Prof: Okay,
this morning we're going to
carry on talking about Jeremy
Bentham and classical
utilitarianism.
 
And I'm going to begin by
making a few points about the
measurement of utility,
which we bumped into in a
glancing kind of way last time,
but we're going to dig into it
a little bit.
 
And then we're going to move
from that into talking about
utility and distribution in
classical utilitarianism;
how we should think about the
measurement of utility across
the whole society and what
implications Bentham's argument
has for that,
and I think you'll start to see
why classical utilitarianism
became such an ideologically
powerful doctrine in the
eighteenth and nineteenth
centuries.
 
So just briefly to recap,
we talked last time about
Bentham's principle being
maximized,
"the greatest happiness of
the greatest number."
The idea being that if you
think of,
in this case,
a very simple two-person
society,
and you think of that as the
status quo,
A has that much utility,
B has that much utility.
 
Anything on this side of the
status quo would be an
improvement for society.
 
The greatest happiness of the
greatest number will have been
increased.
 
Now, that's all very abstract,
and by way of trying to make it
somewhat more concrete,
let's notice two features of
utility measurement.
 
The first, as I said to you
last time, as far as Bentham is
concerned, this is a doctrine of
what I called objective egoism;
that people are self-interested
and behave self-interestedly,
but that we can figure out
what's likely to motive them
regardless of their own
interpretation of their actions
or behavior.
 
We have our interpretation;
remember, Bentham says the rare
case--
as with the physiology of the
human body,
so with the anatomy and
physiology of the human mind,
it's the rare case that you get
it right about yourself.
 
And it's the objective
scientific calculus that's going
to tell us what maximizes
people's utility.
Now, you might say,
"Well, how is that
actually going to work?"
 
So there are two steps here.
 
The first one is that he thinks
all utility is quantifiable.
I went through that last time,
but the piece I didn't mention
is that it follows from that
that utility is reducible to a
single index,
and in this case Bentham's
thinking of money.
 
Money is going to be the
measure of utility in his
scheme,
and that means that we could
think of these units of utility
as having a kind of dollar
value.
 
So anytime you think this
doctrine is crude or extreme,
remember my point that this is
a guy who takes every thought to
the logical extreme.
 
But if so you get one,
let's just for simplicity say,
say one Standard International
Util costs a dollar.
And let's suppose you
experience two Standard
International Utils of pain from
coming to class.
Then I could make you
indifferent between coming to
class and not coming to class by
paying you two dollars.
It could get you to come to
class if I paid three dollars,
and I would not get you to come
to class if I paid a dollar,
right?
 
And so that's the second point.
 
In the first instance we say
that utility is quantifiable and
expressible through money,
but then related to that,
and as indicated in the example
I just gave you,
we can work with a doctrine of
revealed preference.
We can vary the price that we
charge admission for the course.
So let's say we charge--let's
imagine there are three of you
and one of you experiences two
utils of pain from coming to
class,
one experiences three utils of
pain,
and one experiences two utils
of pleasure.
 
There's one perverse student in
the audience who actually likes
coming to the class.
 
So then we would find that if
we paid a dollar,
one of you would come.
 
If we increase it to two-fifty,
two of you would come,
and so we could vary the price
to get information about your
utility.
 
And we could even influence
your behavior without actually
changing your preferences,
and that's a very important
distinction to make.
 
Your enjoyment from coming or
not coming to class wouldn't
change, but your behavior would
change if we varied the price;
so that we can influence your
behavior by manipulating the
incentives without regard to
what your underlying preferences
are,
and we could allow them
actually to stay the same.
 
You'd rather be at home asleep,
but if the price is high enough
you'll come anyway.
 
Okay, so that's all well and
good at the level of thinking
about one individual's behavior,
but what about thinking about
society in more general terms?
 
When we talk about
utilitarianism in Bentham's
system,
classical utilitarianism,
we see that he operates with
these numbers that attach to
specific actions or policies and
that we can make comparisons
across individuals.
 
So to put this in the jargon of
economists, Bentham allows
interpersonal comparisons of
utility.
Bentham allows interpersonal
comparisons of utility.
We can say that if you take one
unit of utility from one person
and give it to another person
their utility will go up and the
first person's utility is going
to go down.
Okay, so it's a doctrine of
interpersonal comparisons of
utility.
 
And for those of you who are
mathematicians here it might
also be worth noting that
Bentham operates with cardinal
scales.
 
These are additive things.
 
You can actually think about
these as sort of lumps of
pleasure or pain experience that
are moved around across people
and can be added and subtracted.
 
And so I put up just here to
sort of--so you can think your
way through this doctrine.
 
If you imagine a status quo,
a perfectly egalitarian world
in which each person has six
units of utility,
you can start asking yourself,
"Well,
let's imagine if we could
redistribute things."
What would that mean as far as
Bentham's doctrine is concerned?
What I've given in this first
column as a potential departure
from the status quo is the
utility monster example we
talked about last time.
 
If it turns out Leonid has a
vastly superior capacity to
experience pleasure than anybody
else,
then we could get a huge
increase in total utility by
taking a lot from B and C and
giving it to Leonid,
so that we would say
"allow,"
right?
 
Or we could think of this
change from the status quo--
we go to a more inegalitarian
society and,
again, the greatest happiness
of the greatest number has
increased.
 
We have a world here where
there are eighteen utils and a
world here where there are
nineteen utils.
Or think about this case,
we might think of this as a
kind of schematization of the
Eichmann problem.
If the utility that the Aryans
gain from practicing genocide
and ethnic cleansing against the
Jews exceed the utilities that
the Jews lose,
there would be no reason under
Bentham's doctrine not to do it.
 
Okay, now there's a certain
ambiguity in the phrase,
"Maximize the greatest
happiness of the greatest
number,"
which Bentham never finally
resolves.
 
The ambiguity is whether he's
saying just maximize the total,
so here the total's bigger than
eighteen,
here the total's bigger than
eighteen,
here the total's bigger than
eighteen,
so it's obviously the case that
it's preferable,
on Bentham's scheme,
to the status quo.
Or is he perhaps saying
maximize the utility of the
majority,
the greatest happiness of the
greatest number,
the greatest number simply
meaning the majority?
 
But in that second
interpretation you could still
get highly inegalitarian
distributions being judged
superior to the status quo,
because if you imagine going
from here to here we've got a
majority here experiencing
twelve utils of pleasure,
and here we have a majority of
two experiencing seventeen
potentially utils of pleasure.
So there is some ambiguity
there as to just what Bentham
meant,
but most of the time he is
taken as having meant just the
crude statement,
"Maximize the total amount
of utility in the society."
And so that nuance between
whether we're saying the
greatest number means a majority
or just the total amount is not
something that will detain us
any further.
Now, you could say,
"Okay, so far so good,
but isn't all of this a little
counterintuitive?"
After all, if you
compare--let's focus on the
difference between the status
quo and distribution IV here.
These people might be on the
verge of starvation.
Surely giving them a unit of
utility is going to be much more
enhancing to their happiness
than giving A a unit of utility.
Anyone know what the principle
behind that idea is?
 
 
Anyone want to take it?
 
How many of you have done ECON
101, the first econ course?
Yeah, so what is the principle
that would tell you if you have
no food and I give you a loaf of
bread,
your utility goes up a lot more
than if I have ten loaves of
bread and I give you a loaf of
bread.
Somebody?
 
Okay.
 
Student:  Diminishing
marginal utility.
Prof: Diminishing
marginal utility,
the principle of diminishing
marginal utility of all good
things.
 
And this is the idea just
encapsulated,
to make it a little bit more
dramatic: if you don't have a
car and somebody gives you a
Porsche Turbo,
your utility's going to go up a
huge amount,
right?
 
But if you already have a
Porsche Turbo and somebody gives
you a second one,
you're going to get less new
utility from the second Porsche
than you had from the first.
And if somebody gives you a
third one you're going to have
less utility,
less new utility from the third
one that you had from the
second.
It's not that you won't get any
new, but you'll get less.
And the principle of
diminishing marginal utility
says that this line will get
flatter, and flatter,
and flatter toward infinity.
 
You'll always get more utility
from a new increment of the same
good,
but it'll be less new utility
than you got from the previous
increment of that same good,
okay?
 
That's the concept of
diminishing marginal utility.
The new utility you get
diminishes at the margin.
Each new Porsche is less
valuable to you than the
previous Porsche.
 
Now, is that plausible?
 
 
 
Anyone think there's a problem
with that idea?
 
 
Yeah?
 
Student:  The idea with
shoes.
If you're given one shoe you're
going to get absolutely no
utility,
but if you're given two shoes,
a right and a left,
then maybe you'll get more
utility?
 
Prof: Okay, so shoes.
 
If we just kept giving you lots
of right shoes,
there'd be a problem.
 
Student:  Right.
 
Prof: Okay,
so I think Bentham would have
to say it would have to be pairs
of shoes, right?
Student:  Yeah, I guess.
 
Prof: Okay,
but that's a great example to
start us off on this.
 
What else?
 
Anything else anyone might find
problematic?
Yeah, over here.
 
Student:  Well,
it just seems that if we're
going by diminishing margin
utility that if you had everyone
literally dirt poor and always
starving,
if you give them just a little
bit of something their happiness
would increase so much more
because they got that much
little,
but people would still be
living in misery technically.
 
Prof: Just explain that
a little more.
Student:  Well,
marginal utility is if you had
a little bit of something for
the first time your happiness
increases so much more because
the first time.
So if you were to give people
very little food,
or anything at all,
and then you suddenly gave them
a little bit they would get
really,
really happy about it.
 
But by this then also if
they're also very wealthy and
they got something more they
wouldn't really be happy.
So it'd be more beneficial to
the utility if they only got a
little bit so they would be
very, very happy.
Prof: Okay.
 
That's a very sophisticated
observation.
I'm just going to put it one
side and come back to it in
about ten minutes when I start
talking about redistribution.
Okay.
 
But anything else about--if
we're still focusing on one
individual,
anything else that might be
problematic with this notion of
diminishing marginal utility?
Over here?
 
Student:  Well,
let's say you're C.
Just because you're rich
doesn't mean you don't want to
be more rich,
and just because you have a
certain amount of money doesn't
mean more money isn't going to
make you equally as happy as it
did before.
Prof: Okay,
that's true,
but why is it problematic?
 
Student:  I don't know.
 
Prof: Well,
I think you hit on something
really important.
 
There are a lot of people who
think that the principle of
diminishing marginal utility
means that money is less
important to people as they have
more of it.
After we said the principle of
diminishing marginal utility of
all good things,
right?
Money is a way of purchasing
good things,
so your example might be
thought to suggest that this
implies the more money you have
the less important money is to
you,
okay?
So you're right,
but notice what that means.
Does it mean that rich people
will care less about money?
 
 
It's a tricky question because
the first impulse is to say,
"Yes, they'll care less
about money,"
but the answer is no.
 
Why is the answer no?
 
Yeah?
 
Student:  They just need
more money to get the same
amount of happiness.
 
Prof: Exactly.
 
They need more money to get the
same amount of happiness
precisely because of the
principle of diminishing
marginal utility.
 
So you got it exactly right to
see that money creates some
problematic examples for the
principle of diminishing
marginal utility.
 
But the thing that follows from
it is that,
for Donald Trump to get more
utility,
you have to give him a huge
amount of new money just for him
to get the same amount of new
utility as somebody who only has
ten thousand dollars,
right?
So the way to think about the
desire for money it's a bit like
sort of a heroin addict needs
more,
and more, and more new heroin
to get the same hit,
right?
 
So the more money you have,
actually the more money you
will want in order to get the
next marginal increment of
utility.
 
So we should expect rich people
to be greedy by this theory,
not to become more and more
indifferent to money.
Very important assumption and a
lot of people get that wrong
when they think about the
principle of diminishing
marginal utility.
 
Are there any other examples of
this doctrine that might make it
seem problematic?
 
Yeah, over there.
 
Student:  Well,
if I had a second Porsche Turbo
I would be just really reckless
with it and I could do whatever
I want.
 
I wouldn't have to protect the
first Porsche Turbo as much.
Prof: Yeah?
 
Student:  I mean it's
like there's more you can do
with it, right?
 
Prof: Yeah,
so why is that a problem?
Student:  Well,
then wouldn't the second car--
I mean, like,
say if you have a little bit
and you're given a little bit
your utility goes up,
but you really want to protect
that little bit,
but when you get more maybe it
encourages you to save money,
to not spend more.
 
Prof: So you wouldn't
want the second one?
Student:  What?
 
Prof: Are you saying you
wouldn't want the second one?
Student:  Well,
why wouldn't I want the second
one?
 
Prof: If you had one and
I said,
"I'll give you my one,
it's right out there,"
you wouldn't want it?
 
Student:  It's not that
I wouldn't want it.
Prof: You wouldn't be
like Jay Leno,
who--how many cars does Jay
Leno have?
Student:  Too many.
 
It's not that I wouldn't want
it, but maybe the utility for
the second one in some cases
would be more than the utility
for the first one so the curve
would be thrown off.
Prof: Because?
 
Student:  Because you
want to protect that first one,
so, I mean, so you don't lose
what little you have.
Prof: Okay,
so it's a possibility.
Any other examples of where
this becomes problematic?
I mean, think about beer.
 
One beer increases your utility
a lot.
The next, and the next,
and the fourteenth,
isn't it going to at some--you
know, or taking an aspirin,
isn't it going to,
you know?
No?
 
Student:  What about
other values like integrity?
If you have a little bit of
integrity and you get some more,
but if you have a lot of
integrity, a little bit more is
still worth an equal amount.
 
Prof: So integrity is a
great example because once you
start putting values like that
out there it,
I think, threatens the idea
that it's all reducible to a
single index,
right?
Because you can't--having a
little bit of integrity is sort
of like being a little bit
pregnant, right?
Once Eliot Spitzer's integrity
is blown it's not like there's
some--it's a binary good.
 
You either have it or you
don't, right?
People either think he's either
a hypocrite or he's not,
it' a binary thing.
 
Maybe some people are somewhat
hypocritical,
but it seems like there's a
threshold there,
one side or the other.
 
So there might be some goods
like integrity that are not
easily capture-able in this
logic.
We should put that out there,
but yeah, over here?
Student:  What about
health?
It's not quite binary because
you can be in medium health,
but I think it would be pretty
useful to be healthy and then
super healthy,
ad infinitum.
Professor Ian Shapiro: Health.
 
The thing about health it's
tricky.
Actually less so in our day
than Bentham's,
it's tricky to think about
redistributing health,
right?
 
Although you'll see we will
come up against some pretty
bizarre cases.
 
If some people are sighted and
some people are blind and you
could do eye transplants,
should we be transplanting from
the sighted to the blind?
 
Arguably the blind person would
gain more utility from getting
one eye than the sighted person
would lose from losing one eye,
so shouldn't we do that?
 
So that can also give you some
ways of proceeding that would
make you queasy,
right, if you allow the
principle of diminishing
marginal utility.
What about the examples I threw
out there, beer and aspirins?
They're a bit like the sort of
left shoe examples,
right?
 
I don't think those are
actually deep problems for
Bentham's theory because I think
what he would say is,
"Well, you'd drink beer
and at some point you would sell
the beer rather than make
yourself paralytically drunk and
feel terrible."
 
You'd sell the beer and use
that to buy some other good that
would give you increasing
utility at a diminishing
marginal rate.
 
So the main thing is that the
fungibility of utility and its
expressibility in terms of
money,
although as was pointed out
here, when we think about the
diminishing marginal utility
even of money,
we shouldn't think that that
makes you care less about money
the richer you get;
rather it will make you care
more about money the richer that
you get.
Okay, now, here's a historical
statement about the principle of
diminishing marginal utility.
 
Every serious economist since
the eighteenth century has
assumed that the principle of
diminishing marginal utility is
true, including Jeremy Bentham.
 
You can't do economics without
assuming that the principle of
diminishing marginal utility is
true.
And I think if you threw out
some of these problematic
instances like integrity,
I think that what Bentham would
have said,
or what any economist would
have said,
"Well, yes,
there are some things that are
not capture-able easily,
or easily captured by this
idea, but if you want to get it
right,
if you want to see how people
are going to behave,
if you want to get it right,
it's a better assumption than
any of the competing assumptions
you could make.
 
It's going to get you closer to
the truth more of the time than
not assuming the principle of
diminishing marginal utility is
true."
 
So Bentham would have probably
said that, I think,
if questioned or if somebody
had probed with some of these
counter examples.
 
So it's the best assumption you
can make given that you've got
to assume something.
 
But now, and now I want to come
back to the sophisticated point
that was made in the middle at
the back there a few minutes
ago,
when you start to think about
the utility that people at the
bottom of the social order
derive from a particular good,
versus the utility that the
people at the top of the social
order derive from some
particular good,
because in Bentham's scheme,
remember,
we are allowing comparisons
across individuals.
 
Let's suppose a two-person
society,
again, and let's suppose it
consists of Donald Trump--
well, it can be a multi-person
society but we're just going to
focus on two:
Donald Trump and a homeless
woman living out of a left
luggage locker in Grand Central
Station.
 
Actually there are no lockers
at Grand Central but there are
at Penn, at Penn Station,
okay?
And the question is,
should we take a dollar from
Trump and give it to the bag
lady.
What? Should we? Yes? No?
 
How many think yes?
 
Okay, yeah, almost everybody.
 
Why?
 
Because by assumption with the
principle of diminishing
marginal utility we take the
dollar from Trump up there,
his loss of utility is
negligible, but we give it to
the woman who's starving down
here,
and her gain in utility is
enormous from that dollar,
right?
 
So we should take the dollar
from Trump.
Let's assume there's no dead
weight loss to the government
and all of that for right now.
 
We will just keep it simple.
 
We should take that dollar from
Trump and we should give it to
the bag lady,
and the greatest happiness of
the greatest number will have
increased,
right?
 
But then maybe we should take
another dollar,
shouldn't we?
 
I mean it worked the first
time, so we should take a second
dollar from Trump and give it to
the bag lady,
and a third dollar,
and a fourth dollar.
When are we going to stop?
 
When are we going to stop?
 
Yeah?
 
Student:
>
Professor Ian Shapiro:
Yeah, we're going to stop at
the point of perfect equality,
right?
We're going to keep
redistributing until they have
the same amount.
 
So now you should be able to
start to see why classical
utilitarianism was a doctrine
that was thought to be
profoundly radical and
frightening to rich men,
because it has this built-in
impetus for downward
redistribution.
 
You can say well,
there'll be cost,
there'll be dead weight loss to
the state and so on,
but still the underlying logic
says take it from Trump and give
it to the bag lady,
right?
At the margin that's what you
should do.
And Bentham completely saw that
this was an implication of his
doctrine.
 
Now, Bentham was a fairly
radical guy.
He was a supporter of
democracy, which was a radical
thing at that time.
 
But he wasn't as egalitarian as
all that,
and he wanted to temper the
downward redistribution that
flows from his principle,
and so he makes a distinction
between what he refers to as
"absolute"
and "practical"
equality.
He says, Suppose but a
commencement made,
by the power of a government of
any kind,
in the design of establishing
it (absolute equality,
that's redistributing to
equality),
the effect would be--that,
instead of every one's having
an equal share in the sum of the
objects of general desire--
and in particular the means of
subsistence,
and the matter of abundance,
no one would have any share of
it at all.
 
Before any division of it could
be made, the whole would be
destroyed;
and destroyed,
along with it,
by those whom,
as well as those for the sake
of whom, the division had been
ordained.
 
He's basically saying,
if you want to reduce that to a
bumper sticker,
he's saying the rich will burn
their crops before giving them
to the poor,
and that is a common argument
in politics.
It's the sort of reverse of
trickle-down,
right?
 
Trickle-down is the notion that
you allow inequality because the
rich will create more wealth for
everybody, right?
The pie bigger for everybody,
and so the greatest amount of
utility is increased by allowing
inequality.
This is the inverse claim.
 
Bentham's saying,
"Well yes,
in principle absolute equality
would maximize the greatest
happiness of the greatest
number,
but in fact if a government set
out to do that,
the rich would rebel."
 
And this is a claim that is
often made in everyday politics.
So you'll destroy incentives to
work,
is the claim that you'll hear
when we have arguments about
raising taxes in the run up to
the fall elections,
right?
 
In the transition to democracy
in South Africa people said the
white farmers will destroy their
farms before turning them over
to the majority.
 
It turned out not to be true.
 
So those examples put on the
table, what sort of force does
this claim have?
 
It's really an empirical claim,
and we don't really know how
much the rich will tolerate
before burning their crops.
Presumably they'll allow some
redistributive taxation,
but we don't know how much,
and a lot of the day-to-day
argument of politics turns
around how much.
So Bentham makes a distinction
between absolute and practical
equality,
and he says,
"We should redistribute to
the point of practical equality,
but not to the point of
absolute equality because
redistributing beyond practical
equality has this perverse
counter-trickle-down logic and
that's not going to be
acceptable from the standpoint
of the principle of
utility."
 
Okay, so when you allow both
interpersonal comparisons of
utility and you assume
diminishing marginal utility,
utilitarianism becomes a very
radical doctrine.
You can hedge it in to some
extent with claims of this sort,
but they are themselves
controversial and you're going
to get into a very messy world
of macroeconomic predictions and
counter-predictions about
whether and when you reach this
point of practical equality,
or when the gains from downward
redistribution are offset by the
losses from the shrinking of the
pie.
 
Now, some of you might have
said, "Well,
at the beginning of this course
of lectures,
Shapiro said,
'Every Enlightenment thinker is
committed to postulants.
 
One is that we can have a
scientific theory of politics,
and the other is that
individual freedom
operationalizes a doctrine of
rights is the most important
good.'
 
Now, having sat through these
lectures on Bentham,
I can see what he's saying
about science.
Bentham has this monomaniacal
view of science.
He's got his objective egoism.
 
He can figure it all out,
what will maximize social
utility,
and run around the world
writing constitutions for
people,
can devise a whole public
policy that's going to
scientifically maximize the
utility of society,
but I'm not seeing a whole lot
of room for rights in this
doctrine.
 
It seems to allow ethnic
cleansing, even genocide.
It seems to allow
redistribution from one person
to another, all justified on the
grounds that this is maximizing
the total utility of society.
 
Well, even if it is,
how does this respect
individual rights?"
 
 
 
Am I just wrong?
 
Is there some elementary thing
I've missed here?
There's not much room for
rights in Bentham's doctrine.
So I'm just wrong that these
Enlightenment thinkers were
committed to individual rights?
 
It would be a reasonable
inference from what I'm said so
far.
 
But remember,
for Bentham when we try to
maximize utility in the society,
individual motivation is vital.
This is a passage I read to you
last week,
but I'm just repeating it,
"The great enemies of
public peace are the selfish and
dissocial passions--
necessary as they are...Society
is held together only by the
sacrifices that men can be
induced to make of the
gratifications they demand:
to obtain these sacrifices is
the great difficulty,
the great task of
government."
 
He's saying you have to work
with individual motivations.
You can't ignore them,
and I think that is the point
that's behind his distinction
between absolute and practical
equality.
 
The rich will burn their crops
before giving them to the poor.
You have to take that into
account.
You have to see individuals as
the basic generators of utility.
In another piece of Bentham's
writing which I didn't have you
read,
but I'll just put it out there
because it's where you start to
see our old friend the
workmanship ideal creeping by
the backdoor into
utilitarianism.
 
Bentham says,
"Law does not say to man,
Work and I will reward
you but it says:
Labour,
and by stopping the hand that
would take them from you,
I will ensure you the fruits of
your labour--
its natural and sufficient
reward, which without me you
cannot preserve.
 If industry creates,
it is law which preserves.
If at the first we owe
everything to labour;
at the second,
and every succeeding moment,
we owe everything to law."
 
So another way of thinking
about this is,
that Bentham's idea of the
state is essentially regulatory.
It stays the hand of somebody
else who would steal your goods,
but the government cannot
itself create utility.
Labor creates utility,
and this is why I say that
workmanship,
that idea that we first
confronted when we talked about
Locke,
comes into utilitarianism by
the backdoor,
because Bentham's going to say,
"Unless you respect
individual rights you're not
going to be able to maximize
utility for the society as a
whole."
So the state is basically a
regulative state,
not a state that's actively
involved in creating utility for
individuals.
 
It will do some redistribution
to the point of practical
equality,
but the basic idea is that the
state should be hands-off with
respect to the utility creation
in the society.
 
It's industry that creates
utility--labor,
work--so incentives are going
to be important going forward if
you're going to maximize
utility.
So that's the way in which we
see that even a classical
utilitarian like Bentham is
going to resist dispensing with
the doctrine of individual
rights.
Now, there's a problem,
though, with his mode of doing
this,
and the problem arises because
the claim that the rich will
burn their crops before giving
them to the poor might not be
true.
And even if we get to less
extreme circumstances like South
Africa before and after the
transition,
when we look at actual debates
in contemporary politics in the
United States,
this is what we see.
Ronald Reagan comes in and
says, this is in 1980,
"If we cut taxes,
the pie will get bigger for all
and they'll be actually more
revenue,"
and so utilitarianism says do
it.
And the Democrats say,
"No, they won't,"
and it's an empirical argument.
 
And you will find,
if you go back now and look at
what happened during the 1980s,
perfectly credible economists
will line up on both sides
because they cut the taxes,
but, of course,
eight other things happened as
well that affect the
macro-economy,
right?
 
And disentangling how much the
tax cuts were responsible for
what happened,
versus how much many other
things that happened were
responsible,
nobody really knows.
 
Or if you look at the current
debate we watched and are
watching unfold about the
economic stimulus.
If the economy turns around
between now and November,
the Democrats will probably do
a lot better than if it doesn't,
but the Republicans will say,
"Well,
it would have turned around
faster if we hadn't had all this
taxation."
 
And Paul Krugman will say,
"Well, it would have
turned around even faster if we
had had more taxation."
And so a lot of the problem in
debating incentives,
once you get into the real
world of macroeconomic
policy-making,
is that (a) you never have the
counterfactual;
you can't go and rerun history
without the stimulus,
right, or without the Reagan
tax cuts.
 
And (b) the sheer complexity;
so many other things
happened--the price of oil goes
up,
or the commodities collapse,
or the dollar,
or this, or that,
or the Chinese revalue,
do or don't change the value of
their currency.
So that when it gets down to
it, you're never going to get a
definitive answer to the
question what is the point of
practical equality.
 
When have we passed the point
of practical equality,
to use Bentham's terminology?
 
Are we close to it?
 
Have we gone by it?
 
Are we nowhere near it?
 
There have been periods in our
history when we've had top
marginal tax rates of 90
percent, right?
Reagan thought a top marginal
tax rate of 40 percent was
beyond the point of practical
equality.
You're never going to get a
definitive resolution of those
questions.
 
But if we think back to what
the aspiration of the early
Enlightenment was,
it was certainty.
To use the example,
remember, I read to you from
Hobbes, from his Epistle
Dedicatory to his Six Lessons to
the Professors of
Mathematics;
he said, "For the things
we don't make,
we can't know we can only guess
about the causes,"
right?
 
Well, here we're guessing about
the causes.
We don't really know and there
will be--the people who want
either policy will be able to
find a plausible set of experts
to defend their view.
 
So you're getting to this very
messy world of macroeconomic
prediction,
if you want to put some limits
on the radical edge of classical
utilitarianism.
And as a matter of history,
that's not how it went.
As a matter of history,
how it went was to rethink the
analytical structure of
utilitarianism in a way that
completely defanged its radical
redistributive edge without any
reference to these messy
macroeconomic considerations.
And just how that happened in
the transition from classical to
what we're going to all
neoclassical utilitarianism is a
subject with which I will begin
on Wednesday.
See you then.
 
 
 
