When Value Judgments Masquerade as Science - NYTimes.com - 0 views
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Most people think of the term in the context of production of goods and services: more efficient means more valuable output is wrung from a given bundle of real resources (which is good) or that fewer real resources are burned up to produce a given output (which is also good).
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In economics, efficiency is also used to evaluate alternative distributions of an available set of goods and services among members of society. In this context, I distinguished in last week’s post between changes in public policies (reallocations of economic welfare) that make some people feel better off and none feel worse off and those that make some people feel better off but others feel worse off.
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consider whether economists should ever become advocates for a revaluation of China’s currency, the renminbi — or, alternatively, for imposing higher tariffs on Chinese imports. Such a policy would tend to improve the lot of shareholders and employees of manufacturers competing with Chinese imports. Yet it would make American consumers of Chinese goods worse off. If the renminbi were significantly and artificially undervalued against the United States dollar, relative to a free-market exchange rate without government intervention, that would be tantamount to China running a giant, perennial sale on Chinese goods sold to the United States. If you’re an American consumer, what’s not to like about that? So why are so many economists advocating an end to this sale?
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Strict constructionists argue that their analyses should confine themselves strictly to positive (that is, descriptive) analysis: identify who wins and who loses from a public policy, and how much, but leave judgments about the social merits of the policy to politicians.
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a researcher’s political ideology or vested interest in a particular theory can still enter even ostensibly descriptive analysis by the data set chosen for the research; the mathematical transformations of raw data and the exclusion of so-called outlier data; the specific form of the mathematical equations posited for estimation; the estimation method used; the number of retrials in estimation to get what strikes the researcher as “plausible” results, and the manner in which final research findings are presented. This is so even among natural scientists discussing global warming. As the late medical journalist Victor Cohn once quoted a scientist, “I would not have seen it if I did not believe it.”
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anyone who sincerely believes that seemingly scientific, positive research in the sciences — especially the social sciences — is invariably free of the researcher’s own predilections is a Panglossian optimist.
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majority of economists have been unhappy for more than a century with the limits that the strict constructionist school would place upon their professional purview. They routinely do enter the forum in which public policy is debated
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The problem with welfare analysis is not so much that ethical dimensions typically enter into it, but that economists pretend that is not so. They do so by justifying their normative dicta with appeal to the seemly scientific but actually value-laden concept of efficiency.
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economics is not a science that only describes, measures, explains and predicts human interests, values and policies — it also evaluates, promotes, endorses or rejects them. The predicament of economics and all other social sciences consists in their failure to acknowledge honestly their value orientation in their pathetic and inauthentic pretension to emulate the natural sciences they presume to be value free.
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By the Kaldor-Hicks criterion, a public policy is judged to enhance economic efficiency and overall social welfare — and therefore is to be recommended by economists to decision-makers — if those who gain from the policy could potentially bribe those who lose from it into accepting it and still be better off (Kaldor), or those who lose from it were unable to bribe the gainers into forgoing the policy (Hicks). That the bribe was not paid merely underscores the point.
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In applications, the Kaldor-Hicks criterion and the efficiency criterion amount to the same thing. When Jack gains $10 and Jill loses $5, social gains increase by $5, so the policy is a good one. When Jack gains $10 and Jill loses $15, there is a deadweight loss of $5, so the policy is bad. Evidently, on the Kaldor-Hicks criterion one need not know who Jack and Jill are, nor anything about their economic circumstances. Furthermore, a truly stunning implication of the criterion is that if a public policy takes $X away from one citizen and gives it to another, and nothing else changes, then such a policy is welfare neutral. Would any non-economist buy that proposition?
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Virtually all modern textbooks in economics base their treatment of efficiency on Kaldor-Hicks, usually without acknowledging the ethical dimensions of the concept. I use these texts in my economics courses as, I suppose, do most my colleagues around the world. But I explicitly alert my students to the ethical pitfalls in normative welfare economics, with commentaries such as “How Economists Bastardized Benthamite Utilitarianism” and “The Welfare Economics of Health Insurance,” or with assignments that force students to think about this issue. My advice to students and readers is: When you hear us economists wax eloquent on the virtue of greater efficiency — beware!