Beware of Economists Bearing Advice

Food for thought

Beware of Economists Bearing Advice: “Beware of Economists Bearing Advice

Daniel M. Hausman and Michael S. McPherson

(Policy Options 18, no. 7 (September, 1997): 16-19.)

(comments in brackets are mine)

“Beware of economists bearing advice. Though some of it is valuable, the framework of theoretical welfare economics from which economic advice usually issues has serious normative limitations and distortions. When economists go beyond identifying consequences of policies to making recommendations, they typically rely on a theory whose only normative concern is welfare and its distribution and that mistakenly identifies welfare with the satisfaction of preferences [what if your preferences are bad for you?, or if you do not know what is best for you?]. Their advice about how to increase welfare must accordingly be regarded with caution, and policy makers must not forget that increasing welfare should not be their only goal. [what about the other dimensions of freedom and happiness other than preference-satisfaction?]

“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 — 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.”