A Non-Sokratic Dialogue on Social Welfare Functions: Hoisted from the Archives from 2003

A Non-Sokratic Dialogue on Social Welfare Functions: Hoisted from the Archives from 2003:

Glaukon: ‘Professor!’

Agathon: ‘Professor! Good to see you. Getting coffee?’

Glaukon: ‘Yes. I’m teaching. I find that teaching is always and everywhere a caffeine phenomenon.’

Agathon: ‘I tend to find that teaching is usually a bagel phenomenon myself. What are you going to teach them?’

Glaukon: ‘Social welfare. Utilitarianism. Condorcet. Arrow. Aggregation of preferences. Preference-revealing mechanisms.’

Agathon: ‘Sounds like a full class.’

Glaukon: ‘You have no idea.’

Agathon: ‘Be sure to teach them about the market’s social welfare function.’

Glaukon: ‘The market has a social welfare function?’

Agathon: ‘Under appropriate conditions of perfect competition, non-increasing returns, and the absence of externalities the market’s decisions about the production and allocation of goods and services attain a point on the Pareto frontier. Every point on the Pareto frontier maximizes some social welfare function.’

Glaukon: ‘Yes, of course.’

Agathon: ‘Therefore the market, considered as a collective mechanism for making social decisions, chooses to maximize a particular social welfare function. It is instructive to consider what that social welfare function is.’

Glaukon: ‘I resent the tone in which you are talking down to me.’

Agathon: ‘You do not. This part of this conversation never took place in even approximate form in the real world. It is interpolated in order to bring readers of this weblog up to speed. Since I never said my last speech to you, you could not have resented it.’

Glaukon: ‘And I want readers of this weblog to know that I am considerably smarter and more clued-in than he is letting me appear to be.’

Agathon: ‘Are you quite finished?’

Glaukon: ‘Plato at least worked harder to make his information dumps fit more gracefully into the conversation. I want a better author.

Agathon: ‘Are you quite finished?’

Glaukon: ‘Yes.’

Agathon: ‘As I was saying, the market system chooses an allocation. That allocation can only be justified under the assumption that moves along the Pareto frontier in every direction–moves that transfer wealth from one member of society to another–are of no benefit to social welfare, while moves toward the Pareto frontier do benefit social welfare. If we restrict ourselves to social welfare functions that are weighted sums of individual utilities, that means that the market system’s social welfare function gives each individual a weight inversely proportional to his or her marginal utility of wealth.’

Glaukon: ‘Didn’t somebody say about society that there was no such…’

Agathon: ‘Hush! If you want to quote Margaret Thatcher, you must introduce her as a speaking character in this dialogue and grant her some of her time…’

Glaukon: ‘I? You’re the authorial stand-in in this dialogue, not me…’

Agathon: ‘That means that the market system, in weighting utilities and adding them up, gives you a much lower utility than it gives Richard Cheney. In fact, if marginal utility of wealth is inversely proportional to the square of lifetime wealth, the market system gives Richard Cheney about 400 times as big a weight as it gives you.’

Glaukon: ‘That’s sick.’

Agathon: ‘And it gives Bill Gates a weight about 400,000,000 times as big a weight as it gives you.’

Glaukon: ‘That’s sicker.’

Agathon: ‘But it gives you about 40,000 times the weight it gives your average Bengali peasant, who thus has about 1/16,000,000,000,000 the amount of the market system’s concern as Bill Gates has. Will you teach that?’

Glaukon: ‘They’ll call me a Communist!’

Agathon: ‘But it’s true!’

Glaukon: ‘That I’m a Communist?’

Agathon: ‘No. That that’s what the market system does!’

Glaukon: ‘We are value neutral economists! We don’t care about distribution! We care about efficiency!’

Agathon: ‘But claiming that you don’t care about distribution is implicitly saying that shifts in distribution are of no account–which can be true only if the social welfare function gives everybody a weight inversely proportional to their marginal utility of wealth.’

Glaukon: ‘You’re introducing politics into a value-neutral technocratic social science.’

Agathon: ‘Politics?! Moi? I’m simply evaluating the derivatives of a social welfare function under the assumption that the market allocation is its ArgMax. What could be more technocratic than that? I’m just trying to attain a little clarity of thought.’

Thrasymachus: ‘But where rule rests not–as somebody or other said at one of Old Joseph de Maistre’s little soirees in St. Petersburg–on the hangman, but on misdirection and confusion, to strip away the veils of alienation and false consciousness that keep humans from perceiving their species-being, the act of unveiling is itself a powerfully political act.’

Agathon: ‘Are you Thrasymachus or Karl Marx?’

Thrasymachus: ‘Ah. Marx thought unveiling was a good thing. I think it is neither good nor bad, for ‘good’ like ‘justice’ is really just another word for the interest of the stronger party.’

Glaukon: ‘And we gave you tenure here at Berkeley?’

Thrasymachus: ‘Shhh! The humanities departments still think relativism is sexy. They haven’t yet figured out that to assume a position of relativism–like the claim to be neutral on issues of distribution–is really a statement that you are on the side of the powerful.’

Agathon: ‘And are you?’

Thrasymachus: ‘It is the just and the good–or, rather, the ‘just’ and the ‘good’–thing to do.

Must-read: Richard Mayhew: “CHIPPING Away at Uninsurance”

Richard Mayhew: CHIPPING Away at Uninsurance: “The Arkansas Times named its person of the year…

…all the Arkansans who are newly insured. There was one vignette that stuck with me:

The average high school senior isn’t too worried about insurance coverage, but for Fairfield Bay native Crystal Bles, it was a priority…. While many young adults now rely on their parents’ insurance to stay covered until age 26–thanks to another change created by the Affordable Care Act–Bles’ parents were uninsured…. She ‘most definitely’ knew she needed coverage, she said, given her chosen area of study. ‘In welding, people tend to get injured.’… For young Arkansans like Bles, the private option has already become a fact of life [my emphasis]— a vital government service, funded by taxpayers and provided for taxpayers, just like public schools and food stamps, highways and Pell grants, law enforcement and libraries.

There have been numerous liberal attempts to slowly build… by proposals to lower Medicare eligibility age. The theory… is that taking the most expensive people off of the private market… will save money systemically and not face significant opposition as employers and private insurers will want to dump their most expensive covered lives to someone else… anything that shifts people from the most expensive part of the covered system (employer sponsored insurance) to a less expensive part (Medicare) is a big win. The final part of the theory… is that the change to Medicare for 60 year old individuals works well and is not too scary so the next slice of the salami….

What if we are trying to cut the salami from the wrong end? Kids are adorable, sympathetic and, after they start crawling, dirt cheap to cover.  Kids use lots of low cost services but they are unlikely to need high cost services. What if  the Childrens’ Health Insurance Program (CHIP) was expanded to be the most probable insurance  to every kid between the ages of birth and nineteen?

Must-read: Simon Wren-Lewis: “The Dead Hand of Austerity; Left and Right”

Must-Read: There is an alternative branch of the quantum-mechanical wave-function multiverse in which we reality-based economists got behind the “safe asset shortage” view of our current malaise back in 2009. Savers, you see, love to hold safe assets. And in 2007-9 the private-sector financial intermediaries permanently broke saver trust in their ability to create and credibility to identify such safe assets. If, then, we seek to escape secular stagnation, the government must take of the task of providing safe assets for people to hold and then using the financing for useful and productive purposes. That could have been an effective counter-narrative to demands for austerity–not least because it appears to be a correct analysis…

Simon Wren-Lewis: The Dead Hand of Austerity; Left and Right: “Those who care to see know the real damage that austerity has had on people’s lives…

…The cost on the left could not be greater. Austerity and the reaction to it were central to Labour losing the election. The Conservatives managed to pin the blame for Osborne’s austerity on Labour, and as the recent Beckett report acknowledges (rather tellingly): ‘Whether implicitly or explicitly (opinion and evidence differ somewhat), it was decided not to concentrate on countering the myth…’ It was also central in the revolution of the ranks that happened subsequently. Austerity is a trap for the left as long as they refuse to challenge it. You cannot say that you will spend more doing worthwhile things, and when (inevitably) asked how you will pay for it try and change the subject. Voters may not be experts on economics, but they can sense weakness and vulnerability….

That dead hand… touches the reformist right… as [well]…. There were genuine hopes on all sides that Universal Credit (UC) might achieve the aim of simplifying the benefit system…. But as a result of austerity, and those cuts to tax credit that the Chancellor was forced to postpone, UC will now be seen as a way of cutting benefits and will be either extremely unpopular and/or be quickly killed…. The years of austerity will be seen as wasted years, when no new progress was achieved and plenty that had been achieved in the past setback. Recovery from recessions need not be like this, and indeed has not been like this in the past. They can be a time of renewal and reform…. In the UK that dead hand continues, seen or unseen, to dominate policy and debate. And with its architect set to become Prince Minister and large parts of the opposition still too timid to challenge it, it looks like another five wasted years lie ahead for us.

Must-read: McKay Coppins: “The Gospel According to Trump”

Must-Read: McKay Coppins: The Gospel According to Trump: “Trump’s religious posturing is not about theology… [but] about branding…

…dated… by design… rooted in a gnawing nostalgia and economic anxiety that grips much of the country’s white working class. Mr. Trump’s target demographic is not America’s most devout, but its most anxious and aggrieved, and what he’s selling isn’t salvation, but a bygone era of plentiful factory jobs, robust pension funds and safe, monochromatic suburbs dotted with little white churches that everyone in town attended on Sundays…. Mr. Trump is stoking a tribal hostility toward those who worship differently, one that hucksters have seized on throughout history to infect and co-opt America’s faith communities. It is the same visceral force that animated the witch trials in Salem and set fire to the crosses in front of black churches….

Even before he became a candidate, Mr. Trump seemed skeptical that a new era of ecumenical progress might be seeping into American politics. When I interviewed him in 2014, he argued vigorously–despite a mountain of evidence to the contrary–that Mitt Romney lost the 2012 election because many Christian voters were put off by his alien faith. Eventually, I had to to interrupt him. ‘I’m actually Mormon,’ I said. He raised his eyebrows. ‘You are?’ He promptly recalibrated, telling me about a Jewish friend (‘great guy, rich guy’) who had moved to Utah and fallen in love with the local creedal breed. ‘You know,’ he said, ‘people don’t understand the Mormon thing. I do. I get it. They are great people!’ But alas, not everyone was so enlightened as Trump. ‘There was a religious undercurrent there,’ he told me, then hastened to add, ‘unfortunately.’

Must-read: Tod Kelly: “Broken Elephants, Part I: Donald Trump and the Triumph of the Conservative Media Machine”

Must-Read: The key question: How is one to attempt to do technocratic politics in the face of a massively dysfunctional Republican primary electorate and legislative right wing?

Tod Kelly: Broken Elephants, Part I: Donald Trump and the Triumph of the Conservative Media Machine: “If the only candidates willing to support rather than disparage their own political party…

…can’t muster a quarter of that party’s potential votes, then that party is broken–period. Not necessarily broken permanently, but broken nonetheless. Arguments to the contrary are some combinations of smoke, mirrors, and wishful thinking.

So how did the country’s most powerful political party transform, in the space of a single decade, from the basis for a presumed ‘permanent majority’ to a state of chaos, its leaders actively conspiring against their own candidates in hopes of said party not permanently imploding? The answer… is that the GOP’s growing reliance on feeding a ratings-driven propaganda machine has led it to this state of disrepair….

Despite the fact that this Presidential campaign has likely already lost the GOP its 2016 White House bid, that defeat will matter little to the principal players…. These calculating rabble-rousers will be lucratively rewarded by the same Media Machine that created them… [and] be more venerated as losers than the past two actual Republican Presidents, and will… hog the Party spotlight…. The GOP’s upcoming 2016 White House loss will not be used as a cautionary tale to future conservative Presidential hopefuls… [but] as a road map…

Must-read: Matthew Yglesias: “2015: The Year Congress Started Working Again”

Matthew Yglesias: 2015: The Year Congress Started Working Again: “The story of the 2015 legislating boom…

…is that Senate Majority Leader Mitch McConnell and House Speakers John Boehner and Paul Ryan decided to care less about presidential politics…. Making Obama look bad has stopped being a legislative priority…. None of the leading GOP contenders are particularly well-liked by the party’s congressional leaders, so there’s less interest in helping them out…. While competition for political office is zero-sum, actual public policy isn’t…

Over at Project Syndicate: “Piketty vs. Piketty”

Over at Project Syndicate: Piketty vs. Piketty: BERKELEY – In Capital in the Twenty-First Century, the French economist Thomas Piketty highlights the striking contrasts in North America and Europe between the Gilded Age that preceded World War I and the decades following World War II. In the first period, economic growth was sluggish, wealth was predominantly inherited, the rich dominated politics, and economic (as well as race and gender) inequality was extreme… READ MOAR over at Project Syndicate

Must-read: Jefferson Cowie and Nick Salvatore: “The Long Exception: Rethinking the Place of the New Deal in American History”

Must-Read: From “The Defining Moment” to “The Long Exception”…

Jefferson Cowie and Nick Salvatore (2008): The Long Exception: Rethinking the Place of the New Deal in American History: “The period from Franklin Roosevelt to the end of the twentieth century… [shows] that the New Deal…

…was more of an historical aberration–a byproduct of the massive crisis of the Great Depression—than the linear triumph of the welfare state. The depth of the Depression undoubtedly forced the realignment of American politics and class relations for decades, but… there is more continuity in American politics between the periods before the New-Deal order and those after its decline than there is between the postwar era and the rest of American history…. While liberals of the seventies and eighties waited for a return to what they regarded as the normality of the New Deal order, they were actually living in the final days of what Paul Krugman later called the “interregnum between Gilded Ages”… [with respect to] race, religion, class, and individualism.

Must-Read: Steve Roth: The Pernicious Prison of the Price Theory Paradigm

Must-Read: Steve Roth (2014): The Pernicious Prison of the Price Theory Paradigm: “Steve Randy Waldman has utterly pre-empted the need for this post…

…cut to the core of the thing, in the opening line of his latest (collect the whole series!):

When economics tried to put itself on a scientific basis by recasting utility in strictly ordinal terms, it threatened to perfect itself to uselessness.

But I’ll try to help a little. What that means: In the mid 20th century, economists decided:

It’s impossible to measure absolute utility. We can’t say what the value to you is of a heart bypass for your mother, or the value of a college education for your kid, or the value of (you or someone else) buying a third or fourth Lamborghini…. Absolute utility — because we can’t measure it — will effectively not exist…. We not only aren’t able to think about absolute utility — actual human value — we are forbidden to do so. Barred.

And with this spectacular piece of rhetorical legerdemain, the discipline disavowed itself of any responsibility for the implications and effects of that rhetorical legerdemain. (It’s hard not to be impressed.)… The (inexorable) implications? Concentration and distribution of wealth and income not only don’t matter… they can’t matter. Steve explains it all far better, with circles and arrows and a paragraph on the back of each one explaining how each one is to be used as evidence against us. But I hope this little summation helps.

Must-Read: Paul Krugman: Scam They Am

Scam They Am The New York Times

Must-Read: Paul Krugman: Scam They Am: “Eric Lipton and Jennifer Steinhauer… find that the…

[Tea Party] PACs… [of] the Freedom Fraud caucus are basically in it for the money… consultants’ fees… paid to the… people organizing the drives…. As Rick Perlstein pointed out several years ago, the modern conservative movement is in large part a ‘strategic alliance of snake-oil vendors and conservative true believers’ with ‘a cast of mind that makes it hard for either them or us to discern where the ideological con ended and the money con began.’… Goldbuggism, for example, is intimately tied to direct-marketing schemes for gold coins and gold certificates…. The American Seniors Association… bills itself as a conservative… AARP… [but] is a for-profit enterprise whose goal is to sell me insurance. And so on. This is surely a[n]… important part of our political story…. Obama- and Hillary-hatred… much of it is generated by scammers out to make a buck off the racism and misogyny of some–sad to say, fairly many–older white men.

The two classic readings on this are: Rick Perlstein**: [The Long Con](http://thebaffler.com/salvos/the-long-con); **David Frum**: [The Fox News Wink](http://www.thedailybeast.com/articles/2012/08/08/fox-news-email-chains.html). It is an attempt to identify those Americans with the very-poorest reality testing and mobilize them politically–but only tertiarily to get them to vote. The primary objective is to scam them directly. The secondary objective is to terrify them, and so keep their eyeballs glued so that they can be sold to advertisers.