Hausman and McPherson discuss Larry Summers's memorandum - Essay Example

of Learning: Hausman and McPherson Discuss Larry Summerss Memorandum The Summers Memo was a memorandum on trade liberalization written in 1991 by Lant Pritchett and signed by the then World Bank Chief Economist Lawrence Summers. The memo included an “aside” that proposed dumping toxic waste in less developed countries (LDCs) for perceived economic gains. Essentially, the memo discussed the idea that the free trade strategies that, at the time, were belligerently sought after and adopted by the World Bank were likely to elicit a negative effect on the environment of most of the third world countries they were being prescribed to (Group).

Even though Summers and Pritchett argued the “aside” on the memo as a sarcastic inference, the “aside” generated worldwide uproar and criticisms. In the book Philosophy of Economics, Hausman and McPherson debate the Summers Memo, lamenting the idea that health-impairing pollution could not be promoted or shifted to LDCs. This paper discusses one of Hausman and McPherson objections to summers arguments.In the essay ‘The Philosophical Foundations of Mainstream Normative Economics’, Hausman and McPherson suggest that the three paragraphs in Summers memo presented a scientific argument while the last paragraph highlighted moral objections.

However, according to Hausman and McPherson, the entire “aside” was essentially a moral argument, which is significant to the relationship between market evaluation and welfare. By isolating welfare and preference satisfaction, and then leaning on the relationship positive economics establishes between preferences and market prices. Consequently, the Summers memo established a link between premises regarding costs and demands and conclusions regarding the specific outcomes that augment welfare (Hausman and McPherson 233).

According to Hausman and McPherson the uproar instigated by the Memo signified objection to its conclusions. On page 232, they outline five objections discussing why the World Bank should not encourage the migration of pollution to LDCs. The first objection states that encouraging ‘dirty’ industries to shift to LDCs might cause more total pollution. Specifically, compared to LDCs, industrialized countries have better incentives, superior administrative ability, and extensive resources to implement pollution regulations.

The second objection is that even though individuals in the industrialized economies and LDCs would agree to the migration of pollution to the third world in exchange for suitable compensation, the exchange may be discriminating. Notably, in such an exchange, the First World countries are taking advantage of the poverty of LDCs which, in most cases they are guilty of causing. Subsequently, it may not be correct to better the lives of people since it involves injustice. Justice is also essential (Hausman and McPherson 233).

The third objection is that Summers’ assessment compares a single alternative to the status quo (that is migrating pollution to the third world). However, there are numerous alternative policies that would work better to achieve the main objective. Summers’ Memo is only contingent on the vast income inequalities among rich and poor countries. The fourth objection is that satisfying preferences does not necessarily guarantee enhanced welfare, since; individuals may desire things that are harmful for them.

The last objection questions the morality of the Summers Memo; particularly whether economic costs and benefits represent what is morally appropriate, or, whether rational and knowledgeable individuals can assent to the projected market evaluations of the impacts of pollution (Hausman and McPherson 234).Indeed, upon retrospection, the objections outlined by Hausman and McPherson appropriately counters Summers’s arguments. However, objection five stands out as a significant and valid argument.

This is because, from the start, the Hausman and McPherson essay sought to address the Memo as an issue of morality. Therefore, by questioning the morality of Summers premises, and further investigating the notion of human rationality, Hausman and McPherson adequately address the controversy inherent in the exchange between LDCs and developed countries. This last objection brings to the fore the value of human life, to discredit the theory of welfare that is favored by normative economists such as Larry Summers (Hausman and McPherson, Economic Analysis, Moral Philosophy and Public Policy).

Overall, the essay provides a lucid and effective way to address the concerns elicited by the Summers Memo. Particularly, by segmenting their ideas into key sections, Hausman and McPherson were able to establish a solid background, identify arguments or premises for debate and also provide valid theoretical counter arguments. In essence, Hausman and McPherson offer a sufficient critique to the Larry Summers memo, which cannot be put in any other form.Works CitedGroup, The Whirled Bank. Our Words: The Lawrence Summers Memo. 2001. 04 March 2013 .

Hausman, Daniel M. and Michael S. McPherson. Economic Analysis, Moral Philosophy and Public Policy. New York: Cambridge University Press, 2006.Hausman, Daniel M. and Michael S. McPherson. "The Philosophical Foundations of Mainstream Normative Economics." Hausman, Daniel M. . The Philosophy of Economics: An Anthology, Third Edition. New York, NY: Cambridge University Press, 2008. 226-250.