pull down to refresh
Most of this in my mind falls into the category of identity-theoretic problems which is not simple aggregation, which economics (and most everything else, in fact) chokes on. Simple example:
Tim wants heroin. He gives Burt $100 and gets heroin. It is fantastic for a little while! And then Tim's life goes to shit. Not all at once, but little by little. But even in the very short term, Tim who wakes up the next day and has to go to his job suffers from the behavior of Tim the night before.
So what can we say about this? I don't even know what sense the standard economic narrative would make of it -- Tim's utility increased, else he wouldn't have bought the heroin, it is tautologically true, therefore it was utility-enhancing? Something about temporal discounting?
But this to me is the most obvious nonsense. Every sensible person knows that Tim is worse off after this trade. Zero people who are not deeply mentally ill would say "if I was Tim's dad I'd want him to get the heroin" which is a pretty good way to pragmatically assess bullshit from sense. A notion of "free" in which an alcoholic is free to drink himself to death in the grips of his compulsion needs amendment, to say the least. And much "freedom" has a similar bouquet when you zoom in a bit.
So there's something needed that when we say "Tim" we're really talking about a gradient of beings through time, loosely described as "Tim" from the outside, and that there's no such thing as talking about what's good for Tim in a way that means much. Good for Tim-at-time-t perhaps; but then the calculation of Tim's utility becomes an exercise in integration; or else we consider Tim as a vector and his utility function as vector components? Presumably there is work on this someplace.
Anyway, similar logic around this aggregation idea. Who are we talking about, exactly, wrt how "the rich" and "the poor" of countries X and Y benefit from trade? Assessed when, and how? Simple and intuitive language is insufficient to the task, perhaps because the metaphysics of the issue are complicated and horrifying to entertain.
That's what I think, anyway.
Something about temporal discounting?
Yes
Every sensible person knows that Tim is worse off after this trade.
Yes, but Tim is not a sensible person and does not have a sensible person's preferences. Should non-sensible people be forced to behave as though they were sensible?
when we say "Tim" we're really talking about a gradient of beings through time
I want to recommend L.A. Paul's work about transformation. Here's an EconTalk interview. Also, this one with Agnes Callard (my wife's favorite living philosopher) about aspiration.
The idea that we could want different things than we currently do (and can even want to want different things) is hard to grapple with in a rigorous way, but that's what you're getting at. There might be a version of Tim that's glad someone intervened in his prior behavior and got him on a path that doesn't involve drug abuse. Tim never wanted to become that person but he is happy he became that person.
It's a tricky problem. There's no bright dividing line between forcing someone to change for their own sake vs changing for the sake of the person doing the forcing.
The idea that we could want different things than we currently do (and can even want to want different things) is hard to grapple with in a rigorous way, but that's what you're getting at.
Yup. That and more.
The L.A. Paul "vampire" construction is exactly the issue, and complicated in exactly the way she lays out. Beggars easy analysis. A good recommendation for many reasons.
It's a tricky problem. There's no bright dividing line between forcing someone to change for their own sake vs changing for the sake of the person doing the forcing.
That's the trickiest version of the problem; but taking a less tricky variant (e.g., metabolic health) I'd say most of the Western world is defined by preferences we have at time t that we ourselves repudiate at time t+delta, where delta is small. We commit our future selves to fates they will curse us for. [1]
Now aggregate this problem across millions, as you pointed out earlier. It renders praxeological analysis absurd, although it's absurd for other reasons too.
[1] Interesting thought experiment: imagine you are not a singular agent, but some collection of personas. Model the preferences of the different components of you (sampled at some rate) over time. What are the preferences of the "group" and how do members of the group act in opposition to each other?
We're in real trouble if the group-individual model is correct. Social choice theory clearly demonstrates that there's no meaningful way to generally aggregate preferences. Obviously, that's not a counterargument. Things aren't true just because it would be easier if they were.
Many of the "that's a problem for future Homer" problems are reasonably well covered by extreme versions of time preference. It doesn't really matter how recently you enjoyed something if you have high time preference you'll usually wish you hadn't done it then because you'd rather do it (or some substitute) now.
We're in real trouble if the group-individual model is correct. [...] Things aren't true just because it would be easier if they were.
I'm worried that you've got both the diagnosis right and the commentary on the diagnosis right.
Many of the "that's a problem for future Homer" problems are reasonably well covered by extreme versions of time preference.
I assume you're right about this too, but I consider it to be tantamount to an epicycle. I find the underlying generative model of TD much less plausible than my ~model where the unified self is basically an illusion. You can make the math work, but what, practically, has been achieved? You wind up with a lot of Tim-problems.
To be clear, I don't know what to do about any of it -- maybe there's nothing to be done? Maybe assuming coherent identities through time is the best one can do in terms of law / political economy, the way I suspect that, practically speaking, property rights is the best you can do, despite the obvious shortcomings of that formulation?
But it does help me think about the world in a way that seems (to me) more useful.
It totally muddies up ethical or policy implications of economic theory. The theory itself is positive rather than normative, so I think theory is relatively unscathed.
In international trade theory, we model nations as though they have preferences and utility functions. This is, or should be, purely a modeling convenience and says nothing about welfare of the individuals in the country (because of The Impossibility Theorem from social choice theory). Trade flows into and out of countries do adjust to prices and that behavior is like the behavior of an individual with preferences.
Your framework basically turns individuals into nations, which means we can still model them as individuals but we can't infer welfare from revealed preferences anymore.
It's a real Pandora's Box.
We shouldn't overstate the issue though. One of my colleagues wrote a book called "Escaping Paternalism" which criticizes behavioral economics for over emphasizing the importance of its results, and in any case being internally inconsistent because if you claim that people can't make rational decisions, then on what basis do you pronounce one choice better than another? By what basis do you decide in which direction to "nudge" them?
Assuming unity of preferences within the individual, while clearly not true in all circumstances, is still probably the best approximation to human decision making and the best approximation to some concept of "welfare" that we can loosely define
At least, I would argue that the burden of proof rests on the person who wants to say that the rational model of the individual is inappropriate, and they also need to present some viable alternative.
That being said, to those who implicitly or explicitly have internalized the rational model, they should also recognize the limitations thereof
the burden of proof rests on the person who wants to say that the rational model of the individual is inappropriate
In general, I think it's valuable to figure out who bears the burden of proof. Oftentimes, it's wrongly assigned.
To me, using the word "rational" to describe habitual behavior that makes a person hate themselves and their life for most of their waking hours is a curious practice that belies other uses of the word.
You can do it - we are doing it - but it lacks parsimony in the ways I think matter. Or rather: it's extremely parsimonious in a nonsensical way that breaks badly in complex settings. But beyond what I've already said, I have no crisp alternative.
The better formulation is probably in the realm of philosophy, as @Undisciplined mentioned previously.
Also, this one with Agnes Callard (my wife's favorite living philosopher) about aspiration.
After you wrote this I was trying to think who my favorite living philosopher would be. C. Thi Nguyen is 1 of my 3 candidates, and apparently he did a talk w/ Callard. I haven't watched it but now I'm going to.
Oh, thanks for the Callard link, btw. I will listen to it.
Yes, the latter could be thought of as an aggregation problem.
Your scenario is really rich people in poor countries trading with people in rich countries (although it doesn't really matter if the trade partner is rich). If those gains from trade increase their ability to engage in non-voluntary exchanges with the poor people in their own countries, then the trade may well be a net negative for those poor people.
So, the poor country gets richer without the poor people in it advancing.