Morality vs efficiency, a quick answer

A certain commenter asked about whether morality and economics are related and whether the theoretical economic system of distributism becomes either atheistic or Marxist. I shall address each one as best I can given my limited knowledge of the philosophy and the time of day.

The first question posed presents one of the fundamental issues of economic and political thought in the past century and then some. On the extreme left the Marxist would say that any economic system which is not having the means of production in the hands of the collective workers is an immoral system. The other extreme, the libertarian, argues that any economic system not based on individual self interest is an immoral system. Somewhere in between lies the optimum for the vast majority of society, in which people want efficiency but not the marginalization that would be necessary to achieve it. For example, in the field of health care most individuals would say that they want health care provision to be the best in the world, but would object to allowing those unable to pay to die. In a purely market efficient system the poor would be allowed to do die because their willingness to pay is below the market price, so they would be excluded. This difference between what is the most efficient and that which is best for society is the difference between two economic schools, the welfare economists and the classically liberal schools.

All economic systems try to maximize two ideas:efficiency and equity. As stated above the two are often at odds because the efficient level of production is not society's optimum level because of externalities. These are non price factors resulting from a policy or production of a good. Positive externalities include increased security to neighboring buildings from the hiring of a security guard for a different building(the externality affects the one not paying for the guard), and negative ones include pollution and noise.

Two interesting works to contrast these ideas are Ayn Rand's Anthem with Huxley's Brave New World. In the former a collectivist society is said to be removing the freedom and individuality from man, while the latter portrays a collectivist society which takes away the freedom from individuals in the name of efficiency. To the libertarian, the free market is the most important safeguard to individual rights and therefore individual morality. Conversely, a more unorthodox economist might see the free market as filled with many negative externalities which would carry a burden for society and would require oppression in the name of efficiency. The conditions of the laborers in China in my previous post shows that in a truly efficient systems individuals are made into little more than living cogs. In a truly free economic system there is always a good degree of inefficiency because certain pursuits have social value but little economic value. If this were not the case, then artists and teachers would be highly paid since their contributions to society have long term dividends in spreading culture and knowledge between generations, but in the calculus of modern economics they are low paid because their product does not have immediate financial gain, so they are valued less. They are, however, valued because their contributions have a societal benefit which outweighs their economic benefit.

Question 2: does a distributist economic system lead to either atheism or Marxism?

From what I have read about this system it seems the more likely result from such a system is not Marxism, but regionalism. Since distributism values the smallest unit possible to carry out economic activity, it logically follows that smaller parts will wield greater power in terms of everyday transactions. Ergo, the small collective units will end up creating a lot of small scale states such as Renaissance Italy or ancient Greece, with trade between them as necessary but problems in terms of certain larger scale needs such as defense.

Religion could be a problem also because the distributist ideology seems to favor subsidiarity(that smallest units possible be utilized to carry out society's goals) since a logical contradiction occurs if religion is a top down institution. E.g. the church may claim one goal for society, but the smaller subsidiaries believe in another path, resulting in a societal breakdown. Secondly, certain institutions withing churches such as tithing will pose friction in this system since their will be the issue of whether the money stays locally or is better used by a higher office of the church. These issues all arose in different periods of history, and caused splits within the churches. I would see religion being a very weak force in such a state, but becoming atheist is not as likely since religious values tend to be passed on a family level, so the impetus on smaller units would tend to keep religion around.

Hopefully that answered some questions, I wish I could write more but I must sleep at some point.

Morality in Economics?

A read asked why I do not address any morality in discussing economic issues and the answer is simple, from a purely competitive standpoint there is no efficiency other than what clears the market. In other words, matching a buyer with a seller is the only right thing in the world and preventing equilibrium is the only wrong thing.

This is the view of the Austrian school and the Milton Friedman cult of personality. It believes that markets never fail and government stops free enterprise. They believe that everything is a matter of allowing the market to work and if you are not successful it is because you are lazy since everyone has the ability to trade their goods and services freely with anyone else in a free market. With their belief that the absence of government promotes freedom and prosperity, shouldn't they point to Somalia as the perfection of their ideology? It has had no government for nearly two decades and no barriers to entering the market. It should be a paradise!

This view is intellectually and morally shallow because it does not deal with the impact of externalities since the market will "take care of it." As anyone who has not had their head in the sand the past two years can attest, businesses do not self regulate. Companies in bankruptcy are flying executives to resorts while laying off workers and the balance sheet crumbles. Also, pollution is another area that market does not fix because the cost of pollution is borne by third parties more than by the producer. Without the right to not be sickened by pollution, individuals have no power to stop it. This is the purpose of government, to deal with the externalities that the market cannot address because the efficient level is not the societally efficient level.