Twitter: _I remember back in the... spring of 1981, I think it was https://threadreaderapp.com/thread/1271237461272715267.html. I asked my professor, William Thomson, visiting from Rochester, roughly this: "The utilitarian social welfare function is Ω = U(1) + U(2) + U(3)... The competitive market economy maximizes a market social welfare function Ωm = ω(1)U(1) + ω(2)U(2) + ω(3)U(3)..., where the ω(i)s are Negishi weights that are increasing functions of your lifetime wealth W(i)—indeed, if lifetime utility is log wealth, then ω(i)=W(i).
Market failures drive wedges between what the economy achieves and what it could achieve. Why isn't the unequal distribution of ex ante lifetime income—inequality of opportunity—conceptualized by us economists as the greatest of all market failures? And why isn't the distribution of political power that creates & preserves a property order of unequal wealth seen as the greatest of all "regulatory capture by a special interest group" flaws in the working of society, economy, and the state?"
Thomson did not have a good answer.
My other teacher Joe Kalt, however, did. "These Chicago Boys are all right-wing Marxists," he said. "They buy the Marxian proposition that the state is an executive committee for rigging the economy in the interest of the ruling class. But they think that that is a good thing as long as the ruling class is based on wealth, however previously acquired. All their objections are to those who use some form of societal power other than wealth to try to rig the economy in their interest. And while there is an argument that a wealth-based ruling class is in general best, it is a weak argument."
(& do remember that I learned much of my political economy from Richard Musgrave and his TA Manuel Trajtenberg, who expicitly conceptualized public finance as having 3 branches: (1) repairing Pigovian externalities, (2) fiscal policy for full employment, (3) redistribution to shrink all the Negishi weights in the market's SWF toward one.
The Chicago School underwent an enormous change between the Midwestern Populist days of Henry Simons, for whom private monopoly was the big foe and large inequalities an enormous menace, & the monopoly-tolerant fundraising paradise that Stigler & co. created.
I put it that this transformation from Simons to Stigler was possible only by "othering" the non-rich by every means possible, so that their low weight in the market's Negishi-weighted SWF could be dismissed as deserved. & I put it to you that taking the Rothbard Road in race relations—trying to bring to life their anti-New Deal monopoly-tolerant union-busting economic policy agenda by white racism & supremacy, as Frankenstein's monster was brought to life by the lightning—was a very important part and remains a very important part of that shift away from economics understood as a policy science that attempts to implement a Benthamite or a Millian utilitiarianism that seeks the greatest good of the greatest number.
.#economicsgonewrong #equitablegrowth #highlighted #historyofeconomicthought #2020-07-04