Mark D. White

Today we continue our preview of Accepting the Invisible Hand: Market-Based Approaches to Social-Economic Problems with Chapter 4, "Don't Let the Best Be the Enemy of the Good: A Stoic Defense of the Market," by Jennifer A. Baker. (Chapter 3 by James D. Gwartney and Joseph Connors was discussed here, Chapter 2 by John Meadowcroft was discussed here, Chapter 1 by me was discussed here, and the preface was posted here.)

From the introduction to the chapter:

The moral relevance of general affluence is often overlooked. We might wish for humane conditions, we might talk of human value, but short of some minimal level of general affluence, life is too grim to entertain ethical notions beyond it. It seems we can hardly count the very poor of the world into our moral considerations. If everyone has to be considered, “well,” the ethicists seem to harrumph, “then we are dealing with too much need and everything thought conventionally moral is off the table!”

In this chapter I would like to offer a corrective, a way to acknowledge the moral significance of general affluence without disassembling conventional morality. To do this we have to recognize that markets are our only means of bringing about general affluence. We have, literally, nothing else capable of doing the job. Yet markets are, for reasons we will go into, left out of our moral calculations. We either suggest “it isn’t personal, it’s just business” in the hopes that all moral bets are off when we are engaging in trade, or simply live with the cognitive dissonance of refusing to integrate our support for markets with the rest of our beliefs about what is good. (p. 69)

...

For many reasons, it will be helpful to point out a way in which we can situate support for general affluence within conventional morality. Clearing up the deep confusion we so often display about the role of ethics in the market is one, clarity about our own behavior is another, and what we owe other humans worldwide is a third. After reviewing approaches that will not work, I will offer a means for this. I argue that the solution is to organize our thoughts about morality using an ethical theory—Stoicism—that has a two-level structure. One of these must acknowledge the value of material inputs to human life, and the other must function to maintain a standard for personal choices. How these levels serve as a framework for making choices we already admire is what I aim to demonstrate. (p. 70)

Baker surveys the difficulties with justifying the market using standard theories of moral and political philosophy, as well as attempts by economist-philosopher to do so, before laying out her Stoic alternative, based on essential concepts thereof such as indifferents, neutrality, and the bi-level theory of value.

She phrases her conclusion exceptionally well (emphasis added):

Is the market just? Not in the sense that it meets some discrete ideal of political good. The market, not being an ideal, simply cannot measure up to such standards. If we are to dismiss it as amoral, we are left without guidance when it comes to how we should act in the market. Far better is to determine that the market has a peculiar status of “just enough.” It is not glorious. It is never how we would prefer it to be and never as good as it could be. But humans thrive in market-based systems and can do so without the cost of horrific violations of human dignity. Higher standards cannot be imposed on a social system until the possibility of meeting these higher standards exist. We are not to expect too much, or to confuse political ideals for actual social good. (p. 83)

Mark D. White

Today we continue our preview of Accepting the Invisible Hand: Market-Based Approaches to Social-Economic Problems with Chapter 3, "Economic Freedom and Global Poverty," by James D. Gwartney and Joseph Connors. (Chapter 2 by John Meadowcroft was discussed here, Chapter 1 by me was discussed here, and the preface was posted here.)

From the chapter:

Over the period 1980–2005 many developing countries achieved remarkable increases in economic growth. Real per capita income increased substantially in countries that had experienced only modest increases in living standards for a century or more prior to 1980. Recent scholarship has pointed to the adoption of institutional and policy changes more consistent with economic freedom as an important, if not the most important, explanatory factor underlying the recent economic growth of developing countries. But economic growth and increases in real per capita GDP only provide information on how average income figures are changing. They may be a misleading indicator of what is happening to the living standards of the poor. Did the rapid growth of 1980–2005 lead to lower poverty rates? How does economic freedom affect poverty? What can be done to accelerate reductions in poverty rates? This chapter will address all of these issues. (p. 43)

Gwartney and Connors use recent World Bank data on extreme and moderate poverty to analyze the effect of institutional factors associated with economic freedom--"personal choice, voluntary exchange, open markets, and protection of privately owned property" (pp. 47-8)--on poverty rates in various regions of the world.

While economic freedom is commonly held to be associated with higher growth (for reasons reviewed on pages 47-9), the authors also recognize concerns that this higher growth does not increase the well-being of the poorest members of these societies. After analyzing the data from the World Bank together with the Economic Freedom of the World index (and controlling for factors such as foreign aid), they find that increased levels of economic freedom are correlated with lower poverty rates:

Compared to those that were less free, countries with higher economic freedom ratings during 1980–2005 had lower rates of both extreme and moderate poverty in 2005. More importantly, countries with higher levels of economic freedom in 1980 and larger increases in economic freedom during the 1980s and 1990s achieved larger poverty rate reductions than economies that were less free. (p. 56)

This chapter provides valuable empirical support to arguments (such as in Amartya Sen's book Development as Freedom) that changes in institutions and governance that enhance people's freedom and capabilities are crucial to ameliorating global poverty.

Jonathan B.Wight

In case you haven’t seen it, a (relatively) new book explores the fascinating intersection of morality, law, economics, and development:

Douglass C. North, John Joseph Wallis, and Barry R. Weingast, Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History (Cambridge University Press 2009).

The book received rave reviews from luminaries (it’s on my list of summer reading). 

Here’s the publisher’s blurb:  “All societies must deal with the possibility of violence, and they do so in different ways. This book integrates the problem of violence into a larger social science and historical framework, showing how economic and political behavior are closely linked. Most societies, which we call natural states, limit violence by political manipulation of the economy to create privileged interests. These privileges limit the use of violence by powerful individuals, but doing so hinders both economic and political development. In contrast, modern societies create open access to economic and political organizations, fostering political and economic competition. The book provides a framework for understanding the two types of social orders, why open access societies are both politically and economically more developed, and how some 25 countries have made the transition between the two types.”

Mark D. White

To lead up to the release of Accepting the Invisible Hand: Market-Based Approaches to Social-Economic Problems early next month, I will be posting features on each of the chapters, starting with the complete preface today (with hyperlinks) - as always, comments are most welcome.

Mark D. White

When it rains...

As the New York Times and many other news organizations have reported, New York City mayor Michael Bloomberg (together with New York State governor David Patterson) are petitioning the U.S. Department of Agriculture for permission to block the city's 1.7 million food stamp recipients from using the funds to purchase soda and other sugary drinks.

Of course, this is nothing new or surprising from Mayor Bloomberg, who has already enacted curbs on trans fats in city restaurants as well as increased limitations on smoking (possibly to be extended to city parks and other public outdoor areas). But this recent move is different in that it applies only to recipients of the food stamp welfare program, and therefore is an additional limitation on how state-provided funds may be spent (alcohol, tobacco, and prepared foods are already blocked) (After all, a food stamp recipient may have other sources of cash income which he or she can use to buy soda as well as alcohol, cigarettes, and so forth.)

The obvious argument for such restrictions is that the state--which is to say the taxpayers--are providing recipients with aid to help ameliorate the effects of poverty, so the state is wholly within its rights to limit the use of that aid as a condition of receiving it. Setting aside the classical liberal or libertarian arguments, both principled and pragmatic, against welfare programs, which are not my concern at the moment, one can still question, given the existence of food stamp programs, the ethics of placing paternalistic restrictions of the use of such aid.

If the state is gonig to provide aid to its worst-off citizens, the least manipulative way to do that is to provide cash (such as in Milton Friedman's negative income tax proposal). As a further step, if the state wants to focus on food poverty, it may issue food stamps (actually a debit card now, but the name has stuck) that are limited to purchases of food (and basic household items such as soap), assuming that food will be one of the primary purchases made by citizens in poverty (after housing, which the state also actively subsidizes). This is manipulation and paternalistic, but in the grand scheme of things, it is rather mild.

But one can question if the state goes too far when it narrowly defines what food items are to be excluded, based on what it wants people to consume or not. Note the city's proposed formula (from the linked Times article):

The ban would affect beverages with more than 10 calories per 8 ounces, and would exclude fruit juices without added sugar, milk products and milk substitutes. A 12-ounce soda has 150 calories and the equivalent of 10 packets of sugar, according to the health department. City health officials say that drinking 12 ounces of soda a day can make a person gain 15 pounds a year.

It does not take a prognosticator to predict the maneuvers by the soft drink industry to work around that (such as CAFE standards affected the automotive industry). (And I'm not even going to touch the bit about soda's ability to "make a person gain" weight, as if consumers cannot adjust their exercise and diet routines to accommodate the occasional Coke.) But my main point is the micromanagement involved in such precise delineations of what can and cannot be purchased with food stamps (especially given the other resources, however meager, that may be at recipients' disposal to buy the occasional Coke).

But I must give the mayor credit--he is not shy about his intentions, saying:

This initiative will give New York families more money to spend on foods and drinks that provide real nourishment.

And that's the crux of the issue: the mayor will decide which "foods and drinks provide real nourishment" for the city's 1.7 million food stamp recipients. Of course, he has already made that choice for all New York City residents insofar as he banned trans fats from restaurants. But limiting the use of food stamps is no less paternalistic for the welfare program aspect of the situation; restricting welfare assistance to food is limiting enough, but giving recipients a state-approved shopping list is going too far.

You can't make every New Yorker healthy, Mayor Bloomberg. But you can respect their choices, and let them bear the consequences of their actions. Even a real parent would do that.

Mark D. White

The open access, online journal Rationality, Markets and Morality has issued the following call for papers:

Amartya Sen's recent book The Idea of Justice is put forward as a challenge to what Sen holds to be the predominant approach to justice in contemporary philosophy and marks as 'transcendentalism'. Justice is a matter of reason, but, argues Sen, there is no and cannot be a reasoned agreement on the nature of perfect justice. Moreover, no ideal conception of 'spotless' justice will help us solve the numerous problems of injustice easily identified in the real world. So Sen promotes a different 'comparative' account of justice whereby societies, practices and states of affairs are judged against actual and possible alternatives drawing on a plurality of views and conceptions of the good as expressed and argued for in public debate. Thorough economic and political analysis is at the heart of such moral reasoning. In expanding on and arguing for his conception of justice Sen expounds and integrates many of his well known ideas about welfare, capabilities, equality and liberty, democracy and human rights.

The Idea of Justice has immediately attracted the attention of the scholars in the field. Without doubt, it is an exceptionally resourceful and important contribution to the philosophy of justice. It is most instructive and illuminating but there is also plenty to argue with.

More details at the journal's website (linked above).

Jonathan B. Wight

A student of mine is finishing up her Honors Thesis on substantive measures of development. One measure she examines is cell phone ownership as a proxy for infrastructure.  One can argue that in a rural areas without land lines, access to cell phones enables one to live a life of greater affiliation and connectedness to those you love (e.g., many husbands migrate and may return only once a year). Having the capability of communicating with loved ones can be considered an important aspect of human development.  What do you readers think?

Amartya Sen writes provocatively about substantive measures and his book, Development as Freedom (1999) offers great insights. 

But Paul Krugman’s quote still captures the issue most succinctly:  

     “Feudalism with cell phones is still feudalism.”

Anyone want to share other pithy quotes on this subject?

Mark D. White

Steve Pressman and Robert Scott of Monmouth University pubished an interested op-ed titled "Poverty: Numbers Alone Don't Tell the Real Story" in The Star-Ledger (New Jersey) this morning. Steve is also the chief financial officer of the Eastern Economic Association, co-editor of the Review of Political Economy, and a great person to sit next to on a long plane trip from San Francisco to Newark, NJ. (I have never flown with Robert, but I'm sure he is a raconteur of distinction as well.)

The title is somewhat misleading (I'm guessing the paper's editors changed it)--the article is pressing (pun intended) for better numbers or calulation of poverty levels, in particular to include the interest on household (non-mortgage) debt:

Interest payments for past debt leave less money to purchase goods now. In many cases, such payments mean that a family can no longer buy the necessities needed to survive during the year. The family is poor; but because the government ignores interest payments on past debt, they do not count these families as poor. We undercount the number of poor Americans.

For a more in-depth look at these issues, see Steve and Robert's papers titled "Who Are the Debt Poor?" in Journal of Economic Issues, 43/2 (2009), 423-432, and "Consumer Debt and the Measurement of Poverty and Inequality in the US," Review of Social Economy, 67/2, 127-148.