tag:blogger.com,1999:blog-19727420.post4483662778438227678..comments2024-03-23T12:05:13.464-07:00Comments on Ideas: The Need for Interpersonal Utility in EconomicsDavid Friedmanhttp://www.blogger.com/profile/06543763515095867595noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-19727420.post-47376920879039722142022-06-03T20:05:37.548-07:002022-06-03T20:05:37.548-07:00Whose monetary utility did the Fed decrease to inc...Whose monetary utility did the Fed decrease to increase banks' monetary utility by trillions of dollars during Quantitative Easing?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-19727420.post-13571087509690892342022-05-28T22:46:10.108-07:002022-05-28T22:46:10.108-07:00I'd misunderstood the point you were trying to...I'd misunderstood the point you were trying to make. That is, if you try to do economics without reference to utility, and substitute willingness to pay instead, you get a model that's about as useful as a model based on utility. (And like many models, partially wrong or incomplete but still useful is a fine outcome.) If we insist on anchoring it to some concept of utility, you can still get ordinal comparisons though "which would you pay more for?" exercises. I'd thought you were saying that neglecting utility was still useful, as opposed to saying that we need to anchor things more thoroughly in utility.Jon Leonardhttps://www.blogger.com/profile/13001372928384512123noreply@blogger.comtag:blogger.com,1999:blog-19727420.post-84584874391056139132022-05-27T21:33:47.488-07:002022-05-27T21:33:47.488-07:00Gilbert:
It's true that one can do economics a...Gilbert:<br />It's true that one can do economics as a wertfrei project and the information produced is sometimes useful to people, but if economists are not trying to reach conclusions about what is good for a country, or the world, why do they waste their time with efficiency theorems? <br /><br />It's at least a curious coincidence that so many economists are free traders.David Friedmanhttps://www.blogger.com/profile/06543763515095867595noreply@blogger.comtag:blogger.com,1999:blog-19727420.post-12430337695614739872022-05-27T21:29:40.337-07:002022-05-27T21:29:40.337-07:00Jon:
As I wrote (about Marshall):
"He offered...Jon:<br />As I wrote (about Marshall):<br />"He offered the concept as an imperfect proxy for a utility increase on the grounds that although a given amount of money might represent more utility for one person than another such differences would usually average out for changes that affected many people."<br /><br />Your point is why it is an imperfect proxy, as Marshall recognized.<br /><br />The usefulness of Marshall's concept depends on interpersonal comparison — without that, why do we care whether something increases value as Marshall defines it?<br /><br />The point of what I posted, which is part of a much longer chapter, is that in order for concepts such as efficiency to be of use one has to accept interpersonal utility comparisons, that the Paretian and Hicks-Kaldor approaches don't solve the problem. I'm arguing for Marshall's approach, which makes its utilitarian basis explicit, over alternatives that hid it.<br /><br />You are correct that one can't deduce interpersonal comparisons from observing choices, even under uncertainty, for the reason you give. Nonetheless we do in practice make interpersonal comparisons all the time, whether or not philosophers approve of it. I'm about to post that piece of the chapter next.David Friedmanhttps://www.blogger.com/profile/06543763515095867595noreply@blogger.comtag:blogger.com,1999:blog-19727420.post-63281903086308579322022-05-27T15:29:33.538-07:002022-05-27T15:29:33.538-07:00And why should economics conclude on what is good ...And why should economics conclude on what is good for a country?<br /><br />I think the more usual presentation and the only one that can be taken seriously is that it will conclude who will gain and loose how much and then note that value judgements are beyond science and economics in particular.<br /><br />Frankly the argument you present here sounds a bit like a fairly vicious leftist straw-man of what a Libertarian would think. Basically (1) Value judgements, mostly ones favorable to Libertarianism, fall out of economics (2) only if we buy into the provably meaningless idea of interpersonal utility comparison (3) and operationalize that meaningless idea in a way that assumes the interests of the rich are more important than those of the poor (because a rich man can and therefore will pay more to avert the same bad thing) (4) and therefore we should believe these absurdities. I mean horse carriage much?<br /><br /><br />Also I haven't read Marshall, so I'm not sure how simplified your summary is. My folk-historical understanding is that he did actually believe in a naive cardinal utility which was an understandable and productive confusion at the time. But if he seriously thought that "although a given amount of money might represent more utility for one person than another such differences would usually average out for changes that affected many people" the parts simplified away better include an answer to (3) above.Gilberthttps://www.blogger.com/profile/15147875524343127720noreply@blogger.comtag:blogger.com,1999:blog-19727420.post-13840733238385613382022-05-27T04:21:41.216-07:002022-05-27T04:21:41.216-07:00Aren't willingness to pay and utility fundamen...Aren't willingness to pay and utility fundamentally different? If I'm using what I think of as the standard definition of utility, I may value my next dollar differently than someone else would, and I definitely value my next dollar differently than I would if I had substantially more. Von Neumann's insight about probability and utility lets us model utility fairly well as a real-valued function. (Imperfectly, since people sometimes have nontransitive preferences, but the model is still useful.) It's not unique, since multiplying utility by a positive constant or adding a constant doesn't change the results: If I claim I enjoy everything good twice as much as someone else does, that can't be proven or disproven, and interpersonal utility can't be compared in that sense. But willingness to pay is much easier to work with, using things like second-price auctions. It's not clear that that's fair (utility-wise) between rich and poor, but Marshall's definition doesn't really depend on interpersonal comparison of utility.Jon Leonardhttps://www.blogger.com/profile/13001372928384512123noreply@blogger.com