Brad DeLong **************
Fair enough you arrogant prick. Lets go....
> > Look. Somewhere I have Ceci Rouse's notes from when she was a section
> > leader the last time Larry Summers taught at Harvard, undergraduate
> > public finance, Economics 1410. IIRC, one section of them goes
> > something like this: "Divergence between maximizing real GDP and
> > maximizing social welfare... monopoly... externalities... income
> > distribution... the market maximizes *a* social welfare function, but
> > unless the distribution of wealth is exactly right there is no reason
> > to believe that it maximizes *the* social welfare function..."
*****************
Who determines *the* social welfare function in order to generate the utilities
which are then used to calculate "the equilibrium rate of investment" so that
the distribution of wealth is "roughly right" [let alone exactly right]? Or is
it the other way around with "the equilibrium rate of investment" struggling via
imperfect information that leads to the divergence between maximum GDP and *the*
social welfare function? What does it mean to say the distribution of wealth can
be exactly right? Nothing.
> > I know--Lant knows--Larry knows--Joe knows that even if government
> > policy is carefully tweaked to preserve competitition and neutralize
> > all externalities by providing the right incentives to producers and
> > consumers, there is still a big gap between the market's equilibrium
> > and the social welfare maximum. I know--Larry knows--Lant knows--Joe
> > knows that Bengal's market economy in 1942 was in a Pareto-optimal
> > equilibrium, only because two million people had no wealth and no
> > income and thus a zero weight in the market's calculus, they were
> > about to die. If everyone has the same indirect utility function that
> > is (say) logarithmic in real income, then the market's calculus
> > maximizes a weighted sum of individuals' utilities, with each
> > individual's weight being proportional to his or her income. That's
> > what the market does. If you don't like the distribution of wealth,
> > you *cannot* like the market equilibrium.
**********
When was the last time you heard Orrin Hatch or Tom Daschle [or any one else with the "authority" to do so] calling for the elimination of all externalities and requesting the Fed, Wall Street and our leading polluters [as merely one example of externalities] to voluntarily reconfigure the property rights structure so as to eliminate said externalities while making rigorous use of the lamba calculus to achieve said aims? Lots of reification and fetishization in the grammar above. For the evisceration of Pareto see Alan Buchanan's "Ethics, Efficiency and the Market" and "Economics and the Law" by Nicholas Mercuro and Steven Medema [especially p. 118-121]; then tell me what's left of the referential work that can be accomplished via applying Pareto to the real world.
As for equilibrium, might I suggest a reread of Nicholas Kaldor's "The
Irrelevance of Equilibrium Economics"? Or perhaps Mario Amendola & Jean-Luc
Gaffard's "Out of Equilibrium? Are energy price movements in equilibrium? Are
the pricing strategies [given not only imperfect information, but deliberate
disregard for extremely relevant ecological knowledge] for energy Pareto
optimal? Are the energy flows through the economy in equilibrium? Are the energy
flows through the global ecology/economy Pareto optimal? From which species
perspective?
> >
> > And all of this does not even consider the power dimension (which I
> > know Larry thinks about, but have never talked to Lant or Joe about).
> > Until there was a flourishing transatlantic shipping capability and a
> > demand in Europe for sugar and tobacco, there was little demand in
> > the Caribbean for slaves. Until there was a flourishing demand in the
> > Caribbean for slaves, the rewards to coastal African kings from
> > undertaking slave raids into the interior were low, so few slaves
> > were taken. But once there was both a transatlantic shipping trade
> > and strong European demand for sugar, the west African slave trade
> > took off...
********
Using Pareto analyses directly above would have been logically consistent with
your use of it in the preceding paragraph, but that would have shown the
vacuousness of it's presumed normativity unless one can assume that Pareto
himself would have refrained from such usage as he may or may not have condemmed
slavery on other grounds, thus refraining from using it's referentiality to at
least one set of economic/ethical problems; the political nature of labor
contracts.
> >
> > Similarly, if there were no oil in Ogoniland it would not be
> > worthwhile for generals in Lagos to kill, torture, and terrorize:
> > after all, if you go into the bundu you might get hurt. But once
> > there is oil--and companies to buy it--all of a sudden the level of
> > violence goes *way* up, because now there is something to kill,
> > torture, and terrorize for.
********
MMmmmmmm institutionalized murder is Pareto superior in the short run equilibrium, perhaps with regards to using, say, democratic deliberation to achieve a sustainable "long run equilibrium" allocation of property rights in order to get the distribution of wealth exactly right?
> > You can talk about--I do talk about--the opportunities for
> > Pareto-preferred exchange and universal increases in wealth and
> > welfare produced by increased globalization. But you must also
> > recognize that most governments are made up of thugs with spears, and
> > when there is more wealth to be extracted by being more thuggish you
> > will find a lot more governments behaving more thuggishly--whether
> > Polish nobles enserfing peasants so they can increase grain shipments
> > down the Vistula, or the African slave trade, or the expulsion of the
> > Dakota from the Black Hills, or UNITA's funding of its continued
> > campaign in Angola via diamond sales.
********
So thuggishness is Pareto optimal?
> >
> > It's no secret which way I come down--I am a card-carrying
> > neoliberal, after all. Let free trade and investment rip, watch
> > wealth accumulate, hope that sweet commerce creates softer forms of
> > rule, and get ready for the next turn of the political wheel which
> > will make movement toward social democracy possible in a generation
> > or so. That seems much better to me than, say, telling Malaysians
> > that they cannot have steelworker jobs because that would raise
> > pollution levels in their rivers, or telling Ecuadorians they cannot
> > have electricity because coal-burning power plants raise SO2 levels,
> > or telling Mexicans they cannot build automobiles because autoworker
> > jobs belong in Michigan.
********
And pray tell the name of the straw people who are suggesting this path of
throttling "development"?
> >
> > But I am aware that the neoliberal bet is a *bet*, and that it may
> > come out very badly. Lots of bets have come out very badly in this
> > century: look at Lenin, or Nehru, or Mugabe.
*********
In a world loaded with irrational expectations and oligarchical expectations cloaked with "the mantle of democratic deliberation", not to mention the loaded dice of our Pareto superior international institutions used to make it look nice and legal, there's no doubt the neoliberal paradigm should become our new ecological-economic eschatology.
> >
> > >Stiglitz defended Suharto, saying of him, "He wasn't
> > >really that bad...He was no Moi." Lots of polite embarrassed smiles
> > around the
> > >head table.
> >
> > Suharto killed 700,000 people. Suharto also poured money into rural
> > education like there was no tomorrow. And under Suharto rural
> > material standards of living appear to have doubled, and nationwide
> > GDP per capita quadrupled.
********
Is the quest for dismantling the Indonesian oligarchy Pareto optimal? From the
Ruling clique's perspective? From the "masses" attempting to get a semblance of
rights perspective? Is the mutual incompatability of their aims Pareto
efficient?
> >
> > If Indonesia continues to spiral downward I will wind up viewing
> > Suharto much like I view Marshall Tito: someone with very bloody
> > hands who was (unless you were one of the dead) a relatively good
> > dictator--and under Suharto Indonesia's economy appears to have grown
> > much faster than Yugoslavia's under Tito.
**********
Is it because he studied Frederich List?
With warm regards and a tilt of the glass to Ludwig Lachmann & Peter Albin & Janos Kornai,
Ian