You Got Morals in My Economics!

Economics, qua social science, is not a normative field. But much of the drive to understand how social interaction works is to give advice about policy. However, giving advice implies a standard for determining what counts as good advice, some kind of value theory. This is inconvenient for economists, who want badly to make policy recommendations, but who tend not to be very sophisticated moral philosophers (though there are some notable exceptions). Bryan Caplan tries to find a way around the inconvenience:

In many cases, there is no need to state your moral premise, because (economics + almost any moral premise) will do.

Suppose legalizing the market in human organs would make sick people healthy and poor people rich.  What moral premise would imply “don’t legalize”?  Sheer malevolence?  Blind adoration of the status quo?  While these are coherent moral premises, they’re so rare that the cost of addressing them is a waste of time.

It seems that Bryan thinks most opposition to markets in organs is a function of either ignorance of the likely consequences or perverse and exotic moral premises. This makes me wonder if he has ever debated this issue with anyone? Lots of people understand the economics well enough but continue to believe that markets in organs ought to be illegal. Here’s rough sketch of the standard argument.

Human beings have a certain dignity that is central to the value of human life. That dignity ought to be respected, preserved, and protected. Allowing the sale of human body parts diminishes the dignity of those involved in the transaction and erodes respect for the dignity of human beings generally. Therefore, markets in body parts ought to be legally prohibited.

Is this a good argument? No. I think it’s lousy argument, even in its most sophisticated form. But the idea that the value and conditions of human dignity imply that some things shouldn’t be bought and sold is not at all rare. Indeed, I think this is likely the dominant moral stance of most people in most places at most times in human history. If one grants the benefits of legalizing markets in organs, which I certainly do, then addressing this argument is not only not a waste of time, but is of fundamental importance in removing one of the main barriers to great improvements in human health and well-being.

Which is just to say, no, you can’t get around defending your moral premises by claiming that once the facts are established, all moral premises worth taking seriously point in the same direction. It’s just not true that there are “many cases” in which all paths converge like this. And when there is such a case, the convergence is often counterintuitive, and thus needs to be demonstrated, not just asserted. Policy analysis is at least as much applied moral philosophy as applied economics. Without some normative standard, economics has no application at all. Moreover, public deliberation about policy requires taking other people’s moral beliefs seriously and you can’t do that by ignoring them.

Hansonian Cultural Politics

Robin Hanson replies to my post below on cultural externalities and harm:

When I ask students to justify various subsidies and taxes, they are quick to say “externality,” but slow to identify specific plausibly-related side-effects, and even slower to seek opposing side-effects.  They usually just seek support for pre-existing intuitions.

Like Robert Frank and Geoffrey Miller, Will Wilkinson seems to me a bit too quick here to assume the activities he likes are less deserving of taxes.  I’ve been arguing mostly for consistent application of principles.  If we are to tax positional or unhappy activities, then let’s do that consistently, following our best data on positionality or happiness.   Let’s not just selectively apply a rationale to things we already intuitively disliked.

We have long had a clear theoretical basis for allowing businesses to harm each other via competition, but we have less clear a basis for allowing harm via changing expectations about car standards, female workers, neighborhood race, and marriage legitimacy.  So I won’t rule taxing such things out of hand.  But I will insist we first articulate a clear principle we are willing to apply consistently across a wide range of cases.

First, I think Robin may have missed one of my key points, which is that “negative externality” is not a synonym for “harm” in the relevant sense of the word. It begs the question to just go ahead and talk about various harms as if I had not just argued that they don’t all count as harms just because someone is bothered by each of them.

Another of my key points was that the fight over what is and is not included in the category of harm is to a great extent what “culture war” is about. If Robin wants a clear theoretical basis for who ought to win these fights, then he needs a moral theory. But a clear theoretical basis is different than a decisive theoretical basis–a basis that all are bound to accept on pain of irrationality. I don’t think there is any such basis. To put it another way, there is no clear theoretical basis for selecting a single, clear theoretical basis for determining what does and does not count as a harm. Indeed, no one is rationally bound to accept the normative assumptions underlying the case for economic competition–the clear theoretical basis for “harm” Robin is willing to accept. Many people understand perfectly well that anti-competitive measures such as subsidies or tarrifs buy temporary stability at the price of utility, and they think it’s totally worth it.

Moral diversity and disagreement are ineradicable. Disagreement over what does and does not count as a harm is ineradicable. Something like agreement over various cases and principles emerges through the fight of what I call, following Richard Rorty, cultural politics. Part of the fight is to get intellectual types to agree that your theory of harm is compelling. One way we do that is to push on consistency. So we say to people who lose a job to offshore outsourcing that this is really no different than losing a job to a robot, but we don’t think we should protect workers against robots. But this kind of thing only takes us so far. Most of the fight is to get sufficient buy-in from whatever forces shape public opinion and public attitudes. Natural human conformism takes care of the rest.

Robin might want to consider that moral categorization is by its nature contingently nominalistic. The fact that enough people just do consider one thing and not another thing a harm, due to the local history of cultural change and socialization, might seem to lack theoretical normative teeth, and leave little space for criticizing the actual system of norms. But the actual system of norms has actual normative teeth pretty much by definition. Which is why we work so hard fighting over the norms, whether or not we can come up with a unified, clear, coherent theory that accounts for their authority.

My sense is that Robin wants some kind of theory that allows us to avoid cultural politics. I don’t think there is one. I think Robin complains that I share Miller’s and Frank’s reliance on intuitions about things we happen to dislike because I’m arguing with them from within what I see to be their prior liberal moral commitments, which I share. We’re all liberals, which means we dislike many of the same things. We’re not starting from nowhere. So I’m trying to show that their arguments leave them at a place at odds with something we all like very much: a pluralistic, liberal, open society tolerant of dissent, peaceful cultural conflict, and social change.

Robin wants to argue from a more abstract, culturally disembodied position. What must be true if positional or pro-happiness taxation makes sense, and what do these truths imply if applied consistently? I don’t see this as much different from what I’m after. Geoffrey Miller and Robert Frank clearly endorse certain epistemic norms which make arguments from consistency, like Robin’s, extremely effective. By their own lights, they owe Robin an answer. We’re right to demand that serious intellectuals stick as close to possible to the best norms of rational argumentation, just as we’re right to expect liberals to stick to their liberal commitments.

Anyway, one can’t fault others for failing to cut nature at the normative joints, since there is no such thing. At some point, we lean pretty hard on things we already intuitively dislike, and if enough people agree with us, we win. Robin has a classic rationalist’s skepticism about the authority of our intuitions, other than his intuitions about epistemic integrity, which puts him in the position of a revolutionary, prophethic outsider. This can be an extremely powerful position–if we don’t decide Robin’s just crazy. And we’ll decide he’s not just crazy insofar as we share his intuitions about the the authority of his conception of rationality. That Robin’s so successful at selling his frankly unusual vision of unbiased rationality shows that he’s much better at cultural politics than he gives himself credit for.

MLK, BHO, and Moral Progress

It puzzles me a little that the idea of moral progress is still in such poor repute among intellectuals. It’s easy to see how Whiggish meliorism would seem naive at the center of the last century when the immense productivity gains of the modern era of growth brought “productivity” gains to the enterprise of mass coercion and death-dealing. But even then we were getting a distorted picture. That there were more people than ever alive to kill, that there was better technology with which to document concentrated carnage, led us understandably to miss that, despite all of this well-reported horror, we were on the whole becoming more civilized, more peaceful, better.

Indeed, over the past half-century, progress has been so rapid that perhaps with distance we might come to think of it as the Great Era of Moral Progress.

I was thinking about this today while reading Martin Luther King Jr’s great “Letter from a Birmingham Jail.” It is impossible to read King’s enumeration of injustices — injustices still fresh in the memories of my parents’ and grandparents’ generations — and to not feel sickened and then gladdened at the staggering moral distance we’ve traveled in such a short time.

Perhaps it is easy for those who have never felt the stinging darts of segregation to say, “Wait.” But when you have seen vicious mobs lynch your mothers and fathers at will and drown your sisters and brothers at whim; when you have seen hate filled policemen curse, kick and even kill your black brothers and sisters; when you see the vast majority of your twenty million Negro brothers smothering in an airtight cage of poverty in the midst of an affluent society; when you suddenly find your tongue twisted and your speech stammering as you seek to explain to your six year old daughter why she can’t go to the public amusement park that has just been advertised on television, and see tears welling up in her eyes when she is told that Funtown is closed to colored children, and see ominous clouds of inferiority beginning to form in her little mental sky, and see her beginning to distort her personality by developing an unconscious bitterness toward white people; when you have to concoct an answer for a five year old son who is asking: “Daddy, why do white people treat colored people so mean?”; when you take a cross county drive and find it necessary to sleep night after night in the uncomfortable corners of your automobile because no motel will accept you; when you are humiliated day in and day out by nagging signs reading “white” and “colored”; when your first name becomes “nigger,” your middle name becomes “boy” (however old you are) and your last name becomes “John,” and your wife and mother are never given the respected title “Mrs.”; when you are harried by day and haunted by night by the fact that you are a Negro, living constantly at tiptoe stance, never quite knowing what to expect next, and are plagued with inner fears and outer resentments; when you are forever fighting a degenerating sense of “nobodiness”–then you will understand why we find it difficult to wait. There comes a time when the cup of endurance runs over, and men are no longer willing to be plunged into the abyss of despair. I hope, sirs, you can understand our legitimate and unavoidable impatience.

To say that we are better, that our moral culture has progressed, is not to say that it could not be better still. But thanks to MLK, to those who marched beside him, and to the tens of millions to whom he gave such a powerful voice, we have become better. The idea that ours is a culture in moral stagnation or decline is simply preposterous. Martin Luther King Day is an excellent time to expose the silliness of the moral stasists and declinists. It’s an excellent time to celebrate the profound and rapid progress we have made, and can continue to make.

Now, I’m cynical about the romantic personality cult around Barack Obama because I am cynical about the romantic personality cult around the American presidency, which, because it is contemptible and stupid, demands cynicism. I think I’m not being cynical about liberal democratic politics when I concede that it is a very advanced, civilized, and relatively peaceful form of organized coalitional agression. But I’m definitely not cynical about what Barack Obama’s election means in light of the “Letter from the Birmingham Jail.” I’m admiring, I’m proud, of that.

Because I intend to be pretty hard on Obama, the politician, and his starry-eyed, mush-headed followers, I think it’s important to note that it’s not only possible, but morally recommended, to assume a posture that ought to be comfortable, but is in fact culturally awkward. One should both recognize in Obama a real symbol of morally meaningful cultural change and attack the romance of democracy and the cult of the presidency — because that is the direction of further moral progress.

Happy Martin Luther King, Jr. Day!

Are People In Commercial Societies "Better"?

In a characteristically penetrating and insightful post on the question “Does the Free Market Corrode Moral Character?” Richard Posner concludes:

History teaches that a commercial society is bound to be more prosperous and peaceful than an honor-based traditional society. The commercial culture creates incentives and constraints that, provided that economic activity is effectively regulated, (an important qualification) maximizes the values that are important to most people. This doesn’t mean that people in a commercial society are “better” than people in other types of society. The human race is genetically uniform, and our “moral” genes are not much different from the corresponding genes in chimpanzees. The success of commercial societies just illustrates that different institutional structures produce different human behavior.

I think Posner is off the mark here. He seems to think that moral dispositions are exogenous to institutional structures because humans are genetically uniform. This is wrong. Humans are genetically uniform, but one of those uniformities is a capacity for acquiring and transmitting culture, some of which is moral culture, from which comes variation in moral dispositions. Different institutional structures are possible only because cultural variation is possible. And a configuaration of institutions, once in place, exerts pressure on culture, which in turn exerts pressure on institutional structure, and so on. If more peace and prosperity is better, and the institutions and behavior that produce peace and prosperity are mediated by  moral cultured, and moral culture is embodied as emotive and behavioral dispositions by the people within that society, then it seems evasive to deny that those people are “better” in a pretty obvious sense. People who are better at producing moral ends are morally better. It’s not wrong to visit a place rife with corruption, dishonesty, racism and cruelty and remark that “the people are horrible.” It may not be anyone’s fault that they turned out this way, but people do turn out that way, and whole societies, whole peoples, can and do get better.  If behavioral dispositions were in fact invariant, and variations in peace and prosperity were entirely due to variations in institutional structure, Posner would be right. There would be no difference in the people. But since variations in institutions are themselves due in large part to variations in people, Posner is wrong. The evidence points to the conclusion that people in commercial societies are better, which is one of the best reasons to prefer commercial societies.

I answered the Templeton question here.

Yesterday's NYC Economist Debate

It was huge fun, as always. There’s nothing quite like taking part in a big public debate in a magnificent Gilded Age bank on Broadway. Of course, it’s fun to win. Clive Crook and I, arguing the affirmative, began the debate with something like a 40-60% disadvantage in audience support, but we brought a good portion of of the crowd over to our side and the final voting ended in a dead heat.

Thanks to all of you who left links in the comments to help me prep. I’d not done anything on corporate social responsibility before this debate, so I’m really grateful for the help. Your links were almost sufficient preparation. The paper I found most useful overall was “Corporate Social Responsibility through an Economic Lens” by Reinhardt, Stavins & Vietor, recommended by GU.

Among papers not recommended in the comments, I was pleasantly surprised to find Robert Reich’s “The Case Against Corporate Social Responsibility” so congenial. I think he’s got the main idea right. We need to get the rules of the game right, and then let the players play. Reich and I have very different ideas about the ideal rules of the game, but I think he’s very insightful in seeing the futility, and the danger, of simply asking corporate players to play as though they were in a different game.

It has became clear to me that CSR is driven in large part by frustration with democratic politics. Here’s my sense of what’s going on. Usually (but not always) left-wing groups find themselves stymied politically. Taxpayer money and government power come to be seen as out of reach for financing and implementing what are thought to be urgent and imperative initiatives. This is frustrating. So what explains the failure of these self-evidently necessary environmental or labor policies to gain sufficient democratic support? Here, it seems, CSR advocates are tempted to reach for just-so stories about how the “right” policy would have been put in place if only organized business constituencies had not been in the way. (It’s never that we live in a pluralistic liberal society containing deep substantive moral and intellectual disagreement.) But who other than the state has authority over lots and lots of other people’s money and the discretion to implement large-scale projects? Well, corporate executives do! So, then, it may seem only right that the directors of corporations be pressured by NGOs, “socially responsible” investors, and consumer activist to “fill the gap” — to implement a kind of shadow version of the policies that they have themselves prevented from becoming government policy.

My main argument was that the corporate form–as immense and wonderful as the efficiencies it enables are–has an enormous principal-agent problem at its heart. A vast and diffuse set of owners is destined to struggle to keep the incentives of managers aligned with their own interests in investing in a company. Imploring managers to balance the interests of an open-ended set of stakeholders, and to be senstive to a set of sometimes incompatible values, exacerbates the agency problem, and provides potentially dangerous cover for both inefficiency and self-dealing.

Here’s a bit I included in my opening statement.

The stakeholder theory requires that the varied and potentially conflicting interests of the all those affected by the business be “balanced” by directors. But executives get to the top of the heap by proving they can fatten the bottom line, not by demonstrating virtuoso moral judgment or skill at analyzing public policy. Boardrooms are not in fact thronging with moral philosophers and social welfare economists. The recent financial collapse vividly illustrates the tricky agency problems inherent in separating ownership from management. As we’ve seen, corporate bigshots can be incredibly cavalier even in looking after shareholder risk once they’ve stashed their own diamond-encrusted nuts. So is it really such a great idea to demand that the likes of Dick “The Gorilla” Fuld also set environmental and labor policy from the boardroom? Why are we supposed to think these people are going to be effective stewards of the broader public interest? What do we suppose will motivate them to perform a serious, sometimes self-sacrificing, balancing of stakeholder interests? The surplus of warm compassion and evolved sense of justice for which the wealthy leaders of large capitalist enterprises have become so famous? Are they more likely to really apply themselves to this task, or to become captivated by moral fashion?

My sense is that CSR won’t work the way its advocates want it it to unless executives can be won over by moral fashion–unless there is a lack of honest motivation to really balance stakeholder interests. That’s why it doesn’t matter to CSR folks that executives have no special capacity for assessing what is most welfare-enhancing, or environmentally efficient. The idea is that NGOs, CSR activists, etc. will tell them. The agency problem of corporate governance is why there is CSR. If shareholders were to vote on the humanitarian or environmental uses of their money, you’d find the same problem the CSR advocates found in democracy: there would be too much disagreement about “social responsibility” for CSR-types to succeed in commanding the resources necessary to realize their aims.

Is there any reason to believe that serious and concerted attempts by the directors of thousand of different corporations to actually weigh the interests of their various stakeholders–to fairly balance all the competing values–would lead to the kind of uniformity of emphasis on environmental and labor issues that we tend to see in CSR? Why does it seem so weird when BB&T’s John Allison pledges to forgo potential profits from financing projects involving eminent domain?  Because the moral and ideological assumptions behind that decision are so alien to the dominant CSR project. It conforms to the letter of CSR, but not to the motivating ideological spirit. It is out of moral fashion.

That CSR is moral cover for rent-seeking and regulatory capture is also increasingly clear to me. There is a weak positive correlation between CSR activities and profits. But that seems to be largely because the most prosperous companies are most likely to do CSR. They are, for example, in the best position to over-comply with government regulation. The example of a sector-leading company’s successful “socially responsible” overcompliance can be used strategically to lobby to bring the mandatory level of regulation up to their self-imposed standard, putting the squeeze on smaller competitors and new entrants. Ka-ching! Relatedly, we are more likely to see CSR in less competitive markets, in which it is easier to pass on the costs of inefficient decisions to consumers.

When I mentioned the case of T. Boone Pickens in this regard during the debate, one of our opponents, Harvard’s John Ruggie, said something roughly like, “If CSR gives moral cover to T. Boone Pickens, then God Bless CSR.” This left me mystified. I know of no evidence that a huge infrastructure investment in natural gas-powered cars, for example, would be deliver the best environmental gains for the money. Indeed, it likely would crowd out many potentially more effective initiatives. Suppose, as the Pickens case suggests, that we end up with a regulatory structure that most benefits those energy companies most effective in using environmental propaganda in their lobbying efforts. Is there a single sane reason to believe that that regulatory regime will be superior in either economic or environmental terms over the alternatives? Over the status quo?

The bottom line for me is that there is no reason to believe that CSR does any good, net of the opportunity costs, and plenty of reason to believe that it can do a lot of harm.

Does the Free Market Corrode Moral Character?

That’s the question over at a forum sponsored by the Templeton Foundation, and I find most of the answers disappointing.

The main difficulty in tackling this question is squaring moral means with moral ends. The moral ends worth caring about are the various constituents of human welfare–longevity, health, wealth, pleasure, happiness, a sense of purpose and self-efficacy, the realization of potential, creativity, love, friendship, etc. Moral character, or virtue, is a means to achieving moral ends. As the socioeconomic structure shifts, the means of achieving moral ends shifts. But there is an inevitable lag in moral culture, in the evolution of our shared moral sentiments. Free markets precipitate extremely fast socioeconomic change, and therefore market cultures are most likely to see a mismatch between the traits of moral character valued by the culture and the traits of character actually effective as means within the existing structure for achieving moral ends. So you can (I think we do) have a situation in which people may seem debased according to the superannuated standards of our lagging moral culture while the system  simultaneously delivers moral goods more effectively than at any time in human history.

So, the correct answer to the Templeton question is: Yes, market societies corrode traditional moral norms. But this corrosion is an integral part of moral progress. Nothing in human history has done more to eradicate moral evil than the development of market societies. If cultural lag makes it difficult for us to see this, then cultural lag may in fact be our greatest moral danger.

[via Tyler, whose answer is here [pdf].]

Coasean Morality

via Frank Pasquale, I find this treat from Frank Tipler, the awesome weirdo physicist.

ABSTRACT: I show that in a true Coasean world – a world with no transaction costs – there would be no disagreement on moral questions. There would be no disagreement on what the appropriate distribution of income should be. There would be no disagreement on the question of capital punishment or abortion. If the government tried to re-distribute income contrary to the no-transaction cost ideal, then in a Coasean world, the beneficiaries would return the money to those from whom it was taken by taxation. Empirical studies of a near-Coasean economy show this predicted return occurring. Thus disagreements on values are actually disagreements over facts. I shall argue that the Coase Theorem itself suggests a moral rule: act to minimize transaction costs.

I didn’t read the paper, but the idea astonishes me! What can we say about the abstract? Well, to get the result, it seems you would need to stipulate something like homogeneity in motivation. Is heterogenous motivation a transaction cost? Well, what’s the aim of the social transaction that is an argument or conversation? If agreement or truth is the aim, then motivations based in something other than a drive for agreement or truth would indeed be a transaction cost. But if there are different kinds of motivations for maintaining a position, such as social signaling, commitment to an identity, or sporting obstinateness, then you can’t say agreement or truth is the point of the social transaction. And so you can’t see motivation incompatible with convergence as a transactions cost. Which seems like another way of saying that disagreements over values (or agreement on fact-indifferent values) drives disagreement over both factual and moral questions.

The point that what counts as a transaction cost depends on what the transaction is deserves more attention. The fact that two people are talking to each other, or bargaining over a deal, needn’t entail they are both up to the same thing. The fact that one party is aiming for ains from trade and the other party isn’t may well forestall a deal. And from at least one side, it may look like there was a transaction cost. But one or both party’s was simply mistaken about the meaning of the engagement. Transactions costs don’t keep me from reaping more consumer surplus from stones. I would simply be mistaken to try to bargain with a stone. And if I am frustrated by my inability to come to some understanding with someone who is not committed to basic norms of rationality, it’s not really their fault that they saw our intercourse as a different kind of transaction, with a different kind of point. Maybe they saw the game as “size each other up,” in which case, my frustrated agreement/truth-seeking would be seen as a perfectly satisfactory display of certain commitments of mine.

The Coase Theorem is supposed to be an impossibility theorem. The point is that there never is efficient allocation (the economists’ ideal analogue to the social epistemologist’s convergence on truth) since there always are transaction cost. And this does direct attention to the source of those costs, the so-called “institutions” or “rules of the game” underlying regularities of social interaction. Bad institutions can leave a lot of potential gains on the table. The theorem helps us see just how much institutions matter. But I think we should be careful not to assume too much when defining transactions costs. Gains from trade may go unrealized not because of transactions costs, but because of failure to coordinate on the purpose of interaction or the nature of the gains sought.

That said, I love the idea of reducing transactions costs as a moral imperative. Let’s test it. Try to think of examples where reducing transactions costs leads to a morally inferior result. Go!

I Heart Adam Smith

I’m really glad I got a chance to finally read A Theory of Moral Sentiments closely. It is I think deeply incoherent in a way that highly recommends it, because it is the incoherence of lived moral reality.

To be happy is to be loved and praised. Also, to be happy is stoic indifference to love and praise. The love of high relative standing is based on misery-making self-deception. And this self-deception turns the wheels of industry, which produces wealth, and leaves even those of low relative position in a good absolute position. Which is all you really need to be happy! That is, as long as you are stoically indifferent to love and praise, to relative position. Which, really, none of us are, because, OMG, we really really want other people to think highly of us. And, hey, again, that’s a pretty good thing when you think about it, otherwise none of us would be self-deceived enough to do all the crazy hard work that creates the wealth that leaves us all in a good absolute material position. So, you personally should probably worry about becoming actually praiseworthy, instead of just seeking to receive praise, because you’ll be happier if you deserve it, whether or not you get it. Unless everyone is doing this. In which case we’ll all just be poor, which isn’t good at all.

A different strand… We are naturally sympathetic. Of course, our sympathy is rather limited and weak. But because we are sympathetic, we sympathize with the weakness of others’ sympathy. So, being sympathetic to the limits of others’ sympathy, we mute the expression of our own emotions, so that others will not be made uncomfortable or burdened by their failure to connect fully with what we really feel. And, likewise, we appreciate it when others do this for us.  A sympathetic person doesn’t put other people out. Observing many instances of this pattern of praise for the sympathetic accommodation of weak sympathy (“thank you for not asking me to be that sad for you!”), we produce a general rule. And then we apply it to ourselves and come to disapprove of freely expressing unmuted emotion even when alone — even though we are actually having our emotions and not trying to sympathize with them. Our natural sympathy, wedded to the general weakness of sympathy, generates an individual conscience that demands that we be no more emotional than other people are ready to handle. Therefore, stoic self-command is awesome. “It’s OK! Just let it all out.” Nonsense! Why would you so rudely embarrass yourself with your own emotions?

This is truly great stuff.