On philosophical and economic illiteracy

As I may have mentioned, I’m in the Netherlands this week, giving a paper at an Ethics and Economics conference in Utrecht. My paper (here) starts out by belabouring some of the issues that were raised by N. Gregory Mankiw’s much-derided attempt to defend the incomes of the top 1% (here). There was a huge amount of criticism piled onto Mankiw in the wake of this, but one of the things I noticed was that few economists challenged the most problematic feature of his argument – namely, that it is based on the zombie idea that paying workers according to their “marginal productivity” is equivalent to paying them the actual product of their labour, and therefore corresponds to some pre-theoretic concept of what they “deserve.” (According to this view, the marginal productivity theory of wages provides the foundations for a moral justification for the distribution of income under capitalism.) This is an argument that was bandied about a lot in the early 20th century (and given its most spirited defence by John Bates Clark in his 1899 book, on The Distribution of Wealth), and is almost universally regarded as having been defeated.

Unfortunately, there is no single piece of work that sums up what is wrong with the view (i.e. “wage = marginal productivity = worker’s contribution = moral desert”) in a convenient way. What happened, as far as I can see, is that people just chipped away at it from various directions. More importantly, the most influential economists on the right realized that the argument was dangerous, because it held the market up to an impossibly high moral standard (by generating the expectation that the wages of labour should in some way correspond to what workers morally deserve to earn), and since markets actually have no tendency to equate wages with desert, insisting that desert is a relevant criterion when it comes to assessing an economic system is basically a recipe for converting people to socialism. So both Friedrich Hayek and Milton Friedman spent some time heaping scorn on the idea that desert is either a useful or relevant concept when it comes to the moral assessment of markets. As a result, most people just let the argument drop, figuring that if even Hayek and Friedman could see the problems with it, then it wasn’t worth spending too much time refuting. But apparently not! So the initial impetus for my paper was just to provide an accessible summary of the arguments against the idea that “marginal productivity” generates any plausible conception of desert.

The marginal productivity view is actually what provides the deep structure of Mankiw’s argument. Unfortunately, many people got distracted by some of the more “surface” features of the view, including the bizarre misreading of Rawls that occurs in his paper. This is actually something that I want to comment on. In the paper, Mankiw uses the old eyeball-lottery thought experiment as an argument against the difference principle – a move that will immediately strike political philosophers as weird, since this argument is normally presented as an objection to utilitarianism. Furthermore, it obviously doesn’t work as an argument against any form of contractualism that limits the scope of the principles of justice to the benefits of cooperation. So for Mankiw to deploy the argument against Rawls suggests that he somehow missed the fact that Rawls is a contractualist – or else failed to appreciate the significance of that fact. This implies, in turn, that he read through all the passages of A Theory of Justice critical of utilitarianism (like the stuff about not respecting the “distinctness of persons”) and somehow failed to grasp the import of any of it.

There has, as a result, been a lot of tut-tutting among political philosophers about the astonishing incompetence on display in Mankiw’s paper. After all, if an undergraduate in a first-year philosophy class were to have written this in a paper, one would be hard-pressed not to give it an F, for having failed to grasp the most elementary feature of Rawls’s view. Indeed, encountering such an egregious error in an undergraduate paper, the most plausible explanation would be that the student had not read the book. Thus there has been some rather predictable astonishment that a Harvard faculty member could commit such an error, or that it could find its way into a refereed journal.

Anyhow, Andrew Lister recently pointed me to an even more outrageous “reading” that Mankiw provides of another classic of political philosophy, this time of Robert Nozick. In an essay that I had previously overlooked (here), Mankiw writes the following:

Let me propose the following principle: People should get what they deserve. A person who contributes more to society deserves a higher income that reflects those greater contributions. Society permits him that higher income not just to incentivize him, as it does according to utilitarian theory, but because that income is rightfully his. This perspective is, I believe, what Robert Nozick, Milton Friedman, and other classically liberal writers have in mind. We might call it the Just Deserts Theory.

Whoa! Andrew has a done a careful analysis (here), explaining how Nozick and Friedman most emphatically did not have anything like a just deserts theory “in mind.” Just to make the most obvious point, the “just deserts” theory is an example of what Nozick called a “patterned” conception of justice, and the main point of Anarchy, State and Utopia is to reject any such conception. So again, if an undergraduate were to write on an exam that “to each according to his desert” is what Nozick had “in mind,” one would be hard-pressed not to give in an F.

Okay, cue the scandalized denunciations. It is a bit depressing to think that one of the most prominent economists in America could fail so completely to grasp what was at stake in what are arguably the two most important works of 20th century political philosophy. I mean, is what we do really that difficult? I think the most plausible explanation is that Mankiw is committing something like what Tyler Cowen calls the “fallacy of mood affiliation” — assuming that all those whom he finds politically sympathetic must believe what he believes, and that all those whom he finds unsympathetic must believe things that he rejects.

Anyhow, lest any of us get too carried away in denouncing the philistinism of economists, I think it is worth pointing out that many prominent philosophers have committed errors that are even more egregious, with respect to their understanding of undergraduate economics. (The problem is, if anything, even worse, because of the fashionable tendency to dismiss all of economics, on the grounds of methodological quibbles, particularly with regard to the underling action theory.) It is worth remembering, for instance, that the debate over “global justice” was dominated, for at least a decade, by a view that presupposed a theory of economic development that was, not just mistaken, but ridiculously so. Charles Beitz probably bears most of the blame for this, for having written that:

Some areas are rich in resources, and societies established in such areas can be expected to exploit their natural riches and to prosper. Other societies do not fare so well, and despite the best efforts of their members, they may attain only a meager level of wellbeing because of resource scarcities.

This idea got picked up and further popularized by Thomas Pogge, leading to an incredibly misguided debate on global justice — wasting untold amounts of time of people who should have known better —  all based on the presupposition that the major source of inequality in the world involved unequal distribution of natural resources. Again, if an undergraduate were to write this on an exam in an introductory economics class, the instructor would be hard-pressed not to give it an F.

This episode should be enough to inspire some humility among philosophers. It also raises a more general point about interdisciplinarity. I know that interdisciplinarity has been a big trend in higher education for the past two decades, and most people are sick of hearing about it, but there is an important point to be made. The sort of incompetence that is on display in these examples really is quite scandalous. Furthermore, by the time that university professors get their first job, most of them have become effectively unteachable – they are simply no longer open to the possibility that they may not know, or may have misunderstood, anything of importance. So you really do have to get to people earlier on in their education, like with PPE (politics, philosophy and economics) undergraduate programs.


On philosophical and economic illiteracy — 1 Comment

  1. Great post. What is your take on Rawls economically? What do you think he got right, and what do you think he got wrong?