Curtiss, in a comment on a recent post, referred to Hilary Putnam’s The Collapse of the Fact/Value Dichotomy. It took me a couple days to get my head around the concepts, but there’s some important stuff there, important enough (thanks, Curtiss!) that I’ve queried the library catalog and found a copy of Putnam to check out tomorrow. Via Curtiss, here’s Putnam on Arthur Pigou (of Pigovian Taxes non-fame): “If the Law of Diminishing Marginal Utility is right, then the marginal utility of money should also diminish. . . the marginal utility of, say, a thousand dollars to someone at the point of going hungry or becoming a homeless beggar is much greater than the marginal utility of a thousand dollars to, say, Bill Gates. Conclusion: . . . income redistribution promotes welfare” (Putnam 53). According to Curtiss, economists declared this problematic due to the inability of definitions of individual utility to transfer over to discussions of societal utility. (I think.) There’s also the difficulty that economists want to claim the status of science (however dismal, an’ thank yew, Mr. Carlyle) for their discipline, and so address themselves to “descriptive” rather than “normative” concerns (I talked about the problems with this position in a very early post), making ethical questions into methodological inconveniences. (Is it just me, or does this feel very similar to the rhetoric of ideologues who say things like, “We’re talking about facts, here, stuff that’s black and white; we don’t have time for your namby-pamby noodlings about how ethical something is”?) There are other factors here, as well, that connect to what Curtiss is getting at, and also to the stuff I was going on about yesterday.
For one thing, there’s the weird blur that happens when you consider this idea of “utility” in an “efficient” market (which is what economists say they’re interested in) as opposed to “utility” in an “equitable” market (which economists like Mankiw say is the domain of policymakers). A market is “efficient” when society as a whole achieves the greatest utility, given its market constraints. Furthermore, “an efficient market” is a zero-sum game because it “cannot offer opportunities to one person to improve his or her wealth position without also making someone else worse off” (Wolff and Resnick 89). Taxes intended as progressive — intended to help redistribute wealth from the rich to the poor — make the market less efficient by imposing “deadweight losses”, by which the dollar amount taken out of Bill Gates’ income by the tax is exceeded by the loss in marginal return caused by the tax. (I think. Again, I’m no economist, and write only as one of those flaky English people who’s read an Econ 101 text.) This all has something to do, though I’m not quite sure what, with the quality of Pareto optimality: the point at which the ratio of marginal costs for producers is perfectly in balance with the ratio of marginal utility for consumers, indicating “that a society has fully realized its potential output” (Wolff and Resnick 92). Mankiw provides a useful reminder from the neoclassical perspective: “Most people agree that taxes should impose as small a cost on society as possible and that the burden of taxes should be distributed fairly. That is, the tax system should be both efficient and equitable” (244). Redistribution of wealth, the neoclassicals argue, is inherently inefficient (partly, they say, because it reduces the incentive for wealthy people to work hard, in addition to the harmful effect of deadweight losses on productivity), so whether we ought to do it becomes a question of equity.
Also, I think there’s an important line here between individual utility and group utility. While Pigou’s ideas may suggest to us that — deadweight losses aside — taking $1000 away from Bill Gates to give to Darla the Wal-Mart greeter increases the sum of “utility” in society as a whole, the fact remains that it still diminishes Bill’s utility. Personally, I’d be more than happy to do a little diminishing for Bill — I still haven’t forgiven him for Windows 3.1, much less what followed, and the mention of Palladium makes me want to reach for the nearest rock — but it takes us straight back to the ethical questions: how do we decide what to take from whom? Quoth the neoclassical economist: Don’t tread on me.
Finally: according to the idea of utility, each person sets a value for herself on what she buys and sells. The points Curtis makes make me wonder: how does one measure the utility of an ideology? I think I’d suggest that an ideology is very similar, if not identical, to a preference. If individual preferences, including ideologies, are the essential starting points for neoclassical economics, then neoclassical economists would say that ideologies can’t have values because they cause values and causality only runs one way according to the way they see the world.
I made vichyssoise today, for Bastille Day. Actually, yesterday now, looking at the clock. It was goood.
A couple of things–I’m just trying to remember Putnam here, BTW, so check these when you lay hands on the book:
Regarding ideology selection, I think you’re closer the mark than I was w/r/t a neoclassical account of ideology selection; the neoclassical would claim their economics is ideology-free, just a description of what happens, and that a selection of ideology gives rise to values with which their theories have nothing to do. A vulgar Marxist (or someone in a vulgar Marxist mood) would say this is just a fig leaf for class interest; Putnam, I think, would say that the selection of the Pareto optimal criterion for welfare economics reflected certain scientific values, e.g., simplicity, elegance. Putnam might then go on to assert that since we are letting values into our science–or rather, since it can be shown that we cannot keep values out of science–we are entitled to ask about the appropriateness of Pareto optimality as measure of a healthy economy–he devotes two essays to Amartya Sen’s multifactor capabilities approach to economics.
Faced with something like the neoclassical value-free attitude, I fall into a vulgar Marxist view. Which is why I’m grateful for Putnam’s alternative critique. However, if Putnam’s book gains, uh, currency, I wouldn’t be surprised if Putnam’s account is painted as vulgar Marxism and “the politics of envy.”