Well, that tells me then

Richard Murphy (and I quote in full, so that you get the full flavour):

I thought I’d finished with Tim Worstall. But not quite as it turns out, for he left a comment on this blog yesterday which really does blow his whole position apart.

I’d said:

It is impossible to suppose that a man who can argue (as you did in the Guardian, very recently) that “Things in markets are worth what the markets say they are worth” is a true heir of [Adam] Smith

His response? This:

As I’ve said before, no one thinks that all markets all the time produces the optimal allocation of resources.

The argument is not over whether markets *always* produce either “just and moral” prices, as opposed to simply market prices, or whether they *always* produce an optimal allocation of resources. It’s over when and where do they and when and where do they not.

That’s fine Tim. I agree. But let’s be clear what you have conceded here. What you’re saying is:

1) Markets don’t necessarily produce the optimal allocation of resources;

2) We don’t know when they do, and when they don’t;

3) In that case the economics you espouse provides us with no useful information – we’re left making our own choices;

4) In that case you either can’t sustain your claim that economics is a rational science, or alternatively you can say it is, but the results it produces are of no use to anyone;

5) As a result economic decisions are always subjective;

6) The economic theory you espouse can never be used to justify intervention in the economy because it is clear that it cannot predict optimal outcomes, and we could not tell is those had been achieved in any event.

Put bluntly, this means you’re about as far away from objectivity as it is possible to get: you pretend you’re objective when you know you’re not. That’s not just a failure of objectivity and a lapse into subjectivity, it’s rank hypocrisy.

And it’s rank hypocrisy that you use for a particular purpose, which is always to favour markets when they suit the well off and to oppose regulation when it suits the least well off. This is readily apparent from your argument against the minimum wage recently where you said there was a moral argument for abolition because this interfered with market outcomes: market outcomes you now admit you cannot predict. The only morality on offer therefore was your own, designed in this case to harm the well-being of those on the lowest pay in our society.

At some points over the last couple of weeks I seriously wondered why I bothered to engage with you. Now I know two things: one you definitely do not know what you’re arguing, and second that all the arguments you and your ASI colleagues put forward for the supremacy of the market are pure bunkum: they’re simply a subjective argument for the endowment of favour on those you choose.

It was worth getting to this point. The argument with you has been won. I’m satisfied with that outcome. So please don’t bother me again: it’s now abundantly clear it’s not worth my time dealing with you or your like.

I\’m not really sure what to do here other than snigger.

1), yes, of course, we all agree that markets and markets alone do not necessarily produce the optimal allocation of resources. I\’ve already in this (long) series pointed to any number of such examples.

2) We don\’t know when they do and when they don\’t? Blimey! So what is this economics thing then? It is, at least in part, a study of when they do and when they don\’t. As above, I have given a number of examples about when economics (no, not "neo-liberal" economics, not "right wing", not anything other than simply the standard economic toolkit) tells us that pure and unadorned markets do not give us the optimal allocation of resources. Externalities for example, pollution is a good one. Ronald Coase pointed out that a pure market solution may or may not work: it depends upon transaction costs. Alan Walters (from his Times obituary: " In 1968 he published the Economics of Road User Charges,"….the paper that led directly to the London Congestion Charge. Again, a study iof how we deal with an externality and in this case, one where the transaction costs make a pure market solution impossible). Or the entire system of copyrights and patents: we think that creation is a public good, public goods are undersupplied in a pure market because the creator cannot appropriate the value that is being created. Thus we rig said markets to get to a better, if not entirely optimal, outcome.

3) No, economics informs those choices.

4) As points 2 and 3 are false, then so is the conclusion, 4, drawn from them.

5) Now there is indeed subjectivity in the system. Of course there is. But it\’s not in the economics.  The statement that "a very high minimum wage will cause unemployment" is not subjective. It\’s a statement of the blindingly obvious. Similarly, the statement " a very low minimum wage will make no damn difference" is not subjective, it\’s similarly a truth. "The current minimum wage has some good effects and some bad effects" is yet again, simply a truth. The subjectivity somes when someone says, "I think the good effects are worth the bad", or, the opposite "I think the bad outweighs the good".

Economics can be and is used to tell us what those effects are: whether we prefer one set to the other is subjective, not the analysis of what they are.

6) The economics I espouse is indeed used to justify interventions in the economy. It\’s used to do that each and every hour of each and every day. See, say, carbon taxes, cap and trade, congestion charges, copyrights, patents, anti-monopoly laws, and so on nearly ad infinitum.

This plays onto the morality thing mentioned. Morality is of course personal and is thus subjective.  But that\’s how we make the choices between the various options that economics reveals are available to us. That we might differ  here is unsurprising: but to reject economics itself  because it reveals those choices is absurd.

Worth remembering what I was actually arguing for as a moral precept there as well. That if we, societally, wish to change the outcomes of the market pricing mechanism then we, collectively and societally, have to be willing to pay to do so. Rather than dumping the costs onto some subset of society.

I find it very hard to see that as an immoral position but do agree that it\’s not an economic point, it\’s a subjective one.

And as I also argued, we should stop taxing the working poor. how this harms the well-bing of those on the lowest pay in our society I\’m really not sure.

As to who has "won" this argument I\’ll let others decide that. I certainly don\’t think that Richard Murphy has, but then that\’s probably me just being subjective.

21 comments on “Well, that tells me then

  1. Extraordinary!

    When he talks about “economic decisions being subjective”, I assume he’s not actually talking about economic decisions, like what to buy, which is trivially subjective, but about judging whether market outcomes are optimal or not. Well of course he’s right it’s impossible to know that, mainly because most of the information you’d need to “know” that is unobtainable. But it’s not as if economics doesn’t give us a menu of theoretical reasons to explain why market outcomes might not be optimal, and lots of strategies for finding empirical support for those theories and for trying to evaluate whether they are at work in any given market.

    How to interpret his claim that “the economic theory you espouse can never be used to justify intervention in the economy” when of course, as you point out, it is used to do just that, all the time? Assuming he’s not that hilariously stupid, does he mean that economics is incapable of providing irrefutable objective proof that a given market outcome is optimal? But again this is to do with the availability of the necessary information and the absence of a complete theory of everything. Such problems beset scientists of all stripes. What does he propose instead, throwing up our hands and saying we cannot say anything about anything because it’s “all subjective”, or does he have a superior methodology that will provide us with the objective certainty he wants? Will he now stop opining on economics because he’s realised it’s “all subjective”?

    He might applaud economics for helping us grope our way forward in the darkness, to start to understand how the economy works, and help us obtain evidence that, say, a given “intervention”, will improve outcomes, or not (even though we cannot “know” it’s optimal) which sounds a pretty science-ish thing to do to me, but that’s not good enough for him.

  2. Has anyone ever studied copyrights and patents and tried to arrive at a formula for determining the optimum time for these which balances the needs of creators and the public?

  3. pure and unadorned markets do not give us the optimal allocation of resources.

    Would somebody care to define “optimal” and tell me how I can objectively calculate it?

  4. Tim,

    Yes, and the answer was shorter than they currently are. (This was done within the last year or two) – unsurprisingly the govt looks likely to ignore the study they requested and increase copyright terms anyway. The guy’s name who did the report began with a B iirc, Butler maybe?

  5. I’ve never understood why righties don’t believe intellectual property should be owned forever, and can be passed onto whomever the owner wants when they die, as they believe normal property should be.

  6. Matthew: A libertarian view as to why patents are evil is that they break the non-aggression principle, by giving the copyright owner the ‘right’ to take your money, by force if necessary, for infringing his right by making a copy of a tune, a CD, a book, a machine, even if it is done in total ignorance of the patent-holders ‘original’.

  7. Matthew,

    “I’ve never understood why righties don’t believe intellectual property should be owned forever, and can be passed onto whomever the owner wants when they die, as they believe normal property should be.”

    Because there’s no such thing as “intellectual property”, only intellectual rights. They’re granted for the purpose of creating art and technology for people to enjoy. As the right is also a restriction on others to use you as the monopoly supplier, they deserve something back, and that is that after a period of time, what you created becomes public domain.

  8. Economics is indeed subjective in the sense that it requires a subjective understanding of the world rather than one based around entriely around mathematical models. As Tim points out it is not subjective in the sense of being opposed to objective.

    We cannot say whether market outcomes are good are not in any particular case. But we can say what the economic laws governing a well functioning market economy are and encourage them to occur in practice by enacting the right legislation.

  9. >they break the non-aggression principle, by giving the copyright owner the ‘right’ to take your money, by force if necessary, for infringing his right by making a copy of a tune, a CD, a book, a machine, even if it is done in total ignorance of the patent-holders ‘original’.

    But libertarians have no problem with this sort of aggression when it comes to stealing stuff. We put people in jail and/or fine them for taking other people’s property.

    So “breaking the non-aggression principle” simply won’t stand up as a basis for any objection to patents and copyright.

    >Because there’s no such thing as “intellectual property”, only intellectual rights. They’re granted for the purpose of creating art and technology for people to enjoy.

    So you say. But what makes it true that there’s no such thing as intellectual property? What makes it true that intellectual rights exist, but intellectual property doesn’t? If intellectual rights are simply decisions we make, then how are they ontologically superior to intellectual property?

    And if ownership of a physical thing is such an uncontroversial matter amongst us libertarians, why baulk at ownership of of intellectual thing, esp. when it’s an invented story rather than a scientific procedure? The ownership of the physical object itself is an abstract concept — the fact that the thing in question is physical doesn’t change the abstract nature of ownership. So that can’t be the difference.

    So you’ll have to work a lot harder than these sorts of glib responses that I see so often given if you want to defend the view that copyright and patents are wrong.

  10. Intellectual goods are non-rivalrous. If I eat your apple, then I have deprived you of its enjoyment. If I make a copy of your CD, I have not. So the traditional notion of what constitutes property breaks down. If no countervailing mechanism existed to stop me copying your CD then the intellectual good it represents would also become non-excludable. Non-rivalrous and non-excludable goods are public goods, on a par with a pretty sunset. There is no market incentive for a producer to create public goods. We therefore institute a non-market framework to counteract this. At present this is the system of patents/copyrights/licenses etc.. As a libertarian, I have no problem with this in principle. Where I object is the rent-seeking of copyright/patent holders in extending the period of excludability to the ridiculous terms they have in the US (and may well institute in the EU).

  11. recently I have begun to think that Shakespeare got it wrong. It shouldn’t be the lawyers that should all be killed but the economists.
    My but how they like complexity and my the results of their activities are not pleasing.

  12. I said rightists, not libertarians (whom I know are split on the issue). I was under the impression there was a difference.

    Tim adds: What rightists or libertarians argue about copyrights I’m not sure. I am aware of what I argue about them and David Gillies has summarised it very neatly.

  13. And it’s rank hypocrisy that you use for a particular purpose, which is always to favour markets when they suit the well off and to oppose regulation when it suits the least well off.

    That’s not hypocrisy, it is inconsistency.

  14. It was worth getting to this point. The argument with you has been won. I’m satisfied with that outcome.

    I very much doubt this is true. Nobody who is satisfied that he has won an argument tries to call it to an end. Indeed, it is pretty poor form to try to adjudicate on an argument which you are yourself part of. It sounds to me that he is trying rather desperately to bring the argument to an end for his own purposes, not because he is either satisfied or the argument is over.

  15. Tim:

    One of these days the truth will out. You’ll be humiliated when people learn that this Richard Murphy is your invention, an alter ego you’ve set up to spew perverse rationality and petty name-calling—all in an effort to make yourself appear better by comparison. Childish.

  16. Obnoxio:

    Can’t believe you’ve said that playing with Dick is dull. Only if you do it to excess.

  17. ok so Murphy says that because economics cannot predict the future with accuracy then it cannot be a science and therefore it should not inform our views on how to run the economy. However, as I read it, he fails to give an alternative method of running the economy. Does he just want us to assume that the world should be governed for everyone’s benefit by an omnicompetent man called Murphy? is this the birth of a new political philosophy called Murphocracy?

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