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August 29, 2002

Silliness of Right Economists on "Choice"

Probably in no other area are conservative economists so willfully ignorant (or disingenuous) than in dealing with the dilemma of individual preference versus collective choices we make in the economy. Often, we know that an individual preference will benefit us individually in the short-term, but if everyone acts similarly, the aggregate result will be a result we would not have chosen.

Take this Washington Times article by economist Gary Galles. He is shocked that union storeworkers in southern California are appealing to customers to "save their jobs" against anti-union Wal-Mart and help pass local regulations to stop them. Galles states this obvious point:

If every local citizen opposed buying groceries and pharmacy items in big-boxes, no politically imposed restrictions on competition would be necessary, because big-boxes wouldn't enter areas or continue to offer products that attracted few customers.
All true- but the customer preference here is not between the individual items-- since of course people usually want cheaper goods -- it's a desire to avoid the expected collective outcome of those individual choices, something that is not on Galles menu of preferences. A rational person can on one hand shop for the cheapest goods when available, knowing their individual boycott is too marginal to have much effect, while having a collective preference for high-paying union jobs that he or she can support at the local or national ballot box.

The very fact that consumers will mobilize against their "self-interest" (as economists focusing only on the cheapest goods define it) for environmental and labor regulations that raise their price just shows that there are inherently multiple preferences at work, many of which are not recognized by the market.

One can argue endlessly over whether particular political decisions thereby reflect this complicated set of preferences, and many more sophisticated economists do so in analyzing regulations and whether they match the collective desires of those who enact them. But disputing the efficacy of particular collective decisions is quite different from the willful blindness of economists like Galles who ignore altogether the conflict between collective and individual preferences.

Posted by Nathan at August 29, 2002 07:32 AM

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Comments

I'm curious, have you ever heard of Ken Arrow's "Impossibility Theorem"? Buchanan and Tulloch's "The Calculus of Consent"? Hayek's "The Use of Knowledge In Society"? Sowell's "Knowledge and Decisions"?

Posted by: Patrick R. Sullivan at August 31, 2002 07:56 PM

Yes- I recognize that there is an industry among economists in proving the uselessness of democracy-- the inspiration for Chilean authoritarianism as the only route to freedom among the "Chicago Boys" economists. Why vote if it's useless illusion?

Posted by: Nathan Newman at September 1, 2002 09:43 AM

I guess your answer is: "No, I haven't a clue as to what insights Arrow, Hayek, Buchanan et al have provided". Since, none of those gentlemen ever said voting is a "useless illusion".

Posted by: Patrick R. Sullivan at September 1, 2002 03:43 PM

Get over yourself. You post a schoolmarmish question without an explicit point and I hand back you how others have interpreted such work. There is no question that those who advised Pinochet were much inspired by Hayeh and company; Ken Arrow's insights on econ are by far the most interesting of your list, but as for the Impossibility Theorem-- the idea that one cannot democratically translate what individuals prefer into what the society wants as a whole-- economists like Amartya Sen have challenged the assumptions built into such public choice attacks on collective decisionmaking.

But feel free to parade your own pseudo-superiority by reeling off a few more names without any actual argument.

Posted by: Nathan Newman at September 1, 2002 04:22 PM

Your original claim was that "conservative economists" were either "willfully ignorant" or "disingenuous". Now you are conceding what everyone who is informed on this matter knows; there is in fact a tremendous amount of scholarship on the question, by some of the world's most talented economists (my list included three Nobel laureates).

Apparently recognizing the thin ice on which you were skating, you now attempt a diversion (the article you first cited was about grocery stores in California): Chile under Pinochet. Again, I'm curious, are you aware that Allende also made use of U of Chicago trained economists? And, surely you recognize that Chile is in far better shape, economically and politically, post Allende?

Then maybe we can talk about why you seem to favor a decision making process that utilizes far less than the available knowledge, and that in a slow, cumbersome manner.

Posted by: Patrick R. Sullivan at September 2, 2002 12:24 PM

And yet you have yet to answer the argument made about the original article on Wal-Mart-- still just rhetoric. Yes, there are a few conservative economists who have constructed elaborate models to attack democratic choices, rather than just ignoring it as the article I mentioned did. But most conservative economists are not Nobel prize winners and are usually as reductionist on collective choice as the original article cited. As I said, Ken Arrow has said some interesting things, but he is not most conservative economists.

Posted by: Nathan Newman at September 2, 2002 05:24 PM

I suppose this is progress, getting you to compose an entire paragraph without mentioning Chile or Pinochet. But you still cling to your security blanket with the emotional phrase, "attack democratic choices".

What economists do is to compare alternative uses for scarce resources. Time and knowledge being such scarce resources, comparing democratic, collective decision making with decentralized, market decision making, in a rigorous manner, is exactly in the job description. And that is what the economist in the cited article was doing.

Had you some knowledge of the works I cited for you, you would have recognized that.

Posted by: Patrick R. Sullivan at September 3, 2002 10:13 AM

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