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From: carnes@gargoyle.UUCP (Richard Carnes)
Newsgroups: net.politics.theory
Subject: Re: Redistribution of income and wealth
Message-ID: <196@gargoyle.UUCP>
Date: Wed, 18-Sep-85 21:08:32 EDT
Article-I.D.: gargoyle.196
Posted: Wed Sep 18 21:08:32 1985
Date-Received: Fri, 20-Sep-85 04:40:16 EDT
References: <186@gargoyle.UUCP> <10415@ucbvax.ARPA>
Reply-To: carnes@gargoyle.UUCP (Richard Carnes)
Organization: U. of Chicago, Computer Science Dept.
Lines: 131

Rick McGeer writes:

>Pigou wasn't exactly what I had in mind.  It's not one of the basic
>texts, and I think many or most economists would disagree with this
>statement.  The "aggregate sum of satisfactions" is thought to be a
>pretty meaningless phrase since satisfaction, or utility, is thought
>of as a cardinal rather than an ordinal quantity.  The relative
>intensity of wants of one individual can always be measured, but I
>think that almost all economists would agree that determining the
>intensity of A's wants vs B's is a very chancy game.  We can debate
>debate whether the determination can be made, if you like, but the
>point here is that if there is a consensus among economists in the
>matter, it is on the negative.  Uh, strike that.  Economists will
>agree that there is such a thing as the "aggregate sum of
>satisfactions": Alchian and Allen claim it is that quantity which is
>maximized by the free exchange of commodities in an open market.

Now I'm confused, Rick.  First you say that "aggregate sum of
satisfactions" [ASS] is a "pretty meaningless phrase," since most
economists don't think you can compare the utilities of different
persons.  Then you say that Alchian and Allen say that the ASS is
maximized by the free market.  Then you say

>I don't understand what the "aggregate sum of satisfactions" is.

Then you say

>I don't know of any evidence which shows that any
>transaction increases or decreases such a thing  

but then you say that any voluntary transaction increases the ASS by
definition, but you don't know how this would be measured.  So I
suspect that we are both confused by this point.  If I were you, I
would first get my head out of Alchian & Allen.  I suppose it is a
useful textbook, but they spend a lot of time grinding their
ideological axe.  Everything say should be taken with heaping
spoonfuls of salt.  One of their exercise questions quotes Einstein
(who was sympathetic to socialist ideas) and says "Prove your
superiority to Einstein" by refuting Einstein's statement.  My
recollection is that the quote shows Einstein's superiority to
Alchian and Allen.  

Back to utility theory and the ASS.  I can't improve on N.
Georgescu-Roegen's discussion of "Utility" in the *International
Encyclopedia of the Social Sciences*, so I will just quote an excerpt:
____________

The endeavors to explain economic value by a single "cause" have
followed two trails.  In the chronological order, it was Marx, in his
labor theory of value, who first claimed to have disovered the same
thing that Aristotle asserted exists in every exchangeable good.
Marx did see that for such a claim it is necessary, first of all, to
bring ALL FORMS of labor to a common denominator.... The founders of
the utility theory, on the other hand, steamrollered over the
parallel issue of whether every concrete want is only a particular
form of a general abstract want -- utility.  For, in essence, this is
the meaning of utility.

The fact that at one time economists held that utility is measurable,
although no one could devise a hedonimeter, led them to defend their
position by arguing that a cardinal scale exists only for the utility
of an individual person, not for the utilities of all persons.  The
dogma of the interpersonal noncomparability of utility has ever since
been strongly advocated.  But if this dogma is accepted, economics
must reconcile itself to being a science (perhaps the only one)
unable to recognize at least a modicum of standards in the phenomenal
domain which it purports to study.  Fortunately, the dogma flies in
the face of two irresistible forces:  the faculty of man called
empathy, without which "there is really no game we can play at all,
whether in philosophy, literature, science, or family"; and the
hierarchy of wants.  To be sure, the interpersonal comparison of
wants does not always work.  At the same time, it can hardly be
denied that it makes objective ECONOMIC sense to help starving people
by taxing those who spend their summers at luxurious resorts.  There
is economic sense even in taxing the latter more heavily than those
who cannot afford any luxuries.  However, in view of the absence of
any order among the luxury wants, there is no objective justification
for taxing those who have motorboats and using the money to help
others buy hunting equipment.  The fact that the advocates of the
interpersonal noncomparability of utility had in front of their eyes
only a society of relatively high incomes is certainly responsible
for their view.
_____________

Georgescu-Roegen goes on to say that the hierarchy of wants can
explain some phenomena that utility theory cannot, such as why
central planning works poorly in any advanced economy and why rising
personal incomes in the Soviet Union have resulted in increasing
decentralization in the production of "luxuries."  

>(any transaction
>which is voluntary axiomatically increases [ASS], but who knows by how
>much...what are the units?), and I don't understand the relationship
>of such a thing to any measurable quantity.  Unless and until I do
>understand these things, or you can explain them to me, I'm really
>not interested.  

This raises some rather large questions.  Why should we not be
interested in something unless we can measure it?  Not everything can
be reduced to numbers, as far as I know.

>And in both physics and economics, arguments "by
>common sense" should be regarded as guilty until proven innocent.
>After all "by common sense" if the cost of a factor in the production
>of a commodity A goes up, then the price of A must go up.  (Hint:
>wrong).  

This isn't what I meant by "common sense."  You are talking about a
mistaken deduction, I am talking about our everyday knowledge of the
world:  e.g., if you drop something, it falls down.  Science is built
on this basic knowledge.  An economic science that adheres to a
dogmatic principle (the interpersonal noncomparability of utility)
that may have served a useful theoretical function in the past, at
the expense of our common-sense knowledge of the faculty of empathy
and the hierarchy of wants, condemns itself.  However, it is not
coincidental that this principle forbids us to say that there is any
objective sense in which a group of people in the aggregate are
better off if the wealth is distributed equally than if one person
has most of it:  such a position obviously legitimizes the existing
inequalities in the distribution of wealth, and I believe that this
apologetic function is part of the reason that the dogma is adhered
to.

If you don't believe there is any sense in the statement that the
world would be worse off if one person possessed all the wealth that
now exists and everyone else was starving to death than if the wealth
were distributed more equally, then I don't know what I can say to
you.  But if you do believe there is some sense in the statement, you
should try to make sense of it in terms of economic theory.
-- 
Richard Carnes, ihnp4!gargoyle!carnes