Economic Analysis, Moral Philosophy, and Public Policy

by Harry on April 3, 2006

My colleague Daniel Hausman and his collaborator Michael McPherson (formerly President of Macalester, now of the Spencer Foundation) have just published the new edition of their book Economic Analysis, Moral Philosophy, and Public Policy; (UK).

This is the perfect book for many of our readers, presenting moral philosopical ideas in a way that directly shows how and why they matter for issues in economics and public policy. It contains accessible introductions to ideas in economics and moral philosophy (eg utility theory, social choice theory, game theory, libertarianism, utilitarianism and egalitarianism) and uses the controversies around pollution transfers and school vouchers to illuminate the debates about these concepts, and to show why those debates matter for public policy. There’s a great analysis of the notorious Larry Summers memo, a chapter which outlines the incredibly intricate “equality of what?” debate and an illuminating chapter about efficiency (which everyone who dares to use the word “effiicent” should be forced to read if only that were efficient). It is one of those unusual books which is great for an undergraduate or graduate class, but which as a professional economist or philosopher you will still learn a good deal from, not only about how to present complex ideas in a lucid manner, but about the ideas and debates themselves. It is also an unusual second edition, in that the authors have actually rewritten the book substantially, rather than just tacking a new chapter on the end and calling it a new edition. Strongly recommended.



Tim Worstall 04.03.06 at 9:29 am

Obviously not read the book but did read the Summers note. I’m obviously missing something. What’s wrong with it?


harry b 04.03.06 at 9:53 am

I’m not telling — read the book!

Well, I will tell you that what they offer is a careful balanced and reasoned critique, not a rant, and that they use the core considerations Summers raises to explore the relationship of different values in public policy. Just to reassure you here’s a quote from page 20:

“The uproar caused by the memo suggests that many people are not willing to accept its conclusion. But this may be a thoughtless first reaction. Why shouldn’t the World Bank encourage migration of dirty industries? Since the argument is logically valid….”


Daniel 04.03.06 at 10:07 am

The big problem with it is Summers’ identification of the value of health with the wage rate; this is a pretty clear failure to treat people as ends rather than means, because it identifies the value of their health with the value of their labour on the market rather than its value to them.


joel turnipseed 04.03.06 at 10:19 am

The book’s in the bag–can’t wait to have a look at it.

Meantime, as to the Summers memo: his statement wouldn’t be philosophically interesting (or would only be trivially so after, e.g., Rawls, Sen, Williams) if he was just identifying the value of their health with the value of their labor on the market. He realizes this, as is evidenced by his statement:

“The problem with the arguments against all of these proposals for more pollution in LDCs (intrinsic rights to certain goods, moral reasons, social concerns, lack of adequate markets, etc.) could be turned around and used more or less effectively against every Bank proposal for liberalization.”

Given his other remarks, on, e.g., price elasticity for clean environment, you could very easily interpret this as saying: “Look, it sounds coldly utilitarian and sinister. But while it may be utilitarian, it’s in the favor of those getting ‘dumped’ on–their net transfer of wealth is going to be out of all proportion to their decreased welfare (and most likely their welfare, even accounting for negative effects of pollution transfer, will improve).

Now, he could be wrong and I could be overly generous–and I’m certainly not leaving out the severe criticism to be made from stance of “we’ll decide what trade-offs they make”–but I think it’s not a wholly evil statement & can see how it touches on everything from distributive justice (Rawls’ ‘basket of goods’ on multiple levels) to fundamental problems with our intuitions about utilitarianism.

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