Economics and Ethics

New Stanford Encyclopedia of Philosophy entry on Adam Smith's moral and political philosophy

Mark D. White (channeling Jonathan B. Wight)

Samuel Fleischacker has a new entry at Stanford Encyclopedia of Philosophy on "Adam Smith's Moral and Political Philosophy." (Thanks to Judicial Philosophy for the news.)

The Illusion of Mathyness

Mark D. White

Kevin Drum at Mother Jones recently highlighted a new paper by Kimmo Eriksson (Mälardalen University and Stockholm University) published in Judgment and Decision Making titled "The Nonsense Math Effect" (7/6, November 2012). Here's the abstract:

Mathematics is a fundamental tool of research. Although potentially applicable in every discipline, the amount of training in mathematics that students typically receive varies greatly between different disciplines. In those disciplines where most researchers do not master mathematics, the use of mathematics may be held in too much awe. To demonstrate this I conducted an online experiment with 200 participants, all of which had experience of reading research reports and a postgraduate degree (in any subject). Participants were presented with the abstracts from two published papers (one in evolutionary anthropology and one in sociology). Based on these abstracts, participants were asked to judge the quality of the research. Either one or the other of the two abstracts was manipulated through the inclusion of an extra sentence taken from a completely unrelated paper and presenting an equation that made no sense in the context. The abstract that included the meaningless mathematics tended to be judged of higher quality. However, this "nonsense math effect" was not found among participants with degrees in mathematics, science, technology or medicine.

It's a short paper and well worth the quick read (or read Drum's post, which summarizes it well). Eriksson reports that humanities/social science readers tended to be enchanted by the irrelevant equations, with 60-65% rating the adulterated abstract higher, but economists are not broken out of that very broadly defined group (which only includes 84 people as it is). Given some (most?) economists' predilection for mathyness, though, I would not be surprised at some degree of unconscious bias for research that promises greater mathematical sophistication (though I assume any such bias would melt away once the paper was read).

But I think many other economists, especially heterodox economists who are more skeptical about the benefits of mathematical modeling, might go the other way. I know that when I read an interesting abstract and then skim the paper, my eyes glaze over when I hit math--not because it doesn't add anything to support the author's thesis but because I'm afraid it will leave out many things in the interest of abstraction and simplicity, such the very nonquantitative aspects of the model that I found fascinating in the first place! Some things must be left out of a model, of course, but these factors should be omitted because they are relatively unimportant, not because they're don't fit into the modeling framework.

As Eriksson writes in his introduction to the paper,

In areas like sociology or evolutionary anthropology I found mathematics often to be used in ways that from my viewpoint were illegitimate, such as to make a point that would better be made with only simple logic, or to uncritically take properties of a mathematical model to be properties of the real world, or to include mathematics to make a paper look more impressive.

He very well could have included economics in there as well--I'm curious if his exclusion of it was intentional or random. Gee, I'll bet we could model that...

SCOTUSblog on the same-sex marriage issue

Mark D. White

Lyle Denniston at SCOTUSblog has begun a four-part series on the impending same-sex marriage controversy at the Supreme Court. From the introduction to his first post (discussing the role that constitutional standards will play in any such case):

This is the first article in a four-part series explaining the constitutional controversy, now awaiting the Supreme Court’s attention, over same-sex marriage.   At its private Conference on Friday, the Court is scheduled to consider ten separate petitions seeking review of lower court decisions on that issue.  Eight of the petitions deal with the constitutionality of a 1996 federal law, the Defense of Marriage Act, as it applies to gays and lesbians who are already legally married under state law.  One petition deals with a similar state law adopted in 2009 in Arizona for state employees.  And the tenth involves the constitutionality of California’s “Proposition 8,” a voter-approved ban on same-sex marriage in that state.  Today’s first article in the series deals with the choice of a constitutional “standard of review” — that is, the test to be used to judge the validity of any of these laws.  Later articles in the series will deal with the legal arguments for and against same-sex marriage, and with the options the Justices have as they consider the ten petitions.

(Thanks to Robert Loerzel and Felicia Yonter on Twitter from the link.)

Nutritional labeling, nudges, and a "cynical view of human nature"

Mark D. White

New today from associate editor Brian Fung at The Atlantic is a piece on an experimental nutritional labeling system modeled on traffic lights. In use in the United Kingdom (where it was instituted by the British government's "nudge unit"), the revised nutrition labels would have color-coded icons for fat, calories, and other aspects of food products according to whether the levels are considered healthy or unhealthy. Mr. Fung reports the results of a study from Masschusetts General Hospital that--unsurprisingly--such labels increase the amount of healthy food consumered and lower the amount of unhealthy food consumed.

I discuss labeling systems such as these in my upcoming book, The Manipulation of Choice: Ethics and Libertarian Paternalism, in which I differentiate between the information provided by such label--which allows people to make better decisions according to their own interests--and schemes like the traffic light one which nudge people toward some food and away from others based on bureaucrats' judgment of what is healthy and what is not. (I also discussed nutrition labeling in an earlier blog post.) As Mr. Fung acknowledges, "Bickering over what red, yellow, and green actually mean is likely to be as difficult -- if not more so -- than actually putting the system in place." Some of this bickering may be political, of course, but some will be due to disagreements among health experts over what a proper diet consists of--a debate unlikely to be settled any time soon among the experts, much less by government fiat!

But what I found most interesting about Mr. Fung's article was the irony in the subheading:

If soda bans take an implicitly cynical view of human nature, food labels that give consumers the impression of freedom might be their opposite.

I don't know what could reflect a more cynical view of human nature then trumpeting proudly the prospect of "giving consumers the impression of freedom." These two approaches to paternalistic regulation are not opposites--the only difference is that one is clumsy and the other is "clever." This attitude continues as the article begins (emphasis mine):

From New York City's point of view, humans are notoriously bad at making good decisions. That's what makes a ban on large sodas necessary: the idea that Americans can't be trusted with their own health. But maybe there's a middle ground between letting people gorge themselves on junk food and making it illegal. The key to making it all work is creating an environment where consumers still believe they're in control.

No, there's no cynical view of human nature on display there.

Finally, as the article ends, Mr. Fung writes:

New York's faith in humanity must be low indeed if it thinks only the most blatant coercion can get people behaving differently. Whether collectively or alone, people are hopelessly incompetent, is the message Bloomberg's soda ban sends. A more accurate way to put it might be that people are incredibly malleable, open to having their decisions swayed in terrible ways by factors that are out of their hands. The difference is slight, but in the small gap between those two statements lies an opportunity to move people in the right direction without taking away their freedom.

As above, I disagree with Mr. Fung: the difference is not slight, it is nonexistent. In my view, all paternalists have little faith in humanity, as shown by their willingness to substitute their own judgment for those of the people they claim to help, based on an overly simplistic view of decision-making and interests. And if you "move people in the right direction" by manipulation rather than by reasoned persuasion--subverting their deliberative processes rather than engaging them--you are taking away their freedom, little by little.

But as long as they're left with the "impression" of their freedom, as long as they "still believe they're in control," I guess that's OK.

Chick-fil-A, Corporate Social Responsibility, and Ethical Consumption

Mark D. White

I've read an enormous amount of what's been written on the Chick-fil-A controversy the last couple weeks, although I'm sure I haven't scratched the surface. But I was fascinated by Will Wilkinson's recent post at The Economist's Democracy in America blog, titled "Feathers Flying," in which he casts the fast food company's stance against same-sex marriage as an example of corporate social responsibility (CSR), though not the typical social justice concerns usually associated with CSR.

It's my view that this sort of skirmish in the culture wars is an inevitable consequence of trends in "ethical consumption" and "corporate social responsibility". Conservatives sceptical of the corporate social responsibility (CSR) movement have often charged that CSR is a stalking horse for liberal causes that have failed to get traction through ordinary political channels. This charge finds some support, I think, in the fact that few in the media seem to see Chick-fil-A's Christian-influenced culture and business practices as an example of CSR, though obviously it is. Doesn't the demand that corporations act responsibly in the interests of society, in ways other than profit-seeking, directly imply that corporate leaders who find same-sex marriage socially irresponsible should do something or other to discourage it?

Rather than comment on Chick-fil-A's position itself, I want to point out Mr. Wilkinson's perceptive comments regarding the politicization of the marketplace itself:

Matters of moral truth aside, what's the difference between buying a little social justice with your coffee and buying a little Christian traditionalism with your chicken? There is no difference. Which speaks to my proposition that CSR, when married to norms of ethical consumption, will inevitably incite bouts of culture-war strife. CSR with honest moral content, as opposed to anodyne public-relations campaigns about "values", is a recipe for the politicisation of production and sales. But if we also promote politicised consumption, we're asking consumers to punish companies whose ideas about social responsibility clash with our own.

Those opposed to a particular company's moral or political position may consider their actions to exemplify corporate social irresponsibility (or worse) rather than just a different type of CSR. The issue for ethical consumption then becomes not just a matter of choosing companies who actively support the "right" causes rather than those who don't, but more important, staying away or boycotting companies that support the "wrong" ones. (This is not new: for examples, labor union members have long refused to patronize nonunion businesses, whether out of solidariry or some other principle.)

Wilkinson's proposed remedy is elegant, and on first blush seems to make perfect sense:

I'd suggest the best arena for moral disagreement is not the marketplace, but our intellectual and democratic institutions. We hash out our disagreements, as best we can, in public deliberation. The outcome of this deliberation becomes input to official policymaking, which in turn determines the rules of the game for business. Businesses then seek profits within the scope of those rules (and the consensus rules of common decency), and consumers buy the products that best satisfy their preferences.

That would be the ideal, I agree. In unpublished work on CSR, I draw a distinction between internal and external actions: internal CSR would cover the operations of the business itself, such as treatment of employees and environmental production methods, while external CSR involves actions not directly related to the business, such as charitable giving--or political positions. My conclusion based on this distinction can be considered a restatement of Milton Friedman's oft-caricatured position that business should focus on maximizing returns to owners within the legal and ethical standards of their industry. The italicized phrase refers to the importance of internal CSR--which still leaves room for controversy, such as whether benefits can be extended to same-sex partners or the extent of environmental safeguards--and cautions against external CSR, either because profits can be devoted to social or political causes by the owners just as well as by the company, or because the business wants to avoid endorsing a controversial position and politicizing its product.

I think that corresponds fairly well to what Wilkinson recommends, but I fear the horse has left the barn on that one. CSR and ethical consumption together comprise a vicious cycle that we will find it very difficult to extricate ourselves from at this point. Consumers have adopted the mindset of making a moral statement with their purchases--with good intentions--and they expect businesses or business leaders to reveal their positions. Businesses are more than happy to comply, sincerely or otherwise, even at the risk of alienating a segment of their customer base. Even companies that remain neutral on heated social issues may be accused of "if you're not with us you're against us"--and certainly with some issues, there is no neutral position. A company can refuse to take a public stand on same-sex marriage, but they either provide same-sex benefits or they don't.

I'll finish--as I often do--with Kant. Often caricatured himself as a rigid demanding moralist, he ridiculed as "fantastically virtuous" any person "who allows nothing to be morally indifferent and strews all his steps with duties, as with mantraps... Fantastic virtue is a concern with petty details which... would turn the government of virtue into tyranny” (Metaphysics of Morals, 409). We can take his comments one step farther and argue that, given our limited attention, the more attention we pay to "petty details," the less we pay to more serious issues or more effective ways to deal with them. Equality for gays and lesbians is no petty detail, of course, but no matter which side you're on, there must be a better way of supporting your position than choosing whether to eat a chicken sandwich.

How Much Inequality Do We Want? This is the Wrong Question.

Mark D. White

Today on The Atlantic's website, Dan Ariely describes an experiment he conducted with Mike Norton in which they survey people about both the current distribution of wealth in the U.S. and what they thought the ideal distribution of wealth is. Not surprisingly, they find that most everybody underestimates the level of inequality of wealth, and that most everybody would prefer a more equal distribution of wealth--and, most interestingly that the "desired" distribution is extremely stable regardless of political party or nation of origin.*

In fact, he writes, "most likely, if you participated in one of our tests, your response too would have fallen in line with these findings." Uh, no, it wouldn't--I would have refused to answer the question because I don't accept its premise, which is that the final distribution of wealth is more important than the processes which led to it. In Robert Nozick's terms, Ariely implicitly uses a patterned theory of justice, whereas I prefer a historical theory of justice. When I see a skewed distribution of income or wealth, my first thought is not, "let's correct that," but rather "let's see what caused the skewed distribution and see if they're anything unjust about that."

Ariely illustrates this distinction with his two proposals for lessening inequality: education and taxation. Education improves the process while taxation improves the results after the fact. This is comparable to making sure a football game is officiated fairly, but then adjusting the score after the game is finished. If the outcomes of a football game--or of the economy--result from just and fair processes, then it is difficult to find a justification for questioning the results (outside simple utilitarianism).

Ariely describes his methodology as inspired by John Rawls' "veil of ignorance," in which people are asked what kind of world they'd like to live in if they had no idea where they'd fall in socio-economic terms (or, more broadly, in terms of race, gender, and so on). Ironically, however, Rawls was opposed to redistribution after the fact, and meant for his veil of ignorance metaphor to be used when designing institutions that would benefit the worst-off in society so wealth would not have to redistributed after the fact. (Ronald Dworkin's resource-egalitarianism takes the same approach: equalize resources at the beginning of persons' lives, and let them make of their lives what they will.)

My point does not lean only to the left or the right; people on both sides of the political spectrum (and especially libertarians) will happily point out injustices in the system that lead to unjust outcomes. This is one thing that the Occupy movement and the Tea Party have in common: there is corruption throghout the system that benefits the few at the expense of the many. But it does little good to say what we want the world to look at any point in time. Instead, we should focus on how we want to world to work over time--all the time--so everyone has a fair chance at leading the life they want to live.

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* They also neglect to ask what means people are willing to accept to reach their desired level of inequality--I imagine that's where differences in political affiliation would show up the most. Ariely admits to this shortcoming, but casts it in terms of what sacrifices people would be willing to make themselves to lower inequality, not what structural changes in our institutions they would recommend:

Our study also doesn't deal with how to bring what people say they want under the veil of ignorance into line with what they're willing to do when it's their money and resources that are about to be distributed. It is one thing to get people to tell us what kind of society the would want to join, and another to get them part with their money in order to create that society.

Which is "harder": social science or physical science?

Mark D. White

Yesterday, Kevin Drum at Mother Jones spoke up for social science following an editorial in Nature arguing against the NSF's proposed defunding of research in political science. Here's a bit of the op-ed:

Part of the blame must lie with the practice of labelling the social sciences as soft, which too readily translates as meaning woolly or soft-headed. Because they deal with systems that are highly complex, adaptive and not rigorously rule-bound, the social sciences are among the most difficult of disciplines, both methodologically and intellectually. They suffer because their findings do sometimes seem obvious. Yet, equally, the common-sense answer can prove to be false when subjected to scrutiny. There are countless examples of this, from economics to traffic planning. This is one reason that the social sciences probably unnerve some politicians, some of whom are used to making decisions based not on evidence but on intuition, wishful thinking and with an eye on the polls.

...As Washington Post columnist Charles Lane wrote in a recent article that called for the NSF not to fund any social science: “The 'larger' the social or political issue, the more difficult it is to illuminate definitively through the methods of 'hard science'.”

In part, this just restates the fact that political science is difficult. To conclude that hard problems are better solved by not studying them is ludicrous. Should we slash the physics budget if the problems of dark-matter and dark-energy are not solved? Lane's statement falls for the very myth it wants to attack: that political science is ruled, like physics, by precise, unique, universal rules.

And here's some of what Mr. Drum added to it:

The public commonly thinks of disciplines like physics and chemistry as hard because they rely so heavily on difficult mathematics. In fact, that's exactly what makes them easy. It's what Eugene Wigner famously called the "unreasonable effectiveness" of math in the natural sciences: the fact that, for reasons we don't understand, the natural world really does seem to operate according to strict mathematical laws. Those laws may be hard to figure out, but they aren't impossible. ...

Hari Seldon notwithstanding, the social sciences have no such luck. Human communities don't obey simple mathematical laws, though they sometimes come tantalizingly close in certain narrow ways — close enough, anyway, to provide the intermittent reinforcement necessary to keep social scientists thinking that the real answer is just around the next corner. And once in a while it is. But most of the time it's not. It's decades of hard work away. Because, unlike, physics, the social sciences are hard.

Bonus points for the Foundation mention!

(I don't have much to add; I made a similar point in this post, comparing the complexity of marcoeconomic forecasting models to meteorological weather-forecasting models.)

Nancy Folbre on corporate social responsibility

Mark D. White

In today's Economix blog in The New York Times, Nancy Folbre comments on the recent Journal of Economic Literature survey of the economics of corporate social responsibility by Markus Kitzmueller and Jay Shimshack (which is open access, for the time being). Folbre nicely summarizes the complex and often strategic interaction between financial and ethical motives on the part of corporate leaders, shareholders, and consumers alike.

A blogsistential crisis: Lynne Murphy asks, "Am I an academic, a blogger, or both?"

Mark D. White

I'm fascinated by the recent trend of academic bloggers reflecting on what it is they do, and the latest comes from linguist Lynne Murphy of the Separated by a Common Language blog, writing in the Impact of Social Sciences blog run by the London School of Economics. (Thanks to Andrea Doucet for the link.)

Her post there is titled "I’m having a blogsistential crisis! I am a blogger. And I am an academic. But am I an academic blogger?", and in similar way to Doucet's examination of blogging versus academic research discussed earlier here, Murphy ponders the relationship between her blogging and her university position and responsibilities:

This has been an issue for me since I started the blog while on research leave in 2006. It served me then as a limbering-up exercise before writing the “hard” stuff that would be subjected to peer review. At the start, I was meticulously careful about keeping blog and work separate. I acknowledged my qualifications and title, but only in order to give readers some reason to think I knew what I was talking about. I don’t blog at the office. And I still defensively refer to blogging as my ‘hobby’ on my Blogger profile. But when I became aware that my blogging was (being acknowledged as) a selling point for the University and the programmes I teach on, I started being less meticulous about separating blogging/tweeting activities from my academic life. A few months ago, I added mention of my employer to my Twitter profile and I’ve started asking media contacts to mention the University when the introduce me, because otherwise I can’t be listed among the staff ‘in the news’. But it is still a constant question for me: Am I working for the University when I blog? Should I be?

To get her answer, read the rest of her post here.

Positive signs regarding "The Future of Economics" from Davos

Mark D. White

As pointed out by Lynne Kiesling at Knowledge Problem, Nobel laureates Peter Diamond and Joe Stiglitz, along with (this year's ASE/ASSA keynote speaker) Robert Shiller and Brian Arthur, discussed "The Future of Economics," which moderator Martin Wolf summarizes at the Financial Times' The World blog. Kiesling condenses Wolf's summary (as reproduced below):

1. First, orthodox economics had, in the years leading up to the crisis, become more a cult than a science, particularly with the assumption that what exists in competitive markets has to be the best possible outcome, since, if it were not, it could not exist.
2. Second, let a thousand flowers of thought bloom.
3. Third, the sociology of the profession – the need to define and defend a core discipline that can be taught to students and so determines what it means to be an economist – militates against such heterodoxy.
4. Fourth, human beings are not rational calculating machines.
5. Fifth, time matters in economic processes, which are, in general, not reversible and not characterised by any sort of equilibrium.
6. Sixth, the world is not computable.
7. Seventh, being a study of complex human behaviour, in which the world is created by human understand [sic] and motivations, economics is hard.
8. Eighth, in theory it is right and proper to abstract in order to focus on a specific phenomenon. In addressing policy, this is irresponsible.
9. Ninth, even though economists get much wrong, they still have much to offer to non-economists who tend to assume that economic problems are far more simple than they actually are.
10. Tenth, there is a great danger that in rejected the most simplistic pro-market mantras, economists and policymakers will embrace even more dangerous and naïve statism.

In my opinion, these are fantastic, especially 4, 6, 7, and 9 (concerning the complexity of economics as a social science and popular misunderstandings of that), 8 (about the responsible conduct of policy analysis), and 10 (cautioning against extreme reactions to the crisis). I just hope people are listening.