Tuesday, February 01, 2005

Relativism by any other name

In an old post from last month, Tyler Cowen seems to imply that there's nothing wrong with a 66-year old woman apparently "buying" IVF services so that she could have a baby. I don't know if I agree with the conclusion, but I know I don't like his reasoning.

His post seems to be saying that since the procedure was a voluntary transaction between the doctor and the woman we can assume that a pareto improvement was made and wealth was maximized. He's right, but so what?

Both the woman and the doctor might be "better off" as result of the trade, but was the transaction "moral"? I certainly don't know the answer to that question, but why isn't "morality" a criteria worth using to evaluate this market outcome? What makes pareto efficiency the best criteria to judge this or any market outcome? Dr. Cowen doesn't attempt to answer these questions.

I'm not advocating some sort of "social justice" agenda and I know none of these questions are new to Dr. Cowen. I just think economists should articulate the fact more often that efficiency is just one of many criteria we could use to judge market outcomes. I've met too many fellow econ students who think that they can declare "policy X leads to a reduction in efficiency, therefore we should not implement the policy". Maybe that's true, but you're going to have to work to convince me that efficiency is the best criteria we can use, and that's going to involve an argument from moral philosophy.

To me efficiency is basically moral relativism when we use it in the world of "good" and "should". And this relativism can lead to some awkward outcomes. The market for slaves in the 19th century was probably efficient, but did that make it "good"? The market for cloned harvest-ready bodies could be very efficient, but does that mean we "should" establish one?

There are still other problems with the efficiency criteria I can't go into here (this post is long enough alread), but I hope I've made my basic point that there is more to evaluating market outcomes than efficiency.

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All of that being said, I still love Marginal Revolution and Tyler Cowen is my idol. *smooch*