Itâ€™s time for the post that I am sure you have all been waiting for on that perrenial hot-button issue of the Mormon intelligensia: the relationship of the Gospel to welfare economics.
Generally speaking economists are interested in explaining and predicting human behavior. Their basic tool is the rational actor model. Contrary to popular belief among humanities majors and other econ-loathing types, the rational actor model does not mean that people are inherently greedy or that â€œGreed is good.â€? Rather, it rests a couple of simple ideas. First, that people have coherent preferences. What this means is that one forced to choose between different states of the world â€“ say one in which you eat oranges with your yogurt, one in which you eat apples, and one in which you eat pears â€“ one will be able to rank oneâ€™s preferences â€“ pears, oranges, apples â€“ and that ranking will be transitive â€“ If I prefer pears to oranges and oranges to apples, then I prefer pears to apples. A final assumption about preferences is that they are complete. Given any two states of the world, everyone will either prefer A to B, B to A, or be indifferent between them. The second key idea in the rational actor model is that people will act so as to satisfy their preferences. Thus, all other things being equal, if you prefer apples to oranges, you will eat apples rather than oranges when faced with a choice between them. This is it, folks. That is the rational actor model stripped to its bare essentials.
In order to make the math easier in modeling human behavior based on the rational actor model, economist tend to adopt the assumption that people are maximizing some reified something that the economists call utility. This does not mean that the economists are utilitarians, and all of the philosophers and English majors that are getting all set to do battle against Jeremy Bentham and the heartlessness of 19th century classical liberalism need to take a couple of deep breaths, think of a happy place, and calm down. Utility is a mathematical expression of two basic assumptions of the rational actor model.
Welfare economics is the branch of economic thinking that deals with two interrelated issues. The first issue is how we gauge the well-being of people. The second issue is how we evaluate desirability of differing states of the world based on our assessments of their impact on human well being. At this point, I think that most economists and more annoyingly most libertarians who have had a basic econ class fall into the trap of equating utility with well being. Maximize utility and all is well!
There are some problems with this. The first is that has to do with what is called the social welfare function. Utility is a postulate of the rational actor model. The idea that we can judge states of the world based on whether or not they maximize utility, however, is not a postulate of the rational actor model but of our social welfare function. Implicit in the maximization argument is the assumption that the over-all desirability of some state of affairs x is defined by the sum of the individual utility functions (which remember are simply a mathematical description of individuals’ preferences) of all members of the society. Mathematically, this looks like this:
S(x)=I1(x) + I2(x) + I3(x) + . . . + In(x)
Where S is the social welfare function, In is the individual utility function of person n, there are n people in the society, and we are judging the state of affairs x in the world. At this point, S(x) ought to look pretty arbitrary. After all, why shouldnâ€™t I have a social welfare function that looks like this:
S(x)=2 * (I1(x) + I2(x) + . . . + Ic(x)) + (I(n-c)(x) + I(n-c+1)(x) + . . . In(x))
Where individuals 1 through c represent one class in society and individuals n-c through n represent a second class. Perhaps the first class consists of the poor or the virtuous or members of some favored racial group, etc. etc. The issue of how we shape the social welfare function simply expresses in mathematical terms the simple fact that we need some theory other than the rational actor model in order to judge between states of the world. This does not mean, of course, that mucking around with social welfare functions is utterly vacuous. For example, Kaplow and Shavell, two economists at the Harvard Law School, claim to have demonstrated that given very weak assumptions about the nature of society logically speaking there is no social welfare function such that choosing a state of affairs that does not result in utility maximization does not also lead to lower levels of social welfare, regardless of how one specifies the social welfare function. My understanding is that this claim is quite controversial, although I donâ€™t pretend to understand the math.
There is a deeper problem, however, than the shape of the social welfare function. That is the nature of utility itself. Remember that utility is simply a description of preference satisfaction. The problem, of course, is that it is not clear that satisfying our preferences is desirable. There are two arguments against the idea that preference satisfaction is important: A good argument and a not so good argument.
The not so good argument is presented by the problem of so-called utility monsters. Jeffery Dahmer clearly had a preference for murdering and eating people. Many rapists have a preference for raping people. Suppose that we maximize aggregate welfare. This would suggest that the world ought to be organized so that Dahmer and the rapist should be able to satisfy their preferences so long as they get more utility than do their victims. Reductio ad absurdum. This is not such a good argument for two reasons. First, it requires that we assume that utility (which remember is nothing more than a mathematical expression of the rational actor model) is interpersonally comparable. This is doubtful. Second, the reductio probably rests on implausible empirical assumptions about how much people actually value not being raped or murdered and eaten. To see what I mean, imagine a thought experiment in which everyone in the world was given precisely the same amount of money. As an empirical matter, do you think that Jeffery Dahmer could find very many people willing to be paid to be murdered and eaten?
The deeper problem with utility is that it is not at all clear that getting what we want matters. It does not necessarily make us happy. It does not secure to us things that are of greatest worth. This, it seems, leaves us with a couple of options. First, we could argue that what matters is happiness, but that this is defined in terms of a particular psychological state rather than in terms of the satisfaction of preferences. Note, this is not an argument against the rational actor model, which may continue to be a valid way of describing and modeling human behavior. It only suggests that in judging states of the world we ought to defer to psychologists, assuming of course that they can identify the subjective state of happiness. One neednâ€™t suppose that we are left here with nothing more than simple hedonism. Perhaps the true joy that the Gospel brings, the kind of happiness that really matters is qualitatively different from the â€œhappinessâ€? of the faithless libertine.
The second option is that true happiness is not a psychological state but an objective condition. Consider the claim that â€œsinfulness never was happiness.â€? If sin is an objective concept, then happiness, it would seem, has some objective component. This gets really tricky, however, because it is not at all clear what this means. By objective I am suggesting something like a metaphysical condition. Perhaps sin is some sort of metaphysical, spirit sludge that inheres in the soul, a kind of inversion of Prattâ€™s famous spirit fluid. More plausibly, sin and happiness may consist of some sort of objective relationship to God.
Both of these options, however, leave open the most difficult question. What is the shape of Godâ€™s social welfare function? Assuming that we understand the individual welfare functions that God deals with â€“ psychological perhaps, objective perhaps, almost certainly not classical economic utility functions â€“ we still do not know how God aggregates them. Perhaps God, as no respecter of persons, counts everyoneâ€™s welfare function completely equally. Perhaps, as a lover of the poor, he counts the welfare functions of the poor double. It is hard to say.
Of course, there is a final economistâ€™s dream. Suppose that we could nail down Godâ€™s social welfare function, including whatever individual welfare functions he uses. Could we then come up with an expression of this welfare function in terms of individual utility functions? If so, then we could, indeed, use the rational actor model to construct Zion!