image by jef safi (‘pictosophizing) – Creative Commons license
In the course of my occasional blog discussion with Tony Wang about the nature of value (economic and otherwise), I’ve gotten us off on a bit of a philosophical tangent: namely, exploring the question of whether a pluralist value system–one in which we don’t assign any judgment to what one person believes/wishes versus another–is a sufficient framework to allow us to determine what rules/policies/social structures are optimal for the human race at any given moment in history. In his latest post, Tony says,
I think it’s ok to disagree on what’s valuable. Do Ian and I really have to duke it out and come to some sort of shared valuation of happiness, freedom, and egalitarianism in order to talk about organizational structures? Or is it ok if Ian values happiness a bit more and I value freedom and egalitarianism a bit more? If pluralism is not ok then the alternative is that we would all have to agree on our relative valuations of happiness, freedom, egalitarianism, etc. before we moved forward in any substantive conversation. And to be honest, I think that’s counterproductive.
I agree with Tony as far as the first sentence. No, we don’t have to agree on what’s valuable – he might care more about education and I might care about economic empowerment, or he might care about science whereas I care about the arts. That’s fine. My point is that as long as there is some means of reliably measuring or knowing what each individual values and how deeply, it should be possible to come up with a single set of rules/policies/social structures that works optimally given the specific mix of people in the world. (When I say “a single set,” I am including among the possibilities a decentralized system that would take into account local differences and customs, etc. In fact, there would likely have to be at least some decentralization in order to maximize collective benefit.) It would just be a straight-up modeling exercise, albeit one with a potentially gigantic number of parameters. Note that the “values” I am talking about are different from preferences as considered in a market-based context: whereas markets are shaped by participants’ immediate preferences when presented with a limited set of possibilities, here I refer instead to values or long-term goals that people would strive to uphold regardless of the extent to which they may be realistic at that moment.
I would imagine that this line of thinking intersects rather significantly with happiness economics, which I am dismayed to admit I haven’t yet had a chance to explore to the extent I’d like. Indeed, we could go ahead and simply equate utility with happiness, though doing so requires an assumption that human desires can all eventually be reduced to one goal (and also an assumption that people actually know what makes them happy). Even if we don’t, however, we can still work with a finite list of desired “final” outcomes (e.g., world peace, personal prosperity, universal submission to His Noodly Appendage, etc.) as long as we have an idea of how many people care about them and how deeply (and in which direction). The next step after these goals have been identified would be to design an enormous “logic model for the world” that would consider what intermediate factors impact each goal and what societal levers can be manipulated to facilitate the movement of those indicators in a positive direction. It is very likely that in some cases, the intermediate factors (or even the goals themselves) will compete with each other — helping one in a specific way will hurt another. Banning guns, e.g., may be helpful for the goal of world peace but may hinder the goal of individual liberty. In such cases, the relative weights of each goal matter, as does the measure’s ability to impact each goal. So, if banning civilian gun ownership is much more likely to hinder individual liberties than it is to help achieve world peace, and more people care about liberty than peace, then we don’t ban guns. The logic model’s construction would need constant revision as our understanding of the causal links between various regulations and social behavior improves, but given its fundamental basis in logic and science, it should be possible to make one that is as “correct” as possible within the limits of human knowledge.
So why don’t we get off our asses and just do this already? Well, unfortunately, that necessary condition I mentioned at the top–knowing what people value and how deeply–is a work in progress. We don’t have enough information about that now, probably, to be able to perform an exercise like the one I described. But I think we’re getting closer to being able to do it every year that passes, and I think it’s entirely possible that within Tony’s and my lifetimes we will have enough good data to be able to at least get a good start on it.
In the meantime, there are tools we already use to approximate what people’s value systems might look like. The most significant one is the market economy. Friedmanesque true believers claim that most social interventions on the part of government and others are superfluous, because markets already reflect the preferences of the people participating in them–as long as all transactions are voluntary, there are no deceptive practices, transaction costs are minimal, and anyone can participate. And it is certainly true that markets can do wonderful things when all of these factors are in place. One problem, though, is that they often aren’t–and many times, existing participants (especially suppliers) have powerful incentives to keep it that way. Furthermore, many market transactions have things called externalities, costs or benefits that accrue to third parties who are not part of the transaction (and thus do not participate voluntarily). A third problem is that markets have a way of leveraging existing inequalities and power differentials between participants by putting greater amounts of wealth in the hands of those who already have it — a quality exacerbated considerably by our practice of handing down family inheritances from one generation to the next. Finally, markets use money as their currency and also as a proxy for value — but as we discovered earlier this year, money and value are not at all the same thing. In fact, the observed relationship between money and happiness is murky at best.
All of these factors lead to what are known as market failures — situations in which the market economy, despite working as designed, fails to achieve an optimal outcome for the whole. And in such situations, we have the government to take up the slack. In many arenas, including defense, national security, emergency services, low-income housing, some health care and education, and the law, the government takes part in the marketplace directly. Furthermore, the United States has recognized and systematized a third legal status of organization, the 501(c)(3) public charity, to which it provides indirect subsidy in the form of tax exemption. Thus, in this country, we are provided with three sectors with which to try to maximize social good.
Market failures aren’t in and of themselves a bad thing, but they are bad when they result in a loss or non-optimization of collective utility. The arenas in which the government operates through direct action or indirect subsidy are those arenas that it has defined as poor fits for the market economy–essentially, where it thinks market failures that are bad for society are likely to occur. These arenas can provide us with a hint as to the proper and optimal organization of activities if our overall goal is to maximize social good. For the most part, though, these designations come from an earlier era, and the world has changed a lot in the past couple of generations. So part of our job over the next several posts will be to re-examine each of these arenas and try to come to our own conclusions about whether each one might be better suited for market solutions or not, and if not, whether direct government action or third-party nonprofit/NGO intervention makes more sense.