The Problem of Evil and its Coasian Solution
A dialogue on the economic theory of theodicy
The following is a Platonic dialogue I wrote for a Philosophy of Religion course in college circa 2014. The piece pokes fun at rational choice theory and economic imperialism (i.e. applying economics in non-econ fields such as religion). It received an A- so YMMV.
The year is 2035. Breakthroughs in genomics, artificial intelligence and synthetic biology have led to a scientific renaissance — a second enlightenment — as the brains of the great intellectual and academic figures of the past (at least those with surviving DNA fragments) are regrown and reprogrammed with the contents of their original corpus mentally intact.
Meanwhile, at the massively online University of Chicago, a controversy is brewing. The brain of the late, great economist George Stigler has been made a Professor Emeritus at, of all things, the Divinity School. His appointment causes especial uproar among a coalition led by the brain of the late biologist Stephen Jay Gould, under the slogan that economic science and religion belong to “non-overlapping magisteria.”
Fresh from the hereafter, Stigler’s first post-posthumous seminar bears the title “The Problem of Evil and its Coasian Solution,” which, according to Stigler, will launch a field of research known as “Theology and Economics.” Unbeknownst to Stigler, Gould is present in the audience taking notes, ready to pounce when the lecture concludes.
STIGLER: In summary, heretofore theologians have developed incomplete theodicies due to their failure to grasp the Coase Theorem. The evil god allows, as a type of harm, is always and everywhere reciprocal. We should not waste our time moralizing about victims and perpetrators of evil — the best we can do is seek the least costly way of reducing said evil: that mutually beneficial outcome which leads to minimized social cost. This means the existence of evil is not only consistent with a benevolent and all powerful God, but further demonstrates his providence through Coasian means. Any questions?
GOULD: Yes. I have several questions to pose to you. You seem to be saying that evil does not exist, that it is only apparent. This is a most absurd and reactionary view, it seems to me, given mass technological unemployment and the enduring plight of the Global South.
STIGLER: Ah, Professor Gould! So glad to see your mind was salvaged. You went much too early. But yes: to say that “evil is only apparent,” as Hume pointed out, is indeed contrary to human experience. That is not my view. My view is simply that in some sense there is an optimal amount of evil in the world which, like pollution, is unlikely to be zero. If there is an excess of evil in the world it is due to an incompleteness of property rights. The crux, then, is not evil per se, but the quantity thereof.
GOULD: So you’re saying the ten billion humans living in subsistence is optimal? Do you not err in much the same was as the naïve adaptationist who treats natural selection as ruthlessly molding an organism for optimal fitness? “Our world is not an optimal place, fine tuned by omnipotent forces of [economic] selection … History matters.” The evolution of societies, just like organisms, often “reflects inherited patterns more than current environmental demands.”
STIGLER: That’s right. But it is precisely this ubiquitous influence of history and transaction cost (stretching back to the Garden of Eden) that forces us to live in a “second best world” — that is, one separated from God. Every durable evil is efficient for the context or else it would not persist over time. Otherwise, the rational agents involved would have practiced their God given free will (i.e. negotiated) and improved their situation through a Coasian bargain. It is nonsensical to declare, in the abstract, that a state of affairs is evil. It must be put in context; measured against the opportunity cost of the alternative state of affairs. In other words, evil compared to what? My position is similar to the “greater good” theodicy developed by Richard Swinburne many decades ago. In a finite world, God allows for the best of possible logical worlds. That implies efficiency in the Pareto sense, constrained, as it may logically be, by path dependency. I am therefore with Hume, too, in rejecting the view that God will rectify evil in the future. If an evil can be efficiently rectified it would already have been — there are, after all, no $100 bills lying around on the sidewalk.
GOULD: Ah, the economist’s version of the “myth of natural harmony—all is for the best in the best of all possible worlds”. Is that not the foolish vision of Dr. Pangloss, so vividly satirized by Voltaire in Candide — the world is not necessarily good, but it is “the best we could possibly have.” The quasi-optimum you describe is at best merely local, not global. The world is too random and complex for your stylized analysis. Do you defend the evil of African American slavery on the basis that it persisted for many years? Mere efficiency could not be less relevant to the problem of evil. The concept is an amoral technocratic farce; pure ideology.
STIGLER: On the contrary, Stephen. Violations of the Pareto principle create outcomes in which one person is made worse off without anyone receiving any benefit. To quote the philosopher Joseph Heath, “one way of formulating the Pareto principle would therefore be to say that it recommends the elimination of gratuitous suffering,” the very sort of suffering the problem of evil seems to concern. Efficiency, or the seeming lack thereof, is thus the issue at the heart of any theodicy. The end of American slavery did not come without costs. The Britons, for example, got rid of slavery without having a destructive civil war by buying their freedom. In economics, we call that approach compensating variation.
GOULD: That’s all fine and good, but this focus on efficiency completely ignores the issue of massive class inequality around the globe. Forget simply about class — God fails so much as to provide equality of opportunity — and for whole nations! Your vision of God strikes me as brutally and implausibly meritocratic. Perhaps even racist.
STIGLER: Hold on now. I’m with Swinburne again on this, in that we both recognize that such disparities are not evil per se. To quote the man himself, “[I]f [God] gives to some ten good things, and to others twenty good things, no one is wronged; nor has he failed to be perfectly good. He has been generous, and, more so, he has made it possible for us to be generous.” Swinburne may not have realized it, but that is pure Pareto principle. And, if I may proffer another Coasian formalism, the notion that poverty creates the conditions for compassion strikes me as eminently describable in terms of a positive externality.
GOULD: Some show of compassion. Do you follow the Irenaean line that suffering — even if not strictly gratuitous in your view — exists to aide in spiritual development?
STIGLER: More or less. I prefer to cite the models by my colleague, the brain of Gary Becker. Indeed, he has a forthcoming paper in the Journal of Theology and Economics titled “Spiritual Capital: A Theoretical and Empirical Analysis.” Preliminary results indicate spiritual capital formation adds two percent annually to the growth of gross domestic spirit.
GOULD: And what spiritual development comes out of the ichneumon parasites; that genus of wasp which plants its eggs in a caterpillar’s body, but not before permanently paralyzing the host so that it can live to be devoured alive, bit by bit, when the eggs hatch? Is the total, senseless deprivation of the animal kingdom not the death knell of your economic theology?
STIGLER: I think not. Perhaps if my theology gave moral status to a caterpillar, but I have my doubts that something so small should feel much pain at all. More to the point, suffering demands a marginal analysis. How is the life of a caterpillar likely to resolve if it manages to avoid contact with an ichneumon? Death by fire ants, bird beak, or being baked in the sun? Everything biological ages and decays; and, until recently, death was a human inevitability. Parasites exist in humans too, and have evolved symbiotically to help regulate our immune systems. The providence of God is evident in the balance of the marginal costs of the earth’s carnivora against the marginal benefits of a stable but dynamic ecology; our natural resource endowment on which we built human civilization. As they say here in Chicago, there are two kinds of theologian: those who understand price theory… and everyone else.
GOULD: And of other natural evils, like earthquakes or tsunamis?
STIGLER: God is the kind of parent that lets his children learn from their mistakes. In other words, God recognizes that intervention in these areas tends to create moral hazard, so God in his infinite wisdom gave man skin in the game. The Coasian corrective to your specific examples is to ensure people who live on fault lines or near the coast pay a premium on their insurance policy to internalize the cost of their risky choices.
GOULD: Disgusting — you are simply substituting one evil for another: insurance. Perhaps God’s laissez faire attitude to suffering is due to the fact that he’s been swindled by a ‘free market’ hack.
STIGLER: You’ve reminded me of a remark I made in my Nobel Prize banquet: A Swedish physicist cannot discuss his work with fifty people unless he goes abroad, while a Swedish economic theologian can get opinions in his native language from thousands upon thousands of his fellow citizens. It seems we will have to leave matters at that. I am giving a lecture at my Prayer Tank on finite horizon models of Christian eschatology that I’m quite late for.