The trouble with economics, part 92

I’ve had a busy week, to say the least. So I’ve only been inching my way very slowly through the very interesting  by Charles Calomiris and Stephen Haber.

On Monday at the OECD Forum, though, as well as talking about my own book, , I had a very interesting debate with Marie-Laure Djelic and Yves Flückiger about economics and economics education. They were both critical of economics, for familiar reasons – many of which I agree with.

However, Marie-Laure made one really interesting point I hadn’t thought of before. She was talking about Michael Sandel’s . A weakness of the book, in my view, was its failure to answer the question about where those limits lie. Sandel criticises the fact that people pay other people to stand in line for them to pick up free tickets for plays in Central Park. But why is that worse than paying people for their time in other ways, like babysitting? Marie-Laure argued that he should not have tried to specify the limits of the market, however – she sees it as a collective, political decision, not a question to which there can be a technocratic answer.

[amazon_image id=”0241954487″ link=”true” target=”_blank” size=”medium” ]What Money Can’t Buy[/amazon_image]

I only partly agree with that. Of course political imperatives should be able to override a market – think of the civic need for rationing during wartime even though it fuels a “black market”. However, it seems clear to me that instincts or political outcomes should be tested from the perspective of what a market outcome would look like. Take the example of emissions markets: there are people, maybe many people, who think markets and the environment shouldn’t mix at all, but that’s just perverse if a market process can lead to a better environmental outcome. And if there is a strong moral instinct not to allow payment for queuing, the moral philosophers should try to explain why it does differ from other forms of payment for labour time.



7 thoughts on “The trouble with economics, part 92

  1. First time I’ve read your blog, Diane. Not surprised you didn’t have time to read more this week. I agree with you. And paying other people to do stuff you don’t want to do has a long and illustrious history. In Britain Against Napoleon (Roger Knight’s recent book) he points out that there were fine deals to be struck in doing other peoples’ military service for them. ps. As a student I would have killed for the chance to be paid for standing in a queue.

  2. The reason the paying-somebody-to-queue-for-you thing is problematic is not because it’s paying for time per se, but because the free tickets are supposed to be a form of universally-available provision. That’s not actually possible, but the time committment does act as a leveller of sorts, and paying people to stand in line allows somebody with more money to essentially cheat the system.

    (One can argue about the relative value of time to different groups of New Yorkers, of course, but the intent of the approach seems relatively clear to me)

    • That’s a good answer – similar to the fairness rationale for rationing in wartime – but doesn’t it move the question to the one of which activities are those where fairness or civic participation must trump efficiency? I’d agree with putting some cultural activities in that category, but it needs a clearer argument, I think.

      The free ticket system is similar to the cheap tickets on the day system many London theatres operate, which also work in favour of time-rich and (usually) income-poor groups like students and pensioners.

      • No, absolutely — I agree that these things need to be well-defined.

        In fact, I’d go so far as to suggest that communicating the benefits and disbenefits of anything approaching universal provision of anything is something we’ve struggled with in a modern, Western society with capitalistic leanings, and that’s something which applies equally to small home-grown initiatives and to large institutions (though often not for the want of trying).

        Historically we’ve relied on the “obviously a good thing” argument to an extent (with some degree of success, of course), but often this results in a comparison of apples and oranges and a lack of clarity of purpose all round.

        I’d posit that it can be advantageous to be able to point to something and be able to articulate clearly why it’s a good thing in language that society understands.

        On the other hand, we do live in a world where “economic arguments”—and I do use the term loosely—are fought and won on the basis of entirely fudged numbers (HM Treasury’s propensity for applying “adjustments” when comparing the relative costs of implementation by the public versus private sector, for example). That said, I don’t think the inability of government departments to perform meaningful like-for-like comparisons is a good reason not to provide the data permitting that, nor improve things by providing clarity which initiatives and organisations can benefit from.

        However, there is a significant risk that the quantifiable indicators can be construed as the definition, particularly when we collectively attach more immediate emotional value to them than to the purposes themselves.

        Theatre tickets which are disproportionately more readily available to income-poor groups is something which almost certainly could be shown to generate a net economic benefit and so justified on that basis: but is that really why they’re a good thing? If the directly-quantifiable outcomes cease to show a benefit, what happens then?

        Mind you, I’m not sure whether I’m allowing the argument to run away with me, or whether I’m following it to a logical conclusion.

        But, whether or not the point is to be able to clearly articulate an area where the “usual rules” don’t necessarily apply and why, there is always pressure to express the “why” in terms of something quantifiable, and by consequence comparable—with the dragons which be herein.

        Sometimes, perhaps, ‘fuzzy’ is not a bad thing.

        (And I say that as somebody who prefers that everything be representable in base 2 so that I can work with it).

        • I’m a big fan of not trying to quantify the unquantifiable – if you can explain how each is being used to inform decisions…..

  3. Why don’t we (usually!) charge people when they come round for dinner? It’s not really a moral question as such, it’s something to do with demarcation of economic and non-economic. It’s a great point that you should take it on a case by case basis – the potential positive environmental benefits is spot on. But I still think there are purely social (arbitrary from an economic point of view) distinctions that don’t lend themselves to any specific analyis. Not a new idea ->

    “From a cultural perspective, the production of commodities is also a cultural and cognitive process… Out of the total range of things available in a society, only some of them are considered appropriate for marking as commodities…. The same thing may, at the same time, be seen as a commodity by one person and as something else by another.” (Kopytoff, The Cultural Biography of Things: Commoditisation as Process in Appadurai, A., (Ed.), The Social Life of Things: Commodities in Cultural Perspective, (1986, Cambridge, Cambridge University Press), p. 64)

    p.s. actually in Greece, people have begun selling dinner and maybe airBnB can be seen as encroaching on the same terrain.

    All the BBC stuff *and* finding time to read, blog and respond to comments? I’m in awe!

    • Hi Dan,

      Interesting point about the charging for dinner in Greece. I had a revelation about small-scale corruption in poor communities when reading Katherine Boo’s book about life in an Indian slum – she said people can’t afford not to charge for anything that might bring in a little bit of cash.

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