Note: this post is unlikely to be of interest if you haven’t done a basic undergraduate course in macroeconomics.

I use notation and terminology from Carlin and Soskice (2015).

What is the central bank (CB) trying to achieve? In discussing the CB’s goals, it’s important to distinguish rates of change in inflation from levels of inflation.

Costs of high rates of change in inflation

1

The CB wants to avoid runaway inflation or deflation. If inflation is high (or low) because the labour market (WS-PS model) is out of equilibrium, then inflation may increase (or decrease) without bound. The CB wants to set employment and output to the level consistent with a WS-PS equilibrium, where inflation will be constant.

The goal of constant inflation could in theory be achieved at any level of inflation.

2

There is another, conceptually distinct cost of volatile inflation. Volatile inflation interferes with the ability of prices to convey information. It masks relative price changes.

Levels of inflation, and their costs and benefits

1

There are costs to high absolute values of $\pi$:

• Increased menu costs
• High inflation incentivises making purchases quickly and holding no cash, while large deflation incentivises delaying purchases and holding cash.

2

There are also benefits to higher levels of inflation. Workers are particularly resistant to nominal wage cuts. So inflation oils the wheels of the labour market.

Which level?

As we said above, the bank’s primary concern is to avoid runaway inflation or deflation. But what level of inflation should the CB target? Inflation has costs and benefits. So it might not seem unreasonable to target $\pi=0$ or even $\pi<0$. But there is a good reason to aim for a positive level of inflation. Because of the zero lower bound on $i$, it’s more prudent to stay away from low or negative $\pi$. Suppose aggregate demand falls when $\pi = -x$. Then $r=i-\pi$ has a lower bound of $x$ and cannot be lowered enough to bring the WS-PS market into equilibrium. The result is a deflationary spiral.

This argument works for both positive $x$ and $x=0$.

Even if $i$ is not currently at the ZLB, there could be measurement error or forecasting failures, so that $i$ could unexpectedly hit the ZLB. The CB uses a target $\pi>0$ to stay safely away from the ZLB.

In fact, the target rate of $\pi^T=2\%$ is typically used. Why 2%? We have seen that the ZLB provides a good reason to avoid levels of inflation very close to zero. But why not target higher inflation? The qualitative considerations discussed above could go either way, and provide no particular justification for the specific choice of $\pi^T=2\%$. Choosing the optimal level of inflation is a very difficult empirical and moral question.

A typical loss function

The CB is conventionally taken to be minimising, at each time $t$:

This loss function makes no sense from the point of view of the considerations we discussed above.

First, the loss function tells us that the CB does not care about rates of change in inflation at all. It is perfectly myopic, and never looks beyond the current period. But runaway inflation and deflation are catastrophic, and avoiding them should arguably by the CB’s primary goal.

Second, when $y_t>y_e$, the loss function penalises higher output. But getting richer is usually taken to be a good thing.

I think there’s a confusion here between final and instrumental goals. Minimising $L$ makes no sense as a final goal. But in practise, $L$ is a good rule of thumb for avoiding runaway inflation or deflation. Penalising output above $y_e$ while ignoring future inflation may lead to policies which approximate the CB’s true final goals.

Carlin and Soskice write: “The policy maker is modelled as an inflation-targeting central bank not because this is necessarily the best policy-making arrangement, but because it most closely resembles hoe modern stabilisation policy is undertaken”. They also say: “Note that this loss function […] assumes a symmetrical attitude to positive and negative deviations […] from the equilibrium level of output. The most straightforward way of thinking about this is that the central bank understands the model and realises that inflation is only constant at $y_t=y_e$. If $y_t<y_e$ then this represents unnecessary unemployment that should be eliminated. If $y_t> y_e$, this is unsustainable and will require costly increases in unemployment to bring the associated inflation back down”.

Unfortunately, I think this confuses rather than clarifies matters. According to the WS-PS model, $y_t < y_e$ will lead to runaway deflation, and $y_t>y_e$ will lead to runaway inflation. In the same breath, the authors mix instrumental goals (“If $y_t > y_e$, this is unsustainable and will require costly increases in unemployment…”) and final goals (“If $y_t<y_e$ then this represents unnecessary unemployment”).

Instead, I think the (final) loss function of the CB should be something like:

$L = \sum_{t=0}^\infty \delta^t (\beta y_t - \gamma(\pi_t-\pi^T)^2 -\theta(\pi_t - \pi_{t-1})^2)$,

where $\delta$ is the discount factor, $\beta y_t$ represents the fact that more output is good, $\gamma(\pi_t-\pi^T)^2$ reflects the fact that inflation has costs and benefits, so we want to aim for an optimal rate $\pi^T$, and $\theta(\pi_t - \pi_{t-1})^2$ is present because volatile inflation is costly.

William MacAskill proposes a definition of effective altruism (EA). I think having a definition is useful. It could allow effective altruists (and their critics) to have better, clearer conversations, and to avoid misconceptions.

Contents

1. A definition
2. Common misconceptions
3. Why this definition

A definition

In MacAskill’s quote below, I have emphasised in bold some notable features of the definition.

As I and the Centre for Effective Altruism define it, effective altruism is the project of using evidence and reason to figure out how to benefit others as much as possible, and taking action on that basis.

On this definition, effective altruism is an intellectual and practical project rather than a normative claim, in the same way that science is an intellectual and practical project rather than a body of any particular normative and empirical claims. Its aims are welfarist, impartial, and maximising: effective altruists aim to maximise the wellbeing of all, where (on some interpretation) everyone counts for one, and no-one for more than one. But it is not a mere restatement of consequentialism: it does not claim that one is always obligated to maximise the good, impartially considered, with no room for one’s personal projects; and it does not claim that one is permitted to violate side-constraints for the greater good.

Effective altruism is an idea with a community built around it. That community champions certain values that aren’t part of the definition of effective altruism per se. These include serious commitment to benefiting others, with many members of the community pledging to donate at least 10% of their income to charity; scientific mindset, and willingness to change one’s mind in light of new evidence or argument; openness to many different cause-areas, such as extreme poverty, farm animal welfare, and risks of human extinction; integrity, with a strong commitment to honesty and transparency; and a collaborative spirit, with an unusual level of cooperation between people with different moral projects.

“Effective Altruism: Introduction”, Essays in Philosophy: Vol. 18: Iss. 1, Article 1, doi:10.7710/1526-0569.1580

In what follows, I quote or paraphrase extensively from a presentation given by William MacAskill at the Oxford workshop on the philosophical foundations of EA, 2017.

Common misconceptions

There are a number of common misconceptions about EA.

• Misconception #1: EA is just about poverty. This is misguided both in principle and in practice. In principle, EA is open to any cause. In practice, different EAs support different causes, including animal suffering reduction, existential risk mitigation, criminal justice reform, science and tech progress, and more.
• Misconception #2: EA is just utilitarianism or consequentialism. EA is a project, not a normative claim. Any normative claims would have to be about someone’s obligations to engage in that project. EA doesn’t require doing the most good possible with all your resources; EA doesn’t condone rights violations. Utilitarianism might entail effective altruism, but so do many other moral views
• Misconception #3: EA neglects systemic change. EA supports systemic change in principle and in practice.
  • The Open Philanthropy Project is funding projects in immigration reform, criminal justice reform, and macroeconomic policy.
  • One of GiveWell’s main goals from the beginning, perhaps its primary goal, has been to change the cultural norms within the non-profit sector, and the standards by which they are judged by donors.
  • Giving What We Can representatives have met with people in the UK government about options for improving aid effectiveness. One of its first and most popular content pages debunks myths people cite when opposing development aid. One of the first things MacAskill wrote when employed by Giving What We Can was on the appropriate use of discounts rates by governments delivering health services. Rachel Glennerster, a self-identified effective altruist, is currently the chief economist of DfID.
  • Some 80,000 Hours alumni are going into politics, think-tanks, setting up a labour mobility organisations or businesses that facilitate remittance flows to the developing world.
  • Several organisations focussed on existential risk (e.g. the Future of Humanity Institute, the Centre for the Study of Existential Risk and the Future of Life Institute) take a big interest in government policies, especially those around the regulation of new technologies, or institutions that can improve inter-state cooperation and prevent conflict.
  • Many effective altruists work on or donate to lobbying efforts to improve animal welfare regulation, for example with the Humane Society of the United States. Other activists are working for dramatic society-wide changes in how society views the moral importance of non-human animals.
• Misconception #4: EA is mainly about earning to give. According to 80,000 Hours, only ~15% of EAs should earn to give. At the most recent EA Global conference, only 10% of attendees were planning to earn to give long-term. (Rather than, for example, doing so temporarily as a means of building skills.)

Why this definition

MacAskill considers the following desiderata for a definition of EA:

1. Stated views on the definition by EA leaders
2. Faithfulness to the actual practice of those in the effective altruism community
3. Philosophical justification
4. Ecumenism with respect to different moral views
5. Practical value of public concept: how valuable it is to have the concept, so defined, discussed in the public sphere.

And he notes that different definitions proposed so far have varied insofar as they sometimes do, and sometimes do not:

1. Build in some theory of value
2. Include a prohibition against violating side-constraints
3. Include a sacrifice component
4. State the view as a normative claim

Within this framework, we may note that in MacAskill’s definition:

• EA is an intellectual and practical project, not a normative claim
  • According to a survey of EA leaders, a large majority believe the definition should not be a normative claim and should not include a sacrifice component.
  • The definition is compatible with practising EA being supererogatory, and with the view that there are no normative claims at all. (Both are common views among EAs).
  • Most EAs want to get on with the project of figuring out how to maximise welfare, rather than asking how much is required of one.
  • A project is more appealing as a public concept than a normative claim.
  • Any normative claim risks being inflexible. By analogy: it’s a good thing that science was not defined as some specific empirical claims believed by Galileo or Bacon.
• This project’s aims are welfarist, impartial, and maximising. (Some values should be immediately emphasised, but aren’t part of the definition, such as: cause-neutrality, epistemic humility, good conduct (including respect for rights and co-operation), moral commitment, excitement.)
  • To be philosophically well-supported, it can’t just be ‘doing good’, given whatever conception of the good. What about Neonazis?
  • A majority of EA leaders surveyed believe the definition should include welfarism and the equal consideration of interests.
  • Compatibility with current practice:
    • All current projects within the effective altruism community are focused on promoting welfare.
    • Most members of the community state that they identify as, or are sympathetic to, utilitarianism.
  • Ecumenism: Promoting welfare (within constraints) is at least permissible on almost all moral views (given the way the world is) and is very important on many moral views.
  • This definition avoids EA losing all of its value by becoming so diluted as to be meaningless, or falling into relativism.
• A prohibition against violating side-constraints is not included in the definition
  • EA leaders in the survey were evenly split on whether the definition should include respect for common-sense ethical prohibitions.
  • Science is the use of evidence and reason to discover truths. It would seem strange to include a “without killing anyone” clause, even though it’s true.
  • Defining EA as a project, not a normative claim, escapes ‘the end justifies the means’ worries.

This diagram illustrates some popular theories of normative ethics, with a particular focus on consequentialist theories and their internal structure.

Theories of normative ethics, and the structure of consequentialist theories. Here’s the same diagram as a .png and an .xml.

Contents

1. What is consequentialism?
   1. Axiology
   2. Evaluands
   3. Decision rule
   4. What is utilitarianism?
2. Comparing consequentialist and non-consequentialist theories
   1. Older theories
   2. Theory C applied to acts vs the spirit of consequentialism
   3. Why Act-C has received so much attention
   4. Why it matters
      1. Demandingness
      2. Self-defeat, decision-making and motivation

What is consequentialism?

The term “consequentialism” has been used in many different senses. Of course, what matters are not the words, but to clearly distinguish different distinctions. What’s important about the diagram above is how it carves up the space of possible theories, not what the theories are called. Let me just clarify how I use the terms.

SEP tells us that consequentialism is the view that moral rightness depends only on consequences. I’ll take a slightly broader definition and say that consequentialism is the view that moral properties depend only on consequences.

John Broome (1991, Chapter 1) calls this the distinction between teleological and non-teleological theories.¹

Broome proposes the following case to summarise the crux of the disagreement between consequentialism and non-consequentialism:

[Suppose that] by breaking a promise now I can bring it about that I shall, in the future, keep five promises that otherwise I would have broken. Suppose, say, that if I break a promise now, the experience of guilt at my present tender age will stiffen my resolve in future life.

In this case, any theory that says I ought to keep my current promise would have to be non-consequentialist.

Any consequentialist theory combines a cardinal axiology and a decision rule that depends only on this axiology in order to compare evaluands.

The issue of agent-neutrality vs agent-relativity is completely separate from that of consequentialism. There can be agent-relative consequentialist theories, and vice-versa. Agent-relative consequentialist theories will simply specify an axiology (and optionally also a decision rule and evaluands) for each agent. The Cambridge Dictionary of Philosophy says:

A few versions of consequentialism are agent- relative: that is, they give each agent different aims, so that different agents’ aims may conflict. For instance, egoistic consequentialism holds that the moral rightness of an act for an agent depends solely on the goodness of its consequences for him or her. However, the vast majority of consequentialist theories have been agent-neutral (and consequentialism is often defined in a more restrictive way so that agentrelative versions do not count as consequentialist). A doctrine is agent-neutral when it gives to each agent the same ultimate aims, so that different agents’ aims cannot conflict.

Axiology

An axiology is a ranking of states of affairs in terms of better and worse overall. A cardinal axiology assigns numerical values to states of affairs. The axiology used by a consequentialist theory must be cardinal in order to be able to apply expected utility theory when there is uncertainty.

An axiology is welfarist if it’s about what makes the life of persons (moral patients) go best. Non-welfarist axiologies might care about other features of states of affairs, like complexity or beauty in the universe, independently of what is good for any person. “Go best” is here intended to encompass a wide range of theories of well-being. Three common theories of well-being are the hedonistic, desire fulfilment, and objective list theories discussed by Parfit (1984, Appendix i).

In a universe with more than one person, a welfarist also has to give an account of how to aggregate welfare across persons. This is population ethics. Again there are many different views of population ethics, I depict only three in the diagram. Totalism is the view that the value of a state of affairs is equal to the sum (as opposed to, say, the average) of the welfare of all persons.

Evaluands

An evaluand is anything that could make states of affairs better or worse. Evaluands could include acts, desires, dispositions, beliefs, emotions, the colour of our eyes, the climate, etc.

The most widely discussed evaluands are acts. For instance, act-consequentialism is consequentialism applied only to acts.

In almost all cases, an evaluand combined with an axiology in the following direct way. Within a set of mutually exclusive evaluands, each evaluand is given the cardinal value of the state of the world that would result if the evaluand were to obtain.

In theory it’s also possible to assign a value to an evaluand indirectly. I only discuss this possibility because it has been the source of confusion. The name “rule consequentialism” has been applied to both a direct and an indirect theory. Direct rule-consequentialism is consequentialism applied only to rules, and has the same structure as act-consequentialism. Indirect rule-consequentilism assings values to acts according to the goodness of the state of affairs in which the rule obtains. For both theories, a bit of additional precisification is needed to explain what it means for a rule to “obtain”. Does it mean that the rule is widely or universally followed? That people intend to follow it?

The result of combining an axiology with a set of evaluands is an assignment of values to evaluands, which is what the blue box depicts.

Decision rule

A decision rule, for our purposes, is a procedure that classifies evaluands into right, wrong, or neither. The decision rule is what gives rise to a theory’s normative pronouncements: its “ought” and “ought not”-statements (much more on this below). A maximising decision rule says that the object which makes states of affairs best (according to some axiology) is right, and all others are wrong. An example of a non-maximising decision rule is satisficing: everything that makes states of affairs better than some threshold is right (or at least not wrong).

Combining consequentialism with a maximising decision rule gives theory C². theory C roughly says: “There is one ultimate moral aim: that outcomes be as good as possible” (Parfit p.24). More precisely, for any evaluand X, it says: “The right X is the X such that if it were to obtain, outcomes would be as good as possible. All others are wrong”.

What is utilitarianism?

Utilitarians claim that each of us has one ultimate moral aim: to maximise everybody’s happiness. There are many ways to precisify this slogan, and hence many flavours of utilitarianism. The simplest one is hedonistic total utilitarianism. Hedonistic total utilitarianism is theory C combined with a hedonistic, totalist axiology. Hedonistic total act-utilitarianism is hedonistic total utilitarianism applied only to acts.

Comparing consequentialist and non-consequentialist theories

Older theories

Older theories of ethics, like, say, the ten commandments or Kantianism, were built entirely around a list of prohibitions. They are essentially just a decision rule, and they only apply to acts. These decision rules pronounce some acts right (and mandatory), some wrong (and forbidden), and make no normative statements about the majority of acts, calling them neither right nor wrong, and permissible. They do not involve an axiology.

This is not to say that these decision rules are chosen by mere intuition (what Will MacAskill would call “no-theory deontology”). Philosophers (famously, Kant) have developed intricate justifications for their decision rules. But these justifications do not involve axiologies, or degrees of goodness which are then compressed down by a decision rule.

The structure of older theories

Theory C applied to acts vs the spirit of consequentialism

I must here make a point that may appear somewhat technical and pedantic. But it actually has some importance (especially if you’re interested in understanding how academic philosophers talk about consequentialism).

Let’s consider the intersection of theory C and act-consequentialism, or, equivalently, theory C applied only to acts. That is, let us consider a consequentialism that is maximising and applied only to acts. Call this theory Act-C. Act-C claims only that the unique right act is the act which would make outcomes as good as possible. It picks out just one mandatory act and makes all other acts impermissible.

The technical point is: Act-C has the same formal shape as these older theories. Of course, what is really of interest to consequentialists is something much richer than Act-C. It is richer in two ways. First, consequentialists care about all evaluands, not just acts; they see no reason to focus the particular subset Act-C of C. Second, what animates them is not even really C itself, but rather the assignment of cardinal values to evaluands (blue box), which, when combined with maximisation, produces theory C as its output.

On the first point: consequentialists have no particular hang-up about acts. They endorse the evaluation of all evaluands according to their consequences, and use whatever evaluand is appropriate.

On the second point: the motivating idea of consequentialism is not to pick out one act as the right one. It’s to assign cardinal values to acts (and to motives, dispositions, or anything else you might be able to affect) and to say: “that’s how good it is!”. That is what we find in the blue box. The move from the blue box to the red box is an act of lossy compression, throwing out almost all the information and retaining only a ternary³ classification⁴. That is why I call the red box only the “normative output” of consequentialism. It’s what a consequentialist will say if forced to make “right/wrong”-statements.

In sum, Act-C is a doubly watered down of the real idea behind consequentialism.

Why Act-C has received so much attention

What I’ve said is very obvious. Discussing the definition of Act-C as I did may seem rather like philosophic pedantry. I share that sentiment.

Yet Act-C has received most of the philosophical attention devoted to consequentialist theories.

The reason for this strange practice has to do with the order in which ethics has progressed. When consequentialist theories were first developed, they were discussed in terms of how they disagreed with the older theories. This affected the discussion in two ways. First, consequentialist theories were shoehorned into the ternary mould of the older theories, this de-emphasised their distinctive structure. Second, they were applied only to acts, like the older theories.

Why it matters

I haven’t delved into this pedantic distinction just because I’m interested in history of philosophy for its own sake. I think it can actually teach us something. Two common objections to consequentialism are (i) that it’s too demanding and (ii) that it’s self-defeating in a damaging way. The demandingness objection is narrowly targeted at theory C rather than at the spirit of consequentialism, so it is revealed to misconstrue that spirit. The self-defeat objection is aimed even more narrowly at those who (naively) would apply C only to acts rather than to everything. Hence both objections lose much of their force.

In a sense, the order in which ethics has developed has given an unfair incumbency advantage to the older theories. Those theories shaped the terms of the debate, allowing attention to be focused on strange, shoehorned versions of consequentialism, rather than letting consequentialism shine in its natural form.

Demandingness

Theory C is sometimes said to be too demanding, constantly requiring us to do the very best thing, lest we be hit with the moral opprobrium of the theory. To indulge in caricature: deontologists think of morality as a matter of whether or not the heavens will part and god will thunder down at you: “WRONG!”. And it does seem a bit excessive to be thundered down at every time you don’t do literally the most altruistic thing possible.

But if we look at the blue box, we can see that this is not what consequentialists have in mind. It’s more like: if you donate $3000 to the Against Malaria Foundation, the heavens will part and god will say: “30 quality-adjusted life-years added in expectation”; if you donate $6000, the heavens will part and god will say: “60 quality-adjusted life-years added in expectation”, and so on.

Consequentialism needs to be thought of more like a general injunction to maximise good consequences, rather than a god who rains lightning on you if you don’t attain the exact global maximum.⁵

Some might find even that too demanding⁶. But at least the basic form of the demandingness objection is deflected.

Self-defeat, decision-making and motivation

Consequentialism is often said to be self-defeating in some damaging way. For example: making decisions by means of consequentialist calculation might lead to a sort of “alienation” between one’s affections and one’s deliberative self – one that in turn leads to a sense of loneliness and emptiness, and is destructive to valuable relationships. Hence even a consequentialist should not, by his own lights, desire that people make decisions by explicit appeal to consequentialist reasoning. Hence Bernard Williams writes “Utilitarianism’s fate is to usher itself from the scene” (‘A critique of utilitarianism’, p.134)⁷.

In part I of Reasons and Persons, Parfit painstakingly shows the mistakes in these objections. But the solution to the purported puzzle would have been more obvious, I claim, if the focus had been from the start on theory C rather than only on Act-C. Act-C may be viewed as a historical accident which led us into thickets of confusion. Theory C (Ord’s ‘global’ consequentialism⁸) is simpler and more general. It just says: “The right explicit moral reasoning is that which makes things best”, “the right motive is that which makes things best”, “the right act is that which makes things best”, and so on.

These statements do not contradict each other. Hence there is nothing self-defeating about C when applied to decision-making and motivation. There is no logical contradiction. It is somewhat counter-intuitive that the act recommended by C may fail to coincide with the act that would be chosen given the decision procedure or character trait recommended by the same theory. But it actually fits perfectly with our picture of human psychology.

Theory C takes no view on the question of whether homo sapiens are best thought of as “choosing” acts, policies, entire sets of motives, or something else. It’s a topic for decision theory and psychology. It may have great practical importance, but in the realm of evaluating C, it is not relevant.

In this context, the self-defeat objection could be rephrased as: “Humans shouldn’t be thought of as really choosing acts. Rather, the proper evaluand of human moral theorising is motive or character.” The consequentialist may well agree. She might reply: “this claim seems to have some truth to it, but is certainly not an objection to C. It’s a claim about which parts of C are most useful for humans.”