The visible hand in economics

Utilitarianism again and again

Posted on: May 21, 2008

at LAANTA has replied to my reply on his post on the problems with utilitarianism.

In this reply he states two issues that he sees with my view of utilitarianism, namely:

  1. The assumption that utilitarianism doesn’t involve assumptions between what is right and wrong is plainly false,
  2. Justice and efficiency concerns are incomparable because one is non-consequential and the other is consequential.

I plan to reply to the reply of the reply under the flap 😛

Utilitarianism and the assumption of right and wrong

I completely agree that utilitarianism involves assumptions about what is right and wrong. In fact I completely believe that we need to make value judgments before we can reach any conclusion – implying that we need some concept of fairness, justice, and value to get anywhere useful. As I said in my initial reply:

The beauty of utilitarianism is that it allows us to decompose a situation and define when something is “right” or “wrong”

Fundamentally what I am saying here is that a utilitarian framework allows us to decompose a situation and discern what factors are important for justice, fairness, efficiency etc. I am not saying that the practice of utilitarianism doesn’t involve value judgments – I’m saying that it provides us a clearer framework with which to view value judgments.

Why does this matter in terms of the initial question about Justice?  Well, if utilitarianism provides us a framework with which to decompose problems, issues of distributive justice can be placed within such a framework.

Of course the assumption here is that justice only matters insofar as the practice of justice provides a social benefit – this is the view that Terence was initially unhappy with, and a view that I find completely satisfying.

However, back to the point – I didn’t say that utilitarianism did not involve value judgments, I just feel that it provides a transparent way of viewing these value judgments.

Justice and efficiency cannot be compared

As I mentioned briefly here the belief I have that justice and efficiency can sit in the same framework stems from the view that the value associated with an outcome isn’t just a function of the outcome but also of the process involved in getting to that outcome.

This is an extreme version of what we do in economics, but here is an example.  If we only looked at outcomes then a chicken pie from downstairs at 2pm on Friday 22 May should give me the same utility, no matter how I received it.  However, I know that I would get more satisfaction from buying the pie then from walking in with a gun and stealing it.  Even ignoring the different costs associated with these means ($4.50 or some chance of prison time) – I find that the benefit I would receive from the outcome would differ.

Once we are willing to make value judgments about how this works we can reach conclusions on societies value for justice and their value for efficiency.  If the just thing to do reduces production in the economy – then we know we have a trade-off between the two which must be faced.

The main issue I can think of with this stems from Karl Popper and the statement that for something to be scientific it must be empirically falsifiable.  The inclusion of justice, equity, and, efficiency in the same model as movable parameters implies that we can justify any phenomenon with our model – and therefore it has no explanatory power (it is similar to the folk theorem in game theory).

However, once we define value judgments, our model does become empirically testable.  This allows us to falsify hypotheses based on such a justice-efficiency trade-off and thereby leads us to a clearer understanding of societies true underlying preferences regarding such matters.

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1 Response to "Utilitarianism again and again"

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