Cosma Shalizi on turkeys and Pareto optimality. Happy Thanksgiving.
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5 comments
November 24, 2011 at 9:40 pm
JazzBumpa
Shorter crshalizi, in the words of Paul Krugman: “Economics is not a morality play.”
Would it be taking things to far to say that it is both monstrous and perverse?
Happy Thanksgiving. We still do have a lot to be thankful for.
Cheers!
JzB
November 24, 2011 at 11:04 pm
erubin
I had an economics professor a few years back who railed about how great Pareto efficiency and optimality are. I found it strange that he was essentially advocating putting all wealth in one person’s hands (you know, perfect inequality, Gini coefficient of 1 and all that). Pareto efficiency is still interesting as a mathematical fixed point but of hardly any practical significance. It’s a shame that some economists seem to live by it when it’s really just a way of throwing the more theoretical mathematicians a bone while attempting to legitimize the greedier schools of economics.
Also, while the article suggests a Walrasian auction, I’m partial to the Vickrey auction myself. Saves poor Dives a penny in the end and further sticks it to Lazarus, who offered the same bid.
November 27, 2011 at 1:38 am
Walt
I think Pareto optimality is a minorly useful idea that is widely misused. If economists can identify polices that are Pareto improvements over the status quo, then that is a useful activity. Alan Blinder’s book Hard Heads, Soft Hearts has good examples from the 80s. The Reagan administration imposed quotas on Japanese car manufacturers, where the administration assigned the quota for each manufacturer. Blinder argued that once you fix the supply the right to sell in the US becomes a valuable commodity that the US was giving away — rather the US should auction off the quota. (I suppose this isn’t strictly a Pareto improvement from the point of view of the Japanese.)
The way it’s routinely misused is that economists will advocate a “Pareto optimal” policy that is not a Pareto improvement. For example, free trade with compensation to the losers from increased competition is (in theory) a Pareto improvement. But instead, economists push for free trade and at most pay a little bit of lip-service to compensation.
November 27, 2011 at 8:37 am
TF Smith
Semi-serious question – Is anyone aware of recent scholarly work on autarky, especially in terms of current transportation cost differentials from Asia (Eastern and Southwestern) to North America?
I’ve seen some general media reporting that manufacturing/production costs in the US are becoming more competitive with Asia because of fuel costs, but nothing substantive from an academic perspective – same with extractive energy costs.
I’m curious because I think for a true populist/nationalist to break out from the current “free trade” CW among both Republicans and Democrats, they would have to go there – just wondering if anyone has done any work based on the realities of an economic policy based on nationalism. Might take another election cycle or two and a continuing recession, of course; I don’t think the U.S. is there yet…
The other frame that could go forward would a moral/populist trade policy based on “fair trade” – i.e, no trade outside of the West/”Free World” bloc, aimed at China and its potential allies…which could bring some interesting domestic political alliances in the U.S., in contrast to the current polarization on domestic issues – in effect, exporting the political/economic morality question.
November 27, 2011 at 1:55 pm
Cosma Shalizi
I’ve seen some general media reporting that manufacturing/production costs in the US are becoming more competitive with Asia because of fuel costs, but nothing substantive from an academic perspective
To the extent that the market is North America or (perhaps) Europe rather than Asia itself, this would make producing in the US comparatively more attractive,but I am skeptical about the magnitudes. When some acquaintances got very into Peak Oil two or three years ago, I did some digging into how much of the cost of imported goods here goes into intercontinental transport, and was actually surprised the share was so small. (The number which sticks in my head is about 3%, but I wouldn’t trust that at all.) Even if all of that was for fuel, which it isn’t, for this to matter, costs would have to be very fine balanced to begin with, so lots of other things could shift them as well.