Economics and ethics for a rational politics

People often ask me why I started a master’s study in policy economics after finishing two PhD’s in natural sciences and in moral philosophy. I think that economics, ethics and science are three important areas of research for a rational politics. Rationality means accurateness in beliefs, effectiveness in means and consistency in ends. Science deals with the first kind of rationality (epistemic rationality), economics deals with the second kind (instrumental rationality) and ethics deals with the third (axiological rationality).

During the recent Belgian and European elections, I realized how much our political parties are driven by irrationalities. Interestingly, we can roughly say that conservative right-wing political parties are too irrational about ends, whereas progressive left-wing political parties are too irrational about means. Therefore, the combination of good economics and ethics is crucial to improve the rationality of our political decision making.

What are ethics and economics?

Ethics is the study about the best (optimal) choices of ends (such as moral values), economics is the study about the best (optimal) choices of means (such as technologies). Both disciplines face two fundamental questions:

  • Procedural (about strategy): how to make the best choices of ends/means?
  • Substantive (about content): what are the best ends/means?

The first fundamental ethical question: how to make the best choices of ends?

To make good choices of ends, we need to avoid unwanted arbitrariness. Unwanted arbitrariness means making a choice arbitrarily (i.e. without following a rule) whereby the consequences are unwanted by at least one individual (i.e. they cannot be consistently preferred by everyone). This can be translated to the most fundamental principle in ethics: if you make a choice, you have to be able to give a justifying rule of which you can consistently want that everyone follows it in all possible situations.

A good procedure to make the best choices of ends for society, is a rational democracy or futarchy, where political parties and representatives represent moral values such that people can vote on values, but discriminatory and antidemocratic parties and candidates should be excluded from the elections. Democratic voting procedures can be improved further by quadratic voting and approval voting mechanisms. Such democracy is a direct consequence of the principle to avoid unwanted arbitrariness: in non-democratic systems, there is always an arbitrary group of individuals who are excluded from political decision making or who have less voting power than others, and those excluded people cannot want that exclusion. For example a dictator arbitrarily excludes the rest of the population and a patriarchy arbitrarily excludes women from voting.

However, when it comes to procedural choices of ends, conservative right-wing parties often have irrational strategies that include discrimination. This can be seen at the extreme right, with its ethnocentrism, racism, sexism and other kinds of discrimination. These extreme right-wing parties are often antidemocratic. But also on the center-right we often see unwanted arbitrariness in party positions.

The second fundamental ethical question: what are the best ends?

In recent years, a lot of psychological research has been done about moral foundations (Jonathan Haidt) and the values of progressives and conservatives. Basically, we all value ends (moral foundations) such as well-being, happiness, honesty, care, safety, protection, fairness and justice. Progressive left-winged political parties also prioritize environmental sustainability (intergenerational justice), freedom (liberty) and diversity. These values are legitimate, because they do not necessarily contain unwanted arbitrariness.

But conservative right-wing political parties often include irrational ends such as group loyalty, (religious) authority, tradition and purity. These ends are irrational, because they contain unwanted arbitrariness. There are many groups, religions and traditions so why choosing this particular group, religion or tradition over another? Consider nationalism: why should this nation be more important than another? And why should loyalty or patriotism be exclusively towards people in your nation and not in your street, town, province, state or continent? With group loyalty, one arbitrarily picks a group and exclude other individuals from this group. With religious authority, one arbitrarily picks a leader or text book from an arbitrarily picked religion. With respect for tradition, one arbitrarily picks a practice that was common in an arbitrarily picked time period. With purity, one can arbitrarily pick one of the many interpretations of this ambiguous concept and declare that an arbitrarily chosen practice (such as gay sex) is impure. With tradition, one can arbitrarily pick a point in history and a certain region and declare that the common practice in those days counts as the real tradition that should be preserved. There are no universal rules that dictate which practices counts as traditional or impure. Tradition and purity are often related to symbolic values, and one can argue indefinitely about symbolisms.

The first fundamental economics question: how to make the best choices of means?

Economics includes the study of mechanisms that allow us (individuals, consumers, producers, governments,…) to make the optimal choices of means. These mechanisms can be market mechanisms. For example, in rational democracy or futarchy, we can implement prediction markets such that people can bet on beliefs. This market mechanism allows us to improve the accurateness of beliefs (the quality of valuable information). We can also increase the set of means, through technological research. Market mechanisms such as patent systems and pay-for-performance impact funds (e.g. the Health Impact Fund) and other economic mechanisms (e.g. government subsidies) create incentives to advance technological research and development (see for example this analysis about the importance of funding R&D for clean energy to avoid climate change).

However, when it comes to procedural choices of means, progressive left-wing parties often have irrational strategies or procedures. One clear example is extreme left communism, where centralized decision making procedures and the absence of price mechanisms and private property rights (private ownership of production means) creates the wrong incentives. This destroys productive capital and decreases social welfare. Left-wing parties often have a resistance against corrected market mechanisms (corrected for market failures such as externalities, asymmetric information,…), although such market mechanisms, through the price mechanism, can improve the quality of valuable information about costs and benefits (such that better decisions can be made and more preferences can be satisfied at lower costs) and the alignment of incentives (such that individual preferences become aligned with social welfare and people automatically choose what is best for social welfare).

 

The second fundamental economics question: what are the best means?

Next to the question how to make optimal choices of means, economists also study what those optimal means are. This requires cost-benefit and cost-effectiveness analyses. All the benefits (for everyone involved) and all the costs (including opportunity costs, sacrificed time, prices of technologies,…) should be compared.

Because right-wing political parties often have irrational ends such as ambiguous moral values, it is difficult to say whether they choose the best means to reach those vague and ambiguous ends. Left-wing parties on the other hand have clearer ends, so the effectiveness of the chosen means can be studied. But now it becomes clear that left-wing political parties often choose irrational means, i.e. ineffective measures that can even backfire. Examples include the support for organic farming, fair trade, taxes that create huge deadweight losses (economic inefficiencies), and the resistance against free trade, globalization, nuclear energy,…

Summary

Ethics studies how to make the best choices about ends and what those optimal ends are. In this area, conservative, right-wing political parties are often irrational: their ends or moral values often contain unwanted arbitrariness. Economics studies how to make the best choices about means and what those optimal means are. In this area, progressive left-wing political parties are often irrational: their chosen means are often ineffective or sometimes even counterproductive.

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2 reacties op Economics and ethics for a rational politics

  1. michelbauwens zegt:

    dear Stijn, interesting article and views, but I think you are really wrong about the social welfare under the soviet systems. I am not in favour of them, and they had huge problems, including vicious state repression etc.. but they actually realized huge advances in social welfare; until the sixties about 3 times as fast as the western countries .. if they did not have at least some virtues, you can’t explain the nostalgia for it amongst the adults who lived in these systems. You might by the way be interested in the work of the P2P Foundation, which combines commons-based infrastructures, regenerative market mechanisms, and enabling ‘partner state’ functions

    • stijnbruers zegt:

      Thanks for the comments. I have some remarks about the soviet systems
      1) One concern is the lack of reliable data about former soviet economies. See e.g. this interesting post about capitalism and socialism on the effective altruism forum: https://forum.effectivealtruism.org/posts/ktEfsoGfBFGsaiY46/overview-of-capitalism-and-socialism-for-effective-altruism-1 I quote: “On the other hand, empirical analysis of socialist regimes is actually likely to be over-optimistic because they have typically been autocracies, which deceive their audiences (Gregory 1990, Kornai 1992, Martinez 2019). American economics textbooks systematically overestimated Soviet growth during the Cold War (Levy and Peart 2011). Cuba’s official statistics are notoriously unreliable (Salazar-Carrillo and Nodarse-León 2015, Berdine et al 2018).”
      2) Even if the USSR had a high rate of growth for several decased, there seems to be a general consensus among economists that this growth was not sustainable. The transition from agriculture to industry could boost the economy strongly, even with bad central planning. They were picking low hanging fruit, but the communist system was not able to deal with picking high hanging fruit, so it eventually collapsed. Compare this with the capitalist systems in the west: they started a transition towards industry much sooner (in the 18th and 19th centuries) and they still survived into the 21st century.
      3) The USSR growth rate before the sixties cannot be compared with the EU and US growth rates in that same period, because the EU and US had already made its transition towards industry long before the Russian revolution. So the strong USSR growth rate should be compared with the EU and US growth rates in the early industrial revolution. But even then, that comparison is not correct either, because the USSR had an advantage during its transition towards industry: it could leap-frog, using the technologies already developped by the west, so they could skip a lot of research and development. So the correct comparison would be the soviet union with communism versus the hypothetical, counterfactual soviet union with a capitalist system such as in the EU or US.
      4) The nostalgia is not a good indicator, because the older people have a nostalgia bias (rosy retrospection https://en.wikipedia.org/wiki/Rosy_retrospection). For example, older people may believe that there was less violence in their youth, although the data clearly say the opposite.

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