What Economics Can’t Tell Us

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One of the more difficult lessons to teach economics neophytes — and, many times, trained economists — is that economic theory cannot say anything definitive about subjective statements, such as what’s better, good, bad or worse. Let’s try a few examples to make the point.

Cabernet sauvignon wine is better than fume blanc. Turkey is better than pork. Matter in the solid state is better than the plasma state. Each of those statements begs the question: Where’s the proof? With subjective statements such as those, disagreements can go on forever. It’s simply a matter of personal opinion. One person’s opinion of what’s better or worse is just as good as another’s.

Contrast those statements with objective ones, such as: Water is 2 parts hydrogen and 1 part oxygen. Scientists cannot split the atom. The distance in degrees from the equator to the North Pole is 90. With positive statements such as those, if there’s any disagreement, there are facts to which one can appeal to settle the disagreement. For example, if one person says scientists can split the atom and another says they cannot, a trip to Stanford’s linear accelerator to watch atoms being split settles the matter. However, if you say fume blanc is better than cabernet sauvignon and I say cabernet sauvignon is better, our disagreement can go on forever because there are no facts or figures to which we can appeal.

A useful clue as to whether a statement is subjective is the use of words such as should, ought, better and worse. I tell my students that though it’s important for thinking properly to know whether a statement is subjective or not, by no means do I suggest they purge their vocabulary of subjective statements. Subjective statements are very useful in fooling others into doing something you want them to do; however, in the process of fooling others, one need not fool himself. For example, President Barack Obama said that college is “an economic imperative that every family in America should be able to afford.” There’s absolutely no evidence to support such a claim, but it’s a good way to trick others into paying for someone else’s education.

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  • itfitzme

    Science can survey individuals wants. What fullfills those wants is better then what does not. Perhaps, for consistency with economic terminology, we may simply sue "utility". If the utility of A is greater then the utility of B then A is better then B.

    There is a standard test in the certification of electronic equipment. It is a test for flicker, the effect that equipment has on lighting on the same circuit. A standard bulb of standard brightness in a standard room is made to flicker at varying rates. People are asked, "does this suck". And the measure of to much flicker is obtained by survey.

    So yes, science can answer the question of what is better. And as such, so can economics. All sciences begin with axioms. For economics, the most basic axiom is that alive is better than dead. Even in more basic terms, science can answer the question of whether 120V is better then 240V, when it comes to being dead or alive. The anwser is 120V.

    The issue that arises in economics is that some people don't care about what is better for others. They only care what is better for themselves. But that is easily resolved. a) Economics is a social science, not an individual science. b) If you don't care about others, others are not obligated to care about you. What is better for you becomes irrelevant. They can, they just aren't obligated.

    "Better" simply optimizes average utility and it is measurable. All that is required for science is that it be measurable. All you have to do is ask people, "Is this essential to you?" And if cars, cell phones and running water optimize society's economic utility, then they are essential.

    • ebonystone

      Just because something is measurable doesn't make it science. Nixon got over 47 million votes in 1972, about 18 million more than McGovern. His percentage of the vote was one of the highest ever, so I guess that proves he was one of our greatest Presidents. Science proves it!
      For years, Chevrolet was the best selling car in the world. So I guess that proves it was the best car in the world. Rolls-Royce, stand aside!

    • eleutherophilia

      Suppose a millionaire wants a Monet painting and a homeless man wants some hard liquor.

      Plase quantify in a value-neutral way the relative utility of each want being satistied. To really impress me, use cardinal numbers.

      Now, if you can't do it in this simple case to the general satisfaction of everyone, what are the prospects for your alleged science of objective utility measurement applied to society as a whole?

      Not high, are they?

  • Edisa

    Because God exists and is totally fair, standards exist declaring human beings as equals with each other in God-given rights before Him. Utility alone is not enough for making right decisions, because utility is subjective–based upon the definitions of the persons in power. Utility as a standard enables corruption in power. Because a good God exists, right decisions are possible and can be objective rather than subjective. In fact, people are responsible before a good God to do their best to approximate right decisions and to treat one another with fairness–as they would wish to be treated. Equality is reciprocal. This includes avoiding superficial reasons to reject someone seeking employment, and avoiding a tiered society of unequally applied laws based on superficial differences. Individual equality before the law is not mere subjectivity. It is an objective good, worth seeking to preserve, and worth using as a plumb line for appropriateness in law and practice. The freedoms we appreciate in practice are dependent upon this plumb line–and losing such an ideal will result in loss of freedom eventually, as people forget the traditions that were built using the plumb line.

    • mrbean

      Wealth, in a free market, is achieved by a free, general, “democratic” vote—by the sales and the purchases of every individual who takes part in the economic life of the country. Whenever you buy one product rather than another, you are voting for the success of some manufacturer. And, in this type of voting, every man votes only on those matters which he is qualified to judge: on his own preferences, interests, and needs. No one has the power to decide for others or to substitute his judgment for theirs; no one has the power to appoint himself “the voice of the public” and to leave the public voiceless and disfranchised. Now let me define the difference between economic power and political power: economic power is exercised by means of a positive, by offering men a reward, an incentive, a payment, a value; political power is exercised by means of a negative, by the threat of punishment, injury, imprisonment, destruction. The businessman’s tool is values; the bureaucrat’s tool is fear.

  • ebonystone

    Well, you ocnvinced me!