My friend Alan Nelson recently posted a link on facebook to the following article: http://www.nytimes.com/2014/03/23/business/economic-view-when-the-scientist-is-also-a-philosopher.html with an appropriately snarky note that the author, N. Gregory Mankiw (the Chair of the econ department at Harvard, natch), seemed to be arguing that the only changes to the status quo permissible are those that are verifiably Perato efficient improvements. An obvious corollary is that, since every reasonably substantive and complex policy change will have winners and losers, we should never change policies at all.
The author is right about one thing: economics, no matter how much some practitioners might like to pretend otherwise, is wrapped up in philosophical assumptions. These are too often held implicitly, and too rarely made explicit. (One of my favorite books is Varoufakis' "Foundations of Economics: A Beginner's Companion" http://yanisvaroufakis.eu/books/foundations-of-economics-a-beginners-companion/ simply because it does, I think, a really nice job trying to make explicit some of those usually implicit assumptions.)
But Mankiw's suggestion, that "economists should be sure to apply the principle 'first, do no harm'," is deeply problematic, and obviously wrong-headed. It treats current policy as if it were handed down from on-high, or, worse, as if it were the result of fair bargaining on the part of those people now engaging with it.
(Is it merely a coincidence that he is arguing for a "do no harm" approach at a time when organized labor has been effectively destroyed, the tax system made effectively regressive, the minimum wage eroded by inflation, and regulations on industry etc so severely weakened? Because of course, a "do no harm" approach adopted at an earlier period would have resulted in a very different economic world, wouldn't it? You can't avoid picking winners and losers. But notice the winners Mankiw implicitly picks!)
To take an example from his article, health care insurance reform, most of the people suffering under the previous "system" (really a hodge-podge of partially overlapping non-systematic bits) of funding health care in the U.S. had no say in its creation, and many of those who were "losers" in the previous system suffered very badly under the policies that had grown up around healthcare delivery and payment in the U.S. It is fairly obvious that there was no way to get from the system we had to a system in which the current losers weren't suffering as badly without "harming" someone. But the argument that we ought therefore have done nothing, that tens of thousands of unnecessary deaths per year was simply unavoidable, because to change the "system" would involve, by necessity, making some people worse off, is surely not the right answer to reach in this case. But I can see no way to read Mankiw's article except as recommending precisely that.
Whether one thinks that the ACA was, all things considered, a good response to the real problems with the old "system" notwithstanding, any change that addressed the substantial problems that existed before would create winners and losers. A policy that demands that all changes produce only winners works only to entrench the current winners, and dooms the current losers. When the losers are suffering in ways that are morally unacceptable, such a policy cannot be right one.
The "philosophy" (and politics) that get imported into economic theory need not be limited to naive utilitarianism, nor is it. We need to admit that certain "economic" questions require us to not only make guesses about possible economic outcomes (narrowly construed) but about other important values as well. One such value, that I at least hold dear, is that an honest day's work should earn an honest wage, which I, at least, interpret to be one that respects basic human dignity. Another reflection of these values is that a "system" in which many people in one of the richest countries in the world die every year because they lack access to reasonably affordable healthcare is morally repugnant. And neither a naive utilitarian approach, nor especially a pathetic half-assed defense of the status quo, captures the importance of these values worth a damn.
If this is the best economics professors at Harvard can do to integrate important values into economics, something has gone terribly wrong.
(Edited to remove some able-ist language! Thanks to John P for calling me on it.)