HANS.DESPAIN at m.cc.utah.edu
Mon Jul 17 11:37:15 MDT 1995
First, like many others (economists) the label of cost-benefit analysis
might not be the best terminology because of the confussion which might
emerge between neo-classical economic cost-benefit. However, Lisa
characterization of her approach is very similar to the neo-classical.
In neo-classical economics one groups "willingness to pay" is weighed
against the "compensation needed" of another group then an equilibrium is
found where "willingness to pay" is equal to "compensation."
The epitome example of intermediate texts book use is the "value of clean
air." This example is used because the problem, according to
neo-classicals, is that for air there is no market, and no "well" defined
property rights. Thus, they create "virtual markets": "The benefits
portion of that study [clean air] examined how much people value clean
air, using empirically determined estimates of the demand for clean air.
Although there is no explicit market for clean air, people do pay more to
buy houses where the air is clean than they pay to but comparalbe houses
in areas with dirtier air" (Pindyck and Rubinfeld, *Microeconomics*
2nd.:117-118). Then, the second question to find out how much people are
willing-to-pay to be able to continue to supply dirty air, and where the
supply and demand cross is the equilibrium for deciding how much to
the "polluters" must pay to clean the air.
The problem here is that too many important questions are left out of the
anaylsis. Even if these other questions could be included, such as the
benefit of a more healthy life, which may not seem to be a choice to some
one buying a house in a city. Or the benefit of healthy new borns, or the
possiblity of reducing cancer, we really are forced to struggle to
get at any ethical questions, they are assumed to be implicit in the
compensation needed questions.
The difference between neo-classical c-b anaylsis and the what has been
discussed over the list is that the neo-classical is plotted in price and
utility space, for Lisa, it would be plotted in dis-utility and utility
space. Hence, in this sense her account is still closer to Popper's
situtional logic (SL).
SL says that if you want to understand the action of X, find out what X's
goals were and what X perceived his situation to be; X's action will then
be seen to be one approapriate to that perceived situation.
In his autobiography Popper says of his situational logic: "The main
point here was an attempt [with emphasis] _to generalize the method of
economic thoery (marginal utility theory) so as to become applicable to
other theoretical social sciences_. In my later formulations, this
method consists of constructing a _model of the social situation_,
including especially the institutional situation, in which an agent is
acting, in such a manner as to explain the rationality of his action.
Scuh models, then, are the testable hypotheses of the social sciences;
and those models that are "singular", more especially, are the (in
principle testable) singular hypotheses of history" (1974:93-94).
Popper goal with SL is to construct a purely objective method for the
social science, again Popper: "The logical investigation of economics
culminates in a reslut which cn be applied to all social science. This
result shows that there exists _a purely objective method_ in the social
sciences which may well be called the method of _objective_
understanding, or situational logic. A social science orientated towards
objective understanding or situational logic can be developed
independently of all subjective or psychological ideas" (Popper 1976:102).
Thus, the the aim of Popper is to rid social science from psychological
analysis, for *rational behavior* (admited by Popper to be false for
simplicity). Popper says "In other words, the situation is analysed far
enough for the elements which initially appeared to be psychological
(such as wishes, motives, memeories, and associations) to be transformed
into elements of the situation" (Popper 1976:103).
Thus, situational logic is simply the metaphysical princple of rational
behavior. It is a method with deep roots in economic c-b anaylsis and
rationality and perfect information assumptions. It is meant to be
purely objective empirical, individualistic with no psychology.
The problem here for me is that rationality and c-b analysis does not
allow for many ethical questions to be asked, because it is subscribed to
a strict distinction between normative and positivist issues. I
contend that such issues should not and cannot be so easily seperated.
Perhaps if one is investigating a past civilization, there is little harm
in appling such logic. But when suggesting policy or discussing Welfare
economics, subjective psychological aspects seem to have a place in the
anaylsis. I am simply not willing to negate human "intentionality" for
the false believe of objectivity.
The rationality for suicide seems silly, if this is the case, why is it
that so many people are unable to weigh the situation of the suicidal
person differnet than the she does her self. What situational logic and
c-b analysis suggests is that if we were able to undertandstand their
position we would also suggest suicide. This is a situation where I
would suggest psychology is very much needed, not an objective analysis
of rational behavior. For if it is rational for anyone to commit suicide
why would anyone want to change their mind.
If we can agree that rationality is a metaphysical principle, why not
have a more flexible metaphysics? It seems much to restrictive for
economics, certianly welfare economics, psychology would not be possible,
and social science severely limited in anaylsis.
despain at econ.sbs.utah.edu
hans.despain at m.cc.utah.edu
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