Morals and markets

Posted on March 18, 2019 by Diane Coyle

I’ve now finished Elizabeth Anderson’s Value in Ethics and Economics, with mixed reactions. The part I really liked is her critique of utilitarianism/consequentialism. She advocates a ‘pluralist-expressive’ approach to value.

Consequentialism “promises to provide a single, simple, precise and determinate procedure of justification that employs objective calculation to overcome disputes about what to do.” Deliberation – be it rational or not – aims to deliver an optimum result on a single dimension. This is inevitably reductionist because all goods need to be made commensurate. This approach has the merit of making decisions easy to explain, and an inherent pragmatism because after all choices are always inevitable.

Anderson’s ‘expressive-pluralist’ alternative requires choices to be guided by norms which refer to ideals or evaluative concepts such as ‘respect’, ‘friendship’, ‘charity’. “Because their constitutive concepts are essentially contestable, the expressive theory cannot provide a procedure for respolving conflicting interpretations.” Confusingly, Anderson also describes this as pragmatic; I think she means realistic. This is, of course, what we do. “No compelling theoretical or practical reasons demand the global maximization of value. Evidence form our actual practice and failures to construct plausible global measures of value suggests there is no single measure of value valid for all contexts.”

The realism here is attractive, the reductionism of the former is not. And yet in public policy contexts where people’s conflicting values have to be considered, consequentialism has great force. This is more than pragmatic, I think. It serves in its own right as a form of evaluative concept to try to build consent for decisions. Having said that, of course one has to wear the pluralist spectacles too.

The weaker part of the book is the second half, applying the philosophy to an analysis of markets and cost benefit analysis. Like many critics of ‘markets’ she treats markets as an abstraction characterised by anonymity and concerned ‘merely’ with ‘use value’, absolutely failing to recognise that they are social institutions taking many forms and embedding social relations. Some economists are equally abstract, many are not. None I know would disagree with the statement that “the market does not provide a sufficient domain for the expression of all our valuations but must leave room for other social spheres to operate on non-market principles.” And while there are certainly major limitations with cost benefit analysis, some of which I’ve written about here and here, there is a choice when it comes to issues like valuing life (QALYs) or intrinsic environmental or heritage value: either try to do this in a common metric (money), or implicitly value them at zero.

Still, it’s an interesting book. And I’ve just been recommended her Private Government by my esteemed co-author Leonard Nakamura.

Value in Ethics and Economics

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Private Government: How Employers Rule Our Lives (and Why We Don't Talk about It) (The University Center for Human Values Series)

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Economists, utilitarians, and individuals

Posted on March 10, 2019 by Diane Coyle

I started reading Elizabeth Anderson’s Value in Ethics and Economics, having read an intriguing profile of her in the New Yorker recently, and am about two chapters in. The book is in Michael Sandel territory. It got off to a bad start by setting up the usual straw man version of economics: “Markets are represented as the generically rational form of human organization,” she writes. “To count as rational, any other domain of human interaction would have to be governed by the same principles as the market.” This is passive voice, but it most economists I know certainly don’t think like that (there’s also clearly an issue about different meanings of the word rational’ but that’s another matter.

However, the book quickly improves by pointing out the limitations of the focus on individual choice with too little attention in economics to social influence. This for me is a problem in terms lack of conformity with reality, never mind ethics. The second chapter then hones in on the inadequacies of utilitarian consequentialism as a foundation for conceptions of economic welfare (although a Very Distinguished economist told me recently that if I wasn’t a utilitarian, I wasn’t an economist). Interestingly, Anderson seems to see a feedback loop between ethical value and social norms – “social norms are constitutive of rational attitudes” – it reminded me of Robert Sugden’s recent book, The Community of Advantage.

It’s slightly heavy going, as so much philosophy is. Oh for an equation or two to clarify the logic! But I shall carry on. I’m reading a second hand copy and amusingly one of the previous readers has heavily marked the book with references to God as the source of ethical value, challenging Anderson with citations to Corinthians I and so on. But luckily only for the intro and chapter 1, giving up on godless ethics at that point.

Value in Ethics and Economics

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Democracy and injustice

Posted on March 8, 2019 by Diane Coyle

This week’s train journeys involved two books which looked competely different on the face of it and ended up being about the same thing: race. They were both random bookstore, I-need-a-treat, purchases: How Democracies Die by Steven Levitsky and Daniel Ziblatt and Exterminate All the Brutes by Sven Lindqvist. (Yes, I am weird.)

The former is an analysis of the way democracies turn into authoritarian regimes, from Hitler’s Germany to Fujimori’s Peru – and, the book argues, Donald Trump’s United States. It does not paint an authoritarian US as inevitable, but it’s hard to emerge from reading it feeling confident about the health of American democracy. And the reason is race. US democracy has functioned well, with civility, healthy checks and balances, and strong norms averting damaging partisanship only when it is democracy among white citizens. This is the same message as Ta-Nehisi Coates’s We Were Eight Years in Power. The politics of the US, both books, suggest, are fundamentally determined by the legacy of slavery.

Lindqvist’s book is an extraordinary reflection through the course of the author’s journey across the Sahara into Congo, and intellectual journey through 19th century authors including Conrad and Darwin, on imperialism. It vibrates with anger at the injustice of what Mike Davis described as Late Victorian Holocausts. Lindqvist also draws the line from imperialist to 20th century holocaust. I would say this is a must-read book for anybody concerned with global justice. For it points forward to the conflict to be expected in a world where – as in the era of Victorian imperialism – technological changes create a superfluous labour force looking for domains to exploit.

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How Democracies Die: The International Bestseller: What History Reveals About Our Future

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Exterminate All The Brutes (Granta Editions)

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Austerity revisited

Posted on March 3, 2019 by Diane Coyle

I’ve been reading Austerity: When It Works and When it Doesn’t by Alberto Alesina, Carlo Favero and Francesco Giavazzi. It’s a book that won’t be popular with some people.

While accepting that fiscal austerity reduces aggregate demand, the authors argue, strongly, that the negative output costs are smaller in the case of expenditure reductions than tax increases, and so that expenditure reductions are also more effective in reducing debt to GDP ratios. They also suggest that austerity can in some circumstances be expansionary. They dismiss claims that fiscal multipliers are larger during economic downturns. And also the claim that voters do not always punish austerity when it comes to election time. The authors dismiss some other often-heard arguments for restraining austerity programmes. For example, they suggest that some European countries had over-invested in unnecessary infrastructure so low interest rates post-2008 were not a good reason to invest more public money in long-term projects. They argue for means testing areas of public expenditure such as free or subsidised higher education.

The book is based on data for 16 advanced economies from 1970, with a chapter focusing on post-2008 and 2012 Europe. Its findings conflict with those of other macroeconomists, including Olivier Blanchard for instance. There are two big gaps – clearly acknowledged. One is contemporaneous income distribution, the other the intergenerational equity issues. This is about aggregate macroeconomics, output growth and debt-GDP ratios.

As the conclusion notes, the questions addressed by the book are intertwined with another: did European countries overdo austerity after the financial crisis? The argument here is that austerity measures were insurance against sovereign debt and further banking crises, and even with hindsight it is impossible to know whether the degree of austerity was just right or too much to avert this potentially disastrous outcome. However, it is clear that the output cost of austerity was lower in the cases of expenditure cuts than tax increases.

This is very much not my area of expertise and – as I so often seem to say – history is over-determined so it is never going to be possible to resolve the causality questions posed by macroeconomic events. The evidence presented here that if you have to do fiscal austerity for cyclical reasons, do it through spending cuts seems persuasive in terms of the aggregate GDP effect. The book doesn’t address, and so doesn’t begin to answer, the question about the effect of actual austerity measures on the social fabric and political events. It seems fair to include these in the assessment.

Nevertheless, the authors appeal to the counterfactual question to justify their argument: “We find it remarkable that those who opposed any form of austerity seem to be so sure that everything would have worked out, with more government spending and more debt in countries such as Italy, Ireland, Spain and Portugal.” Less certainty, more humility, in this area would be welcome – but unlikely. I suspect this book will reignite the controversy it claims to seek to defuse.

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Austerity: When It Works and When It Doesn't

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Delicate morsels for the brain when unwell

Posted on March 2, 2019 by Diane Coyle

This week I had a horrible cold, the kind that turns the brain to cotton wool. It turned out that what I needed to read was not detective fiction but rather short essays. I polished off three rather good collections with just enough intellectual content in each column/essay to make me feel that I did still have some ability to reason. They were Between Eternities by Javier Marias, Umberto Eco’s Chronicles of a Liquid Society, and Colm Toibin’s Homage to Barcelona.