I definitely agree that people in society are allowed to intrinsically value a goal – my issue is when policy makers define goals without placing them within an appropriate reductionist framework.

I like the idea that communities will describe things, and provide information regarding things, that they value – areas where no sense of pricing is clear, or where implicit value is hard to define. And I would never argue against people illustrating preferences in this way.

My concern solely stems from policy actions that are based on aspirational goals – as setting such a goal and doing everything in your power to achieve it ignores:

1) The costs of achieving that goal
2) The actual benefit associated with said goal
3) The achievability of said goal.

My argument is in no way against people having preferences – it is just saying that I don’t believe in policy that is justified on the basis of goals.

“The community gets to say what it wants. It could want anything, feasible or not. That is the nature of a welfare function – there are no theoretical legitimacy bounds on what a community can desire for itself. ”

The is one side of the coin. There is no limit on what the individual desires either – but of course income limits what the individual can actually do. In the same case, there is no limit on what individuals and communities in society desire – but there are limits on the set of resources available to them.

As a result, government provides an institution that allows society to adjust the allocation of resources on the basis of external preferences – that is fine. But, the trade-offs associated with this need to be apparent. The social welfare function needs to be maximised subject to the constraint of what is achievable – and policy action should be both subject to, and transparent regarding, these inherent limitations.

“Trying to discourage people from setting themselves silly, unrealistic goals is an attempt to deny them the ability to define their own welfare function.”

Not at all. Discouraging policy makers from telling society that unrealistic goals are possible – and forcing them to be transparent about the trade-offs that will be faced – HELPS individuals make choices, and would surely help improve the determination of the social welfare function.

“But it is an unintended consequence of any attempt to proscribe the community in terms of what it should ask for.”

There was no prescription regarding the preference of individuals in this piece – there was a prescription regarding the promises of politicians and the behaviour of policy analysts. Aspirational goals are likely to obfuscate trade-offs – making it harder for society to reveal what it wants, and in turn placing additional constraints on the democratic process. A refusal to discuss the underlying trade-offs involved is relatively undemocratic – and this concerns me.

For you, however, the overall goal is so obvious that it need hardly be debated: “But surely the goal of government is to maximise the social welfare function.”

I think that answer is only trivially true, and I say “trivially” because nowhere in that goal is there any statement of what goes into the social welfare function, nor about the timeframe over which we assess it. Stating a goal that way raises more questions than it answers.

In fact, you can think of those other target-setting exercises as revelatory of what is in our social welfare function. If we say collectively that we want to “catch Australia,” then you can infer that forms part of our social welfare function. The community gets to say what it wants. It could want anything, feasible or not. That is the nature of a welfare function – there are no theoretical legitimacy bounds on what a community can desire for itself.

And then policymakers, armed with their analytical frameworks and so on, are charged to try and deliver whatever-the-community-wants as best they can.

That sounds like a realistic version of a policymaking process to me, where the community at large has the agency to define its own welfare function, and then policymakers try to maximise it.

Trying to discourage people from setting themselves silly, unrealistic goals is an attempt to deny them the ability to define their own welfare function. I don’t think that is what you want to do, your subsequent paragraphs make that clear. But it is an unintended consequence of any attempt to proscribe the community in terms of what it should ask for.

Hi Rob, thanks for your comment.

“I think this is a caricature. Do the “intelligent, beautiful people” who make holistic arguments full of all those empirical claims really have no information at all to support them? Not in my experience.”

The passage you are quoting is when I am talking in response to people saying to me “but what happens when we have poor information, how can we say we need to rely on causal mechanisms here when something is obviously good”. The intelligent, beautiful, people I describe are not the same people that throw this critique at me 😉

Now I agree that these people do have a reason, there is some form of causal mechanism there – but it is just my opinion that we should flesh out the entire argument before reaching our goals or targets, and I feel that not aiming to reduce things down is akin to ignoring this.

“Do those guiding principles have any moral content, talking even implicitly about what is desirable, or are they only statements of empirical regularity?”

Guiding principles in this case would be a methodological framework to work from – in its most raw form it might be value free, but of course without adding moral judgments we could never reach a conclusion from such a framework.

I would say the bottom up way of forming policy is first to come up with a framework that describes, and aim to add understanding of what happens. This is both a theoretical and empirical endevour – this is what economists do. Once that is available it is time to start chucking in moral judgments, adding views on value – and only then can we reach a conclusion, only then can we be told what is a “preferable” outcome. This is not what economist do – this is the realm of policy. However, it is important that the policy analysts first have the background provided by the economic method.

My preferences for such a method is that it is transparent – and it gives us some idea regarding “why” things happen. Furthermore, as I said in the post, it avoids the case where we decide to target something that is unachievable.

“Rightly, you argue that having a destination but no map is a ticket to a costly random walk. But your own proposals look to me like a guy with a map but no destination. In order to figure out how to make tomorrow better, first you have to define “better.””

But surely the goal of government is to maximise the social welfare function. I don’t see why we need a target outside of this – why do we need to aim to “catch Australia” without actually thinking of the costs and benefits associated with that “goal”.

Policy should (here I go being normative again) be based on incremental improvements based on information regarding trade-offs, the revealed preference of individuals, and the democratic mandate involved. In a world as uncertain and volatile as ours, I see no need to decide on a destination for the country – I just want sound policy based on strong economic fundamentals and the desire of the people, when those things are in place we will find ourselves on the edge of our production possibility frontier 😉

“I do not believe that we can just pick an outcome, say that it is achievable, say that it is better than what we have now, and then make it happen – all in the absence of any information.”

I think this is a caricature. Do the “intelligent, beautiful people” who make holistic arguments full of all those empirical claims really have no information at all to support them? Not in my experience.

Second, I want to ask you about the “guiding principles” that you say are the building blocks of a bottom-up policy framework. Do those guiding principles have any moral content, talking even implicitly about what is desirable, or are they only statements of empirical regularity?

If they have moral content beyond their empirical content, then they fall victim to many of the same critiques you make of targets;

If they are simply empirical regularities, then on their own those guiding principles cannot help a community pursue much other than nihilism. (Another way to think about this point: try making policy recommendations armed *only* with Mankiw’s 10 principles. I don’t think you will get very far – maybe the most you can say is “don’t print too much money” or “use markets most but not all the time”. Those policies raise more questions than they answer.)

Rightly, you argue that having a destination but no map is a ticket to a costly random walk. But your own proposals look to me like a guy with a map but no destination. In order to figure out how to make tomorrow better, first you have to define “better.”