The Myth of the 'Social'

I have a fair number of (left-wing) friends who like to point out the "inherent" or "hidden" value judgments of most mainstream economics. Of course, believing they're advancing some fairly original or recent revelation they smugly retreat, confident in their intellectual (read: moral) superiority. Let me return the favour.

Having already bashed certain members of my department here at Oxford, I want to emphasise that this is all respectful and collegial, and I much appreciate these sort of discussions. Reading this for class, however, was sort of the straw that broke the camel's back – metaphorically being my patience for nonsensical philosophical and methodological arguments. This week my classes are on welfare and on alternative ways of measuring well-being; alternative for economic historians means metrics or ways of describing historical development that do not involve GDP/cap metrics or real wages/real consumption numbers – that is, things we normally use to proxy for welfare.

There are a whole bunch of interesting discussions going on here, ranging from anthropometric developments of heights resulting from nutrition to incorporating leisure or more dubious research on happiness. Unfortunately – or should I say predictably – you get various attempts at discussing what authors in lack for better word refer to as Social rather than pesky market activities. In short: economists/historians trying to play the role as amateur philosophers. Some common points they try to argue:

• GDP does not correlate with welfare – at least not above a certain income level 
• GDP does not even capture welfare – non-market activities and other values are more important
• Inequality or education or health (or social status, or <insert fluffy characteristic of choice>) matter
• Happiness studies must be accounted for
• Pollution and degradation of the enviroment should be included in our account for progress/well-being
• Outcomes relative either to others' outcomes, or to what you "have reason to value" matter – not only absolute levels

I'm sure you're familiar with the story: vague, often nonsensical adjustments to the dirty and socially-harmful market-determined relations of life. There are a million problems with these positions, such as measurability or bounded-from-above metrics in the case of happiness. What was really weird in class was how we somehow forgot to discuss why GDP or various market-tested metrics are used in the first place or what they bring to the table. The point I want to advance here is an irony: the above valuations themselves are ad hoc and include unjustified value judgments. You can't walk around, like Amartya Sen, deciding that certain vaguely-formulated circular-reasoning attributes of life are intrinsically (and in equal degrees...) valuable; or Nordhaus & Tobin subtracting things they don't consider *welfare*; or various enviromaniacs adding pollution or *resource depletion* as a negative contribution to human welfare; or Avner Offer nostalgically valuing communities or non-market activities. 

Market-tested accounts give us invaluable information that these other attributes cannot give us; they take the fundamental subjective nature of human existence seriously. We can only infer improvement of well-being in action. When I give up x for y we can correctly infer that in that moment I valued a specific unit of y over a specific unit of x, and we therefore know that my well-being from the trade improved. Applying the same rationale for various other kinds of goods that individuals may or may not value (open space, clean air, education, wages relative to others, outcomes relative to some Nirvana-fallacy ideal) do not yield us that result. And no, what people state in a survey is not enough to infer their well-being, thank you very much. You may think they are "intrinsically important", but that's a value judgment on your part, and one you in no way can extend to others. The discussion collapses to "I like strawberry Ice-Cream"-types of propositions. 

The kind of correct version of revealed preference that honestly respects subjectivity also answers why none of the qualities listed above give us meaningful interpretations or useful avenues for economists and historians to pursue. These other characteristics may be interesting to discuss, but amount to nothing but fluff and wishful thinking. Trying to justify them in one way or another amounts to nothing but hidden value judgments on the part of the researcher.