Home > Regular Features > Economists v philosophers Round V

Economists v philosophers Round V

May 29th, 2003

Matt Yglesias accepts my invitation to demonstrate the naivety of economic thinking about consequentialism. He proposes the following example

John is at the casino and he puts $100 on the number 12 spot at the roulette table. While the wheel is spinning, John dies suddenly. The body is removed and the casino manager finds John’s wife and sole heir Jane. The manager now needs to give Jane the money she’s inherited from John. Instead of just giving Jane the $100, however, he decides to cover the wheel and offer Jane the following choice. She can either choose to just take John’s $100 or else she can leave the $100 on the table and the manager will uncover the wheel. If it turns out that the ball has landed in the 12 slot Jane will get the $3,200 payoff, if not she will get nothing. Jane chooses to take the $100 so the manager gives it to her, then uncovers the wheel revealing that the ball had, in fact, landed on the 12.

Yglesias agrees that Jane adopted the correct decision procedure (since the odds were unfavorable), but nonetheless goes on to say

The purpose of the procedure, after all, is to get you the most money possible, and given these circumstances, Jane could have made more money by taking the bet. Thus, there is a sense in which Jane did the wrong thing

This example seems to me to suffer from exactly the same problems as the stock market example put up in the Stanford Encyclopedia of Philosophy which, the post informs me, is by Walter Sinnott-Armstrong .

First, the claim that the choice of accepting the manager’s offer would have yielded a higher outcome is unjustified. The casino might, for example, have welched on the bet. Since this is a low-probability event, it’s true that, conditional on the knowledge that the ball landed on the 12, accepting the offer would be the better option in the ex ante sense I’ve proposed. But on the ‘actual outcome’ criterion Yglesias and Sinnott-Armstrong are defending, there’s no way of telling for sure whether it was better or not.

Second, while betting on 12 and being paid the $3200 is ex post a better option than not betting and being paid the $100, it’s not the best option. It would be better still, for example, to leave the $3200 on the table and bet it on the winning number for the next roll (assuming of course, that the casino paid up).

As in the stockmarket example, if we have perfect knowledge, no best option exists. On the other hand, if we don’t have perfect knowledge, we can’t identify the best option, even ex post.

Does it do any harm to say to say that “The purpose of the procedure, after all, is to get you the most money possible”? I think it does. A characteristic feature of the optimal procedure in most choice problems of this kind is that it gives you a zero probability of getting the best possible outcome. By contrast, as in the Reagan example I posted recently, there are lots of problems where one option may give you the best outcome with high probability, but a very bad outcome with low probability. It’s easy to slide from “The purpose of the procedure, after all, is to get you the most money possible” to a decision rule that says something like “maximize the chance of getting the best outcome” and the latter is clearly wrong.

To sum up, the criterion that the best action is the one with the best actual consequences is at best useless and at worst dangerously misleading as a guide to decisions, and non-operational as a rule for evaluation. At least for an economist, that’s enough reason to say that it’s not a sensible criterion.

A final point. It seems to me that philosophical examples have a lot of gratuitous violence. Why is this? Did we really need to kill John in the first act?

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  1. May 29th, 2003 at 22:27 | #1

    Apologies, that post was “off message”, I was attempting to defend a sick & twisted form of consequentialism: schizophrenic utilitarianism
    - rule-U for civil morality (civil society)
    - act-U for strategic morality (state of nature)
    But I wandered off for a bit, in my grandiose way.
    But Gummo, at least my self-indulgent “opinions on global politics” actually yielded testable hypotheses, namely the “ditch Saudi/hitch Iraqi” theory of Operation Iraqi Freedom.
    This theory argued that terrorism & militarism were not the proximate causes of Op IF.
    It predicted a withdrawal of US troops from Saudi, repositioning of them in Iraqi bases, lifting of sanctions and restoration of the Iraqi oil industry as a major supplier of the US.
    These predictions have & are being confirmed by subsequent evidence, including this report which quotes Wolfowitz saying that the US went into Iraq because it wanted out of Saudi.
    Which is more than anyone can say for Gummo’s inconsequential, interminable and inconclusive moralistic blatherings on the subject.

  2. May 30th, 2003 at 00:46 | #2

    For Chrissake Jack, not everything is related to the neocon power grab. and why don’t you post all that on the catallaxy blog

  3. May 30th, 2003 at 04:33 | #3

    I just did

  4. James Farrell
    May 30th, 2003 at 16:36 | #4

    The example supplied by Matthew Iglesias is unnecessarily complicated. It boils down to whether Jane should take a certain gamble or not, and the stuff about her husband is neither here nor there. Since the actual decision being made is not a moral choice, Matt’s point is evidently one about decision rules generally, namely that you can make the right decision under uncertainty even if it turns out you would have been better off had you decided the other way. This doesn’t strike me as a piercing insight.

    Unlike John, I found the Stanford Encyclopaedia entry quite helpful. For one thing, the distinction between the ethics of individuals’ decisions and morality as embedded in social institutions is valuable, and seems to accord with John’s hunch that ‘[consequentialism] is most appealing as a criterion for public policy’ (though I don’t understand why he brackets jurisprudence with individual ethics rather than public policy.) Most importantly, however, it made me realise that most moral decisions are made neither under conditions of perfect certainty nor in a casino where states of nature are drawn randomly from a pack of cards. Rather, they are made in circumstances where the future is in principle knowable but where that knowledge is costly to acquire. So some of the thorniest moral problems turn out to be those concerning our responsibility to inform ourselves about the consequences of our actions.

    What was the point about the vast literature on food safety, by the way? Would some of this literature have shed more light on the ethical issue than the ‘toy’ story of Bob and the poisoned meat?

  5. May 30th, 2003 at 17:44 | #5

    The example supplied by Matthew Iglesias is unnecessarily complicated. … This doesn’t strike me as a piercing insight.

    I wish I’d said that.

  6. John
    May 30th, 2003 at 18:26 | #6

    What was the point about the vast literature on food safety, by the way? Would some of this literature have shed more light on the ethical issue than the ?toy? story of Bob and the poisoned meat?

    I think it would. A standard problem, analyzed in much detail in this literature, is that a parent might have to choose between cheaper food, that would permit a nutritionally balanced diet, but might contain some pesticide residues, and a more-expensive, less balanced, but pesticide-free diet. In these circumstances, to say that the parent who chooses the first option is morally wrong if the kids get cancer, but morally right if they don’t is IMO both cruel and silly. And similar problems arise with applications of the ‘actual consequences’ approach to public policy on food safety.

  7. Don
    May 30th, 2003 at 18:46 | #7

    Shai suggests reading some Hilary Putnam. Maybe I could suggest another one…

    Putnam has an article on Dewey and utilitarianism (‘Dewey’s Central Insight’) at:

    http://staff.washington.edu/dalexand/Putnam%20Readings/Cosenza_paper.pdf

  8. John
    May 30th, 2003 at 19:05 | #8

    This piece was very interesting and nicely written. It points up the weaknesses of utilitarianism as a theory of personal ethics.

    On the other hand I think the weaknesses of the utilitarian account of what is valuable are not very important in its role as a democratic public philosophy. In this context, what is valuable is what people value. It may not be sensible to say, in a personal sense, that “given equal pleasure, pushpin is as good as poetry”, but in a democratic society, the fans of pushpin should count equally with the poets, and if the poets want public support, they should have to convince the pinpushers that it is merited.

  9. July 13th, 2004 at 16:21 | #9

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  10. May 29th, 2003 at 14:18 | #10

    Machiavelli/Hobbes (M/H) were advising agents (statesmen) on behalf of the prinicipals (citizens) in the new era of enlightened science and empowered society. So their political morality was at radical odds with the traditional personal morality which evolved to deal with face to face encounters.

    Ex ante decision making, under conditions of uncertainty, defines the dilemma of international political action in the age of messianic totalitarian movements (MTMs) and WMDs.
    The analogy of gambling with political consequentialism can only go so far.
    A statesman has two advantages over a gambler:
    – nous: wisdom born of experience
    – power: power to shift the odds
    Gamblers don’t have nous, they are often dealing with random events, where “the cards have no memory”. But a good statesmen is always and everywhere familiar with history, and may recognise a familiar pattern.
    Gamblers don’t have power, they cannot use influence on the dealer to shift the odds in their favour, that is cheating. A statesman may attempt to use inside knowledge (spying) to look at the other fellows cards. And he may not always be able to level with his public (lying) as he may lose his edge. Finally he may convert his inside knowledge to power by the threat of killing (dying).
    Thus spying, lying & dying may be essential in order to win in international politics.

    This highlights the problematic relation of democracy to diplomacy in the era of MTMs & WMDs.
    If we don’t trust our statesmen, whilst they lie spy & die the enemy, we may lose our edge. If we do trust our statesmen, they may use their knowledge to exploit us (“patriotism, the last resort…).

    You have to make a judgement call at the time, based on knowledge of the game and the players. In the case of GW II many people did not trust Bush, they know his form. Others preferred to put their trust in Blair.
    We are still awaiting the outcome of this call, my money is on Blair to see it through.

    Paradoxicly, solid democracies can have a higher tolerance of lying, spying & dying precisely because they have stable institutions that can withstand a bad apple (per Nixon).

    It may be worth the risk of the occasional rogue like Nixon, as a pay off for a reasonable series of gentlemen, like Churchill, Roosevelt Reagan even Howard on a modest scale.

    We may distinguish between consequentialist political moralities in two realms:
    – Intra-institutional: Within their own society, “in civil society” (ICS). M/H favoured absolutist “moral” rule-utilitarianism ie play fair and by the rules.
    – Meta-institutional: Beyond their own society, “in the state of nature” (ITSON). M/H favoured relativist “amoral” act-utilitarianism

    ICS one’s political morality is still consequntialist but is bound by the same philosophy that binds personal morality – be honest and play by the rules.
    ITSON it is really “anything goes” the level of immorality has to be proportionate to the threat -thus the use of nuclear weapons is legitimate if nuclear weapons are threatened.

    Key US security managers now find that they are facing a “meta-institutional” (fundamentalist terrorism/WMDs) threat that exists, literally, ITSON in places like Afghnanistan or N Korea.

    Hence they have unceremoniously dropped the intra-institutional rule-utilitarian committment to “rule of international law” through multilateral agencies (eg UNSC) which they felt were inadequate in dealing with the toxic mess of SW Asian militant politics.

    They may have overestimated the threat (which exists in Saudis & Pakis not Iraqi) but their actions are intelligble in the light of the distinction. And if they have correctly estimated that the real threats are fundamentalist takeovers of the Saudis and Pakis then their actions are correct.

    As Weber said, in international politics, the primary moral responsibility is to be intelligent ie correct. Thus ex ante moralising is somewhat besided the point, statesmen do not have that luxury, although it is true that winners write history.

  11. Shai
    May 29th, 2003 at 15:38 | #11

    Although I can hardly understand why the discussion above is important to consequentialism, partly because I do not have the requisite education, I’ll reply anyway:

    (1) the problems with consequentialism, particularly utilitarianism are taught in every intro philosophy course (i would know, i was just in one). because consequences cannot be reduced to a moral or hedonic calculus doesnt mean consequentialism is a worthless guide for decisions, but it might imply that consequentialism is something other than you think (note: consequentialism isn’t even held in particularly high regard by many philosophers)

    (2) the problems that moral philosophers will normally be concerned with are hardly reducible to a simple decision procedure. problems of equality and freedom, life and death, are not easily reduced to expected utility or preference satisfaction. if that means consequentialism is effectively reduced to nous, or reason and rationality in general, im not complaining. i like to think of it as a style of reasoning a la Ian Hacking.

    (3) that of course does not mean consequentialists would rely on their ad hoc intuitions. if they desire to maximize good consequences to the best of their ability, they would rely on relevant, hopefully intelligent facts which would shape the chosen course of action and in turn through experience and evidence, their intuitions and moral leanings

    (4) amartya sen, an economist and philosopher identifies himself as a consequentialist. i dont know what he has in mind when he says that, but witness his excellent books “Inequality Reexamined” and “Rationality and Freedom”. for a discussion of the relation between ethics and economics see his “On Ethics and Economics”. for something a bit more radical, you might try Vivian Walsh, “Rationality, Allocation, and Reproduction” (but I profess profound ignorance on that topic beyond the basics), or something by a nonspecialist, Hilary Putnam, “On the Rationality of Preferences at:

    http://staff.washington.edu/dalexand/Putnam%20Readings/12_CHAPTER_5.pdf

    For a serious work of consequentialism (that I don’t completely agree with or understand), see: Mulgan 2001, The Demands of Consequentialism

  12. Jim Birch
    May 29th, 2003 at 16:11 | #12

    “…utilitarianism are taught in every intro philosophy course (i would know, i was just in one)”

    hey, did you miss the *first* lecture by any chance!

  13. Shai
    May 29th, 2003 at 16:19 | #13

    Jim Birch your comment was too subtle for me to understand, but that’s OK.

  14. May 29th, 2003 at 16:44 | #14

    Matthew’s example only works by fudging Jane’s situation. It isn’t relevant whether the roulette wheel is at rest with the ball possibly in the 12 spot, or the wheel is in motion with the future possibility that the ball will come to rest in the 12 spot. In either situation Jane faces the same low probability that she will make $3200 rather than the $100 already on the table.

    At the nitpicking level, wouldn’t most casinos take the position that once John’s bet is on the table the money is theirs? Had John lost his bet, I suspect Jane would have had a hard time getting the $100 back as the bet was placed before John snuffed it. Of course this means that what the casino is actually doing in Matt’s example is swindling Jane out of $3200 which is owed to John’s estate. This is only a lay opinion – perhaps Ken Parish could give us a legal view.

    Jack – insightful and edifying as you might find your own opinions on global politics, you need to show more appreciation of the fine distinction between relevant and totally off the topic.

  15. May 29th, 2003 at 17:05 | #15

    This reminds me of the story of the Scotsman who organised a chicken raffle and lost the chicken. He consulted a friend, but they couldn’t decide what to do. Later the friend asked him what he had in fact done. He replied, “Och, I just gave the winner his money back.”

  16. May 29th, 2003 at 18:34 | #16

    Gah! It’s Schrodinger’s Cat for economists!

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