I am not going to argue whether such is morally right or wrong. However, the idea itself, have huge problemThere are a few problem with normative questions in economy. Basically due to these issues, normative questions will always be subjective. Many will think badly on what you think is good.
1. The obvious problem is that different humans have different taste. This may seem to be the main problem for purely theoretical economists. However, it’s actually the least of our problem. Because money is interchangeable, we can, to certain extend, compare people’s utility function even on those things that’s not easily tradable, like lives, reproductive success, preventing poor’s rebellion, voters preferences (and ignorance) etc. We can compute their marginal rate of substitution between a certain outcome and say having another dollar.
2. Huge amount of people’s utility function revolves around games that’s almost “zero sum”. Humans simply want others to suffer. Power, for example. If I have a power to choose cheese or chocolate, chocolate factory has no power to decide that. It’s mutually exclusive. We probably have no problem when the issue is cheese and chocolate. We’ll get back to that later. In purely zero sum game, there can be no optimum. Not in pareto optimal sense, not in any sense.
3. Hypocrisy. Humans’ utility function is moderately complex. It’s not too complex to understand. However, the true utility function of typical humans is pretty politically incorrect. Hence most humans have totally false idea of what humans want. If we construct humans’ utility function objectively based on what people actually choose, the result will be way different than what most people think.
4. Pareto optimal is a very strict topic. There can be no change of policy where not even one person is made worst of out of 200 million. C’mon. However, if we can make 51% people better off and still improve the amount of GDP, that may worth examining. Something along citizen dividend advocated by Georgian libertarians may fit that. Perhaps something less strict than pareto but “reasonable” would help a lot. I don’t know what. Proper alignments between individuals’ utility function and GDP perhaps? Increasing market value of citizenship if those citizenship is tradeable. Who knows?
5. Results of evolutionary psychology says that humans are not even aware what he wants and why he want it. Humans have many hidden motives that not even the actor is rationally aware off. So people may honestly feel or think that he is unselfishly trying to help others while all he/she really wants is to just max out his reproductive success. People may not be perfectly aware of their utility function or their own intent. For example, a person may truly intent to pay his loan or come to his office on time. We know, however, he won’t. As usual, intents, incentives, and results are far more closely correlated than what most people like to believe. Many would claim that Caesar Borgia and Hitler is evil. Yet we know that most humans would have done the same thing and is still doing the same thing under similar circumstances.
6. Our model of what humans’ utility function is too politically correct. Humans’ true utility function, envy, bigotry, power seeking, psychopathy, apathy, selfish, is very politically incorrect, and hence not discussed. If someone stab you in the back, take your wallet, and latter claim that he’s trying to altruistically perform apendix operation on you, is it science what his true motives are? Of course. We know it isn’t true. Many situation is like that. We know what people’s real motives are. It’s just that it’s so politically incorrect we don’t make the obvious deduction. As usual, result (which is disprovable), incentive (which is also disproveable), and some comparison with other’ mammals’ behavior (which is disprovable), and reproductive success analysis of past successful ancestors (which is disprovable), can give pretty good guide that the guy is just a psychopath that want to kill you so he can take your wallet. The same way most laws against consensual acts can be analyzed the same way but people don’t bother
I’ll give you a sample. Say one guy want food. Then we tax the rich to buy food for the poor. Standard economy issue will discuss whether the small sacrifice paid by Bill Gates justify the increased happiness of the hungry.
However, most problem is way out of the box of that thinking. Often, scarcity is not even the issue at all. Many, instead of wanting food, want porn and ganja. The other wants to prohibit it. So you see any normative answer will be seen as “wrong” by at least one side. It’s inherently subjective.
Thinking whether Bill’s tax rate should be 2% or 3% is penny wise pound folly. Some may think that people like Bill Gates can easily attract thousands of women and make many kids, effectively ensuring more kids have rich smart dad, hence reducing any need of welfare in the first place. But this aspect is not talked about because it’s politically incorrect. Again, I am not saying it’s right or wrong. I don’t know all the political and economic implication of this. I know that people don’t like discussing it.
What about if deep inside, socialists demand higher income tax because they don’t want you to be rich? How do we come up with something both you and socialists be happy with?
Also like all people, economists want to stay politically correct.
I’ll give you a sample of hidden utility function. Say, a religious leader says that you have to eat halal food (actual story from Indonesia). We would think that the interest of the religious leader is benign. Ah, he wants people to be more pious. Any experience politicians will see the true issue. The religious leaders want power to decide what you can eat.
Obviously, many people wouldn’t want that. Here, an almost zero sum game is masked into an illusion of cooperative game. “I want to run your life so I can control you and increase my pay” is turned into “I want to help you go to heaven.” Most people don’t see it through, except foreigners. I think we can verify that non secular countries have higher cost of halal/kosher certificate.
I pick a religious sample precisely because US is not a religious country. Hence, my sample is not politically incorrect here.
Due to zero sum aspects of some of our lives, huge amount of unhappiness, if we can call that now, does not happen due to scarcity or lack of redistribution of wealth at all.
Porn is an obvious sample. There is an abundance of porn. However, showing porn to minor is illegal. There are many pressures to get rid porn from the market. Recently somebody got 20 years in prison for watching porn.
Ganja. Again, ganja can be produced cheaply. However, people that want to control what you can smoke is unhappy if you smoke. Here your utility function is in direct conflict with them. As usual it’s masked into something cooperative. Government, for example, argued that ganja is dangerous and hence look as if they care about you.
Does ganja improve your utility function? Well, if it’s legal, would you buy it? See. People’s actual utility function has scientific “bite”. We know that many would do.
Prostitution and sugar babies are another game.
As I argue elsewhere, microeconomics explains the behavior of the singular and unitary actor. It’s not about men and women; in fact, there are no men and women in microeconomics. There are only (singular and unitary) actors. In the words of Levitt and Dubner themselves, “If, for instance, you added up all the women and men on the planet, you would find that, on average, the typical adult human being has one breast and one testicle—and yet how many people fit that description?” Microeconomics is about how the actor with one breast and one testicle behaves. Evolutionary psychology is about how women with two breasts are completely, fundamentally, and irreconcilably different from men with two testicles, because, in large part, women have breasts and men have testicles. It’s the breasts and testicles that make them behave differently
Prostitute is NOT cheap. Beautiful women can earn $5500 per hour as prostitutes as can be seen here: http://afp.google.com/article/ALeqM5hmXLonSBMNvhOli00jFF0fK65pSw.
Typical women will earn more money as sugar babies than as a wife. Matt Ridley, for example, argued that the true reason why polygamy is prohibited is not to protect women but to protect men. Anti-polygamy laws can easily be circumvented if prostitution is illegal. So it’s natural to expect many women would choose the sugar babies path. Yet, most people think that somehow all those women are victims, etc.
So here we have a case where people’s perception of their utility function is way off than people’s actual utility function. Most people believe that no women would ever want to be a prostitute. The truth is many would do if it’s legal.
So you can get a picture of how wrong your utility function to reality let me show you a simple analysis.
Imagine if government prohibit ganja by a 1 cent fine. We can all agree that ganja is effectively legal. Now government can use many different words to describe the action. Government can say it’s a 1 cent fine, tax, punishment, prohibition. However, we see that if the “penalty” is the small anyway, it’s effectively fine. It’s not what it calls. It’s the actual increase cost that often heavily affects humans’ utility function.
So let’s for simplicity sake, we see the world without differentiating tax and fine. Let’s call them artificial costs. We can also include things like jail for our analysis. Jail is not the same with tax. However, it has some monetary equivalent. There is a certain amount of money that people are willing to pay to avoid jail. That amount of money will reflect his utility function and directly comparable with other men.
So let’s count fine, tax, discouragement, and jail, as “artificially increased costs.”
Let’s count subsidy, aids, government programs, incentive, as “artificially decreased costs.” If some people got subsidy, we can count those who don’t to bear some “artificially increased costs” too relative to those who got the subsidy.
Say government tax green skin people $1k. Then government is racist. Imagine if government tax everyone $1k, and then give refund to anyone that’s not green. Everyone can verify that the 2 acts are equivalent right? Here, we can say that green people suffer “artificially increased costs.”
In ancient time, Naz, artificially increased cost of gene pool survival for the jews. Jews that are surviving in the gene pool are killed. Here, killing has a monetary equivalent. The money equivalent of getting killed is the “artificially increased costs.”
The amount of “artificially increased costs” Nazi inflicted on jews must be quite significant because most jews did end up death. If it’s only 1 cents or equivalent to 1 cent, I am sure 90% of jews must have survived holocausts.
After Nazi killed the jews, Nazi redistribute jewish wealth. Well, they’re getting extinct anyway so they didn’t need the money right? I am not saying its right or wrong. I am just saying it’s what the Nazi did.
In contemporary time, social democrats artificially increase cost of gene pool survival for rich smart diligent attractive capitalists (rsdac). Rich men that want to survive in the gene pool face an artificially inflated cost of alimony risk, child support, and so on and so on. All those are set proportional to men’s wealth. Monogamy is also more costly for men most capable to attract females. Also, richer males are less likely to be benefited by public schools. All those are artificially increased costs. Not to mention income tax that’s also proportional to men’s income.
The amount of “artificially increased costs” government inflicted on capitalists must be quite significant because the rich actually ended up making fewer kids than the poor.
Perhaps, if we want to follow the spirit of utility function, we can embrace free trade or free trade like mechanism.
Say I value my watch for 1000 usd. Say you value it by 2000usd. Ah there is inefficiency. This will solve by itself by me selling the watch to you for 1500 usd. I do not know what your actual utility function. However, we know that derivative of U with respect to watch for me is 1000 times the derivative of U with respect to usd. For you, the derivative is 2000 times the derivative for dollar. So your utility function for watch is steeper on “watch” direction. We know that. To be frank, because every change is a change from status quo, all we need to know is those derivatives anyway rather than utility functions. And we can know that.
This is the basic of pareto optimal text book sample. Perhaps we can extend that to something the market does not take care of.
Many things are not directly tradable. But we can measure their marginal rate of substitution toward dollar nevertheless.
If you go to abortion clinic, we know the poor do not value reproductive success by much. If we go to fertility clinic, we know that the rich value reproductive success by far more.
A world where the poor get more money and the rich make more kids may make both better off. Perhaps, government can sell “reproductive licenses” and use the money for citizen dividends?
Another approach will be to see government as businesses and citizens as stock holders. We’re going there. So anyone that make more kids will have to buy citizenships and while those who are childless can sell his right to inherit that citizenship for cash. Perhaps some people will get a discount for staying in countries because of voters’ preference for hanging out with those they’re familiar?
Straight forward redistribution of wealth without something in return for the rich will simply demotivate people from becoming rich. That will simply hurt everyone.