Efficiency

I talked in the summer about my goal of integrating a broad welfare economics component into Econ 101. I had at best a qualified success. The biggest challenge was the ubiquity of the efficiency metric in the 101 canon.

All disciplines need a purview, especially when they are as endlessly broad as the modern discipline of economics. What is the fence around economics? The concept of efficiency is a candidate. The concept of wealth is another. The methodology of the rational choice paradigm is still another.

The deep question at hand, then, is whether to present economics as the study of efficiency, as we define it (encompassing, for example, surplus maximization and dollar utilitarianism), while acknowledging that we are leaving other important considerations aside, or whether to choose another purview and keep a variety of ethical considerations explicitly in play alongside the topics of the course.

This semester, we did do work on ethics, evaluation, social welfare, and the historical links between moral philosophy and political economy very early on in the course, before we got to any material other than a bit of rational choice methodology. This went reasonably well, particularly since it of course links well to the broader liberal arts curriculum, meaning that there was a good amount of shared understanding in the room to build from.

And yet I found it quite difficult to try to maintain ethical perspectives beyond efficiency during the full semester. Part of the reason is that I was continually fighting the textbook version of the material (both the literal textbook and the “received wisdom”) that is so well-established and standardized. Another is that I needed, as always in teaching, to present ideas that are sufficiently narrow to be properly digestible. When there is a lot of ground to cover, a unifying idea like efficiency is a very helpful narrowing tool. It’s productive and useful to hammer home the recurring idea of deadweight loss, for example, and so other ideas sometimes end up on the back burner.

The most significant drawback to the efficiency-only model, though, is that it left me frustratingly little space to talk about systematic differences in outcomes in the actual economy. Data on the distribution of wealth, income, health outcomes, and the cost of education yielded some of the most effective moments of the semester, but they felt disconnected from their intellectual context—almost un-economic—because I was not diligent (or prepared) enough to repeatedly temper the textbook obsession with efficiency with the early grounding that we had in ethical concepts.

I feel like I understand a little better (here close to James Kwak’s concept of “economism“) how it is possible to walk away from an economics education holding the belief that differences in outcome exclusively reflect differences in ability or effort. This gets back to the varied evidence that studying economics is correlated with dollar utilitarian ethics, which I think about almost obsessively—maybe even more so now. Yes, we can talk about the importance of endowments and whatnot, but I think we are selling short reality when we focus on efficiency.

I think we desperately need a kind of economic intersectionality. Since the implications of an efficiency focus are not separable from either the implications of other ethics or undeniable structural aspects of the present reality of the world, efficiency is not a focus but a false portrait. It doesn’t illuminate a specific aspect of reality, leaving other aspects aside, but instead presents an alternate reality. It is not complementary to the domains of other social sciences, but antagonistic to them, because of the non-separability problem.

The status quo in theoretical economics has been not to “do” identity, beyond fringe subfields. There are costs and benefits. Treating everyone as interchangeable except for their preferences and endowments is an immensely principled, powerful, and useful way to think about some questions. But it can be painfully limited. It leaves economics increasingly out of touch with other persuasive fields of contemporary thought, and increasingly isolated from policy debates throughout the political spectrum. Economics can and will have many useful things to say about inequality, race, and gender. I worry now that the near-exclusive focus on efficiency at the freshman level obscures these possibilities, and all the more so when we face classes where only a minority will take many more economics courses.

Next time around, then, I will try to consciously connect the theoretical concepts of the principles canon to thought experiments and data on the likely identity of the model-people. I do still think that insisting on welfare economics first is a valuable move, but this semester it may have been too much “early” and not enough “often”.

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