talking funny is it has been my experience conservatives often use language for rhetorical effect rather than simple communication or discussion.  They say things for the behavioral reaction they think or hope they may generate rather than to express what they really think or engage other people honestly on whatever the issue may be.  I suspect this has long been the case but it has become increasingly and indeed screamingly obvious ever since Mr. Trump has burst upon the political stage.  The man is famous for talking absolute rot and then changing it about every which way depending on the audience and reception.  To put it bluntly, the man lies incessantly and outrageously in a rather transparent attempt to appeal to the emotions of people to get them to do what he wants.  His conservative Republican base is famous for at least claiming to understand this and not being bothered by it at all.  Indeed, by all accounts they appear to expect it and love him for it.  They feel if it helps him do what he wants to do then what’s the problem?  The man’s casual relationship with the truth is something they respect and accept as evidence the man is truly one of them on some fundamental level.

Why would anyone pretend some things are under one’s control when they really are not?  Well one reason that comes to mind is something akin to cheerleading.  We have a large self-help industry here in this country that makes a lot of money from people looking for someone, anyone, to encourage them and give them ideas about how to be more successful financially.  One of the mantras of these self-help gurus is one should act as though everything is under one’s own control to provide oneself with the greatest possible incentive to do the best one can.  The thinking appears to be if one acknowledges some things are not under one’s control then one may be a little too prepared at the first sign of difficulty to throw up one’s hands and bemoan one’s fate rather than working as hard as one can to overcome whatever it is.  This theme shows up in all manner of funny places for example Yoda’s disjointed bit of pseudo-wisdom to young Luke Skywalker in the original Star Wars film:  “Do.  Or do not.  There is no try.”  I suppose he might have been talking about some context in which everything was arguably under one’s control and the only issue was one’s determination to do or not do a thing but that’s not normally the sort of context in which one would say one intends to try to do something is it?  One generally doesn’t try to sit on one’s ass all afternoon and stare into space.  One does.  Or does not.  As the case may be.  However, to accomplish more advanced tasks in the real world one generally needs a little help or co-operation or at least neutrality from some things outside one’s control.  One tries to drive to the convenience store to get a six pack of beer moments before the store closes for the night but one’s car breaks down on the way.  Wah wah.  So why would wise old gnarly Yoda spout off such idiotic claptrap?  Well, he’s not just a Jedi Knight.  He’s also a Self-Help Guru.  He’s  player, coach, and cheerleader all rolled into one.  Actually that’s not a particularly attractive image but anyway I’m sure you get my point.  Sometimes one says things that are not necessarily true to encourage other people to do their best at whatever it may be, in the case of Luke Skywalker to complete his training and save the princess in one movie rather than the usual three.

On the other hand it seems quite possible at least some conservatives truly struggle distinguishing things under one’s control from things that are not.  One of the lines of ethical criticism of the distributional results generated by a free labor market involves just this sort of thing.  The argument is the real world labor market rewards not just effort of the sort one might reasonably suppose to be under one’s own control but a variety of things are not necessarily under one’s control including one’s innate abilities and talents, the quality of one’s early education, the conditions surrounding one’s education including did one have bigger things to worry about such as not getting knifed in the school corridor on the way to lunch, one’s level of family support for education and later in the labor market including helpful connections, even things like what’s going on in the macroeconomic environment at different stages of one’s life and technological developments and so on.  It’s why liberals are generally prepared to dispute the ethical standing of market distributions and willing to consider ways to change them up to help out people who may be struggling for reasons they have very little control over.  Conservatives of course tend toward just the opposite line of reasoning.  Many apparently feel the labor market unfailingly rewards effort and right behavior so to put it in a nutshell rich people are good and poor people are bad.  Under conservative ideology helping poor people is illogical and immoral because they’re getting exactly what they deserve.  Psychologically one would suspect this approach might appeal to the ego of wealthy people although of course it’s also shared by many salt of the earth conservatives who are struggling to make ends meet, which seems a bit weird and self-destructive to me but then I suppose one does tend to see quite a lot of weird and self-destructive behavior in that particular echelon of society.  Hmm, never really thought about it before but I wonder which way the causality runs on that?  You don’t suppose they do all manner of funny things because they’ve managed to convince themselves they’re pretty worthless and have little to contribute anyway so what difference does it make?  I hope not.  That would be such a waste, wouldn’t it?  And of course I haven’t brought up the issues surrounding those elements of our distributional patterns that don’t necessarily involve the labor market directly such as inheritance and that sort of thing.  I’ve mentioned before the jarring disconnect between the conservative conviction that distributions are the result of things mostly under one’s control and indicative of individual merit and their hatred of inheritance taxes and so on that, if supported, would appear to strengthen their case.  Hard to imagine the sort of personal effort a sperm or egg or maybe fetus would need to expend to be born to wealthy parents and eventually and all but inevitably sit at the apex of our little economic pyramid isn’t it?

But do these conservatives really believe their labor market as ethical arbiter model or is this another case of language being used for rhetorical effect alone?  Probably the most well known ethical principle that can be attributed to conservatives with any degree of confidence at all is that greed is good.  As far as I can tell most conservatives believe greed is like the mysterious Force in Star Wars.  It’s the glue that holds the world together.  Under this perspective the big problem with acknowledging there may be a case for changing something up to help people other than oneself is that it runs counter to the dictates of personal greed. One may have to pay more taxes or in the case of a wealthy cad like our president pay any tax at all.  Further, the conditions under which one is currently thriving may change and not in a way that necessarily improves one’s own situation.  It may appear to be to one’s benefit to claim everyone is getting what he or she deserves on the market and to try to convince other people of that fact even if one doesn’t actually believe that to be the case at all. Some people argue against this line of reasoning by appealing to one’s long term greed or enlightened greed in the sense that in the long run one may reasonably expect do better in a stable thriving society than in a society full of struggling, desperate, and sometimes violent and unreasonable people but getting people to think of the future and give up small current gains for potentially much larger long term gains is always a tough sell.  Anyway, the whole argument is neither here nor here for purposes of this post.  I’m not trying to resolve or even shed light on any of these arguments per se.  I’m just trying to speculate on what conservatives really think about what is and is not under one’s personal control. 

So where does that leave us?  I don’t know.  I must admit my head is starting to spin just a little bit.  I may be going into some sort of mental crisis myself trying to think it all through.  I wonder if the psychologist from my workplace makes house calls?  Just being funny.  I think I’ve got a handle on it because I haven’t been able to take conservatism seriously for some time now.  I harbor no illusions I control everything affecting my economic situation or more broadly my destiny.  I just do what I can and hope for the best.  I neither throw in the towel at the first sign of difficulty nor rage against the machine when things don’t go according to plan.  I’m satisfied if I’m doing OK and I wish everyone were doing similarly OK.  I’m proud of my own modest role in my accomplishments but I don’t sprain my arm patting myself on the back because I appreciate a lot of other people were involved and a good portion of the result was likely due more to the luck of the draw than anything else.  But then I’m a liberal so of course that’s what I would think isn’t it?  That raises an interesting question.  I wonder how much we might save collectively on our mental health if more people were liberals and talked sensibly and honestly about economic matters?  Seems to me it might be quite a lot.

Market Distortions and Redistribution

Welcome friends!

I was reading some online commentary on President Trump’s various attempts to implement the latest conservative brainstorm “economic nationalism” (i.e. socialism sans taxes) though tariffs and trade wars and so on when I ran across something that struck me as a particularly apt illustration of the way a too casual familiarity with economic theory can impair one’s thinking.  The commenter I have in mind opposed Trump’s tariffs because he or she felt the resulting market “distortions” would inevitably hurt “everyone.”  It was the sort of pseudo-economic theorizing one suspects many people forced to sit through Economics 101 might espouse and that academic economists who should know better seem never in any hurry to correct mostly likely because many of them find this kind of nonsense furthers their own value judgments.  I know I’ve probably talked about it before let’s say a million times but what the heck let’s make it a million and one shall we?

I did a short summary of the overall gist of neoclassical economic theory in a recent post so maybe we don’t need to go over all that again so soon.  If it’s already faded from your memory please take another look at paragraph four (“OK, so here’s our little one paragraph refresher …”) from my post entitled The Problem with Economic Theory and Then Some from April 18, 2018.

So what’s going on with the argument that market distortions inevitably make everyone worse off?  I suppose we must be starting from the rather dubious or at best only partially correct presumption we’re operating under a perfectly competitive market structure (i.e. what casual or maybe in this case we should just say sloppy thinkers misleadingly characterize as “The Free Market” although there is no particular reason to suppose any real unregulated market would freely tend toward this particular market structure) and that the “distortions” under consideration alter the results that would have otherwise fallen out of that ostensibly happy situation.  What’s wrong with that?  Doesn’t economic theory say if we mess with perfectly competitive markets we’ll diverge from socially optimal results and make everyone worse off?  Nope.  Not really.

For those with more than a passing familiarity with economic theory the issue here will be self evident.  Our ostensible conclusion runs smack into the prohibition within neoclassical economic theory against making so-called interpersonal utility comparisons, that is, ranking or rating economic outcomes that differ from one another by at least one person being better off and at least one worse off (typically discussed in absolute terms although I’ve been thinking for a while now it might be more interesting and relevant to redo the whole thing in potentially more ethically relevant relative terms since we know humans and even some of our fellow primates tend to think of fairness in relative rather than absolute terms).

Let’s just clear this up right now to avoid any confusion down the road.  Let’s say we actually have a perfectly competitive market system but some people are tanking: they can’t find jobs, they’re out of money, they’re living in the woods scrounging food from the dumpster behind the old convenience store.  (Republicans were in the news recently complaining about some UN committee having the audacity to mention severe poverty of this sort in the USA so to play nice with conservatives for now let’s just present this as an abstract thought experiment without laying out the evidence any such controversial phenomenon actually exists.  All some of us have to do to witness this sort of thing is drive down the street and have a look around but I infer for those living in same fancy gated communities seeing a poor person living in the woods behind the old convenience store would be the equivalent of the rest of us seeing Bigfoot strolling through our backyards).  In case you were wondering there’s nothing in economic theory that says no one will tank if we have a perfectly competitive market system.  That would depend on conditions affecting the demand and supply of labor.  Anyway, let’s say we change something.  We do some tariffs, we start a trade war with China, Europe, Mexico, Canada, or heck let’s just say the rest of the world, we run some sort of jobs program, we redistribute resources directly using taxes.  Whatever.  Doesn’t really matter for this post.  Indeed, let’s follow the philosophical thought experiment approach and take everything to extremes to make things more obvious.  Let’s say we take all the institutions that support a perfectly competitive market, roll them into a big ball, and throw them in the trash.  Let’s say the economy crashes entirely and in a short while everyone other than those people we were just discussing, the former tankers, drop dead on the streets.  However, let’s say the former tankers do a little better than they were doing previously.  Imagine they’re particularly adept at scrounging what they require from the detritus of our lost civilization much like the heroes of so many juvenile video games.  Again doesn’t really matter why they’re doing better for our little thought experiment.  Let’s just say for the sake of argument they are.  Talk about your market distortions, right?  What does economic theory say about the ranking of this situation compared to the previous one?  Nothing.  That’s what happens when one deals with a theory that ostensibly looks only at a sort of utility defined in a way that renders interpersonal utility comparisons impossible.  Why?  We don’t know whether the postulated increase in “utility” on the part of the former tankers outweighs the loss of “utility” of the multitudes.  Not really the answer you were looking for?  No, I get it.  Does seem a little weird.  I guess that’s why people fudge it.

One way people fudge it is to give pride of place to the distribution of goods and services falling out of any particular expression of an ostensibly perfectly competitive market system (by which I mean the result of a perfectly competitive market given some initial distribution of resources) and characterize other potential results as “distortions” including other results that could be obtained by redistributing resources and then moving to a new perfectly competitive market outcome that differs from the former by some people being better off and some worse off, which falls into the category of comparisons that are not really supported within economic theory.  Out of nothing something.  It’s like a miracle of philosophy.  I mean honestly if one had a choice between a distorted result and an undistorted result which one would choose?  Who needs interpersonal utility comparisons if we can make a choice on that basis?  Just being funny or trying to anyway.  The language is clearly contrived to establish a ranking of outcomes that is not supported by the actual theory that language purports to express.  One can see the same phenomenon in the terms “distributions” and “redistributions” with the implication the initial distribution must have some higher ethical standing than the subsequent and derivative redistribution.  But of course under economic theory really they are entirely on the same level.  Our current distribution expresses certain value judgments external to economic theory relating to the economic power that should rightfully go to different people and a redistribution would express other value judgements.  If we ever actually made such a redistribution those who held the former set of value of judgments would be talking about redistribution.  Same values, different terms.  In other words the basis of any given distribution cannot be evaluated against any other given distribution (or redistribution if you will) under economic theory.

Another way people fudge it is to claim these so-called market “distortions” inevitably make “everyone” worse off, which is essentially a rather transparent way of trying to avoid the awkward issue of interpersonal utility comparisons entirely.  It presents a local optimum based on a given distribution of resources as a global optimum across all potential distributions of resources. It’s fine if you think so but it isn’t economic theory.  That would be your own idiosyncratic value judgement based on I know not what.

So why do these pseudo-economic pronouncements appear so plausible to the inadequately educated?  Why whenever anyone discusses distributional issues is someone sure to pipe up that we dare not redistribute resources because that would distort the labor market and hurt everyone?

Well, setting aside the obvious incentives for economists who like the current distribution and don’t mind at all if people get the wrong end of the stick about what economic theory says about it, the answer must lie in the peculiar dual role of labor in economic theorizing.  On the one hand labor is an input of production like let’s say a lump of coal or a hammer.  Under a given distribution of resources supply and demand will set a price for that input.  If you start with a different distribution of resources you will get a different pattern of supply and demand and the price will of course be different but never mind let’s just look at whatever we have right now.  If we assign a different price to some non-labor input then I suppose one might reasonably say we’re distorting the market and creating inefficiencies.  So why can’t we say the same for labor?  Well, the funny thing about labor is that it’s not really the same as any other input in one significant respect: labor is the only input we associate with the generation of utility, which is what neoclassical economic theory is ostensibly all about.  People generate utility by fulfilling their needs and desires.  Lumps of coal and hammers do not generate utility in this way.  This is not a small difference because it means changing the price of labor very quickly gets one into the sort of interpersonal utility comparisons that cannot be made within the context of economic theory.  Another way of expressing this is to say there’s nothing sacrosanct about the price of labor under any particular perfectly competitive market result.  If one doesn’t like it for any reason based on one’s ethical reasoning and wants to change things around using redistribution schemes of one sort or another a serious economist will be agnostic about whether such change makes sense.  There is no one “true” price of labor to which we must adhere to get the maximum amount of utility according to economic theory.  We can change the relative price of labor whenever we like without losing utility or more accurately without knowing whether we’ve lost or gained utility.

But after we’ve done our redistribution won’t there by another pattern of supply and demand for labor based on that distribution of resources and another price of labor from which we dare not diverge for fear of not attaining a perfectly competitive market result?  Nope.  We’re basically just back where we started.  If we notice something amiss with that distribution based on whatever ethical theory we’re using to think about distributions then there is nothing in economic theory to suggest we should not change it again.  That is to say, the ostensible optimality of any given perfectly competitive market outcome is really contingent on our accepting the ethical credentials of the resulting distribution of goods and services.  In other words, markets are meant to serve us; we’re not meant to serve markets.  We evaluate markets and determine how well they are working based on our ethical beliefs relating to distributions; we don’t look to markets to tell us what to think about distributions.

Whenever I do these little posts I’m always careful to point out I’m not really arguing for or against any particular distribution.  I may do so in another post but my concern here is simply to clarify what we’re talking about.  If you like the distribution we have now and don’t want to see any redistribution that’s perfectly fine with me.  For purposes of this post anyway.  We can discuss it some other time.  But in that case your conclusion is not and cannot be derived from economic theory.  Indeed, your conclusions most likely do not involve the concept of utility at all but are probably based on some notion of what different people deserve and why and how those considerations are captured or not in real life labor markets.  Similarly, the idea that redistribution schemes like tariffs or what have you inevitably harm everyone is a rather far-fetched claim that cries out for substantiation. It’s fine with me if you think so.  I’d love to hear your theory.  But if you think that result has been established by economic theory you may need to dig out the old textbook and take another look.  In other words all I’m suggesting is that people speak up honestly for their values and stop talking rot.  And to any academic economists who may be reading this post please stop facilitating people talking rot.  It’s your field not mine.  It shouldn’t be left to people like me to clean up your mess.  Not really my job.