Friday, July 25, 2014

Book review: Ethics and Public Policy by Don Welch

BOOK REVIEW:  Ethics and Public Policy by Don Welch

After students learn benefit-cost analysis, they are often eager to start policy debates with their friends and family.  But they usually come away frustrated by their inability to influence others.

QUESTION:  Why is this?

The answer reminds reminds me of some of my favorite economics jokes:

  • "An Economist is someone who knows the price of everything and the value of nothing;" and
  • "You may be an economist if human interest stories don't interest you." (from Yoram Bauman)

While economists are trained to compute the consequences of policy, we are not very good at getting others to see things from our point of view.  More often than not, the cause of the disconnect is the peculiar ethical framework we use to evaluate policy.

Economists are consequentialists (the ends justifies the means) where we measure progress using a total welfare metric (shareholders are people too).

In contrast, normal people are deontologists, who evaluate policy by how well it conforms to a set of principles, like the Ten Commandments, the Golden Rule, or "from each according to their ability, to each according to their need."

So while economists often disagree about the consequences of policy, we do not disagree about how to evaluate policy.  For example, it is likely that a dirigiste economist and a libertarian economist would agree that redistributing income penalizes success and rewards failure, but disagree about the size of the response.  The dirigiste would argue that the response is small, while a libertarian would argue that the response is large.  In essence they would reduce their disagreement to two different hypotheses, and resolve it by testing them against data.

In contrast, when and economist debates with a deontologist, they often speak past one another.  The economist argues about the effects of the policy, while the deontologist argues about how well it conforms to his guiding principles.  Unless the source of the disagreement is made clear, it will never be resolved.

It is here that I found Don Welch's book remarkably valuable.  Clearly and concisely (dare I say "efficiently"), he lays out the various ethical frameworks and illustrates their use with examples. Along the way, he proposes a framework that encompasses the various ethical approaches so that we don't end up talking past one another.

I liked the framework (goodness knows we need one so we can discuss issues cohesively, and reach better decisions), but I think it is utopian in two ways:  

First it relies on an honest accounting of the consequences of policy.  But in modern political discourse, people on both sides of the political spectrum overstate the benefits, and deny the costs associated with their preferred policies.  Fo example, would the Affordable Care Act would have passed if the President hadn't mislead us about its effects?  

Second, these kind of frameworks often get passed down to agencies who have to find ways to implement policy.  If you have an agency with any but a narrow mandate, they become difficult to oversee and manage.  Contrast the successful (and bipartisan) antitrust agencies which are concerned only with consumer welfare with agencies like the EPA, which has to follow multiple, diverse, and conflicting mandates.  As a practical matter, having any but a single mandate makes it difficult to oversee and manage an agency.  

Despite these shortcomings, I would highly recommend the book to anyone looking for a short, well-written introduction to the various ethical frameworks used to evaluate policy.  

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