Art Carden  

Efficiency, Equity, and Ideology: What "Other Values" Matter?

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A Hawk-Dove Ideological Turing... Uncertainty Can Go Both Ways...

Here's a puzzle I've noticed: criticize government intervention on efficiency grounds, and you will be quick to be told that there are "other values" (equity, for example) that a good society should consider in addition to efficiency. Perhaps you will be asked "what does it say about us as a society that we don't permit people to be paid substandard wages or to be gouged after natural disasters?" I answer "it says we're willing to watch people suffer in order to flatter ourselves," but that's beside the point.

Curiously, if you invoke liberty as a criticism of market failure arguments, you're likely to be denounced as an ideologue (in my experience, at least). Consider justifications for antitrust and policies aimed at fighting monopoly. Suppose a monopolist cannot price discriminate and therefore creates deadweight loss. A statement like "yeah, but there are other values to consider, like liberty: pointing a gun at the business owner and saying 'increase your output' infringes on the monopolist's liberty and in effect enslaves him" is a statement that many won't take seriously.

So what gives? Are all "other values" created equal? Are some "other values" more equal than others? Or am I just succumbing to availability bias?



COMMENTS (20 to date)
Ted Levy writes:

Art writes, "Perhaps you will be asked "what does it say about us as a society that we permit people to be paid substandard wages or to be gouged after natural disasters?" I answer "it says we're willing to watch people suffer in order to flatter ourselves,".

But I don't think that's what he means to convey. I think he means to convey: "Perhaps you will be asked "what does it say about us as a society that we PASS LAWS TO PREVENT people [being] paid substandard wages or [being] gouged after natural disasters?"

MatthewH writes:

Probably not definitive, but the four values listed by Deborah Stone in Policy Paradox were Efficiency, Equity, Liberty, and Security. Though she also goes to great length to show that even these 4 values have dozens of interpretations.

Daniel Kuehn writes:

Just a thought (coming from someone who has never called you an ideologue... in case that adds any credibility)... maybe that's coming from stuff like saying people that disagree with you "are willing to watch people suffer in order to flatter ourselves" and not the fact that you like liberty.

I'm not particularly enthusiastic about a federal minimum wage, but the empirical evidence and the theory is there to make me fairly supportive of state minimum wages. If I didn't know you and you told me I was just flattering myself and indifferent to peoples' suffering my assumption would be that you're a jerk and that you don't care much about other peoples' ideas or arguments.

I do know you somewhat so I'm not inclined to think you were a jerk.

I'm not sure if "jerk" has to translate to "ideologue" but there has to be some overlap so that might be helpful in diagnosing exactly where those sorts of accusations are coming from.

Tom P writes:

Many economists secretly (or not-so-secretly) come from the perspective of naive utilitarianism. Everyone's utility is a function of consumption, and social welfare is the sum of everyone's utility.

In such a setup, "liberty" is not valued. Increasing the size of the pie is, though, and so is redistributing it, assuming there is diminishing marginal utility of consumption.

Tom West writes:

I read the "it says we're willing to watch people suffer in order to flatter ourselves," article and find myself somewhat confused.

I do not understand how "Everyone is unambiguously worse off relative to where they would be without price controls." This is a *very* strong absolutist statement.

With rationing, those who have time, but not money are not priced out of the market. Unless you believe that the penniless have no needs because the price they're willing to pay is $0, I cannot see how people who's time waiting is worth vastly less than what would be the fair market price aren't better off.

Especially in a short-term crisis, the concept of everybody "sharing the burden" tends to be socially very important. The idea that the wealthy are sheltered from the effects of the crisis is likely to decrease social cohesion at a time that it is most needed.

Tom West writes:

As to the point of the posting, at least when dealing with those with a left-wing tilt, you are encountering differing notions of liberty.

Personally, while I am fortunate enough to have to fork over a substantial portion of my income, I consider myself *vastly* freer than a subsistence farmer that suffers no government interference at all.

If one doesn't believe that financial restrictions on what you can do count as limitations on freedom, then you have a big difference in semantics when you speak of liberty.

From that perspective, a libertarian can easily be seen as arguing that the minor gain in freedom to the wealthy is worth far more than the major gains in freedom to the less wealthy. i.e. it's not about maximizing over-all freedom but about maximizing *whose* freedom. As I said, semantics.

Daniel Artz writes:

Tom West, it seems that you, and other defenders of laws prohibiting price gouging, ignore the supply-side effects of higher prices after e disaster. If the owners of scarce resourses, like gasoline, generators, plywood, or whatever, are prohibited from "price-gouging" (i.e., realizing prices supported by market conditions), then there is no real incentive for others to import more of those scarce resources into the areas experiencing price spikes. Prices serve a very important signaling function in a free market - when gasoline went to $5, $6 or $7 a gallon in the Northeast after that monster storm, those prices very literally shouted to refiners in the rest of the Country "Hey, We need a LOT more gasoline here!", and the entirely predictable result would have been a very prompt response of increased gasoline imports into the area. Prohibiting price gouging simply silences the signalling of high prices and extends the periods of shortage. So price gouging laws do not simply allow all people to buy the resource in short supply at "reasonable" prices; these laws also force all people to deal with longer periods of shortage.

BZ writes:

Does Mr. Kuehn have a point?

It seems Dr. Carden is advancing an evil (or recklessly indifferent) intent argument to explain advocating price controls (which I agree, having lived most of my life in hurricane strike zones, are nothing but recipes for death and suffering).

If he's right, then the charge that they "watch people suffer in order to flatter ourselves" is on the charitable side.

What other explanations are there? The only one that comes to mind is ignorance, which, like Dr. Carden says about drunk driving, is dangerous in this case. Would a person who believes they drive just fine while dangerously drunk be said to "watch people get into harms way in order to flatter themselves"? Again, that sounds charitable to drunk drivers...

Daniel Kuehn writes:

BZ -
I know I'm not addressing Art's concluding question but my point does speak to the entire first and second paragraph and title. And the point is that when assessing "ideology" claims there's a high likelihood that he's misdiagnosing the source of that treatment.

If you call people elitists (see the article) and you say you like liberty and they respond badly to you and you think it's because of the latter then something is seriously wrong with the way you are assessing other peoples' thought processes.

re: "What other explanations are there?"

Brace yourself for this.

You and Art might have made a wrong step in your analysis.

Minimum wage, which Art brings up, isn't the best example because I'm largely a skeptic myself. But I do think there's something to the so-called "new minimum wage literature" that can justify modest minimum wages. You and Art disagree, my assertion is you're wrong. I don't think Art is an elitist for being wrong. I wouldn't even say he doesn't understand economics because I'm guessing he understands all my arguments he just has a different assessment of them and "ignorance" seems like an awfully harsh label to place on that.

Daniel Kuehn writes:

btw - did anyone else notice that the labels in the supply and demand graph in the article are in Hebrew?

August writes:

I don't like efficiency arguments because whatever it is government is trying to do efficiently is often something I don't want it to do.
Efficiency + government gives me a visual image of the ovens at Birkenau.

Tom West writes:

Daniel Artz,

In this case, I am ignoring the supply-side because of the strength of the initial claim, "Everyone is unambiguously worse off", which to me, at least, means worse off even when ignoring supply-side effects.

Having said that, I do think the supply-side does get improperly ignored when considering the bare numbers. However, in a crisis, (and even when it isn't a crisis,) when we move economics off the blackboard and into the human realm of policy, it's not just about the bare numbers.

After all, I remember someone making the case (as a joke) for the economic efficiency of paying someone to serve your jail sentence for you :-).

MingoV writes:
... Are some "other values" more equal than others?
My values are more equal than yours. That's the credo of far too many people and groups. Today, the commonest refrain is "I value my security more than I value your liberty." There's also the "I value my conscience-relieving (pseudo)environmentalism more than I value your wishes for rational and greatly reduced government spending." Already mentioned is the "I value purchasing goods at low prices despite severe scarcity more than I value your economic freedom." Similarly, "I value conscience-relieving minimum wage laws more than I value your economic freedom." The complete list is huge.
mtngoat writes:

what I do is focus on the claims of market 'failure'.

The 'failure' of a market to do what it is not designed to do is not a failure, any more than it's a bicycle failure that a bicycle is not a pomegranate.

Accepting the meme by answering to it, is to implicitly validate the notion of a market 'failure' where the sole issue is it has not fulfilled collectivist/socialist/'progressive' goals.

markets are not intended to fulfill the social goals of parties not involved in the transactions taking place. they are intended to be a transaction between two willing parties for what they each, and no one else, values for their own reasons.

The *instant* you hear market 'failure', reject it and identify it as the flawed meme it is. In truth, the sole 'failure' in a market 'failure' is the *provable* failure of those members in society to make market choices, with their own money, in ways that would actually fulfill the very goals they claim to be in favor of.

It's not the 'markets' job to satify their desire for providing someone else with a product or service, it's their own job. The market 'failing' is a direct consequence of their *own* failures to act in service of their own values with their own money.

Tom West writes:

MingoV,

How is this different from you valuing your liberty more than my security?

More to the point, usually it's "I value my X more than my Y" and you're merely collateral damage towards getting X.

I've usually assumed that the reason for democracy was to handle these competing preferences.

Vagabundus writes:

"we PASS LAWS TO PREVENT people [being] paid substandard wages"
Whose standards?
If someone has accepted a job, by definition, it has met there standards.

"[being] gouged after natural disasters?"
The choice is bot between being gouged or not being gouged. It is having goods available or not. At some price, buyers become sellers.

Political language . . . is designed to make lies sound truthful and murder respectable, and to give an appearance of solidity to pure wind.
—George Orwell

Roger McKinney writes:

Envy matters most. Cave in to it and you get communism; fight it and you get free markets and prosperity.

Of course, envy has many disguises, one of which is the demand for equality.

Tom West writes:

Cave in to it and you get communism

I don't know. I suspect without envy we'd still be hunter-gatherers.

Art Carden writes:

Thanks for pointing out the typo; it's fixed.

Russ Nelson writes:

Seriously, Daniel? There are two kinds of minimum wages: ones that are inconsequential enough that they cause no unemployment because they do not raise wages above the market-clearing level. The second kind actually raise wages above what people would ordinarily be paid. They also cause unemployment.

Really, the only question here is: are you willing to destroy one person's job *forever*, so that ten people may be paid more?

Back in the real world, there is only one kind of minimum wage law: the kind that doesn't create unemployment that can be laid at the feet of the politician who caused it. You can argue that demand curves in fact don't slope down, and that there is no unemployment created. Feel free. But don't call yourself an economist when you do that. Do it on your own time.

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