Intro to Political Economy Without the Labels

Let’s consider two political-economic theories. Since the terms normally used have been hijacked so that there are too many emotional connotations, it is hard to get anywhere with the common terms (unless you’re talking to an audience willing to do a bit of research). Rather, I would like to describe two types of competing theories without using potentially misleading terms. So, here it goes (I won’t reveal which theories are which until the end).

Both theories have moral and empirical dimensions. The moral issues relate to whether a given action or policy is just or unjust. The empirical dimension relates to whether a return-on-investment is ‘worth it’ (generating the effects that are aimed at, considering the cost). The empirical dimensions are in some ways easier to decipher but in other ways very easy to be misled. The misleading data usually relates to inappropriate conclusions from data or cherry-picking pieces of data that distort the interpretation of the whole.

Theory I

Theory I has a historical-moral foundation about how State governments have ‘gone wrong.’ This would include all of the major civilizations, from ancient Rome, through the feudal states of medieval Europe. The rough idea is that governments have a specific purpose, and this purpose is to respect boundaries that come from human nature and/or God. The governments throughout human history go wrong precisely in that they take on tasks that are outside of their proper bounds. So, here we have a theory of government that also connects to a theory of ethics. The ethics portion relates to the evil of coercion. Since it is evil to coerce another free person to do what you want, against their permission, and these theorists sought to minimize social evil, they sought to minimize coercion. Their solution, then, was that original coercion (violence and force) is the only justification of government force, so that only when there is force initiated by someone, is the government then–and only then– within their proper place to use force against the offenders that initiated the force. In sum, Theory I is about the minimization of force and coercion, and thus also, keeping the State in its proper bounds, so that it doesn’t go rogue (serving the ruling elites instead of its citizenry).

This has been the moral dimension of Theory I

Theory II

Theory II is more difficult to explain because the moral and empirical dimensions are overlapping and confused. Where the return-on-investment is concerned, if the results are favorable, then the moral standard is satisfied. So, in Theory II’s conception of moral justification the very fact that it promises to produce a given result satisfies both the empirical and moral standards (since the moral and empirical issues overlap). The concern for coercion is either minimized, or held to be radically different from the depiction made by Theory I. Theory II advocates emphasize favorable aspects that make human societies better, and adopt the policy that they think promises the best outcome without any concern for coercion, since in their view the coercion is justified if the outcome is favorable. For instance, taking money from the rich is permissible, even if they came about their wealth through perfectly just ways, such as hard work, long-term investment, and family cooperation.

Lady Justice, Case-Law, Right, Scale, Court

Evaluating the Two Theories
These theories operate on different theories of government, justice, and economics.

The first theory aims to minimize coercion, with clear boundaries of the State’s job. The second theory aims to maximize well-being, regardless of theory I’s worries about justice. According to Theory II, it is just if everything is equal, no matter if there needs to be coercion for ‘make it happen.’ Correspondingly, according to Theory II society is unjust if there is too much inequality, regardless of the historical cause of the distributions. Theory I is not worried about differences of outcome per se as long as all transactions are historically just, and there is no coercion.

Theory I’s account of justice fits perfectly with our basic moral intuitions, but Theory II’s account does not fit. For instance, if I give a million dollars to an orphanage, then Theory II would endorse this policy. The fact that the money was stolen from a bank does not matter to Theory II. Theory II regards the State as a kind of super-moral authority, above regular citizens (somehow the ‘whole’ has some special power over individuals if it is for the ‘common good’). On Theory I’s reading of justice, this is not the case. Only if the bank first stole the money, could it rightly take the money, and even then, it would be expected to return it to its rightful owners. Theory I does not regard the State as a super-moral authority. Rather, it is a servant of people, with very tight reigns on its proper sphere. It can only coerce when coercion was initiated towards its citizens first, without which, it cannot justly do anything.

This is the thumbnail sketch of the moral dimensions of Theory I and II. The empirical dimensions are about what actually happens when these ideas are put into practice. As mentioned, this is both easier in one sense and much harder in another sense. For instance, a country might call themselves Theory I or II, but defenders of a given theory might deny that they ‘really’ are specimens of their professed doctrine. This can be frustrating because it would be nice to simply look at history, and say, ‘that has been tried, and it failed horribly.’ It becomes even more complicated when popular audiences don’t precisely know what the key aspects of these theories look like, so one side can blame the other, and the reverse, simultaneously. In fact, this uncomfortable and frustrating fact is part of the motivation for writing this short piece.

There is a lot of data to support the fact that Theory I actually provides better results than Theory II, on empirical grounds, but this argument should be kept separate in our minds. The moral argument for Theory I stands alone, and if right, shows that Theory II is immoral at its root (regardless of what is promises or delivers). There are great worries about Theory II on empirical grounds in that the overall aim of Theory II does not actually occur. The core problem though, considering that most people will not sort through the data and the competing works of literature, is that improvements are happening in the world, regardless of the policies in place. For instance, sometimes a policy can be instituted, where the target effect is getting better without the policy. Think of technological improvements. You can imagine a sneaky CPA siphoning out money from a very successful account, but only when great gains are made. Since the great gains are still seen, the unseen portion of the theft is left unattended. In short, bad policies may have damages and injuries to a system, even though nobody knows about them because it isn’t about what is obvious, rather, it is seeing the contrast to what would have been otherwise. (for an excellent discussion along these lines, see Bastiat).

Statue Of Liberty, Landmark, Liberty, Statue, America

Beyond this introductory analysis, one would need to consider economic theories in light of the 20th-century history, especially theories of value (labor theory vs productive-competitive theory), the competing theories of libertarianism and egalitarianism, and the problems associating to making decisions in groups (the information problem).

I will be adding additional links below for articles and books, for those that are interested in getting a more in-depth understanding of the issues. If you didn’t surmise this already, Theory I represents the libertarian free-market doctrine, and Theory II represents the socialist-egalitarian doctrine. Allowances must be made for ignoring many nuances that exist within any philosophy of political theory. Advocates of both sides might seek to correct things in this brief article, but brevity requires broad strokes. There are important variations of both positions. However, if the Libertarian theory is right, then the big-state egalitarian is wrong, on moral grounds. Secondly, there is a mounting body of evidence that the free markets are simply better at delivering prosperity than socialist-egalitarian policies. Again, there are difficulties for us in deciphering the data though, since one part of a thriving society might obscure the fact that injustices are being made, and citizen’s rights are being trampled.

Related Issues for Research:

Theory of Value, Theory of Alienation, Misunderstanding Boom/Bust Cycles, Centralization Problems: (1) Information (2) Incentives (3) Totalitarianism,
Hayek: The Road to Serfdom: Text and Documents–The Definitive Edition (The Collected Works of F. A. Hayek, Volume 2)

For strictly philosophical arguments: Rawl’s Egalitarianism: A Theory of Justice, Nozick’s Anarchy, State, and Utopia

Please Stop Misrepresenting Statistics: Correlation is not causation.

Oh my goodness, I can barely stomach watching the news, or watching social media posts…the statistical fallacies are basically palpable.

Repeat after me: Correlation is not causation. No, really: Correlation is not causation. It may have something causal to it, or it may not. It might have something informative, or it may not.

A disparity in a statistic does not have causal power because mere statistical correlations are not inherently causal at all!

A true statistic does indicate something, but it is not obvious what that something is.

Case 1: 100% of serial killers drink water. Should we infer that water leads to murders, murderers, etc? Why not?

Case 2: If you and Jeff Bezos were in a waiting room for something, the average net worth for those in the at waiting room would be around 50 billion dollars, assuming you are worth around 0 billion. Should we infer that you do, or should have 50 billion dollars? No. But why not?

Case 3: 100% of the top cartel family is wealthy (this cartel derives its income from prostitution, violence, drug trafficking, etc).  Are we justified in concluding that a member in the top cartel derives money from nefarious means? If yes, then why?

Case 4: 30% of group A are incarcerated. This is 10% more than some other class B. Should we infer that there was a miscarriage of justice? If yes, then why?

To talk about these issues meaningfully, we have to distinguish two types of cause: Agent causes, and natural causes (non-agent causes). Agent causes have to do with the choices of free agents (humans with free will). The other type of cause does not have a direct bearing on our choices (at least not in any obvious, direct, and explanatorily rich way). If we make these distinctions, then we can easily tackle these four cases.

In case 1, the difference between serial killers and non-serial killers has relevant relation to whether they drink water (it has to do with a set of actions, pursuits, etc, of different agents, choosing different paths in life).

In case 2, the average wealth of 50 billion dollars has no bearing on your because wealth has nothing to averages. Rather, it would need further information about previous choices, investments, property, etc. Importantly, there is no obvious insight into mere averages, and we are guilty of hasty generalization if we try to sneak in any other ideas without justification.

In case 3, the wealth of a given cartel member is stipulated to be ill-gotten because of the historical provenance of wealth creation. In other words, the fact that money was ill-gotten has nothing do with the numbers and percentage, it has to do with the quality of free will actions on behalf of the agents. The numbers themselves provide no helpful information…because….mere statistical correlations are not necessarily causal, nor even explanatory, without further information.

In case 4, we are not justified in concluding anything about group A or group B at all because none of the relevant information is included. It says nothing about the choices, the laws, the process by which they were incarcerated. The idea that they should be equal in every way is astonishingly naive.

I have many ideas on why some get misled by statistics, but this is a long enough post. Let’s make the world less crazy with fewer fallacies. Please. Seriously. Please.

As a last-minute qualification, the wrinkle is that some correlations might indicate something causal. However, the issue here is that there is a good reason to not jump to conclusions. For instance, taking cyanide does lead to death. But this simple point here is that we are not justified in making an automatic jump between correlation and causation.

For other posts on voting, social media, logic, citizenship, and philosophy.

For a more in-depth look at statistical fallacies go here.

For a good video introduction to statistical fallacies go here, in the context of the social sciences, Jonathan Haidt (start towards the end if you only want the correlation/causation discussion).

Related Articles:

Other Articles from CommonPhilosopher:

Dissecting Anti-Capitalist Bias

A Strange Paradox: How can so many people believe that a political ideal rooted in ‘freedom from coercion’ is somehow tied to injustice, oppression, war, and even prison! This is nuts. But many people believe that non-coercion is somehow deeply tied to coercion.

I often encounter students that equate consumerism, greed, and authority, with ‘capitalism.’ It is an interesting phenomenon. It makes no conceptual sense, in that advocates of free markets are not advocates of any of these things. It does make sense on a practical level though since teachers and professors continue to preach that all the ills of humanity can be captured by the boogeyman: capitalism. It doesn’t survive careful scrutiny, as most vague emotional doctrines don’t stand up to anything. They are like silly putty: they can bounce around, and they can mindlessly copy news articles. Likewise, they become flaccid when you calmly and slowly examine them.

Since free markets require freedom, the level of coercion must be minimal (focused only on acting against violations of natural negative rights). (See Locke, Nozick)

Since free markets do not benefit from strife and instability, free markets are anti-war (wars do not improve the economy if you look at them objectively) (See Rothbard, Rand, Bastiat)

Since free markets encourage investment, saving, and long-term planning, free-market advocates encourage production, building, and cooperation. Yes, a business within any market wants you to buy from them. However, the important thing is this: in a free market (where it is that case that the government does not force you to buy anything, the only tool is persuasion). Assuming that persuasion is better than coercion, then free markets are clearly better than forced, inefficient, centrally planned economies. (See Problems with Central Planning)

Cronyism is ANTI-FREE markets! I’m shouting because I’ve seen too many students equate cronyism, where a certain business gets some special deal with the State, either a subsidy or some cheap loan, etc, think this is capitalism. But this isn’t capitalism. This is cronyism. The very idea that cronyism could be conflated with cronyism, or that fascism could be connected to free-markets, is absolutely insane. This is like saying ‘minimal authority’ is ‘maximally authoritarian.’ Or, ‘coerced markets’ are ‘free markets.’ Seriously, sometimes it is like we live inside of a chapter of 1984. (See Munger, Hayek)

A similar prejudice relates to a bias against profit (See Carter). To combat these prejudices, you can review my advice on avoiding fallacies, critically thinking through conversation, and learn how to refute arguments.

Provisional How-to for Voting (without being a lemming)

  1. Don’t assume that voting issues are binary (neatly divisible by two; R vs D), because that is simply absurd. There are at least 100 crucial moral, scientific, and historical issues that need careful consideration, in order to make informed policy decisions and voting well. The very idea that all of your political positions can be comprehensively represented by two different parties is indescribably silly. If you think that the political complexities are suitably covered by two categories, please don’t vote. It is likely that your reasoning is ill-informed.
  2. Don’t assume that every policy that promises something as just, is really just. Only a fool would simply assume a politician is telling the truth. Quite often, a policy that is marketed as just is unjust. Or, something for the poor, may not actually help the poor.
  3. Understand the principle of ‘cui bono’, and invested interests. Politicians thrive on emotional appeals. Cui Bono?: this simply translates to ‘who benefits?’. It is a good question, regardless of what the issue is. It isn’t decisive, but it is important to keep in mind. Politicians stay in power, and expand their power, by appealing to the ‘greater good.’ (this includes Third Reich, USSR; this is not a crude ad Hitlerum, but a simple appeal to the facts of history: politicians appeal to emotions, and get power through this)
  4. Suspend judgment (if you think you understand all of the issues of politics without much thought, you are either a bona fide genius, or you’re an utter fool)
  5. Evaluate issues independently: Each issue, and the corresponding political solutions, these need to be considered independently, as well as with other policies, historical context, means, etc. However, since we have a tendency to get wrapped up in emotional and irrational passions, it is wise to isolate things to their barest components before one can seriously evaluate what the issue really is, and what the appropriate response should be (sometimes inaction is preferable to inappropriate State action)
  6. Understand different aspects of policies:
    1. Know how moral issues differ from empirical issues (not strictly speaking, empirical; a policy might be immoral, even if does something that a group of people likes)
    2. Know how empirical issues (factual issues about the actual world) differ from moral issues (issues about right and wrong). For instance, empirical issues, strictly speaking, are not about moral principles. Moreover, sometimes a given policy isn’t obviously wrong (morally), but history may show that it doesn’t provide what it promises, or is grotesquely inefficient; like this$2 million dollar bathroom)
    3. Know how political theories underpin a given policy because some political theories are bad (this isn’t easily captured in a parenthesis, and requires a longer article; see Politics Without the Labels)
    4. Know how economic theories underpin a given policy (if a given policy is based on disproven/bad theory, that is a reason to not support it)
    5. ‘Good consequences’ don’t mean that it is the right thing to (otherwise, robbing a bank would be good, provided you distributed it properly; hint, it is still wrong)
    6. If you can’t separate these issues, this means that you should probably do some research, and after critical thought and discussion (assuming you have friends that are willing and capable of doing this), you can then revisit the underpinning issues later, with a clearer head, so to speak.

7. Exercise a little skepticism about policy promises, especially when someone is appealing to darker vices (revenge, envy, division, blame). Of course, sometimes people are to blame, but if the blame is assigned by getting carried away by tribalistic us-vs-them sentiments, you have to exercise MORE caution.

8. Look at strong defenses for both sides, and don’t formulate your positions by looking at caricatures from one opponent mischaracterizing the other. For instance, free market capitalism isn’t about greed, consumerism, and the destruction of the environment. Really. There are principled, well-meaning people that think that free markets make life better culturally, financially, politically, etc, without being pro-greed, pro-consumerism, and anti-environment. Likewise, though some capitalists may actually advocate for these negative things, it would be foolish to judge an entire group of people by the least coherent, and objectionable person that MISREPRESENT the position.

9. Don’t assume that there is deep-seated racism, bigotry, etc, etc, etc, simply because somebody disagreed with your beloved party. It is just silly…and annoying…and stupid.  If you put on colored glasses….guess what, everything you see will be….wait for it…colored. It will look different if you look at things from different angles and arguments. Consider what I call the Statist Fallacy: assuming that if you somebody does not think that the State is the appropriate mechanism to address a given ill in society, that this necessarily that such a person is against the given cause (e.g. State-run education vs. private charity). Understanding this fallacy makes it clear that it is not valid to conclude that since a person advocates for a private solution for a given problem, it is not necessarily because this person that does not value education itself. For instance, one can intelligently and coherently maintain that one means is more appropriate than another means towards a given end. Research and thought are needed to determine this, not gut reactions, ad hominem’s, and hysterics.

Much more can be said, obviously, but these are essential aspects to voting responsibly. Have any suggestions to add to this? Let me know.