EE and Distributive Justice

There are, broadly speaking, two types of justice in the Western canon. Commutative justice is concerned with the nature of transactions, of fair dealings, of proper recompense for injury. Commutative justice is justice in action, of change. Distributive justice is concerned with the nature of endowments, of wealth, of access to opportunity. Distributive justice is justice at rest, in cross-section.

Much moral miscommunication arises because of either the conflation of these two or a stubborn refusal to consider anything more than one at once. You might say that part of the EE project is to encourage Distributive Justice types to consider that their favored interventions have commutative justice implications, which may over time worsen distributive consequences.

It's probably fair to say that, at least compared to other social science disciplines, economics is concerned overmuch with commutative justice. Or perhaps it's more accurate to say that economics is relatively silent on distributive justice. There's something near-cultlike about the Paretian criteria embedded in our foundational theorems, and when you make value-free, true claims such as "at the Pareto frontier, you can't make anyone better off without making someone else worse off" you risk sounding like a champion of injustice to someone who believes in a commanded-by-providence duty of charity.

I generally attempt to square the circle by harping on the "mutually" part of "mutually beneficial trade." It's hard to make folks better off by denying them opportunities for exchange. I think I should also expand that by saying it's hard to make folks better off by denying them opportunities for charity.

Charity begins at home, always and everywhere. Part of the problem of everything-as-politics is that it shifts folks' attention on the margin away from the home, away from the community, away from the comfortable Dunbar's Number sphere towards the affairs of a nation of over 300 million souls. Do you know where your state-managed charitable donations go? Do you care? Or if you're on the other side, do you know who signed your checks? Do you have fellow-feeling? Gratitude?

Adam Smith was wise enough to point out that we can still get our daily bread without the benevolence (or, indeed, the beneficence) of the baker, but he was also careful enough to make this a de minimis observation: malevolent or indifferent bread will keep you alive, but it will sicken the soul.

What do we gain by foisting every little calculation on the petty bureaucrats in DC? What do we lose by ignoring the neighbors on our streets? Is this a fair trade? Is this a euvoluntary exchange?

GDP vs EE IV: Metric or Target?

Ignore for a moment some of the shortcomings of GDP accounting. Consider instead its role. The positivist, ecological economist sees the "circular flow" model with clinical detachment: a cash-flooded Venturi nozzle, measuring the force and vigor of commerce. She marks and notes relationships between suites of external factors that influence and may in turn be influenced by the adsanguinity of the economy. But even with close scrutiny, she hews ever close to the Lucas Critique.

The normative, engineering economist sees instead GDP as a challenge. Poring diligently over periodic 10-K reports, he sketches up "potential GDP" artifacts using sophisticated econometric techniques based on historic data and cautious assumptions about future behavior. In the specifications of this economist, GDP is a policy goal, and its shibboleths are legion: aggregate demand, targeting, stimulus, RBCT, so on, so forth, & al. In this land, the conductor leads the orchestra, the coach heads the team, the coxswain skippers the gig.

These two approaches are not wholly uncomplementary, but they do reflect deeply different default views about the relationship between the citizen and the state. The first approach yields to individuals the residuals of their actions. If you want to work, that's great: you get paid for producing something others want. If you want to stay home and putter in the garden, that's also fine since it's you that bears the costs. In contrast, the marginal couch potato in the engineered world imposes external costs: each hour of leisure, each minute of factory downtime, each ounce of excess inventory takes away from our collective hale and well-met productive merit.

When GDP is an end, anything you elect to do that doesn't contribute to measured national prosperity imposes a negative externality.

The lemma to this is, of course, almost nothing is euvoluntary. Get hurt in a skydiving accident? Your foregone productivity is a social cost. Crack your skull open on the pavement because you're too stupid to wear a helmet? Your recuperation means time away from work. Shame on you, worker. Like to stay at home and get high? You're a drag (heh) on the economy, you loathsome parasite. Internal costs are cleverly inverted here, and even when no other possible collective action problem can be identified, this "lost productivity" is an easy donkey to flog. An orchard of meddlesome political art is too soon then to blossom.

Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things. All governments which thwart this natural course, which force things into another channel or which endeavour to arrest the progress of society at a particular point, are unnatural, and to support themselves are obliged to be oppressive and tyrannical.

-Adam Smith via Dugald Stewart, Lectures in Edinburgh as noted in the introduction to WoN.

For Whom The School Bell Tolls

Arnold Kling has a great article at the Library of Economics and Liberty on a common epistemic blind spot that conflates school with education. He drops a great line in the fourth paragraph that neatly hooks a codfish circling the tidal basin of Misapplied Scope in the Sea of Almost Euvoluntary Exchange.

[T]he watchword for many conservatives and Republicans is "accountability," which in practice appears to mean top-down control over schools using test scores as a metric.

"Compared to what" is the verbal round economists have chambered at all times, with the hammer cocked and the safety off. "To whom" ought to sit ready in the holdout pistol, particularly when the discussion is about responsibility and accountability. To whom is a vendor accountable? Who bears responsibility for so-called externalitites?

In the case of education, it strikes me as likely that "to whom" educators ought be accountable is parents and students. It's kind of peculiar that the political elite is unwilling to allow people who are empowered to participate in the process of electing them the simple sovereignty of determining appropriate educational standards for their kids. If they're so incompetent at this important task that is so near and dear, why trust them with electoral franchise?

Equal protection under the 14th Amendment unless you're poor, I suppose.

But this idea extends way past mere education. We've got a Uniform Commercial Code and an ADA and OSHA and an EEOC and many more agencies that usurp the accountability implicit in a euvoluntary exchange and put it on a fast train to Union Station ( that's in DC, for those of you who don't live in the area). Thanks to the ubiquity and universality of these government agencies, should we assume that in expectation, no commercial transaction is euvoluntary? Or have we fireless smoke in this instance? Do government agencies provide some other important function other than to shift the burden of accountability from firsthand bargaining parties to third parties with no stake in the outcome of the trade and a set of incentives that may or may not be well-aligned with the outcomes of the transaction.

Is there any reason, pardon my French, to assume that anyone in the National Education Association gives two furry craps about Fort Wayne, Indiana second-grader Kimmy P. Chizzle's progress with spelling, particularly after adjusting for her innate ability, and exceptionally so when compared to the people that actually know and care about her! Education is no more about aggregate test scores than economic performance is about GDP per capita.

Ditto for all these other things. Economics tells us to do stuff where the marginal benefit exceeds the marginal cost. You can type this with six keystrokes (assuming you hold the shift key down the whole time) on a standard QWERTY keyboard. Actually performing the calculus of decision is hard without local knowledge and impossible without relative prices. Heads of DC agencies have neither. It seems dreadfully irresponsible to assume the appropriate scope of accountability is national, especially in a country whose contiguous landspace spans four time zones and hosts more than 300 million people.

Accountability is a vital element in protecting the euvoluntarity of exchanges. It assuages ex post regret, promotes prudence in contract, and cements the socially beneficial bonds of trust and reciprocity. Blithely reassigning accountability without extremely judicious use of the precautionary principle is reckless.

Meta-EE and the Constitution Part 7: Ninth and Tenth Amendments

[Market-preserving] federalism, people. A limited central government. The ninth amendment promises:

The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

 And the tenth:

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

 The author of these constitutional sentiments, particularly in conjunction with the enumerated powers of Article I, Section 8, understood well enough issues of scope. Consistency in standards for weights and measures, uniform coinage, patent protection, national defense... these things may all plausibly contribute to contractibility. That is to say, common sets of standards liberate merchants and their customers from having to make nuisance corrections for state-to-state differences in tonnage measurements or specie error. Folks can plan more suitably when they know their goods won't be expropriated by bandits, domestic or foreign. Uniformity in standards extends the commercial foundation beyond simple, parochial, short-duration bargains.

You don't have to be F.A. Hayek to understand that not everything scales as well as uniformity in excise. If you're like me, you may wonder under what theory of wages should midtown Manhattan have the same minimum wage as Spearfish, South Dakota. You might also wonder what relevance political borders have to education, health, housing, occupational safety, or agriculture. The 9th and 10th amendments can be interpreted as a lens for government, allowing the central government to focus clearly on those tasks for which it is best suited.

When honored, the strong, focused central government amendments IX and X create is more meta-euvoluntary than a sprawling, porcine leviathan set to suckling ravenous cronies and hellbent on engineering ever more baroque sluice boxes to divert power and treasure into the grasp of beltway elites.