Tyler’s quick & dirty summary of the problems with orthodox welfare economics put me in mind of some further problems of economist folk morality.
So, in the formal theory, the highest ranked preference has the highest utility. And the highest ranked preference is revealed by the agent’s actual choice. (If something else had been more preferred, it would have been chosen instead.) Now, the folk theory adds a substantive hypothesis that is no part of the formal theory: preference satisfaction is involves a kind of psychological satisfaction as well as abstract semantic satisfaction (i.e., a fit between the semantic content of the preference and the state of the world.) That is to say, preference satisfaction is satisfying. And the satisfaction of the most preferred option is most satisfying. Economist folk theory envisions a kind of pre-established harmony between formal utility and hedonic utility, and that’s how it is supposed to work. (I blame Bentham.)
Pre-established harmony is a key component of the folk-normative appeal of orthodox welfare theory. Nobody but a bullheaded nettle-grasper will claim that semantic satisfaction by itself has anything to do with well-being. (If I prefer that Saturn have a number of moons greater than five, and it does, I am not therefore better off. Etc.) But the idea that well-being has something to do with the quality of experience is immensely appealing. If preference satisfaction is satisfying, then preference satisfaction might have a lot to be said for it.
The problem is that pre-established harmony is false. The neuroscience shows that satisfaction of the highest ranked preference does not imply the greatest hedonic satisfaction. It does not imply any hedonic satisfaction. Take a look at this paper, “Parsing Reward,” [pdf] by Kent Berridge and Terry Robinson. They report that “wanting” and “liking” have “are in fact dissociable and have different neural substrates.” Roughly, the dopamine system is more about wanting–“incentive salience”–and liking or hedonic satisfaction has more to do with opioids.
Experiments show that morphine addicts will repeatedly push a button to deliver a dose of the drug that is too small to have any experiential effect whatsoever. But they’ll keep pushing it, because the drug is doing something, just nothing you can notice subjectively, and the wanting system keeps you wanting it, even though you get nothing at all experientially out of getting what you want. Berridge argues that a lot of addiction is like that. People who are addicted to cigarettes, for example, may not much like smoking, but they want to smoke anyway. (There is a nice breezy overview of the wanting/liking distinction in Daniel Nettle’s, Happiness: The Science Behind Your Smile.)
And that pretty much demolishes pre-established harmony. What choice reveals is what we most want. But what we most want need not correspond to any kind of representation of what we expected would produces the best hedonic outcome, and doing what you want need not produce any hedonic payoff at all.
This will trouble a lot of people, mostly economists, who buy into economist folk morality. Without pre-established harmony, some libertarian economist folk wisdom falls apart. It will be possible in many circumstance to make people better off hedonically by decreasing their budget–by taking alternatives away. The hedonically ideal choice set will be the one in which the most preferred option corresponds with the biggest hedonic payoff. But that will be a choice set in which all the options that you want more, but which satisfy less, have been removed.
That, in a nutshell, is the basis for a powerful post-harmony, neo-Benthamite, crypto-Marxist, argument for the restriction of advertising and marketing. All Madison Ave. does is create wants that do not satisfy us. Good policy will restrict our choice sets to only truly satisfying options, like watching public television, paying higher taxes, and attending deliberative democracy summits in the local junior high gymnasium, instead of allowing the market to, in effect, addict us to junk. A system that allows us to self-defeatingly generate and satisfy “false” desires hardly constitutes a realm of true freedom, now does it?
Any economists out there wedded to the folk morality that want to tell me how to avoid this conclusion once pre-established harmony falls?