Symposium on Noneconomic Objectives in the History of Economic Thought: introduction

American Journal of Economics and Sociology, The, Oct, 2004 by Bruce Elmslie

The papers in this symposium were first presented in a session titled "Noneconomic Objectives in the History of Economic Thought," organized for the History of Economics Society at the Allied Social Science Association Meetings in January 2002. The purpose of the session was to explore the historical foundations of the concept of noneconomic objectives, which, along with the theory of distortions, provides the foundation for the neoclassical method of policy analysis. These theories are normally associated with Jagdish Bhagwati and Harry Johnson and the neoclassical school of economic thought. But is the explicit notion of noneconomic objectives new? And will a historical perspective shed new light on the strengths and weaknesses of the concept? These are the questions explored in the following papers.

Each of the papers in this symposium point out the fact that the concept of a noneconomic objective is not always clearly defined. What distinguishes a noneconomic objective from an economic one, and what value judgments are implied by the use of these terms? In brief, a competitive nondistorted economy will generate a result that maximizes the consumption stream. A noneconomic objective is an objective of the government that puts a constraint on the results of the competitive outcome. For example, the competitive outcome does not consider the importance of national defense to a nation. This must be determined by some other method. The theory of noneconomic objectives posits that an objective of a minimum level of national defense can be achieved by various policy options, and that these options can be ranked in terms of their deviation from the consumption stream generated by the competitive economy.

One question that is asked in the papers by Elmslie and Persky has to do with the appropriate time period under discussion. An objective that is noneconomic in the short run may become economic in the long run. One can argue that, while national defense expenditures and consumption are tradeoffs in the short run, in the long run national defense is essential for the maximization of a consumption stream. While the papers by Elmslie and Maneschi accept this and related criticisms, they take the standard concept of a noneconomic objective as a useful point of departure for policy analysis. The paper by Persky takes a more critical perspective and seeks to develop an alternative conception of economic versus noneconomic based on the centrality of the objective to economic theory.

One point of interest that can be gleaned from this symposium is that a new area of research may be on the horizon. In a dynamic framework the growth rate is an endogenous variable that can exceed the optimal level. A noneconomic objective could be considered to be analogous to a rate of growth that either exceeds or falls short of the optimal level. Similarly, income inequality is a variable in the argument of the determinant of the rate of growth. There conceivably is an optimal level of income equality that maximizes the growth rate of the consumption stream. Thus, even income inequality may be ready to rejoin the world of economic objectives as traditionally defined. A potentially useful area of research will be to determine how the concept of noneconomic versus economic objectives extends to a dynamic framework. This can be the subject of a future symposium.

BRUCE ELMSLIE, The author is at the University of New Hampshire, Department of Economics, Durham, NH 03824.