News

Loading...

Tuesday, November 08, 2011

Getting All the Details Right...

 while missing the big picture.

Everything Bob says in the above post is correct... in terms of technical economics. But that has nothing to do with making practical judgments in our day-to-day lives, in which we make the practical equivalent of interpersonal utility comparisons all the time -- and while not perfectly, well enough to get by. I make them every time I have to divvy up time and goods amongst my three children.

And I think that's what Dan Klein was talking about. Certainly, Dan knows everything Bob put in his post. But he is saying, "Come on, as a practical matter, we do know that in 9999 cases out of 10,000, an additional dollar will mean more to a poor person than to a rich one."*

So when Bob writes, 'Hopefully you can now see that trying to increase "social utility" by taking money from a rich man and giving it to a poor man, is simply nonsensical,' what he should have written is that ''Hopefully you can now see that trying to promote the common good by seeing to it that fewer dollars  go to the rich and more to the poor makes perfect sense."

* And when I made this case at NYU, guess who agreed with me?

17 comments:

  1. So now the validity of arguments doesn't matter? OK, because 2+2=4, I think people shouldn't drown puppies for sport. Disagree with me Gene, I dare you.

    ===

    Just to clarify for those who haven't been following this from the beginning: If Dan Klein said on his blog, "I think a dollar means more to a poor man than to a rich man, c'mon everybody, you know what I'm talking about," I would not have had the slightest problem with it. It's conceivable I would have used it as an excuse to talk about ordinal preferences, but I certainly wouldn't have disagreed with Klein. (As Gene says, apparently I agreed with him at NYU, though I've tried to block that portion of my life out.)

    No, what made me flip out is that Klein put this question on a test of economic literacy. That is crazy. How can someone possibly use as a test of others' economic literacy, a principle that is so common among free-market people that it is actually taught in a textbook? (And I'm not a nut for putting it in there. This is standard stuff that I was taught.)

    If Klein wants to say, "Our profession is screwy, because we're teaching something that everybody knows defies common sense," then fine I wouldn't have flipped out. But that's not what he said. Instead, Klein said that 30% or whatever of his fellow libertarians were objectively wrong on an economic issue, for repeating something that they very well may have been explicitly taught by an economics PhD in college.

    ReplyDelete
  2. OK, Bob, I think what I said is what Klein meant. I will certainly concede this much: he could have put it much better and avoided this controversy!

    No, it wasn't you who agreed with me that interpersonal comparisons are possible as a matter of practical judgment, although not of economic theory. But can you guess who did?

    ReplyDelete
  3. Live or dead?

    Stringham?

    ReplyDelete
  4. Living.

    It was actually Stringham with whom I was disagreeing.

    ReplyDelete
  5. Yeah, I can see that. I am guessing that you're thinking of an Austrian. The only guys that I have read that I can remember discussing this (though the details escape me) are Bob, Stringham and Herbener.

    Other than that, I am certainly at a loss. I haven't read a whole lot of either Stringham or Herbener's works, to be honest.

    ReplyDelete
  6. We will let Bob have a go at guessing before I reveal the secret.

    ReplyDelete
  7. Well it better be either Salerno or Kirzner, or your story is a let down.

    ReplyDelete
  8. "No, it wasn't you who agreed with me that interpersonal comparisons are possible as a matter of practical judgment, although not of economic theory. But can you guess who did?"

    I'd have to say more than one person -- me included. Or maybe it was you who was agreeing with me, as my statement on the matter was made, IIRC, in 2006:

    "Even when aggression is nominally measurable in known units, it's not necessarily true that the factor of aggression itself will be perceived or valued in terms of those units. ... The value of a dollar may be uniform for certain purposes, but it is highly subjective for most. Most people would agree that stealing a piece of 18 holes on the golf course is less onerous than stealing a baby's bottle of milk, even if the dollar values of the two say otherwise."

    ReplyDelete
  9. When I talk to my students about this, I point out, following the amazing work of Levy and Peart, that neoclassical nihilism about inter-personal comparisons of utility coincides with a displacement of the classical (Smith-Mill) view of fundamental human equality (so, inter alia, equal capacities for enjoyment) by the neo-classical embrace of difference and, in practice, hierarchy. See *The Vanity of the Philosopher*

    ReplyDelete
  10. 'Hopefully you can now see that trying to increase "social utility" by taking money from a rich man and giving it to a poor man, is simply nonsensical"

    I agree that using social utility here is on shaky ground because it cannot be measured. If you said you were doing the transfer because you wanted to increase wealth equality (which is measurable) then it seems you would be firmer grounds in terms of measuring the success of your actions.

    Whether or not wealth equality increases or decreases social utility though is still in the eye of beholder.

    ReplyDelete
  11. "K-Gun"

    Is that Kirzner? Sorry, I don't know the nicknames that you crazy economists use... ;)

    ReplyDelete
  12. That was the very disrespectful name Bob and Von Pepe would use for Kirzner. It never passed my lips!

    ReplyDelete
  13. "it never passed my lips"

    ...only your fingertips. (JK)

    ReplyDelete
  14. Yes, of course, I'm just teasing Bob here.

    ReplyDelete
  15. Very interesting point, Kevin.

    ReplyDelete
  16. "Getting all the details right while missing the big picture."

    I call it "Missing the devil for the details."

    No, I don't really have a comment on the concrete at hand here. heh

    ReplyDelete