At times I fear that the highlight of my blogging career will be pointing out minor errors in Scott’s otherwise excellent posts. But his quality is so high that this is probably a commendable achievement anyway – or so I reassure myself. Anyway, now I’m back from the Midwest and have internet again, I can continue this sacred quest.
Recently, Scott wrote a post about how charity is a better mechanism than political activism for discharging any positive moral obligations we might have. As an aside, he points out that it’s credible that he actually has no such obligations, as his net impact on the world is positive anyway:
The marginal cost of my existence on the poor and suffering of the world is zero. In fact, it’s probably positive. My economic activity consists mostly of treating patients, buying products, and paying taxes. The first treats the poor’s illnesses, the second creates jobs, and the third pays for government assistance programs.
However, while I agree that ordinary productive members of society plausibly do not have such obligations, this argument involves double-counting. He basically does two positive things:
- Treating patientshttps://effectivereaction.wordpress.com/wp-admin/post.php?post=142&action=edit&message=1 in his job (imagine Scott does surgery)
- Buying things (say bread)
(We’ll ignore the bit about taxes.1)
Now consider Scottlynn, the farmer. She figures her net impact is positive as well. She basically does two things:
- Growing corn and turning it into bread
- Buying things (say surgery)
Yet now we have the same activities appearing in two people’s lists! Scott considers both his buying from, and selling to, Scottlynn as his positive impact. Yet Scottlynn counts those exact same transactions as part of her positive impact!
This is because (ignoring for the moment the inherent dignity that comes from productive work) Scottlynn doesn’t really value being employed per say – she values it because it gets her money, which she can then use to buy surgery. Buy surgery… from Scott. He shouldn’t count his purchases as part of his positive impact; the only reason it’s good is because it will later on allow her to buy the other thing he counted as positive impact! To avoid double-counting, he needs to pick one or the other. This is similar to how we have multiple ways of measuring GDP – the production method, the income method and the expenditure method – but we can’t mix them together.
The money/price system serves three purposes; it rations scarce resources, it signals which need to be produced more, and it incentives their production. But it is only a means to an end; ultimately, what matters is the goods and services that are produced, and that they go to those who want them.
Some macroeconomic theories do suggest that there might be times when simply spending money is a good thing; for example, if you have cyclical under-utilization of resources due to sticky prices. But it is unclear if that’s actually ever really an issue; other equally plausible theories of macroeconomics say it’s not. And even if the Neo-Keynesians are right, their theory implies that sometimes (when you have cyclical over-utilization of resources) simply spending money is a bad thing! Over the long run the economy operates at above and below capacity roughly as often, so these two effects will cancel out.
I’m sure there are other positive non-charity things Scott does. For example, he’s probably pleasant to his coworkers, and he creates a lot of value through his blog. But buying stuff isn’t one of them.