Choice and Welfare

Is Economics (mainstream, neo-classical economics) moral?  Does increasing choices necessarily increase welfare?

Professor Ed Glaeser of Harvard defends his view of the economics profession in the New York Times recently against charges that economists have “no moral compass or core”. He maintains that:

Improvements in welfare occur when there are improvements in utility, and those occur only when an individual gets an option that wasn’t previously available. We typically prove that someone’s welfare has increased when the person has an increased set of choices.

He quotes both Adam Smith and John Stuart Mill. Economists on the defensive with the public always like to quote Adam Smith.  I am not so sure Adam would appreciate their summary of his views. But Ed mostly quotes Milton Friedman, including this snippet.

In the last century, Milton Friedman offered “freedom is a rare and delicate flower” and “a society that puts equality — in the sense of equality of outcome — ahead of freedom will end up with neither equality nor freedom.”

I don’t really agree with Glaeser. I believe economics (and economists) has (or should have) a singular moral purpose: to discover how to increase the well-being of people in this world. I happen to think that choice and freedom is an essential element of well-being, but I don’t buy the idea that well-being arises solely from choice. If I am starving, my well-being is better enhanced by access to a single, nourishing adequate meal than if I were to instead only have access to multiple but-all-inadequate alternative meals.

I found this rebuttal of Glaeser’s arguements by Richard Green to be interesting.  I’m not sure he hits the problem head-on, but it’s close.  I also think the comments are fascinating as well and urge readers to them.

I will leave it to others to dispute the notion that more choices are always better than fewer.  But I can’t help but think that it is to easy for those of us who are tenured professors to extoll the virtue of free choice, for the simple reason that we get so many, well, choices.  We get to choose what we write, we to a large extent get to choose what we teach inside our classes, and we can piss our deans off and pay fairly little in the way of consequences.  We might not get a raise or we might have to teach a class that we would rather not, but this is all small beer.  We can make an awful lot of choices and still be economically secure.

Now consider the administrative assistant at a corporation who has a boorish boss and a sick kid.   The company she (he) works for has a good health insurance plan, but if she were to leave, she would find herself unable to get coverage at a reasonable price.  Does she really have choice?

Consider the West Virginia coal miner who goes into a dangerous mine every day, and whose life expectancy is shortened with each hour worked underground.  Now consider the fact that the miner grew up in a West Virginia town with a poor school in an environment where going to college was a rare phenomenon.  Does that miner have a choice?

I could go on, but I think the point is fairly clear.  There are times when government intervention could expand the choice set up a large number of people.

Ed does point out how government can improve choice sets, and for that he deserves credit.  But the more fundamental problem is that market economies produce large institutions that have limited markets inside of them, and therefore sometimes have hierarchies that can be as inhospitable to personal liberty as government bureaucracies.  Elinor Ostrom’s Nobel win in 2009 shows that the economics profession is beginning to recognize this problem,  but I am not sure Ph.D. students are broadly encouraged to study it.

Personally I had always thought that increasing choice was desirable only because, and only to the extent that, it was instrumental in achieving higher welfare. Yes, freedom and choice enters into the “utility function” as a good in it’s own right, but so do other goods such as love, health, security, and the ability to produce or grow.  It is not clear to me that choice necessarily trumps these other goods, nor is it clear that these other goods can only be gained from some abstract freedom of choice that Friedman espouses.