On your last point about whether there are economists who hold this view, I’m not sure I agree. For example, if you look at that IGM poll of economists’ views on scalping, of the eight people in favour of touting who gave a reason, one of them appeals to allocative efficiency, and Caroline Hoxby of Stanford says “Classic example in which good (tickets) are not allocated to those who value them most. Only exception:ticket-holder’s identity matters.” The remaining six don’t say anything incompatible with the allocative efficiency argument.
I don’t think it would be that hard to find lots of examples of economists defending particular policies on the basis that those willing to pay more should get the good.
Economists who accept your crucial premise would necessarily think that there should be no redistribution at all, since the net effect of redistribution is to move goods from people who were originally willing to pay more to people who were originally willing to pay less. But “redistribution is always morally bad” is an extreme outlier view amongst economists.
See for example the IGM poll on the minimum wage, where there is significant support for small increases to the minimum wage despite acknowledgment of the allocative inefficiency. The question most economists ask is “is this an efficient way to redistribute wealth? do the benefits justify the costs?” They don’t consider the case settled because it decreases allocative efficiency (as it obviously does).
I don’t think it would be that hard to find lots of examples of economists defending particular policies on the basis that those willing to pay more should get the good.
People can make that argument as part of a broader principle like “we should give goods to people who are willing to pay most, and redistribute money in the most efficient way we can.”
For example, I also often argue that the people willing to pay more should get the good. But I don’t accept your crucial premise even a tiny bit. The same is true of the handful of economists I’ve taken a class from or interacted with at length, and so I’d guess it’s the most common view.
Thanks, I agree that opposition to all redistribution is an extreme outlier position among economists. I think the explanation is that the rationale that many of them accept for ticket touting is not carried over into other domains.
Some evidence that economists do make this argument. See this paper—http://www.jstor.org/stable/3216858?seq=1#page_scan_tab_contents in the Jnl of Econ Persp. In the first paragraph, Courty says ”...economists usually argue that resale increases efficiency, because it channels tickets to those consumers who value them the most”
I think one should interpret that as saying that those who are willing to pay more (in the actual world, not the hypothetical world after redistribution) value the good more. And that is the main argument appealed to in favour of scalping in one of the most famous textbooks on microeconomics. The main premise used in that argument is obviously false.
If they endorsed the view you say they do with respect to scalping, wouldn’t they say “provided there was perfectly equitable distribution of incomes, scalping ensures that goods go to those who value them most”. Missing out the first bit gives an extremely misleading impression of their view, doesn’t it?
If they endorsed the view you say they do with respect to scalping, wouldn’t they say “provided there was perfectly equitable distribution of incomes, scalping ensures that goods go to those who value them most”. Missing out the first bit gives an extremely misleading impression of their view, doesn’t it?
When economists say “how much do you value X” they are usually using the dictionary definition of value as “estimate the monetary worth.” Economists understand that valuing something involves an implicit denominator and “who values most” will depend on the choice of denominator. You get approximately the same ordering for any denominator which can be easily transferred between people, and when they say “A values X more than B” they mean in that common ordering. Economists understand that that sense of value isn’t synonymous with moral value (which can’t be easily transferred between people).
The reason that easily transferrable goods serve as a good denominator is because at the optimal outcome they should exactly track whatever the planner cares about (otherwise we could transfer them).
Expressing economists’ actual view would take several additional sentences. The quote seems like a reasonable concise simplification.
Your version isn’t true: an equitable distribution of incomes doesn’t imply that everyone has roughly the same utility per marginal dollar. A closer formulation would be “Supposing that the policy-maker is roughly indifferent between giving a dollar to each person [e.g. as would be the case if the policy-maker has adopted roughly optimal policies in other domains, since dollars can be easily transferred between people] then scalping will ensure that the ticket goes to the person who the policy-maker would most prefer have it.”
Immediately before your quote from Mankiw’s book, he says “Equity involves normative judgments that go beyond the realm of economics and enter into the realm of political philosophy. We concentrate on efficiency as the social planner’s goal. Keep in mind, however, that real policy-makers often care about equity as well.” I agree the discussion is offensively simplified because it’s a 101 textbook, but don’t think this is evidence of fundamental confusion. If we read “equity” as “has the same marginal utility from a dollar” then this seems pretty in line with the utilitarian position.
On your last point about whether there are economists who hold this view, I’m not sure I agree. For example, if you look at that IGM poll of economists’ views on scalping, of the eight people in favour of touting who gave a reason, one of them appeals to allocative efficiency, and Caroline Hoxby of Stanford says “Classic example in which good (tickets) are not allocated to those who value them most. Only exception:ticket-holder’s identity matters.” The remaining six don’t say anything incompatible with the allocative efficiency argument.
I don’t think it would be that hard to find lots of examples of economists defending particular policies on the basis that those willing to pay more should get the good.
Economists who accept your crucial premise would necessarily think that there should be no redistribution at all, since the net effect of redistribution is to move goods from people who were originally willing to pay more to people who were originally willing to pay less. But “redistribution is always morally bad” is an extreme outlier view amongst economists.
See for example the IGM poll on the minimum wage, where there is significant support for small increases to the minimum wage despite acknowledgment of the allocative inefficiency. The question most economists ask is “is this an efficient way to redistribute wealth? do the benefits justify the costs?” They don’t consider the case settled because it decreases allocative efficiency (as it obviously does).
People can make that argument as part of a broader principle like “we should give goods to people who are willing to pay most, and redistribute money in the most efficient way we can.”
For example, I also often argue that the people willing to pay more should get the good. But I don’t accept your crucial premise even a tiny bit. The same is true of the handful of economists I’ve taken a class from or interacted with at length, and so I’d guess it’s the most common view.
Thanks, I agree that opposition to all redistribution is an extreme outlier position among economists. I think the explanation is that the rationale that many of them accept for ticket touting is not carried over into other domains.
Some evidence that economists do make this argument. See this paper—http://www.jstor.org/stable/3216858?seq=1#page_scan_tab_contents in the Jnl of Econ Persp. In the first paragraph, Courty says ”...economists usually argue that resale increases efficiency, because it channels tickets to those consumers who value them the most”
And the box in chapter 7 of Mankiw’s principles of microeconomics textbook here—https://books.google.co.uk/books?id=xoztFMavGCcC&pg=PA148&lpg=PA148&dq=mankiw+ticket+scalping&source=bl&ots=5U_xzxQZvl&sig=T9PP88ufUkIFDPpR4j8kSG37kig&hl=en&sa=X&ved=0ahUKEwiPopLst8PYAhXJtxQKHZcpCrsQ6AEISTAF#v=onepage&q&f=false. I will quote in full: “If an economy is to allocate its scarce resources efficiently, goods must get to those consumers who value them most highly. Ticket scalping is one example of how markets reach efficient outcomes. By charging the highest price the market will bear, scalpers help ensure that consumers with the greatest willingness to pay for the tickets actually do get them.”
I think one should interpret that as saying that those who are willing to pay more (in the actual world, not the hypothetical world after redistribution) value the good more. And that is the main argument appealed to in favour of scalping in one of the most famous textbooks on microeconomics. The main premise used in that argument is obviously false.
If they endorsed the view you say they do with respect to scalping, wouldn’t they say “provided there was perfectly equitable distribution of incomes, scalping ensures that goods go to those who value them most”. Missing out the first bit gives an extremely misleading impression of their view, doesn’t it?
When economists say “how much do you value X” they are usually using the dictionary definition of value as “estimate the monetary worth.” Economists understand that valuing something involves an implicit denominator and “who values most” will depend on the choice of denominator. You get approximately the same ordering for any denominator which can be easily transferred between people, and when they say “A values X more than B” they mean in that common ordering. Economists understand that that sense of value isn’t synonymous with moral value (which can’t be easily transferred between people).
The reason that easily transferrable goods serve as a good denominator is because at the optimal outcome they should exactly track whatever the planner cares about (otherwise we could transfer them).
Expressing economists’ actual view would take several additional sentences. The quote seems like a reasonable concise simplification.
Your version isn’t true: an equitable distribution of incomes doesn’t imply that everyone has roughly the same utility per marginal dollar. A closer formulation would be “Supposing that the policy-maker is roughly indifferent between giving a dollar to each person [e.g. as would be the case if the policy-maker has adopted roughly optimal policies in other domains, since dollars can be easily transferred between people] then scalping will ensure that the ticket goes to the person who the policy-maker would most prefer have it.”
Immediately before your quote from Mankiw’s book, he says “Equity involves normative judgments that go beyond the realm of economics and enter into the realm of political philosophy. We concentrate on efficiency as the social planner’s goal. Keep in mind, however, that real policy-makers often care about equity as well.” I agree the discussion is offensively simplified because it’s a 101 textbook, but don’t think this is evidence of fundamental confusion. If we read “equity” as “has the same marginal utility from a dollar” then this seems pretty in line with the utilitarian position.