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What\'s So Hot About Pareto, Anyway?

A while back I left a promisory note in the comments to write a post on diminishing marginal utility and interpersonal comparisons; this might that post, but I'm making it up as I go along so we'll see. Terminological hangups aside, I'll stick to the standard economic use of "utility" in what follows.

So: what's the deal with Pareto efficiency? A Pareto improvement is an improvement that makes at least one person better off while making nobody worse off, and a state of affairs is Pareto efficient if there are no Pareto improvements that can be made. Sounds unobjectionable, but actually is: without appealing to dubious Sen-style notions of "equitable distribution," it's easy to show that perfectly benign, everyday economic activity fails the Pareto test.

Consider a small town in which the current state of affairs is Pareto efficient. Then introduce a new person to that town who's very good at widget-making and can do it at a lower cost than anyone else. (Maybe he migrated, maybe he was just recently born there, it doesn't matter.) His entry into the widget-making market makes the current widget-making monopolist in town subjectively worse off, but makes both the widget-buyers and himself subjectively better off. Clearly this is a Good Thing, but it fails to satisfy the Pareto criterion. One could come up with all sorts of similar examples, but you get the point. Read more »


Utility Vs. Wantability

In the course of an interesting post on utilitarianism, Will Wilkinson linked to this old short essay by Irving Fisher on the problematic connotations of the term "utility" used by economists: Read more »


To coerce or not to coerce, that is the question

Let's say that I've made up my mind to do X, for my own reasons. Ignorant of my decision, Scott then threatens to harm me severely if I don't do X. I subsequently do X. Have I been coerced?

Bonus question: how does the answer to this question bear on the implications of the non-aggression principle?

(Thanks to Harry Frankfurt for the thought experiment.)


Mill and Polycentric Law Redux

Joe Miller was impressed by my earlier post on J.S. Mill's pluralist angle, but now he's cooled off and has reservations. Fair enough, says I. Joe puts his finger on a very real, difficult problem:

What happens when we find some particular political arrangement to be in violation of the harm principle? What, to pick a random example, do we say when one of the private legal services offers sharia law? Fine, one might say. If people voluntarily sign up for a particular view of the law, then what business of mine is it that they do so? And I'll agree to a certain extent. For the first generation of customers, sharia law is a perfectly legitimate option. But what happens in the second generation? What shall we say about the girls who are treated as second-class citizens, who grow into women unable to act in a way that is fully autonomous? When they remain customers of sharia law (because the very law under which they already live does not allow them any independent voice), have they done so freely? Even if they actually claim to prefer sharia law, can we really believe them at this point?

Ironically, this argument is almost the same one used against naive contractarianism by Lysander Spooner in No Treason IV: The Constitution of No Authority. The problem is that I never had the chance to give or withdraw my informed consent to the system of laws I was born under, so how can they reasonably be considered binding on me? I think there are arguments that overcome this objection, but for the moment I'll accept it as valid.

But it should be obvious that this objection applies to all forms of legal order, including a fortiori Joe's preferred form of a federalist, constitutional democracy. Indeed, one of the main arguments for polycentric law is that it suffers from this problem to a significantly lesser degree than any other kind of political order: by having law provided by a multiplicity of smaller firms rather than a great big firm, the harm that any single one can potentially do is dramatically decreased due to lower cost of exit. Read more »


Trivializing Tragedy

I know I can't be the only one who finds this really, really creepy and nauseating:

Until the 1990's, South Korean schoolchildren were awarded prizes for drawing posters depicting diabolical North Koreans. Then the South's so-called sunshine policy of engagement transformed North Koreans into real human beings in the minds of South Koreans and in popular movies like "Joint Security Area."


The Dark Side of the Blogosphere

Tom Barnett ruminates:

The blogosphere demands you defend against all comers, no matter the credentials. Whoever gets the pack moving that minute is the top dog, which is both good and bad. It's good in that ideas alone can drive the process and it's bad in that it encourages a mob mentality.


Throwing the Baby Out With the Bathwater

...the tendency of economists to make a conceptual slide from positive economic analysis to normative ethical arguments without actually making this transition clear, often smuggling in other premises in the process. It’s often harmless (I’ve done it myself), but can result in some confusions, and I think the above argument by Buchanan is a good example... Read more »


Experiments In Living and Law

There is a longstanding tension within the broad sweep of liberal philosophy which has been characterized as "rationalism" versus "pluralism." This terminology obscures the issue somewhat by focusing on the downstream political manifestations of upstream differences in epistemology; where one falls on the rationalist-pluralist axis correlates very highly with the extent of one's optimism or skepticism toward the human capacity for knowledge.[1]

J.S. Mill stood with one foot firmly planted in both camps at the political level; not coincidentally, this is reflected in his epistemological stance as well. Mill's A System of Logic is a work of thoroughgoing empriricist philosophy, which rejects Cartesian rationalism but maintains an underlying Victorian optimism toward human rationality and the ability of inductive methods to reveal the truth. For Mill, in potitics as in science, the proof is in the pudding and there's no substitute for experimental evidence. Hence in Chapter III of On Liberty, Mill writes:

That mankind are not infallible; that their truths, for the most part, are only half-truths; that unity of opinion, unless resulting from the fullest and freest comparison of opposite opinions, is not desirable, and diversity not an evil, but a good, until mankind are much more capable than at present of recognizing all sides of the truth, are principles applicable to men's modes of action, not less than to their opinions. As it is useful that while mankind are imperfect there should be different opinions, so is it that there should be different experiments of living; that free scope should be given to varieties of character, short of injury to others; and that the worth of different modes of life should be proved practically, when any one thinks fit to try them.

Mill was skeptical enough to recognize that what constitutes the good life is far from obvious, and that the most benefit is likely to arise from allowing individuals to beat their own paths in a multitude of directions and observing the results of their experiences.[2] His "experiments in living" elegantly captures the compelling consequentialist rationale for libertarian social policies, and has subsequently been echoed by later thinkers such as Hayek. The value of Mill's contribution to classical liberal thought is not to be understated. Read more »


Speaking Ill of the Dead

Now that the requisite period of "if you can't say anything nice..." is over, Clive Crook gives an ungentlemanly but excruciatingly spot-on assessment of the late John Kenneth Galbraith. Read it and count the number of times you think "ouch." My personal favourite was this: Read more »


In Praise of Exploitation

I've got a TCS essay up on the economics of "exploitation" in developing nations. It'll be nothing surprising or new to this crowd, but it never hurts to drag out the data bazooka.


Trofim Lysenko: Ideology, Power, and the Destruction of Science



"There were absolutely no roots to it. I mean, no material roots, no experiments, absolutely nothing. Nothing but ideology. ... Explaining it all on the basis of Stalin is not enough. Because it had started before Stalin. The attack on the genetic approach, based on ideology, you see, was already present in 1925 and '26. In fact -- well, this whole trend of Western socialism goes back very largely to Rousseau. To the idea that man is good and society is bad. And therefore if you introduce the idea that what defines man as a species, and different men as individuals, is very largely biological rather than social, that goes against the creed."


-- Jacques Monod

"After examining [Lysenko's] arguments I have no doubt that we cannot, as many have been inclined to do, describe him simply as a scientific crank, or simply as a wrong-headed yokel. His mind does not seem to work in either of these ways. ... No, I cannot believe ... that the reward of Lysenko's triumphant career is the advance of scientific knowledge; nor that it is the prosperity of poor peasants. The reward he is so eagerly grasping is Power, power for himself, power to threaten, power to torture, power to kill."


-- R.A. Fisher

A younger Lysenko working in the field
Trofim Denisovich Lysenko (1889-1976) was a Ukrainian born agronomist, a peasant with little education who would likely have toiled in obscurity all his life had he been born in a different place or time. At the age of twenty-nine, while working at a small experiment station in Azerbaijan in 1927, he managed to attract the attention of a Pravda reporter with claims that he had "solved the problem of fertilizing the fields without fertilizers and minerals."

As told by David Joravsky in The Lysenko Affair, the reporter "confessed that he stared at Lysenko's notebook with ignorant awe. He did not understand the 'scientific laws' by which the barefoot scientists had quickly solved his problem, without trial and error." ("Barefoot" is a peculiarly Russian term to connote peasantry.) Nevertheless, this complete incomprehension didn't stop him from reporting breathlessly in the pages of Pravda that this brilliant young man had proved that a winter crop of peas could be grown in Azerbaijan, "turning the barren fields of the Transcaucasus green in winter, so that cattle will not perish from poor feeding, and the peasant Turk will live through the winter without trembling for tomorrow."

When attempted in subsequent winters, the crops of peas failed. Unsurprisingly, this was not reported in the pages of Pravda (nor were Lysenko's subsequent failures in future years). When Lysenko's career took off in the early 1930s, the forced collectivization of Soviet agriculture had precipitated terrible famines and general economic crisis. The Soviet government was flailing about for a miracle to pull them out of the hole they'd dug and allow them to meet the unrealistic demands of Stalin's agricultural plans; Lysenko was ready and willing to tell them what they wanted to hear. Read more »


Rhetoric and Reality

Rarely do I have cause to link approvingly to Matt Yglesias, but he's just written a real corker on the sloppy thinking that defines so much of the current hubbub over Iran. It's hard to pluck out a single choice quote, but for my money this is the point that really deserves emphasis: Read more »


When Information Theory and Copyright Law Collide

Take a copyrighted piece of digitally stored information. Take another comparable piece of digitally stored information that's in the public domain. Take the two binaries of these files and XOR them together. The resultant binary output will bear no statistically significant resemblance to either of the two original inputs. Read more »


Anti-Wealth and Proud

Joe Miller has commented previously on the distinction between liberals and leftists. In his comment section I proposed a litmus test to discern them: ask them their opinion of Adam Smith. Liberals will generally have a positive view of him, leftists will not. But this is far too philosophical and geared toward the intellectual wings of each faction, so I now propose another demarcation line with broader applicability: liberals are anti-poverty, while leftists are anti-wealth. Read more »


Opposite Day: Radical Life Extension

Matthias has decided to come back for another round. This time he's here to grumble about the trouble with immortality. Read more »