Steve Randy Waldman at Interfluidity has taken to batting at what I regard as the hornet's nest that is the boundary between positive and normative economics. I guess I'll take a few swings, too. Let me start with something that was said a few weeks ago in a gathering of economists:
"Well, if you make a normative judgement then you are not a real economist."
I know what you're thinking (if you're not an economist). You're thinking this is just some outlier economist taking an extreme stance. Or you're thinking, "Gosh darn, when I read Wealth of Nations, it seemed like Adam Smith made the occasional normative judgment. In fact, doesn't the very concept of national wealth seem to embody a normative judgement that it is a Good Thing, else why waste time inquiring into its nature and causes?" Or you're thinking, "Didn't Maynard Keynes occasionally opine normatively on certain aspects of what we now call macroeconomics?" I could go on and on, but you get the idea.
No. Not an outlier, I fear. It was said with conviction by someone whose work I greatly admire and who has a national reputation in his particular corner of economics. It reflects the mainstream of economics as we know it today.
It caused me to reflect.
There is a real beauty in math and the hard science that we have tried to make economics. It stirs me in much the same way that poetry stirs me. At the same time, it satisfies some part of me that really doesn't like to haggle much over solutions to technical problems. The part of me that prefers hard technical problems to soft, squishy human problems. Math has the added advantage that you can often say in 5 equations or a graph or two what would otherwise take you 5 pages to say in words.
I remember the first time I contemplated an Edgeworth box. I took such comfort from it. Me, a child of the merchant class. There it was, this beautiful system where everyone traded to the point where no one could be made better off without making someone worse off, resources were used in the right relative (efficient) proportions to produce the right (efficient) mix and amount of output. It made me happy that I had grown up in the core of this marvelous, poetic construct, scion of the class that reduces friction and makes it work. It seemed to solve all the economic problems that could trouble a generous and benevolent soul.
Or so I thought, young innocent that I was.
After I had lived in the world a bit, questions began to occur to me. What if one person has waaaayyyyy more than the other in our two person, two good, two input world? Under what circumstances might that be fair (or unfair)? What if the person with more of the resources produces children and grandchildren who are, say, lazy, yet over time they retain the resources that could, in the hands of the other person, produce more output? What if the budget constraint that the less advantaged person faces is wholly exogenous in the sense that no amount of industry, frugality, or investment in human capital will yield an outward or upward shift in it because of discrimination by the other person in this little economy? What if the person with more resources is able to control and set prices, thereby relegating the other to permanent resource deprivation? What if the advantaged person obtained his advantage by enslaving or killing the ancestors of the disadvantaged person?
You begin to see why there might be strong preferences to avoid normative questions and their answers, yes?
Fortunately, in grad school I discovered Francis Bator's The Simple Analytics of Welfare Maximization. It helped me to see that that I was not alone in recognizing the beauty of the technical aspects of the problem, nor was I alone in recognizing the ethical limitations of the framework. A few years later, I discovered Amartya Sen, who had this sensible, normative thing to say about Pareto efficiency:
“Being in the core [of the economy], however, is not as such a momentous achievement from the point of view of social welfare. A person who starts off ill-endowed may stay poor and deprived even after the [market] transactions, and if being in the core is all that competition offers, the propertyless person may be forgiven for not regarding this achievement as a ‘big deal.’”
The beauty and underappreciated (by non-economists) strength of economics is that we appreciate, understand, and can offer technocratic solutions to problems that have moral dimensions. Our weakness is that we don't always appreciate that economics is, in fact, a morality play whether we like it or not. My take on Waldman's critique of technocrats was not that he was faulting technocrats for being technocrats or for the technical solutions they were offering. He was making the point that a technically sound solution, no matter how brilliant, is doomed if it doesn't engage voters, taxpayers, lawmakers on moral grounds. (He has posted an follow up here, that I think is consisent with this. If I'm wrong and misrepresenting him, I apologize in advance).
Whether we like it or not, our technical solutions are competing in a morality play scripted by interest groups and mama grizzlies who in 25 words or less conflate small government and something they imagine to be "free markets" with individual liberty, a key justice principle. Most sound techocratic solutions are difficult to convey, must less motivate, in 25 words or less (and the motivation is often moral as well as technical: more for most, more for less, prices as reliable signals of marginal social cost, reducing unemployment, increasing inflation to discourage saving and stimulate spending ... you get the idea). But the larger problem, I think, is that allegedly "amoral" economists view the moral sequelae of sound economic policy, such as banksters' gains (at taxpayer expense), as "side issues" that are irrelevant to restoring the economy, while some of "we the people" view it as one of the most important issues. We end up with....the Tea Party (or, at least, with a large portion of the population who are extremely resentful and angry at being unemployed and underwater while the economy romps upward at least for those whom we bailed out).
Robert Frost once wrote that "something there is that does not love a wall." I think it is also true that something there is that does not love injustice or unfairness. That same "something" is why economics is very much a morality play. We ignore this at our peril. Like Frost's neighbor who could not see the circumstances that rendered a fence unnecessary, I wonder if we in economics aren't sometimes deaf and blind to the changing cirumstances that necessitate recognition that the "fence" we like to imagine between our "amoral" technical solutions and their moral context and sequelae is not only no longer needed, it is harmful in formulating sound policy.
He moves in darkness as it seems to me~
Not of woods only and the shade of trees.
He will not go behind his father's saying,
And he likes having thought of it so well
He says again, "Good fences make good neighbors."
It has been drilled into us from the first day that we set our feet on the path to "economist" that "real economists" do not make normative judgments. The greats who went before us (at least some of them) did not and, so, nor should we. Yet who would be better than we with our technical knowledge to understand and communicate the normative ramifications of it?
This "fence" is not making us good neighbors. Maybe it's time to let the wall between technocratic economics and moral discourse crumble. It seems already to be weakening. I think we would become a better science if we acknowledged at least some of the moral aspects of our technocratic solutions with the same scholarly attention we devote to the technical aspects. An additional unintended benefit of such a change might be that undergrads and non-economists would become more interested in the causes of economic downturns and in reading the Financial Times because we will have helped them to see that both have moral, as well as economic, significance.
