[From Bill Powers (2006.08.18.0330 MDT)]
Richard Kennaway (2006.08.16.2347 BST) –
I’ve started reading the David Friedman thing on libertarianism, or
utilitarianism. Here is something relevant:
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**Consider some
change that affects only two people. For each, one may ask how much the
change is worth to him–how many dollars he would if necessary pay in
order to get it (positive value) or prevent it (negative value). One
could then sum the answers to get a dollar value for the effect of the
change. If one person was willing to pay four dollars to get the change
and the other two dollars to prevent it, one might say that the change
increased total value by two dollars. One could make the same calculation
with any number of people, summing the positive values of those who favor
the change and the negative values of those opposed to it. If the net is
positive we describe the change as an economic improvement or an increase
in efficiency, if negative as an economic worsening or decrease in
efficiency.
Although we are measuring values in dollars, no money need
actually be involved. The change might be the transfer of an apple from
you to me. The apple is worth two dollars to you and four to me. You
would pay up to two dollars to keep the apple (prevent the transfer), so
the change has a value to you of minus two dollars. I would pay up to
four to get the apple, so the change has a value to me of plus four
dollars. The change produces an economic gain of two dollars.
How would we find out whether a particular change produced a
net gain or a net loss? The best way would be to observe people’s values
as reflected in their actions. Suppose I offer you three dollars for the
apple and you accept. The fact that I make the offer implies that the
apple is worth more than three dollars to me; the fact that you accept
implies it is worth less than three dollars to you. Assuming that we are
the only people affected, the transfer must result in a net gain.
Generalizing the argument, we conclude that any voluntary transaction
that has no effect on third parties must result in an economic
improvement.
===============================**It’s interesting how once you get a scheme in your mind, it
almost automatically narrows your view to include only positive
instances. Try the above examples, but substituting such things as pride,
respect, love, freedom, fascination, or pity for the good in question. If
the good is love, we have
**Consider some
change (falling in love) that affects only two people. For each, one may
ask how much the love is worth to him–how many dollars he would if
necessary pay in order to get it (positive value) or prevent it (negative
value). One could then sum the answers to get a dollar value for the
effect of the love. If one person was willing to pay four dollars to get
the love and the other two dollars to prevent it, one might say that the
love increased total value by two dollars. One could make the same
calculation with any number of people, summing the positive values of
those who favor love and the negative values of those opposed to it. If
the net is positive we describe love as an economic improvement or an
increase in efficiency, if negative as an economic worsening or decrease
in efficiency.**As Shevek said, love in the economic mode. The whole problem
with Friedman’s approach, or the traditional economic approach in
general, is that he assumes that there is always a tradeoff such that any
good has an equivalent in terms of any other good. So 10 units of air is
equivalent to 6 units of food, and you would be indifferent to
substituting for every 10 units of one, 6 units of the other. Of course
that’s not true. Make that substitution in either direction, and you
die.
Value is primary, not derived. Economics arises because value already
exists and it is not based on economics. We have reference levels for
things we would prefer to have or not have, and for things we must have
or not have to live or remain sane. That is value. All the rest arises
from that.
Economics, as I have encountered it, is a sort of stilted, one-track,
upside-down form of psychology. It ignores most human needs, and those it
does recognize it perverts. The idea of “indifference curves”
amounts to a declaration that everything is optional: breathing, eating,
understanding nature, making money, standing upright, cutting off your
arm, painting pictures, playing music, falling in love. Everything has a
price, and N units of anything can be traded for M units of something
else.
When you think of it that way, it becomes clear that economics is a
product of people who happen to have a hypertrophied interest in buying
and selling, making a profit, besting the other guy, coming out on top.
There’s nothing new in that: neurologists see every human problem as
evidence of brain malfunction; biochemists see problems as chemical
imbalances; sociologists see them as problems of interaction (and think
the Self is a social phenomenon); control theorists see everything as
controlled variables. Who can claim not to have a narrow view? But some
views are more narrow, and more implausible, than others, and economics,
it seems to me right now, is among the narrowest and least
plausible.
The human organism, any organism, is a complex organization of
cooperating and interacting control systems operating in parallel and at
many levels. There is no tradeoff between having a left arm and having a
right leg; between being able to smell and being able to reason. What
makes us human is the whole system, all the parts of it operating at the
same time, all the reference levels being satisfied simultaneously as
nearly as possible. All the parts of our lives have value to us, and we
are not interested in losing any part, or for that matter in doubling up
on any part. The indifference curve is a figment of the imagination and a
product of selective interpretation.
Abandon the indifference curve and you basically start economics over
again from scratch. You certainly pull the rug out from under
Friedman.
Best,
Bill P.