Carrie Shea, Summary of Chapter 2, "At the Shrine of Our Lady of Fatima; or, Why political questions are not all economic", pp. 24-49. Sagoff, The Economy of the Earth, (Cambridge: 1988).

Sagoff begins by discussing the outrage of the citizens of Lewiston, NY, to the response of corporations and political officials regarding their concerns about radioactive waste. Citizens do not care about the "benefits and costs" of a particular action says Sagoff, but rather ethical concerns such as the "manipulation and distribution of power in society" is what troubles them (p. 24). He says that environmental devastation arises when "efficiency replaces infinity as the central conception of value", which is presumable adopted by the powers that be (p. 25).

WHAT WE WANT VERSUS WHAT WE ARE

He begins this section with the major question of the chapter, which is, whether environmental problems are economic ones, to which he will answer in the negative later in the chapter. Baxter, however, answers this question in the affirmative, and says environmental problems arise because we are not using resources efficiently, or not maximizing "human satisfaction" (p. 26).

Economists, such as Baxter, define efficiency, says Sagoff, as the "maximum consumption of goods and services given the available amount of resources". What matters on this conception is the value placed on services, or, the consumer’s willingness to pay. The problem with this view, says Sagoff, is that we are not only consumers pursuing the good life, but also citizens interested in the good society, ready to use the political process to get our voices heard publicly.

Sagoff sees national goals as not just particular to individual selves, but goals that have historical and common roots that uphold these goals, which goes beyond mere self-interest. Public values cannot be quantified or reduced to mere preferences. Environmental goals reflect public values and this is what we are all about. Sagoff is a pragmatist whose interests are in establishing values that go beyond mere consumeristic preference or humanistic utilitarianism.

WHAT IS COST-BENEFIT ANALYSIS?

Sagoff thinks that the "philosophy of normative constraints" should ground our "policies for health, safety, and the environment", though he does not offer a positive account of this until later chapters (p. 29). According to Andrews, this philosophy dictates that:

This conception differs from the cost-benefit analysis conception of markets, implied above, and shall be developed below.

He describes in detail what is involved with the various "market models" which he ultimately rejects. The first he talks about is the ideal market, and the actual market moves away from this conception and towards failure, when externalities are not internalized. In this market, there is consensual or voluntary exchange, perfect information about the products, and unanimous consent to the policies (concerning the latter, there are going to be some losses which they need to be compensated for the policy to be desirable and efficient). Kneese summarizes the ideal market model as follows:

1. The personal wants of individuals should guide the use of resources.
2. Personal wants can be met most efficiently in an ideal market.
3. Therefore, the ideal market is the standard we should use in allocating resources.

While this does satisfy desires, it leaves out what Sagoff considers to be crucial values, such as the cultural, aesthetic, and ethical.

The cost-benefit model is the one he focuses on for the remainder of the chapter, and it involves a tremendous amount of work (as we saw in class) to determine which policy, "compared across alternatives" would be most efficient "on a willing to pay basis" (p. 33). Two key concepts he discusses in detail in the following sections are ‘externality’, where a market’s efficiency increases as externalities decrease, and the nature of value, which is what forms the basis for such policies.

TWO CONCEPTIONS OF EXTERNALITIES

In the beginning of this next section, he discusses how the notion of externality expanded from a rather narrow conception in the 50’s and 60’s (which resulted in virtually no conservation) to a broader sense in the 60’s and 70’s. The narrow conception included merely physical damage or economic loss to unconsenting third parties, whereas the broad conception includes:

Externality on this latter conception now includes internalizing aesthetic, moral, and political values, and not just economic ones. It seems that no one today would accept the narrow sense as it results in "commercially exploitative policies" that violate cultural and ethical considerations (p. 37). However, we can’t expand cost-benefit analysis to the broad sense for at least three reasons:

1. Values and ethical arguments do not depend on any economic considerations;
2. These values may become partisan to those who ‘pay’ for their values to be heard; and,
3. Efficiency, as defined above, could not be maintained, as economists aren’t the ones who ought determine which values are most significant (it is up to the political process to determine this).

EFFICIENCY AND EQUALITY

Sagoff discusses two conceptions of equality. The first involves the distribution of wealth, income, or access to resources. The second involves "equality before the law and within the political process" (p. 39). The second sense is most likely to conflict with the economist’s idea of efficiency as the goal, (insofar as it is the utmost value, which is defined as "preferences for which individuals are willing to pay"), as it precludes the opportunity (it is not seen as significant) to have one’s voice heard in the political process (p. 40).

VALUES AS WANTS

Deliberation over values can be educational, says Sagoff, as values are argued for merit and can result in a shared public point of view. They are beyond criticism, however, if all they are are expressions of preferences or wants. Reasons for one’s views are not counted as "what counts is how much individuals will pay to satisfy their wants" (p. 41).

He next discusses how some psychotherapists hold a similar notion to cost-benefit analysis, insofar as denying that values are or can be objective. Some policy makers see themselves as "neutral among competing values in the client society" (p. 42). But Sagoff asks whether this neutrality is the proper "role of regulation in a good society" or consistent with "the content of current legislation…the idea of democracy and the rule of law"? (p. 43).

TWO CONCEPTIONS OF NEUTRALITY

The first he discusses (and seems to endorse) is the Kantian objective approach, which entails "some values are more reasonable that others" (p. 43). Value judgments are claims about what is right or true, not preferred or felt, and thus one can be mistaken or correct, even though these values reside in subjective states of mind. "The individual, for Kant", says Sagoff:

This view is opposed to the second approach held by cost-benefit analysts, which states "the policy that may be defended on objective grounds – as the right thing to do – is the policy of maximizing the satisfaction of these preferences" (p. 44). So, one is judging policy recommendations on reasons or the common good in the Kantian approach, as opposed to subjective wants on the cost-benefit approach.

Moral dilemmas, says Sagoff, are solved "on the basis of what can be said for or against them" and not as a matter of willingness to pay (p. 45). It would be a moral, not a market, failure were we not "to make the right decisions in these matters" (p 45). Sagoff seems to be saying that if the issue in question is not purely economic, it cannot be resolved by purely economic means. Neutrality is not justified if the concerns are public, as it results in an inappropriate "indifference toward value" (p. 46).

THE CITIZEN AS CLIENT

He returns to the citizens of Lewiston and explains their rejection of placing their values on a cost-benefit scale, as they hold there is a significant, ethical difference between risks that are taken (such as what happens when one chooses to smoke) and those that are imposed on them (as in the case of radioactive waste), even if the risks are similar. They see the decision making process of these agencies as deficient, as not taking these values into account results in "a political problem" as people are not able "to participate in decisions, public and private, that affect their lives" (p. 46).

The answers the politicians and corporations give in response to these concerns are those that reflect their personalization of power, which results in appearing "to have not power of their own and thus justifiably manipulate and control everything" as they are serving the wants of the consumer (p. 47). This conception, which Sagoff contests, entails the following grim conclusions:

1. Power is private, and thus one cannot distinguish between the powerful and powerless;
2. Power serves personal principles, and neglects collection concerns;
3. Public concerns are external, and thus do not partake in the decision making process;
4. Values are merely wants, and thus authority is in the best position to determine how to achieve them;
5. Assumes we all just want our preferences satisfied, and not have our opinions heard; and,
6. Moral distinctions cannot be made as welfare economics replaces them.

Ultimately, Sagoff criticizes cost-benefit analysis because it does not allow for us "to have power to act as a nation", because we are not "able to act…on a public philosophy, conviction, or faith" (p. 49).

I construe the argument against cost-benefit analysis (CBA) on pp. 33-7 as follows:

So 4 CBA is unacceptable as the sole policymaking tool.

(1,2,3)

People like Kristen Schrader-Freshette attack premise 3, arguing that any form of policy-making has to mix preferences and values, and that CBA has advantages of objectivity and neutrality over the political process, which is constantly subject to abuses of power.