Economics is not utilitarian

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Oct 22, 2002, 7:53:29 PM10/22/02
Economics, in so far as it uses population averages, is not
utilitarian - it does not aim for the greatest income to the
greatest number.

It aims for the greatest *average* income to whatever number there

This is not utilitarian in Mill's sense, since adverse consequences -
early death of the poor - can lead to a rise in average income.
In theory, everyone's income can fall, and yet average income can
rise. This is in sharp contrast to classical utilitarianism, where
every good consequence is counted as good and every bad one as bad.
Even if we count income as the sole good, the same applies: if people
on below-mean income die - that's most of us - then the average
income will rise.

The trouble with economics is that economists are allowed
professionally to say "people were 1% better off" on the basis of a 1%
higher average in the later population. These, however, are two
different statements. The first is a statement about the aggregate
effects on real individuals. The second is a statement about a
statistic. The statistic has two types of determinants:

1) income gains and losses to individuals and
2) changes in the statistic due to demographic change.

Where the influence of demographic change is unknown, and the growth
figure is known, the average benefit to individuals is unknown. If
economists don't tackle this, they will end up saying that genocide of
the poor is good for the poor (the poorest quintile at a later date
has a higher average income than the poorest quintile at the earlier
date) or that longer life for the poorest is bad for the poor. These
are the kinds of problems that "average utilitarianism" suffers from.

Economics textbooks that say macroeconomic policy aims to maximise the
social welfare function need to say that this refers to the average,
and that if a government prolongs the lives of people on below-mean
income, other things being equal the average will fall.

This may be thought to have some relevance in the case of countries
and quintiles containing significant proportions of malnourished
individuals. It may also come to seem more important in determining
what we think about the direction of conclusions, when regression
analyses are carried out on several countries, across several
quintiles and time periods at once.

The statement

"incomes of the poor rose 1%"

is not the same as the statement

"average income among people in the poorest quintile at the end of the
period was 1% higher than among those in the poorest quintile at the
start of the period".

The second of these would be currently admissible in economics, but it
requires an inference from the second. The inference is usually
based on an assumption that the influence of demographic change was
zero. Why?

Mark Schonewille

Oct 22, 2002, 8:16:30 PM10/22/02
First, utilitarian does not necessarily mean: "greates income to the greatest
number." Second, macro economists use aggregate numbers rather than averages.
Third, you forget that the wage distribution is a very important issues
amongst micro, particularly labour economists. So, economists are not bluntly
saying that "people were 1% better off". Economists are aware of moral issues
and social justice, at least on the academic side.
Oh,... and in population economics, the distribution of wealth and issues
concerning the acceptable minimum wealth level is more important than the
average income level.


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