Willy Hutton really, really, just does not understand economics, does he?

One of the core concepts of economics, and in particular conservative philosophers, is that individuals have immutable values and preferences: that not only is economic woman rational in the way she behaves, but she has worked out what she values, ranks and prefers before she interacts with the economic world. One of the great conservative intellectual triumphs – the so-called impossibility theorem – is to show that if this is true and there is no external authority enforcing choices on people, it is algebraically impossible for individuals to arrive at a commonly agreed decision that improves all their welfare. So much for liberal do-gooders! Their desire to meddle, to tax, to spend will end up improving no one’s lot.

1) The assumption is not that values and preferences are immutable. It is that they are consistent. And that is all that the word “rational” there means. If she prefers bananas to apples and apples to pears then she prefers bananas to pears. This is not a strange nor constraining assumption about human beings.

2) The impossibility theorem states no such thing. What it does say is that if preferences differ then we can’t please everyone with just the one decision. To bludgeon the point home, in a community of 50 men and 50 women we have one man who thinks rape is just great, 49 men and 50 women who think it ain’t. There is no position upon the allowance or non-allowance of rape which will meet everyone’s preference.

All of which is a bit of a problem for Willy as he’s interviewing Amartya Sen. Who makes only the entirely reasonable arguments that Willy’s understanding, as with all too many other people, of what is being said isn’t wholly correct.

16 comments on “Willy Hutton really, really, just does not understand economics, does he?

  1. I find hard to believe that any married man believes that values are consistent – unless I am just very unlucky.

  2. “they are consistent. And that is all that the word “rational” there means. If she prefers bananas to apples and apples to pears then she prefers bananas to pears. This is not a strange nor constraining assumption about human beings.”

    Jeez Tim! Is it the public school education or something? The statement “If she prefers bananas to apples & apples to pears, then she prefers pears to bananas” would be entirely consistent with every woman I’ve ever known. I actually count on this every time we approach a clothes shop with a credit card vulnerably available. The trick of being able to walk in to look at a €300 dress & walk out with a €20 pair of knickers, rather than the reverse.

  3. @bloke in spain
    IMHO Monday she prefers bananas to apples, Tuesday apples to bananas and Wednesday she hates both. Thursday she wants both again.

  4. is there any other profession that is so populated with gypsies, tramps and thieves as economics, oh and also charlatans, dickheads and imbeciles?

  5. Slight problem with the rationality part. It’s been recently proven inaccurate. See the work of Daniel Kahneman. Mike Lewis did one of his novels on it.

    But your main point is still correct. Hutton is a dickhead.

  6. BiS,

    The bloke who bought me a €300 dress could have my €5 panties, because I wouldn’t be wearing them as an act of gratitude. The €20 pair are still in the shop …

  7. “Willy Hutton really, really, just does not understand economics, does he?”

    Why not make a list of the things WH does understand? Shouldn’t take long.

  8. Tim: preferences are not necessarily transitive. a > b and b > c does not necessarily imply a > c.

  9. “What it does say is that if preferences differ then we can’t please everyone with just the one decision.”

    No, it’s a bit more complicated than that. It basically says that there’s no non-dictatorial procedure for combining the mutually inconsistent preferences of members of a group that simultaneously has the properties that everyone voting for X results in X winning, and that introducing more options doesn’t change the group’s decision on existing ones.

    It’s basically about vote splitting. Offer people A or B, and 60% pick B, so B beats A. Offer them A, B, C, D, and E, and the votes are 40%, 10%, 10%, 20%, 20%; so in a first-past-the-post vote-for-your-favourite system, A now beats B. Nobody’s changed their mind about what they prefer – the introduction of alternatives has split the majority. Some people think a voting system that does this is stupid, and have tried many times to find alternative voting systems that didn’t have this problem (or another that was even more stupid), but it turns out it is unavoidable.

    Willy’s ‘theorem’ is (trivially) false. “it is algebraically impossible for individuals to arrive at a commonly agreed decision that improves all their welfare.” If all the voters prefer X to the status quo, you can improve everyone’s welfare by switching to X. However, there are other situations where it can be conditionally true. If one voter prefers A to the status quo to B, and the other voter prefers B to the status quo to A, you can’t improve the welfare of both simultaneously.

    But the first fundamental theorem of welfare economics (which is what the claimed superiority of free markets is commonly based on) doesn’t have a problem with this. In fact, it states that this is precisely the desirable state that a free market converges on – Pareto optimality is the situation when there are no trades left that improve all the participants welfare.

    So yes, Willy is an idiot who doesn’t understand what he’s talking about.

  10. “Conservatives cleverly argue that society is not an individual thing but a mass of individuals who, because their values and preferences are impossible to aggregate..”

    Not true, not true at all! Never has been true. Economics is very comfortable aggregating individual values and preferences, as are markets. But to use an example you will understand Willy: a few months back we aggregated all the individual values and preferences of any free man and woman who cared to express them… and the result was 52% voted for Brexit. One does not need to be a genius economist from Bangladesh to work out what that means.

  11. “Sen and others counter this view and have developed a new system of thought rooted in the notion that collective action can proactively promote human welfare.”

    A new system of thought? Seriously?

    “And that there are intellectually robust concepts – despite the efforts of the right to prove that all public action is self-defeating”

    Yeah right, the Right has always hated the idea of a patriotic military defending our nation. Or is that your terrorist-loving Trotskyite friends in the Labour Party?

  12. “the notion that collective action can proactively promote human welfare.”

    Lynching Willie Hutton?

  13. Here’s old Timothy, who reckons that banks rush around a 4pm each day trying to find deposits for money the’very lent out that day, casting aspertions on the economic credibility of others

  14. A stupid man’s report of what a clever man says can never be accurate, because he unconsciously translates what he hears into something he can understand

Leave a Reply

Name and email are required. Your email address will not be published.