Thursday, 25 April 2013

A sentence I just don't understand

From Richard Murphy at the Tax Research UK blog. Murphy is discussing what he calls "bankrupt ideas":
Third, that utility is a useful economic concept. It isn’t. Distribution matters.
First I just don't see how distribution mattering means utility isn't a useful concept in economics. Second if you don't use utility what do you assume is the objective of households/consumers.


bk drinkwater said...

Imagine a society in which utility doesn't matter. This society is stipulated to be a utopia with perfect distribution. All members of this society are routinely tortured. This takes no gloss off our utopia, since distribution is still perfect and utility doesn't matter.

Mark Hubbard said...

I believe he's talking philosophically: the use of utilitarianism, the greatest good for the greatest number, leads to tyranny of the majority and collectivist policy - that is, the destruction of a classical liberal individualistic ethic.

I'm an amatuer in things economic, but there is much in the way economists seem to think that disturbs me. For example, I don't like macro thinking at all: the notion of aggregates that central planners can pull the levers to influence, leads to well intentioned, but freedom destroying central planners trying to pull those levers.

I believe the civilised free society can only exist on laissez faire, and that can only exist, because a free market only exists, on the micro level - you and me conducting a trade: the market is merely the expression of the complex needs and desires of every individual, and the clearing house where those needs and desires are peacefully, because voluntarily, resolved.

Note bk drinkwater's comment above becomes absurd when philosophy contextualises economics: even something so basic as the non-initiation of force principle.

Where do philosophy and economics meet for the academic?

And do you read a comment such as I have just made, and your eyes roll as you think 'bloody amatuers' :)

Mark Hubbard said...

Hang on, coming from my previous comment, the notion of individual utility sits comfortably, that's rational self-interest; but from reading economists this seems to always be fatally bashed into something very different, namely the notion of a collectivist utilitarianism in terms of policy making: is that correct?

Paul Walker said...

BK: Yes ignoring utility could lead to some odious places.

Mark: I think the short answer to you is that to say "utility is not a useful economic concept" and "utilitarianism is not a useful economic concept" are completely different statements. Utility is just a way of capturing an objective for a household in the same way profit is the objective for a firm. Nothing to do with utilitarianism.

FC said...

Ludwig von Mises argued that utility and liberalism were compatible.