Re: Some thoughts on Politics

From: hal@finney.org
Date: Wed Sep 27 2000 - 11:11:09 MDT


Robin writes:
> I prefer to use standard economic theory for understanding future
> societies, including politics. [...] [W]hen things change a lot, trends
> don't continue and informal categories break down, and only the most
> abstract and general theory remains a reliable guide.
>
> Standard economic theory and Paretian policy analysis is very general and
> can speak to the future scenarios of interest to us. It often, but far
> from always, supports the sort of policy conclusions that libertarians
> come to. When they disagree, I tend to go with economic theory.

By itself economic theory cannot deliver a policy, as it is value neutral.
I'm not sure exactly what you mean by Paretian policy analysis, but it
must be from this that prescriptions come. I'm going to guess about
the meaning of this term.

An economy lacks Pareto optimality if some people can be made better
off without anyone being made worse. This is a plausible candidate for
providing policy guidance, but I suspect that it is weak in practice.
Given the complexities of the world it will be hard to tweak a system
to make everyone better (or no worse) off.

My experience is that modern liberal-socialist governments go far beyond
this. The underlying philosophy seems to be a desire to see greater
equality. That's why we have graduated income tax, social security,
medicare, minimum wage laws, etc. I would suggest that a substantial
portion of government activities today do not flow from a simple Pareto
optimality criterion. Virtually every government activity makes some
people worse off. It would be an interesting challenge to point to
an exception.

Maybe I have misunderstood the scope and power of Paretian analysis,
though.

Hal



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