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You've outlined two of the various schools of ethics regarding economics and economic policy: The utilitarian school of Nozick and Friedman, and the 19th century socialist school which posits that altruism is the organizing principal of natural law, not self-interest as Hayek and Friedman believe.

There's some problems, however, with the ethics of altruism that explain why socialism (the philosophy, not the political slogan) lost favor long ago with social scientists of both the right and the left, and the most embarrassing one is the consistent lack of strong empirical evidence that altruism is an important explanatory variable for human behavior in any setting, least of all economics. Self interest, on the other hand, can usually be shown to be among the strongest explanatory variables for human behavior in virtually any setting.  This helps explain why neoclassical economics, which is simply the application of assuming rational self interest as the principal element for individual, and by extension, collective action, has such rhetorical power in policy circles -- it's just really compelling based on factual observation, cynical or not.

Altruism, for which you are arguing, can still provide an apparently powerful political image for which to create some support for helping people in need, but most of the important academic work in social science has found that it just doesn't hold up upon analysis. Welfare policies, in Europe or anywhere else, can almost always be shown to have been instituted not for the purpose of helping people in need, but rather because they served the political interests one or more powerful groups.  

Thus we come back to multipliers -- that we need to redistribute wealth from the richer to the poorer in a severe recession because the poor MUST spend it to live, while the rational, self-interested rich WON'T sped it because of fear about tomorrow's lack of income.

by santiago on Sat Feb 28th, 2009 at 10:27:06 PM EST

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