Tuesday, August 27, 2013

Morality in economics, paid parental leave edition

Aussie econ blogs are all having a go at deciphering the debate about government sponsored paid parental leave in the lead up to the the Federal election. And they mostly miss the moral foundations of the debate, leaving us with a whole lot of economics wigs on the opinion pig.

Joshua Gans had a go at framing the debate in terms of productivity instead of fairness, but seems oblivious to the moral foundations of productivity itself and the ambiguity surrounding the aggregated macro-economic productivity outcomes from such policy decisions.

Matt Cowgill seemed to hold back in what is a rather respectful comment
You say a productivity claim is more ‘relevant’ than a fairness claim when it comes to assessing competing policies. Fine, that’s a reasonable point of view. But it is a point of view! That’s a normative, values-based, even ideological claim you’re making (that fairness is a low-order priority), yet you assert it here as if it is incontrovertible truth and that anyone emphasising fairness in policy debates is some kind of moron.
So Gans followed up with some nonsense quotes from a cartoonist that proved he is just being idiotic to impress the neoclassical econ club. Despite, as one commenter noted, his moral arguments in favour of science investment.

Rex Ringschott had a go at Club Troppo. His view is pretty clear from his final paragraph

Whatever the justification – the message to the scullery maid couldn’t be clearer. The sooner you get that Marketing degree and join the smart set the sooner your little fetus gets an even break.

Paul Frijters rehashed a post from the lead up to the 2007 election, essentially revealing how economic reasoning can be used to justify just about anything.

Over at the Guardian, Andi Fox does a good job of identifying the motivation for paid parental leave policies, and assesses the two major party’s policies against it.

The introduction of a universal scheme in this country was about helping those women and their babies catch up to the rest of us

Richard T. Green is the only economist I’ve seen actually properly frame the debate in terms of moral motivations, and the potential success of policies in addressing the moral arguments.
  • The Rights Motivation Having a baby is a universal right and if people cannot afford to take the time off work that is necessary to have a baby, the state should enable them to do so.
  • The Pro-Natalist Motivation We need more babies.
  • The Equality Motivation The time taken off will inevitably fall partially on women (since she has to give birth) and then almost always the period of extreme infancy through the choices of the parents (conditioned by culture and economics). It is unfair that a mother cannot earn money by selling her labour in this period whilst a father can, so the state should compensate her for the unfairness of biology and cultural norms.
I'd assumed that the current round of policies were motivated by some blend of all three of Green's potential moral motivations, with a little more weighting perhaps on the Equality Motivation. Essentially the fact that women rather than men bear children is hugely detrimental for their careers. We have a moral stance that women should have equal opportunities in the workplace, so a paid parental leave policy will take some of the burden away from employers who hire more women. Of course, being financially more able to take leave from jobs without any maternity benefits also satisfies the Rights Motivation, as well as the Pro-Natalist Motivation.

Both policies will satisfy these moral motivations to some degree, and perhaps there are other moral considerations about fairness and economic equality that are required to adequately compare the two.

Given the moral ambiguity, and the unwillingness of politicians to actually put forward a coherent moral justification for their preferred policy, social scientists shouldn’t be rushing to calculate the efficiency of one policy choice over another against their own moral benchmark. They should be seeking clarification about what sort of moral position society at large supports, and assessing the degree to which alternative policies support those moral positions.

Which brings me to the much broader point. In practice economics is not some objective scientific endeavour. Anytime costs or benefits are calculated, recommendations are made, policies are assessed, there are moral judgements underlying these calculations. This is not to say that economics does have a scientific part to it. Positive analysis that seeks to understand empirical regularities of the world as it is certainly is scientific. But as soon as we apply this understanding to the world we must make a value judgement about what is desirable.

Simply ask yourself, why is productivity ‘good’ or desirable, and then keep asking why to your answer (yes, just like kids do). At some point you will hit the moral judgement that says more is better, which conflicts with the empirical literature that reveals happiness is mostly about relative status and reference groups, not about total consumption.

The moral foundations of economics are so clear to those outside the profession, yet so hidden as part of the economics indoctrination process. This leads to all sorts of nonsense debates about economics as a science.

To combat this problem not only am I writing about is, I have made a point of including in the new Australian Economics Learning Standards the requirement that economics student learn about the implicit value judgements within economic analysis.

Let’s hope the next generation of economists take their lead from Green and future policy debates are provided with much more substance from the economics profession.

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