Trust and interests

by Henry Farrell on January 8, 2007

dsquared’s “post”: below reminds me of this “post”: that Duncan Black wrote last year, which I meant to write something about, and never did.

[Mallaby] starts with the basic premise that well-functioning societies require a degree of trust, something I agree with … But then he moves from the issue of shared social capital – trusting each other – to the need for people to have faith in the ruling class … Mallaby’s arguing that society functions much better when the ruling class is unfettered by the pesky masses. Yes, yes, the ruling class shouldn’t abuse its trust – that would be wrong – but when it does the real tragedy is that then they get subjected to pesky oversight from the dirty fucking hippies which prevents them from achieving their true awesomeness as our unaccountable overlords.

A lot of my “academic work”: is on the relationship between trust and interests. Like much academic writing, a fair amount of it consists of spelling out the obvious at laborious length, but given how badly notions of trust are abused in current debate, perhaps it isn’t entirely useless. Simply put, the political argument that you should trust people who don’t have a good self-interested reason to behave trustworthily is at best naive and at worst dishonest apologetics. In particular, powerful people by and large don’t have much interest in behaving trustworthily to weaker ones in the absence of external sanctions; while in some cases they may be trustworthy nonetheless (perhaps they’re genuinely noble and disinterested types), you wouldn’t want to count on it. None of this is exactly rocket science, but given the amount of guff from pundits about social capital, loss of trust in government etc, you wouldn’t know it.

Non sequitur

by John Q on January 8, 2007

In comments on an open thread on my blog, Michael Greinecker points to a truly strange response to arguments for a zero rate of social time preference.

Crucial quote

I found myself becoming very curious whether economists who support Sir Nicholas’s social discount rate of zero, such as econ bloggers John Quiggin and Brad DeLong, identify themselves as pro-choice or pro-life, and whether they had considered the Stern Report from this angle.

My response has been anticipated by a commenter who observes

Strange as it may seem to Economist writers, there are phenomena in the world that aren’t particularly illuminated by applying economic concepts. Attitudes towards abortion have nothing at all to do with discounting rates.

Others in the comments thread spell this out.

One odd feature of the Economist blog is that contributions are anonymous. I know that Megan McArdle (aka Jane Galt) has something to do with the site, but I have no idea whether she wrote this piece. While I’m used to pseudonymous commenters, most economics bloggers are (as Matt Yglesias puts it) proudly eponymous, or at least easily identified, and I find this a more satisfactory mode for arguing about issues like the Stern Review, though can’t exactly say why.

Trust in me …

by Daniel on January 8, 2007

I’m rather glad to see that Hilary Benn is the bookies’ favourite for the Labour party deputy leadership. I have no real knowledge of the state of internal Labour party politics, or of what Hilary Benn’s actual policies are. But on the other hand, neither is my support for him[1] based on pure sentimentality about his dad. Nope, I’m a Benn man for the simple reason that I think there ought to be some earthly reward for a political career that has been marked out by honesty and competence. If only for novelty value. After the disgrace that was Clare Short’s term as Secretary of State for International Development[2], Benn was a breath of fresh air. He was (and remains) utterly essential to the peace talks in Sudan. And he was the only major World Bank shareholder to stand up to Paul Wolfowitz and say what needed to be said about Wolfowitz’s utterly bogus “I Can’t Believe It’s Not An Anti-Corruption Policy”. My only reservation in voting Benn is that, to be honest, the developing world needs him a lot more than the Labour Party does, and that the SSID job is cleaner, more honest and more important than turning himself into the thinking man’s John Prescott.
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During the discussion of discounting and the Stern Review, I got an email raising a point that I had already been worrying about. In discussing costs and benefits in 2100, I and others routinely refer to future generations, and in a sense that’s right, since the people involved in the discussion won’t be around then. But, children alive now have a reasonable chance of living to 2100 – quite a good chance if life expectancy keeps rising. Economists often deal with this kind of thing by modelling a series of overlapping generations, but I haven’t seen much discussion of this in relation to benefit-cost analysis, though no doubt it’s in the literature somewhere.

I finally got around to thinking about this, and in particular the following question. Suppose we accept an ethical framework in which everyone now alive matters equally. Suppose also that as individuals we have a consistently positive rate of time preference, preferring to have higher utility now at the expense of less in the future, that is, more when we are young and less when we are old (this isn’t obvious by the way, but I’m assuming it for the sake of argument) . What is the appropriate pure rate of time preference for society as a whole?

My preliminary answer, somewhat surprisingly to me, is “Zero”. I’ll set out the outline of the formal argument over the fold, but the simple summary has two parts. First, since generations overlap, if, at all times, we treat all people now alive as equal then we must treat all people now and in the future as equal. Given this equality, positive individual rates of time preference translate not into a social preference for the present over the future but into a social policy that consistently puts more weight on the welfare of people when they are young than when they are old.

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