David Runciman wrote a brief essay http://www.lrb.co.uk/v37/n10/david-runciman/notes-on-the-election in the LRB about the results of the British election. I want to focus on one peculiar passage. Runciman observes:

The two countries that have seen the greatest rise in inequality over the past couple of decades are Britain and the United States. Both have a first-past-the-post system designed to offer a clear choice between two main parties. Yet whichever of the two parties wins, the drift towards inequality has been inexorable.

This is, well, nuts or maybe just inexplicable coming from a political thinker of Runciman’s reputation. It tells us nothing about why inequality has accelerated or what might be done to mitigate it. Runciman conflates the British and US political systems because they both have “first past the post” voting—but he somehow neglects to then distinguish them because the US has a presidential model with separation of powers across three branches of government and a widely dispersed federalism, and the UK has a parliamentary model. Which means, of course, as nearly every knowledgable political writer has been screaming during the this time of divided US government, that the US system does not at all offer a “clear choice between two main parties.” In fact, as Juan Linz famously pointed out, in a presidential system two major parties or coalitions can both claim legitimacy by controlling a respective branch of government. (And thus the US can have, simultaneously, two warring “Prime Ministers”, eg, President Obama and Speaker Boehner.)

The American system offers a decidedly murky choice; Because the congressional party (whose election is spread over three cycles) does not merely oppose, but also obstructs the presidential party, the US way of democracy provides the electorate with no logical party accountability—presidential “failures” can be caused by minority legislative parties because the presidential party only appears to voters—and to Runciman, apparently—to be the governing party, but is not. The US system is really enormously different from the UK system. If Runciman had wished to argue that the Congress, whether controlled by Republicans or Democrats, has, in recent decades, abdicated the making and execution of foreign policy to the president, he’d have a point. But he writes as if clear party control of the levers of American politics was built into the system.

And there’s no need for the whole history lesson here, but that’s exactly how it wasn’t designed in the first place. It was, in fact, designed by people who did not anticipate the development of coherent political parties at all and, in fact, loathed the very idea (even if many of them then proceeded to become rather shrewd party politicians in the next phase of their careers). The whole point, as imagined by men who, with certain important exceptions, were very much determined not to replicate the powers of a monarchy in their fledgling nation, was to create conditions that would force elites to compromise and to limit the power of the propertyless (let alone the slaves) to even enter into the discussion. Compromise between powerful interests, not the clarity of unitary authority, was supposed to occur not only between the branches of government, but also between the national government and those of the states (and between the North and the slaveholding sub-nation of the South). There is absolutely nothing structurally about the American system of government, either in its inception or in its current dissipated condition, that offers voters a “clear choice” regarding domestic politics. (Even the rare historical circumstances that have seemingly given one party or the other effective control, eg, FDR’s already balkanized Democrats for, at most four years in the mid 1930s, in fact allowed a cross-party coalition of reactionaries to make the New Deal for “whites only.” http://www.amazon.com/When-Affirmative-Action-White-Twentieth-Century/dp/0393328511)

Later in the essay, Runciman expresses shock that the purportedly smooth running American political structure has crashed into a ditch like the regional trains that its warring parties of equal legitimacy refuse to fund. He writes contemptuously, comparing the squalid Brits with the squalid Yanks, “It is blackmail and veto power, with small groups clamouring to get what they want from the people in charge. This is the current model of American politics, which for all its premium on clarity and executive power is also extremely messy, with all sorts of minor players holding the big boys to ransom.”

But writers and scholars like Norm Ornstein, Thomas Mann, Jacob Hacker and Paul Pierson (and many many others) have written copiously about how and why divided government does not engender clarity in the current iteration of the American presidential system. Runciman seems wholly unaware of this literature.

Sorry to be so sour, but has Runciman ever read The Federalist? Or Madison, in particular? Or just a good history about the ratification of the American constitution http://www.amazon.com/Plain-Honest-Men-American-Constitution/dp/0812976843? To frame his essay with this spurious comparison made it impossible for me to take the rest of his argument seriously.

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LIBOR for the universities?

by Daniel on May 26, 2015

This is a post I’ve been planning to write for a while, with various other CT members alternately encouraging me to do so, and sternly reminding me that the consequences will be entirely on my own head ;-). It’s based on a point I’ve been making over the last few years to all sorts of friends when they’ve been trying to bait me on the subject of LIBOR, forex and the various scandals of the financial profession.

The point is quite simple. Bankers have had their day under scrutiny. But so have Members of Parliament (expenses scandal). So have journalists (phone hacking). So has the Church (paedophilia cover-ups). So has the BBC (ditto). This isn’t a specific issue about financial sector corruption. It’s a general trend, one of gradual social re-assessment of whether the fiddles and skeletons of the past are going to be tolerated in the future. It’s not that these sectors are especially dirty and the rest are especially clean – it’s just that politics, finance, religion, journalism and broadcasting have, so far, had their day under the microscope. One day, it’s going to point somewhere else. Particularly (because a lot of my friends are academics), one day it’s going to point at the universities. How confident are we that when it does, that they’ll be found pure?

At this point I tend to get either nervous laughter or outrage. Comments boxes don’t do nervous laughter very well, so readers of a ragey disposition might as well skip the details…
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Opportunity cost: a Fabian idea?

by John Quiggin on May 26, 2015

As part of the research for Economics in Two Lessons, I’m looking in to the history of some of the ideas I’m talking about, including Pareto optimality, externalities and of course opportunity cost. I’m undecided as to whether I’ll include this material, perhaps as starred (skip if you feel like it) sections, or in an Appendix. Suggestions on this point are welcome.

My research on the intellectual history of opportunity cost has so far gone no further than Wikipedia, which attributes the term to Friedrich von Wieser, an Austrian economist in both the national (he was Minister for Finance there in 1917) and theoretical senses. Turning to the article on von Wieser, I was surprised to read that he put forward an argument very similar to mine regarding the relationship between opportunity cost and the distribution of wealth

Instead of the things that would be more useful, there are things that pay better. The greater the difference in wealth, the more striking are the anomalies of production. The economy provides luxury to the capricious and greedy, while it is deaf to the needs of the miserable and poor. It is therefore the distribution of wealth that decides what will be produced, and leads to a consumer of a more anti-economic variety: a consumer wastes on unnecessary, guilty enjoyment that which could have served to heal the wounds of poverty. —Friedrich von Wieser, Der Wert Natürliche (The Natural Value), 1914.
It turns out, even more surprisingly to me, that von Wieser was linked to a Viennese group of Fabians.

I’m still trying to digest this, and work out where to go next with it. Can anyone point to useful information about von Wieser?

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A Paris memoir from 1978

by Chris Bertram on May 25, 2015

One thing about the interwebs is that you sometimes get to find out about someone you’ve been disconnected from for years. It happened to me yesterday, when I discovered that the guy who had been my “handler” in Lutte Ouvière had died in 2011 aged 62, following a stroke. I’d noticed that some prominent French administrator had the same name and googled to see if it was the same guy. It wasn’t, but up came the obituary of Denis Robin, comrade Cerdon, and with it a whole bunch of memories of the nineteen-year-old me from 1978.

Back then I had finished school, having taken the Oxbridge entrance exams before Christmas. I therefore had about nine months on my hands and wanted to spend it in Paris, where I had friends (and still do) through a language exchange with a family there. I landed a job as a courier with an agency called the Banque Centrale de Compensation which recorded transactions on the Paris commodity exchange, the Bourse de Commerce. This meant that I spent my days running from our office to the Bourse and to the HQs of the various coffee, cocoa, soya and sugar companies.

I’d long been interested in the French left and had even done a school project on May 1968, sucking up lots of information on the various groupuscules. This was, I think it fair to say, alternately irritating and amusing to my French friends who were stalwarts of the Socialists, then in electoral alliance with the barely post-Stalinist Parti Communiste. After one dinner-table debate they expressed scepticism about whether my money would ever follow my mouth, and I took this as something of a challenge. The following day, when I was making a delivery to the main offices of the Crédit Lyonnais, I encountered a bunch of militants selling Lutte Ouvrière, a Trotskyist weekly newpaper and engaged them in conversation. One of the people there was comrade Cerdon, and I agreed to meet him on the evening of Mayday for a conversation, ideally having joined up with their contingent on the big demonstration. I never found LO demonstrators that day and ended up marching with UNEF, the Communist student union. But we did meet in a café in the Place de la République that evening and began one of a series of long conversations about politics and related matters, the purpose of which was to recruit me to the organization. [click to continue…]

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Fight Racism. Confirm Clarence Thomas. (Updated)

by Corey Robin on May 25, 2015

I’ve been reading Jill Abramson’s and Jane Mayer’s Strange Justice: The Selling of Clarence Thomas, the definitive account of Thomas’s confirmation battle, which came out in 1994. Here are eight things I’ve learned from it. Among the many surprises of the book is how men and women who were connected to the confirmation battle, or to Thomas and/or Anita Hill, and who were little known at the time, would go on to become fixtures of and issues in our contemporary politics and culture.

1. Edward P. Jones, author of The Known World, which won the Pulitzer Prize in 2004, was Clarence Thomas’s classmate at Holy Cross. They had long conversations.

2. Clarence Thomas was head of the Equal Employment Opportunity Commission for eight years. When Bush nominated him to the Supreme Court, Strom Thurmond proudly declared, “I’ve known Clarence since he was head of the Unemployment Commission.”

3. Gary Bauer and Bill Kristol vacationed together at the beach each summer, along with their families. In the summer of 1991, at the Delaware shore, they planned the Christian right’s campaign to get Thomas confirmed to the Supreme Court.

4. Citizens United was formed by Floyd Brown in 1988 in the wake of the failed effort to get Robert Bork onto the Supreme Court. Brown helped make the Willie Horton ad. Getting Clarence Thomas confirmed by the Senate was one of the organization’s first missions. In 2010, Thomas was part of the slim majority that ruled in favor of Citizens United in Citizens United v. FEC. Though several arguments for his recusal in the case were brought up at the time, no one mentioned Citizens United’s contributions to his confirmation.

5. One of the ads pushing for Thomas’s Senate confirmation to the Court featured a photo of Thomas with the headline “To the Back of the Bus!” The copy read:

As the left strives to keep Judge Clarence Thomas from his seat on the U.S. Supreme Court, it’s like forcing blacks to take a seat in the back of the bus. Fight racism. Call your U.S. Senators and urge them to confirm Judge Clarence Thomas.

6. Angela Wright, one of Thomas’s accusers whose testimony was buried by the Senate Judiciary Committee, worked for Charlie Rose when he was a Democratic congressman from North Carolina. [Update: Actually, the congressman Charlie Rose whom Right worked for was not the Charlie Rose of TV fame. My mistake! Thanks to Steve Hageman and Rick Perlstein for the correction.]

7. Kimberlé Crenshaw was part of the legal team advising Anita Hill.

8. Thomas liked to say that his favorite character in Star Wars was Darth Vader.

Updated (May 26)

9. One of the charges levied against Thomas in the hearings was that he had once spoken favorably about the views of Steve Macedo, the Princeton political theorist, who was at the time a conservative (and a professor at Harvard). There was an extended colloquy during the hearings between then Senator Joseph Biden, Chairman of the Judiciary Committee, and Thomas—Utah Republican Orrin Hatch also got in on it at one point—about whether and why Thomas was attracted to Macedo’s views on natural law and property rights.

10. Along with Kimberlé Crenshaw, Janet Napolitano, Obama’s former Homeland Security Secretary, was also part of the legal team advising Anita Hill. Now she is the President of the University of California, where Crenshaw is a professor.

11. One of the leitmotifs of Mayer’s and Abramson’s book is how much Biden botched the Thomas/Hill hearings. From beginning—when Hill’s allegations first came to light—to end, when the Senate voted to approve Thomas, Biden got played, was cowed, caved into pressure from the White House and the Republicans, or simply didn’t care or understand enough of the issue to push for a fuller and fairer investigation of the facts.

12. When Howard Metzenbaum, also on the Judiciary Committee, found out the specifics of Anita Hill’s allegations about Thomas, the Ohio senator said, “If that’s sexual harassment, half the senators on Capitol Hill could be accused.”




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Elizabeth Cotten had an unlikely musical career. As a left-handed young girl she taught herself to play her brother’s banjo. Then she bought a guitar from Sears Roebuck at 11 and proceeded to play it Jimi Hendrix-style, upside-down. After getting married at 17 she basically gave up playing guitar for 25 years, except for occasional church performances. Quite at random, she was hired as a maid by part of the Seeger family—working for Pete Seeger’s dad and the children of his second wife. She picked up the guitar again, and blew everybody’s mind. Mike Seeger (Pete’s half-brother) started recording her and the sessions were made into an album from Folkways Records—Folksongs and Instrumentals with Guitar. Her signature tune “Freight Train” became hugely popular among the folk musicians of the revival of the late 50s/early 60s, being covered by Joan Baez and Bob Dylan among many others.

She started to tour and perform with big names, released another influential record in 1967, Shake Sugaree, and kept touring and playing till the end of her life (January 5, 1895 – June 29, 1987). Her unusual picking style was greatly admired, because it’s totally awesome! People have worked out alternate ways to play the songs that don’t involve playing the guitar upside down and backwards. (John spent two weeks learning “Freight Train” when we were on Martha’s Vineyard last year, causing our children to, in extremis, institute a strict “no Freight Train” policy. Happily, though, now it reminds us of my aunt’s house and all being together with my siblings and cousins, and beach plums, and the creek with its perfect flat wet stones, and the cold Atlantic, so grey.) Her music is distinctive because of the bass lines—the strings sounding the lowest notes were at the bottom of the guitar and so she picks out distinctive tunes on them. The highest string being on top, she sometimes treats the guitar like a banjo—since that’s where the high-pitched drone string is. I just learned reading the wikipedia article that she wrote “Freight Train” at 11!

Her voice is wonderful, but many of her best songs are instrumental only:

I’m having trouble choosing here, “In The Sweet By and By” is beautiful…some songs are painfully short, like “Mama, There’s Nobody Here But The Baby” or “Ain’t Got No Honey Baby Now.” [Which I can’t find a working video of :/ ] 56 seconds? NO. Although Harry Taussig plays a killer version on steel guitar. I’ll close with the topical “Take Me Back to Baltimore.”

My dad is an incredible guitarist, and plays steel 12-string bottle-neck slide, though he removes the second string from the highest two strings, making it 10-string. He also picks in this style—and we are big fans of Ry Cooder who is a master at it. When I was a kid we always had music playing. My godfather played the fiddle and we had plenty of other random musicians at parties, which, in South Carolina through to the late 70s were always two- or three-day affairs. We had a whole crew of Hell’s Angels camped out in the back yard one time. My brother and I would sing, folk songs like “Froggy Went a-Courting.” That’s happiness for me, standing on the front porch catching lizards on the screen, listening to live music and the leathery sounds of the palmetto pushed by the wind, live oaks tossing their heads and their festoons of Spanish moss, my feet slowly blackening with the super-fine dust of mildew that settles inevitably on the grey floor of any screen porch, the sky and the hydrangeas planted around the base of the house and the screen porch ceiling all alike powder-blue, the smell of salt water and marsh and endless joints burning mingled into a perfect sweetness. High tide. Got to be high tide at 2 p.m. with a summer thunderstorm blowing up far across the river. Not low tide and with all hanging breathless and hot, and the mud flats on the sandbar across the river stinking in the sun. Eating cold boiled peanuts and watermelon and drinking sweet tea. Perfect. Except now I’m homesick!

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Sunday photoblogging: Florence scooters

by Chris Bertram on May 24, 2015

Florence scooters

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Irritable Gestures

by Belle Waring on May 23, 2015

I have been a little loath to write this because Freddie deBoer already has a huge beef with our blog for some reason (I’m mean to Jonathan Chait?), but…

Freddie deBoer recently wrote a post denouncing the less-hinged supporters of the proposed TPP, one of whom saw fit to compare Obama’s critics on this issue to the lynchers of Emmet Till. This was obviously an awful thing for Dem politico Allen Brauer to say, and most readers here probably regard both this and the TPP with unified disgust, putting us in agreement with deBoer. [UPDATED NOTE: since many people have found this post unclear (which is obviously my fault), I’m merely noting here that I entirely agree with FDB’s actual political point (and in all likelihood most of you do as well), and quoting the post written the other day to explain how I perceive it with suspicion because of his past remarks. It would be irrelevant and unfair to attack Freddie deBoer on the sole basis of a five-year-old dustup.] Allen Brauer fired back at his critics by high-mindedly calling them “dude-bros and manarchists” and saying he was wrecked after a “tsunami of white tears.” DeBoer correctly calls this bullshit:

Allan Brauer, I would argue, is today’s progressive internet in its purest form. He’s someone who’s learned all of the lessons of how we do things too well…. Do we still have the capacity, as a political and intellectual movement, to argue in a way that’s not entirely based on associating with race or gender in a totally vague, unaccountable, and reductive way?

Solid enough. But—

The stakes are much lower in our cultural writing, but the problem is largely the same: tired, rote arguments and magic words, treated as cutting rebuttals no matter how lazy and uninspired. You use magic words in your work, and no matter how good or bad it is, you’ll get credit for it. And if people criticize you, you just use the magic words against them, too.

UPDATE [which interrupts the post but needs to be above the fold]: as I mention below, I’ve said a metric f#$k-ton of dumb things in internet comments, especially years ago. So I feel a bit uneasy basing my complaint on a comment. If Freddie deBoer would like to say, “I made that comment on Tiger Beatdown when I was irritated and stung, but would retract it if I could,” I’m happy to edit the post to reflect this.
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Draft Preface: Economics in Two Lessons

by John Quiggin on May 23, 2015

Over the page, the draft preface for my book-in-progress, Economics in Two Lessons

I got some great comments first time round, but I can see it would be easier if I presented my drafts in a more orderly fashion, though not necessarily sequential. So, I’ll begin at the beginning. Comments, both critical and favorable, much appreciated.

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Sharing information on student protests

by Ingrid Robeyns on May 21, 2015

Manchester

Students and staff who are occupying and protesting: share information!
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Where are the women in the history of open source?

by Sumana Harihareswara on May 21, 2015

Hi – Sumana Harihareswara here. You might remember me from my April guest post about free/open source software, licensing, and codes of conduct in open communities. In that piece I took a stab at thinking about some useful vocabulary and distinctions that help us understand the political values and intuitions common to those communities. Today I’m considering where we got frameworks that we free software/open source folks often take for granted, and specifically what might have been erased from our intellectual heritage due to sexism.

As a soundtrack to this piece, consider “Erase Me” by Ben Folds Five (off The Sound of the Life of the Mind) and “Whatever You Want” by programmer Vienna Teng(off Dreaming Through the Noise; I recently heard tell that “Whatever You Want” is inspired by the film Office Space, which is amazing.)

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Not changing minds on TPP

by Henry on May 19, 2015

I’m writing a longer post on economists and the TPP for the Monkey Cage, and perhaps another post about the idea of “mood affiliation” for here (short version – I don’t think it at all does what its advocates want it to do) but in the meantime, a specific response to this post by Tyler Cowen. Tyler, partly perhaps as a result of an argument I had with him and Noah Smith on Twitter, argues that:

I’m familiar with studies showing estimated economic gains from TPP in the neighborhood of $1.9 trillion (pdf). Given the past performance of trade models, I am willing to believe that might be an overestimate. So let’s cut those gains roughly in half to say a trillion. (That said, if I understand the Peterson document correctly, they are not even trying to incorporate gains from reallocation on the production side, as might result from comparative advantage or dynamic specialization; in this sense $1 trillion may be a considerable underestimate of the upside.) That is still a sizable sum of economic gain. What would convince me to oppose TPP if is somebody did a study showing the following: when you use a better trade model, use better data, and/or add in the neglected costs of TPP (which are real), those gains go away and indeed become negative.

This is fundamentally the wrong way to think about these models. If as Tyler accepts, thinking about TPP primarily in Ricardian terms is likely to lead one ‘substantially astray,’ then starting from a Ricardian model and stipulating that you’ll lower the expected benefits by half to give your opponents a bit of a leg up, is fallacious. Specifically, it’s a weaker version of the Iraq war fallacy that Daniel identified in his 1 minute MBA.

Fibbers’ forecasts are worthless. Case after miserable case after bloody case we went through, I tell you, all of which had this moral. Not only that people who want a project will tend to make inaccurate projections about the possible outcomes of that project, but about the futility of attempts to “shade” downward a fundamentally dishonest set of predictions. If you have doubts about the integrity of a forecaster, you can’t use their forecasts at all. Not even as a “starting point”.

This isn’t to say that the Peterson Institute model that Tyler is working from is “fundamentally dishonest.” Although Alan Beattie notes that Peterson used to be “notorious for claiming trade deals would create thousands of jobs, cure scrofula and turn base metals into gold,” he accepts that they’ve gotten better under Adam Posen, (also, in fairness to the pre-Posen regime, this). But it’s highly problematic as a starting point for debate. As Jared Bernstein describes the results of the Peterson model in email conversation: “Only in DC-style econ would a number like 0.4% by 2025, derived from a model of a 29-chapter trade agreement that the modelers never saw, be taken seriously (Remember, we can’t accurately forecast monthly jobs numbers—yet we can somehow tell you to count on a miniscule change to GDP 10 years hence).”

I’ll have more to say about these issues in a follow up post. For now, just this. If you’re trying to build theoretical argument, you can reasonably ask someone to provide you with a better theory before you abandon your own. However, if you’re trying to advocate for a policy measure, and you accept that your preferred model is likely to lead people substantially astray, you don’t have any very good warrant for suggesting that this model should still anchor policy debate in lieu of someone coming up with a better one. Far better to admit ignorance (while berating the ignorance of your opponents as you like) and to accept that everyone’s views on the policy (including your own) are likely more the product of political values than dispositive evidence.

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Ken MacLeod seminar

by Henry on May 19, 2015

The posts in the Ken MacLeod seminar, in order of publication:

Farah Mendlesohn, And This, Too is a Romance.

Cosma Shalizi, “The Free Development of Each is the Condition of the War of All Against All”: Some Paths to the True Knowledge.

Sumana Harihareswara, Games, Simulation, Difference and Insignificance in The Restoration Game & The Human Front.

Jo Walton, Helical Construction in the Work of Ken MacLeod.

Henry Farrell, Rationalism and the True Knowledge.

Ken MacLeod, Response.

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Response

by Ken MacLeod on May 19, 2015

Thanks, everyone, for all this. It’s gratifying and somewhat bemusing to have my work given so much thought, and such warm appreciation, from contributors like these, and on a site like this. I’m particularly grateful to those who’ve given my books the great and welcome benefit of their critical attention and/or enthusiasm over many years.

I’ve decided to respond to each in turn, in an order that follows the order of the books referred to: Farrell and Shalizi focus mostly on the Fall Revolution books, Walton takes in the Engines of Light trilogy, Harihareswara deals with The Restoration Game and The Human Front, and Mendlesohn covers everything up to Intrusion. There will be references back and forward—some points raised by Farrell and Shalizi, for example, are better answered in relation to later stories. And in my own life, some events that shaped my early books are only explored (and then obliquely, with much misdirection) in later ones. [click to continue…]

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After a couple of preliminary posts, here goes with my first draft excerpt from my planned book on Economics in Two Lessons. They won’t be in any particular order, just tossed up for comment when I think I have something that might interest readers here. To remind you, the core idea of the book is that of discussing all of economic policy in terms of “opportunity cost”. I’ll update as I go, in response to comments and criticism; this may create some difficulties reading the comments thread, but hopefully the improvement in the final product will be worth it.

My first snippet is about

Pareto optimality

The situation where there is no way to make some people better off without making anyone worse off is often referred to as “Pareto optimal” after the Italian economist and political theorist Vilfredo Pareto, who developed the underlying concept. “Pareto optimal” is arguably, the most misleading term in economics (and there are plenty of contenders). Before explaining this, it’s important to understand Pareto’s broader body of thought, one which led him in the end to embrace fascism.

Pareto and the “libertarian” path to dictatorship

Pareto sought to undermine the version of liberalism that dominated 19th century economics, according to which the optimal (most desirable) economic outcome was the one that contributed most to human happiness1, often (if somewhat loosely( summed up as ‘the greatest good of the greatest number’. Particularly as developed by the great philosopher and economist John Stuart Mill, this is a naturally egalitarian doctrine.

The egalitarian implications of the classical framework reflect the fact that the needs of poor people are more urgent than those of the better off. So, the happiness of the community as a whole all be increased by policies that benefit the poorest members of the community, even if these benefits come at the expense of those who are better off. It follows that a substantial degree of income redistribution will be social desirable and that large accumulations of individual wealth, which contribute only marginally to the happiness of a small number of people are undesirable in themselves, though they may in some circumstances be a by-product of desirable policies.

Pareto’s big achievement, further developed by a large number 20th century economists, was to show that much of economic analysis could be undertaken without invoking the concept of utility. Hence, interpersonal comparisons of utility, which invariably lead to the conclusion that redistributing wealth more equally is beneficial, could be dismissed as ‘unscientific’.

Pareto didn’t stop with an attack on the economic implications of Mill’s approach. Mill’s philosophical framework implied support for political democracy, including the enfranchisement of women. Since everyone’s welfare counts equally in the classical calculus, the political process should, as far as possible, give everyone equal weight.

Pareto reversed this reasoning, arguing that a highly unequal distribution of income was both inevitable and desirable; he proposed what he called a power law, described by a statistical distribution which also bears his name. Pareto’s “Law” may be summed up the 80-20 proposition, that 20 per cent of the population have 80 per cent of the wealth.

The supposed constancy of income distribution implies that any attempt at redistribution must be essentially futile. Even the aim is to benefit the poor at the expense of the rich, the effect will simply be to make some people newly rich at the expense of those who are currently rich. Pareto called this process ‘the circulation of elites’. (Footnote: In his dystopian classic 1984, Orwell has the Trotsky-like character Emmanuel Goldstein present the same idea as the starting point of The Theory of Oligarchical Collectivism. Orwell almost certainly derived the idea from James Burnham, an admirer of Pareto whose work Orwell saw as the embodiment of ‘power worship))

All of this led Pareto to become one of the first advocates of a political position combining an extreme free-market position on economic issues with hostility to political liberalism and democracy. Pareto welcomed the rise of Mussolini’s fascist regime, and accepted and accepted a “royal” nomination to the Italian senate from Mussolini.

Pareto was not really a fascist however. Rather, he developed a version of liberalism similar to that of his more famous successors, Hayek and Mises, both of whom embraced and worked for murderous regimes that had come to power by suppressing democratic socialist parties. Like Pareto, neither Hayek nor Mises can properly be described as fascists – they weren’t interested in nationalism or in the display of power for its own sake. Rather, their brand of liberalism was hostile to democracy and indifferent to political liberty, making them natural allies of any authoritarian regime which adheres to free market orthodoxy in economics. (Fn Supporters of Hayek and Mises commonly describe themselves as “libertarians”, but their alliance with brutal dictators makes a travesty of the term – they have been derisively described as “shmibertarian”).

Pareto optimality

Now back to “Pareto optimality”, and why it is such a misleading term. In ordinary language, describing a situation as “optimal” implies that it is the unique best outcome. As we shall see this is not the case. Pareto, and followers like Hazlitt, seek to claim unique social desirability for market outcomes by definition rather than demonstration.

If that were true, then only the market outcome associated with the existing distribution of property rights would be Pareto optimal. Hazlitt, like many subsequent free market advocates, implicitly assumes that this is the case. In reality, though there are infinitely many possible allocations of property rights, and infinitely many allocations of goods and services that meet the definition of “Pareto optimality”. A highly egalitarian allocation can be Pareto optimal. So can any allocation where one person has all the wealth and everyone else is reduced to a bare subsistence.

Recognising the inappropriateness of describing radically unfair allocations as “optimal”, some economists have used the description “Pareto efficient” instead, but this is not much better. It corresponds neither to the ordinary meaning of “efficient” nor to the meaning with which the term is commonly used in economics, which is also misleading, but in a different way.

The concept of opportunity cost gives us a better way to think about the possibility of making some people better off while no one is worse off. If such possibilities exist, then there are potential benefits that have no opportunity costs. Conversely, if there is a positive opportunity cost for any benefit, then we can’t make anyone better off without making someone else worse off. So, a “Pareto optimal” situation may be described, more simply as one where all opportunity costs are positive.


  1. This approach is often described as “utilitarianism”, and, until relatively recently, economists have mostly talked about “utility” rather than “happiness”. This terminology has been the subject of heated, but not enlightening, debate, with the result that it is best avoided. 

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