Wednesday, February 18, 2015

Beware of Economists Bearing Advice

Below is an excerpt from a very short, sensible article (from a philosopher and an economist) which points out some underlying assumptions often glossed over by economists:
The sensible policy maker needs to understand the limitations of welfare economics and to regard its policy recommendations with skepticism. Welfare economics vulgarizes the problems of policy making by its limited concern with only one moral objective -- the enhancement of well-being [TB: "well-being" narrowly construed]-- and by its distorted identification of well-being with the satisfaction of preferences. The pronouncements of welfare economics must therefore be treated with caution. The recommendations -- like providing cash in favor of in-kind benefits -- seem so straightforward, and the arguments -- like the one we have examined -- so watertight. But what makes welfare economics so clear cut is that so much has been left out and that what has been left in has been distorted. Sometimes the omissions and distortions may not matter, but policy makers had better understand the limitations of the framework economists employ.
The whole thing is worth reading.

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