Keynesian Utilitarianism

by Benjamin Studebaker

In A Theory of Justice, John Rawls draws a hard distinction between his prioritarian conception of justice and the utilitarian one. We have mentioned prioritarianism in the past, and indeed, this post is a bit of a synthesis of that post with this other one. Prioritarianism is the notion that a just society always tries to improve the welfare of the worst off before anyone else. In other words, the welfare of the poorest is prioritised. In contrast, utilitarianism is about maximising total welfare, regardless of the distribution. These theories seem at odds (indeed, Rawls wrote about utilitarianism as though he were very much at odds with it). Yet, if we adopt a few Keynesian economic principles, I believe the gap can be closed and the two theories shown to lead to more or less synonymous societies, or at least significantly more similar societies than is presently thought.

The traditional prioritarian objection to utilitarianism comes in the form of this kind of thought experiment:

Society Poor Group Utility Rich Group Utility Total Utility
Society A 49 50 99
Society B 1 99 100

Prioritarianism tells us to choose the society that gives the most utility to the poor and consequently favours society A. Utilitarianism tells us to choose the society that maximises total utility and consequently favours society B. Prioritarians put this sort of case to utilitarians in an effort to morally disgust them with the consequences of their utility preference. In theory it is a compelling case, and it is the assumption we generally operate under in real, day to day politics–if we try to make the poor better off, we will make society as a whole poorer, if we try to make society as a whole richer, we will make the poor poorer. The left gets associated with helping the poor at the expense of the total, the right with helping the total at the expense of the worst off.

However, if it is impossible for a society with the kind of distribution suggested in society B to be more productive than a society with a significantly more wealthy underclass, the entire case can be thrown out. If we agree to be Keynesians, we can do just that, because Keynesians hold to a few principles that, once followed, completely change the nature of the debate.

Keynesians hold the following relevant positions:

  1. Demand is the engine of economic growth–the more people buy, the more producers are able to supply at profit, the more people they are able to hire and the higher wages they are able to pay those people, so the more those people can buy, and so on in a virtuous cycle. If, for example, people buy 1,000 more boxes than they did last year, the box-makers can manufacture an additional 1,000 boxes at a profit. To make those boxes, they may need to buy more box-making machines or hire more box-makers. Since more people are being employed, wages for new employees are pushed up. The box makers make more money, they employ more people, and their employees earn more. This makes those employees more likely to buy more the next year than they did the last year, helping other sectors of the economy to grow. When most of the economy is engaged in this kind of virtuous cycle, the result is economic growth.
  2. People with the lowest incomes spend or invest the largest percentages of their incomes. If you make $10,000 a year, you will very likely need to spend every penny of that income just to get by. If you make $1,000,000 a year, a large part of that income will go unspent. It might nonetheless get invested, but the investment could be foolish and, if the economy is not growing, the investment money will not be spent by whoever receives it. If you make boxes and you notice that people will only buy 2,000 of your boxes no matter how many boxes you make, it is foolish to hire more box makers to make more than 2,000 boxes no matter how much access to investment you have.

These two points are crucial because, when taken together, they yield a larger argument. If the driver of economic growth is demand and the people with the lowest incomes spend the largest percentages of their income, you get a situation in which the more money you give the worst off, the higher demand rises, the higher supply rises, the higher employment and wages rise, and the higher economic output in aggregate rises.

There is a limiting factor on this–you cannot give so much money to the worst off that the people at the high end whose income you are redistributing lose motivation to work to their potential in such a way that it countervails the improvement made by raising demand. However, Keynesians are not the only ones to recognise that–prioritarians do so as well, which is why they oppose scenarios that lead to more equality between rich and poor but lower welfare levels for both.

Nonetheless, the upshot is that, to a point, raising the welfare of the worst off also raises the welfare of the best off and the economy as a whole. These two cases have more real world applicability than the first two we looked at:

Society Poor Group Utility Rich Group Utility Total Utility
Society A 1 70 71
Society B 25 75 100

No matter which way you lean, prioritarian or utilitarian, you should prefer society B to society A. Only someone who opposed redistribution on a deontological level regardless of its outcome (libertarians like Robert Nozick are in that category) could prefer society A.

If we take the Keynesian principles to be true, it is reasonable to say that the utilitarian and prioritarian positions are, at least in terms of today’s policies, identical. If there should be some divergence between the two, it would more likely involve some small improvement to the welfare of the poor group at the expense of a very large fall in total utility, and given that the societies of today are far, far less equal than they were in the fifties and sixties, when rates of economic growth were much higher than they are today, such a divergence, while perhaps possible, is extremely unlikely to be a real-world policy problem. Rawlsians should, for all intents and purposes, agree with utilitarians, and vice versa.

The left, on economic policy, should consequently cease to surrender to the right on the issue of which side produces superior economic growth. The left need not concede inferior growth in the hopes of improving the lot of the worst off–Keynesianism shows that these goals are mutually achievable in tandem.  The left should attack the right not for producing a less compassionate society, but for producing a less productive one. The right is neither achieving high living standards for the poor nor is it achieving high growth rates with its austerity policies. Utilitarians and prioritarians should be working in concert to oppose the singularly destructive libertarian policies of the modern political right.