We consider situations of multiple referendum: finitely many yes-or-no issues have to be socially assessed from a set of approval ballots, where voters approve as many issues as they want. Each approval ballot is extended to a complete preorder over the set of outcomes by means of a preference extension. We characterize, under a mild richness condition, the largest domain of top-consistent and separable preference extensions for which issue-wise majority voting is Pareto efficient, i.e., always yields out a (...) class='Hi'>Pareto-optimal outcome. Top-consistency means that voters’ ballots are their unique most preferred outcome. It appears that the size of this domain becomes negligible relative to the size of the full domain as the number of issues increases. (shrink)

Florida International University, USA edwardj{at}fiu.edu ' + u + '@ ' + d + ' '/ /- -> Several authors have analyzed the optimal k -majority rule based on a variety of criteria. Buchanan and Tullock argued that, in constitutional settings, the criterion should be that all changes meet the Pareto criterion; otherwise the status quo should be preferred. They then asserted that unanimity rule would be the preferred voting rule in this setting. In parliamentary settings, they claimed that (...) a near majority rule would be preferred because it minimizes the sum of decision costs and external costs. This article investigates both claims in an N -voter, two-alternative setting. We show the conditions under which unanimity rule is less likely to select BT preferred alternatives than other k -majority rules and prove that the difference in performance can be negligible when N is large and certain weak conditions are met. Furthermore, if we define external costs as the expected number of losers from a BT-inferior vote, then external costs become negligible for a range of supermajority rules. This implies that unanimity rule and a range of supermajority rules should be equally preferred when decision costs are added. Finally, we show that the external cost function can actually increase for certain populations. Many of the broader conclusions should also hold for multiple alternatives. Key Words: constitutional design • Pareto criterion • external costs • social contract. (shrink)

In economic analysis, it is usually assumed that each individuals well-being (mental welfare) depends on her or his own resources (material welfare). A typology is provided of the ways in which one persons well-being may depend on the material resources of other persons. When such dependencies are taken into account, standard Paretian analysis of welfare needs to be modified. Pareto efficiency on the level of material resources need not coincide with Pareto efficiency on the level of (...) well-being. A change in economic conditions that is Pareto efficient in the standard sense, i.e., with respect to material resources, may nevertheless sacrifice one persons well-being to that of another. It is shown that under plausible assumptions, Pareto efficiency on the level of well-being may require the reduction of inequality on the level of material resources. (shrink)

Suppose a driverless car encounters a scenario where harm to at least one person is unavoidable and a choice about how to distribute harms between different persons is required. How should the driverless car be programmed to behave in this situation? I call this the moral design problem. Santoni de Sio defends a legal-philosophical approach to this problem, which aims to bring us to a consensus on the moral design problem despite our disagreements about which moral principles provide the correct (...) account of justified harm. He then articulates an answer to the moral design problem based on the legal doctrine of necessity. In this paper, I argue that Santoni de Sio’s answer to the moral design problem does not achieve the aim of the legal-philosophical approach. This is because his answer relies on moral principles which, at least, utilitarians have reason to reject. I then articulate an alternative reading of the doctrine of necessity, and construct a partial answer to the moral design problem based on this. I argue that utilitarians, contractualists and deontologists can agree on this partial answer, even if they disagree about which moral principles offer the correct account of justified harm. (shrink)

We show that if identical members first decide on the sharing technology (stage I) taking into account their subsequent effort supply (stage II) decisions, the resulting contractarian sharing technology (constitution) channels individual self-seeking towards team (Pareto) optimum. Voting with one's feet and open entry can ensure symmetry and majoritarian decision making in the real world teams. The model helps explain the differential performance of the Israeli Kibbutz and the Russian Kolkhoz.

We first show that the Generalized Sharing mechanism which is exhaustive, allows a team of identical members voluntarily supplying the observable effort to attain Pareto efficient production under increasing returns provided team size is allowed to vary. We then show that where true effort is imperfectly observable (moral hazard) Pareto efficient production under nonconstant returns to scale is still attainable by varying team size.

The paper argues that the notion of Pareto efficiency builds on two normative assumptions: the more general consequentialist norm of any efficiency criterion, and the strong no-harm principle of the prohibition of any redistribution during the economic process that hurts at least one person. These normative concerns lead to a constrained and static notion of efficiency in mainstream economics, ignoring dynamic efficiency gains from more equal allocations of resources. The paper argues that a weak no-harm (...) principle instead provides an endogenous efficiency criterion, which shifts attention away from equilibrium analysis in hypothetically perfect markets towards an evolutionary analysis of efficiency in real-world, non-equilibrium markets. Moreover, such an evolutionary notion of efficiency would be less normative than the Paretian concept. (shrink)

This paper discusses justice-constrained libertarian claims that were proposed as a way to circumvent the impossibility of the Paretian liberal. Since most of the results are negative in character, we suggest an alternative route: A requirement on the structure of individual orderings should be combined with the idea that under particular circumstances individual decisiveness should be controlled by higher-order principles.

Moriarty argues that the Market Failures Approach to business ethics is inapplicable to “real world” problems, because it treats “market failure” as a failure to achieve Pareto efficiency. Depending upon how it is applied, Pareto efficiency is either trivially easy to satisfy or else so demanding that no real-world market could ever satisfy it. In this Commentary, I argue that Moriarty overstates these difficulties. The regulatory structure governing markets is best understood as an attempt to maximize (...) the number of Pareto-improving exchanges that occur. There is no reason to think business self-regulation cannot be guided by the same normative-conceptual framework. (shrink)

The Pareto argument for inequality holds that any change from a position of equality to one of inequality is justified so long as everyone benefits from the change. G.A. Cohen criticizes this argument (which he attributes to Rawls) on the ground that changes can normally be found which preserve both equality and Pareto‐efficiency. However, this does not resolve the basic conflict between the two desiderata. Strong egalitarians hold that Pareto changes are not for the better if (...) they increase inequality too greatly. Thus if the Pareto argument holds, then strong egalitarianism is unsustainable. I argue that egalitarians need not be troubled by the Pareto argument for inequality. The Pareto criterion would not be widely accepted unless it takes account of moral harms; but if it does take account of moral harms then there is no reason to doubt that egalitarian concerns can be incorporated into the Pareto argument. (shrink)

This article reviews and criticizes Joseph Heath’s market failures approach (MFA) to business ethics. Our criticism is organized into three sections. First, we argue that, even under the ideal assumptions of perfect competition, when markets generate Pareto-efficient distributions, Heath’s approach does not rule out significant harms. Second, we show that, under nonideal conditions, the MFA is either too demanding, if efficiency is to be attained, or not sufficiently demanding, if the goal of Pareto efficiency is abandoned. (...) Finally, we argue that Heath’s appeal to regulations and specific moral requirements as a remedy for market failures is unlikely to safeguard efficiency and exposes a number of general worries regarding the moral force of the MFA. We end this article with a constructive suggestion on how to adjust the MFA to avoid these problems while preserving its contractualist and Paretian spirit. (shrink)

One common justification for the pursuit of profit by business firms within a market economy is that profit is not an end in itself but a means to more efficiently produce and allocate resources. Profit, in short, is a mechanism that serves the market’s purpose of producing Pareto superior outcomes for society. This discussion examines whether such a justification, if correct, requires business managers to remain attentive to how their firm’s operation impacts the market’s purpose. In particular, it is (...) argued that the value of efficiency, despite views to the contrary, cannot be fully separated from the planning and intentions of business managers as long as those managers direct their firms in an ethically responsible fashion. This position is inspired by, and serves as a supportive clarification of Joseph Heath’s so-called “market failures approach” to business ethics. (shrink)

A principal rationale for public policy is to address market failures. Pareto efficiency is therefore a highly common and relatively non-controversial evaluative criterion for many policy analyses and is discussed at length in policy analysis texts. This makes sense, for Pareto improvements involve making at least one person better off without making anyone worse off. Who could object to that? But does efficiency deserve the prominence it enjoys in public policy? Is one policy option better than (...) another, at least in one respect, simply because it is more Pareto efficient? Or, is efficiency valuable for some other reason? In this chapter, I discuss Pareto efficiency as an evaluative criterion and argue that it is a stand-in for a more foundational criterion: wellbeing. I begin with an overview of Pareto efficiency, discuss the various ways in which it is operationalized to evaluate policy options, and argue that it is valuable insofar as more efficient states of affairs promise more wellbeing than less efficient states of affairs. I then raise questions regarding whether the conception of wellbeing presupposed by Pareto efficiency – preference satisfaction – is a defensible conception of wellbeing. I go on to introduce three alternative conceptions of wellbeing which have been proposed and defended by both philosophers and policy scholars, namely, hedonism, objective goods views, and the capability approach, and suggest ways in which each can be operationalized as an evaluative criterion. I close by discussing four ‘theory-free’ approaches to thinking about the impact of policies on the quality of people’s lives. Such approaches reject the idea that there is one single theory of wellbeing that should be used to evaluate policy options, and instead develop ways to evaluate the impact of policies on people’s lives that are not grounded in a specific theory. (shrink)

Efficiency requires legislative political institutions. There are many ways efficiency can be promoted, and so an ongoing legislative institution is necessary to resolve this choice in a politically sustainable and economically flexible way. This poses serious problems for classical liberal proposals to constitutionally protect markets from government intervention, as seen in the work of Ilya Somin, Guido Pincione & Fernando Tesón and others. The argument for the political nature of efficiency is set out in terms of both (...) Pareto optimality and aggregate welfare maximisation, and similar arguments can be generalised to other social values. (shrink)

In the vernacular, ‘efficiency’ typically concerns means. I can choose efficient rather than inefficient means to accomplish my ends. Or more generally, I can be efficient or inefficient in allocating my limited resources. If we could measure the aggregate utility or welfare of a society, as in Benthamite utilitarianism, we could say that a society is efficient in an analogous sense: it uses effective institutions to achieve the greatest possible welfare. But the normative notion of efficiency commonly in (...) use in social and political theory today is about social choices without aggregative welfare measures. Efficiency is invoked as an alternative to such aggregative measures. (shrink)

We study the stable standard of behavior in a perfect foresight situation that was introduced by Xue. We assume that the inducement relations are invertible and coalition free. We show that the conditions are sufficient for the existence of the nonempty-valued optimistic/conservative stable standard of behavior for perfect foresight situation. Moreover, we find that an OSSB-PF supports a Pareto-efficient outcome as a stable outcome; if the preference relations are strict, only the Pareto-efficient outcomes are supported by the OSSB-PF.

The constraint-handling methods using multiobjective techniques in evolutionary algorithms have drawn increasing attention from researchers. This paper proposes an efficient conical area differential evolution algorithm, which employs biased decomposition and dual populations for constrained optimization by borrowing the idea of cone decomposition for multiobjective optimization. In this approach, a conical subpopulation and a feasible subpopulation are designed to search for the global feasible optimum, along the Pareto front and the feasible segment, respectively, in a cooperative way. In particular, the (...) conical subpopulation aims to efficiently construct and utilize the Pareto front through a biased cone decomposition strategy and conical area indicator. Neighbors in the conical subpopulation are fully exploited to assist each other to find the global feasible optimum. Afterwards, the feasible subpopulation is ranked and updated according to a tolerance-based rule to heighten its diversity in the early stage of evolution. Experimental results on 24 benchmark test cases reveal that CADE is capable of resolving the constrained optimization problems more efficiently as well as producing solutions that are significantly competitive with other popular approaches. (shrink)

Scholars have long debated the appropriate balance between efficiency and redistribution. But recently, a wave of critics has argued not only that efficiency is less important, but that efficiency analysis itself is fundamentally flawed. Some say that efficiency is incoherent because there is no neutral baseline from which to judge inefficiency. Others say that efficiency is biased toward those best able to pay (generally, the rich). This essay contends that efficiency is not meaningfully incoherent (...) or biased. The most widely discussed forms of efficiency do not require any particular baseline, and even those that do require a baseline can still serve as useful approximations of more theoretically sound but computationally demanding measures. Moreover, arguments of bias do not account for the source of funds in public projects, produce unintuitive results, and draw an arbitrary cutoff between bias and non-bias that elides important distributional details. Ultimately, the tradeoff between efficiency and redistribution remains the most useful frame for policy debate. (shrink)

We define two versions of stability and efficiency of partitions and analyze their relationships for some matching rules. The stability and efficiency of a partition depends on the matching rule φ. The results are stated under various membership property rights axioms. It is shown that in a world where agents can freely exit from and enter coalitions, whenever the matching rule is individually rational and Pareto optimal, the set of φ-stable and φ-efficient partitions coincide and it is (...) unique: the grand coalition. Then we define a weaker version of stability and efficiency, namely specific to a given preference profile and find some negative results for stable matching rules. (shrink)

Collective rationality in its ordinary sense is rationality’s extension to groups. It does not entail efficiency by definition. Showing that it entails efficiency requires a normative argument. Game theorists treating cooperative games generally assume that collective rationality entails efficiency, but formulating the reasoning that leads individuals to efficiency, and verifying the rationality of its steps, presents challenging philosophical issues. This paper constructs a framework for addressing those issues and reaches some preliminary results about the prospects of (...) rational agents achieving efficiency in coalitional games. It concludes that only under strong idealizations does collective rationality entail efficiency. (shrink)

Joseph Heath1 The Pareto principle states that if a proposed change in the condition of society makes at least one person better off, and does not make anyone else worse off, then that change should be regarded as an improvement. This principle forms the conceptual core of modern welfare economics, and exercises enormous influence in contemporary discussions of justice and equality. It does, however, have an Achilles’ heel. When an individual experiences envy, it means that improvements in the condition (...) of others may worsen the condition of that individual. As a result, envy has the potential to block a vast range of changes that we might intuitively be inclined to regard as Pareto improvements. (Or more precisely, envy results in too many states getting classified as Pareto-optimal, not because, intuitively, they cannot be improved upon, but because no one’s condition can be improved upon without making someone else envious.) For example, a market exchange between two people might not wind up being classified as a Pareto improvement if the benefits produced for the two parties generated envy in some otherwise uninvolved third. (shrink)

The standard allocative efficiency criteria used by economists (Pareto efficiency and Kaldor-Hicks efficiency) are fundamentally unable to rank a slave-labor system against a free-labor system. Given either set of initial property rights assignments the market can reach (or fail to reach) allocative efficiency (that is, allocate resources to their highest-valued uses), but welfare economics provides no meta-framework for ranking initial assignments. This finding underscores the limits to the usefulness of efficiency criteria: they cannot settle (...) all questions, and unfortunately are least decisive just where the stakes are greatest (namely, where wealth effects of alternative assignments are greatest). Explicitly ethical criteria are needed to make the ranking. Key Words: Pareto efficiency • Kaldor-Hicks efficiency • property rights • welfare economics. (shrink)

v. 1. Lo sviluppo del capitalismo (1872-1895).--v. 2. Reazione, liberta, fascismo (1896-1923).

Minimum wages are usually assumed to be inefficient as they prevent the full exploitation of mutual gains from trade. Yet advocates of wage regulation policies have repeatedly claimed that this loss in market efficiency can be justified by the pursuit of ethical goals. Policy makers, it is argued, should not focus on efficiency alone. Rather, they should try to find an adequate balance between efficiency and equity targets. This idea is based on a two-worlds-paradigm that sees ethics (...) and economics as two inherently conflicting ways of thinking. We, however, believe that this view of the relationship between ethics and economics is fundamentally flawed and blurs our understanding of how an ethically responsible regulation of the labour market should be conducted. In drawing on an economic-ethical approach that resolves the antinomy between efficiency and equity, we show that ethics and economics are, in fact, two sides of the same coin and that minimum wage legislation can only be ethically responsible, if it is at the same time economically efficient. In other words, we can have our cake and eat it too. On the basis of our approach, we develop two simple game theoretical models for different types of labour markets and derive policy implications from an economic-ethical viewpoint. We suggest that under the assumption of perfectly competitive labour markets a tax-funded wage subsidy is preferable over minimum wages, as it makes everyone better off. If, however, employers have monopsony power in the wage setting process, the minimum wage is justifiable under certain conditions. (shrink)

Using a laboratory experiment, we examine whether voluntary sanctions induce subjects to coordinate more efficiently in a repeated minimum-effort game. While most groups first experience Pareto inferior coordination in a baseline treatment, the level of effort increases substantially once ex post sanctioning opportunities are introduced, that is, when one can assign costly punishment points to other group members to reduce their payoffs. We compare the effect of this voluntary punishment possibility with the effect of ex post costless communication, which (...) in contrast to the punishment treatment increases efforts only temporarily and fails to bring the players to higher payoff equilibria permanently. Our results indicate that decentralized sanctions can play an important role as a coordination device in Pareto-ranked coordination settings. They also suggest that the motivations behind voluntary sanctions may be more general than usually put forth in the literature on cooperation games. (shrink)

Vilfredo Pareto's Manual of Political Economy is a 'classic' study in the history of economic thought. It is not only one of the leading works in the Lausanne tradition of economics, which centres on the theory of general equilibrium, it is one of the most important books in the history of neoclassical economics. This 'critical edition' of Pareto's Manual of Political Economy is a very significant work for two main reasons. First, it is the only variorum translation of (...) the 1906 Italian language Manuale di Economia Politica and the 1909 French language Manuel d'Économie Politique. Second, it includes extensive contributions by the editors, all of whom are authorities on the work of Pareto. It total, the editorial contribution are around two hundred pages and range from brief annotations, to extended editors' notes and detailed notes on the 1909 mathematical appendix. (shrink)

How should we distinguish between ethical and unethical ways of pursuing profit in a market? The market failures approach (MFA) to business ethics purports to provide an answer to this question. I argue that it fails to do so. The source of this failure is the MFA’s reliance on Pareto efficiency as a core ethical principle. Many ethically “preferred” tactics for seeking profit cannot be justified by appeal to Pareto efficiency. One important reason for this is (...) that Pareto efficiency, as understood by the theory of welfare economics upon which the MFA relies, assumes a static conception of efficiency. This is a problem because many ethically “preferred” tactics can only be justified by appeal to dynamic efficiency considerations. I argue that, instead of Pareto efficiency, we should look to the value of wealth creation to understand the ethical constraints on how market actors may pursue profit. (shrink)

Social robotics has a high disruptive potential, for it expands the field of application of intelligent technology to practical contexts of a relational nature. Due to their capacity to “intersubjectively” interact with people, social robots can take over new roles in our daily activities, multiplying the ethical implications of intelligent robotics. In this paper, we offer some preliminary considerations for the ethical reflection on social robotics, so that to clarify how to correctly orient the critical-normative thinking in this arduous task. (...) We defend the ‘being perspective’ and its linked categories of ‘teleology’ and ‘interest’ as the ones from which to articulate the reflection. We argue that attending primarily to the ‘being’, before the ‘doing’, of robots allow us to correctly approach the core phenomenon of all ethical concerns on social robotics, avoiding the reductionisms in the ethical gaze to which the latter may lead. (shrink)

We consider the problem of choosing the location of a public facility either (a) on a tree network or (b) in a Euclidean space. (a) (1996) characterize the class of target rules on a tree network by Pareto efficiency and population-monotonicity. Using Vohra's (1999) characterization of rules that satisfy Pareto efficiency and replacement-domination, we give a short proof of the previous characterization and show that it also holds on the domain of symmetric preferences. (b) The result (...) obtained for model (a) proves to be crucial for the analysis of the problem of choosing the location of a public facility in a Euclidean space. Our main result is the characterization of the class of coordinatewise target rules by unanimity, strategy-proofness, and either replacement-domination or population-monotonicity. (shrink)

ABSTRACT:In this address, I outline a “back to basics” approach to specifying the responsibilities and role of business in relation to society. Three “basics” comprise the approach. The first is arguing that basic principles of ordinary morality, such as a duty not to harm, provide an adequate basis for specifying the responsibilities of business managers. The second is framing the role of business in society by looking to the values realized by the basic building blocks of contemporary economic activity, i.e., (...) markets and firms. The third is making explicit the basic institutions that structure the background against which business operates. The aim is to develop a plausible framework for managerial decision making that respects the fact of value pluralism in a global economy and that fosters meaningful criticism of current business practices while remaining sufficiently grounded in contemporary circumstances so as to be relevant for managers. (shrink)

Politics, Philosophy & Economics, Volume 21, Issue 2, Page 165-189, May 2022. It is generally acknowledged that a certain amount of state intervention in health and health care is needed to address the significant market failures in these sectors; however, it is also thought that the primary rationale for state involvement in health must lie elsewhere, for example in an egalitarian commitment to equalizing access to health care for all citizens. This paper argues that a complete theory of justice in (...) health can be derived from a commitment to correcting market failure, or in other words promoting Pareto-efficiency, in the domain of health. This approach can address familiar problems around access to care, as well as problems related to resource allocation and rationing, the control of health care costs, and the foundations of public health. Egalitarian theories of justice in health cannot make sense of the depth and pervasiveness of state involvement in health and health care; only a theory rooted in the need to correct market failure can. (shrink)

Waiting time is widely used in health and social policy to make resource allocation decisions, yet no general account of the moral significance of waiting time exists. We provide such an account. We argue that waiting time is not intrinsically morally significant, and that the first person in a queue for a resource does not ipso facto have a right to receive that resource first. However, waiting time can and sometimes should play a role in justifying allocation decisions. First, there (...) is a duty of fairness prohibiting line-cutting where a sufficiently just queue exists. Second, waiting time has several morally attractive features that can justify its incorporation into allocation schemes. Where candidates are in relevantly similar circumstances, allocating by waiting time is relatively efficient, maximizes distribution equality relative to other Pareto efficient distributions, and treats candidates fairly. The claim that allocation using waiting time is fair is controversial. Some have claimed that formal lotteries are a fairer way to select among equal beneficiaries. We argue that lotteries are no fairer than allocation based on waiting time when it is equiprobable how a prospective queue will be ordered. In practice, lotteries share many of the disadvantages of queues; which is fairer will depend on contingent features of the allocation scenario. The upshot is that first-come, first-served is in fact a just way to allocate resources in many of the cases where it seems pre-theoretically compelling, and waiting time has unique normative properties which frequently justify its incorporation into resource allocation schemes. (shrink)

Joseph Heath defends competitive markets and conceptualizes business ethics with reference to Pareto efficiency, which he takes to be the “implicit morality of the market.” His justification for markets is that they generate Pareto efficient outcomes, meaning that markets optimally satisfy consumer preferences. And, for Heath, business ethics is the set of normative constraints—regulation and beyond-compliance norms—needed to preserve that outcome. The present paper accepts Heath’s claim that the economic justification for markets is ethical, in that satisfying (...) consumer preferences is a good. But, contra Heath, the ethical consideration at work is a consequentialist one; and acknowledging this consequentialism exposes limitations of Heath’s “market failures” approach to business ethics. We suggest two limitations, and we expect many will accept our argument that Heath’s conception of business ethics is too narrow. The present paper outlines two broader implications. First, acknowledging that the justification for markets is ethical eliminates the apparent—and false—conflict between purportedly amoral economic activity on one hand and ethical considerations on the other; instead, business ethics is a matter of weighing the consequentialist ethical benefit of economic activity and markets against other moral arguments/other ethical considerations. Second, Heath restricts business ethics to the constraints needed to protect the market’s ability to efficiently satisfy consumer preferences, constraints he calls “efficiency imperatives”; this restriction supports the widespread tendency to think that all social problems are economic; and, a business ethics so-conceived diminishes the perceived importance of noneconomic values—this attitude is dangerous. (shrink)

Joseph Heath (2014) argues that the contribution of competitive markets to Pareto-efficiency generates moral constraints that apply to business managers. Heath argues that ethical behavior on the part of management consists in avoiding profit-seeking strategies which, under conditions of perfect competition, would decrease Pareto-efficiency. I argue that because (1) such conditions do not obtain; and (2) the most efficient result – under imperfect conditions – is not achieved by satisfying the largest possible set of the remaining (...) conditions; it is (3) impossible to draw any substantive ethical guidelines from Heath’s approach. (shrink)

There is an idea, extremely common among social contract theorists, that the primary function of social institutions is to secure some form of cooperative benefit. If individuals simply seek to satisfy their own preferences in a narrowly instrumental fashion, they will find themselves embroiled in collective action problems – interactions with an outcome that is worse for everyone involved than some other possible outcome. Thus they have reason to accept some form of constraint over their conduct, in order to achieve (...) this superior, but out-of-equilibrium outcome. A social institution can be defined as a set of norms that codify these constraints.1 Simplifying somewhat, one can then say that social institutions exist in order to secure gains in Pareto-efficiency. (shrink)

This article examines Sagoff's criticisms of 'Four Dogmas of Environmental Economies' and argues that none of them are fatal. Many of the criticisms appear to rest on general misunderstandings about welfare economics. One misunderstanding is that transaction costs are theoretically indistinguishable from regular production costs. The theoretical distinction is that transaction costs vary under alternative policies and institutions whereas production costs are fixed by tastes, technology and endowments. Another misunderstanding is that market failure concerns only Pareto efficiency. Market (...) failure also concerns social efficiency with respect to the 'social welfare function', a device for making explicit ethical judgments about the interpersonal distribution of welfare. A third misunderstanding is that the 'rationality assumption' drives economic theory. In fact, the explanatory power of economic models comes mainly from explicit assumptions about the constraints facing economic agents. A fourth misunderstanding is that welfare economics is used as a mechanism for making legal and political decisions. Rather, welfare economics is used as a method for informing legal and political decisions by evaluating their outcomes on the basis of individual welfare. Used properly, it can improve the democratic process by bringing hidden costs and difficult issues to the attention of both policy-makers and the wider public. (shrink)

The term “political” egalitarianism is used here, not to refer to equality within the political sphere, but rather in John Rawls’s sense, to refer to a conception of egalitarian distributive justice that is capable of serving as the object of an overlapping consensus in a pluralistic society.1 Thus “political” egalitarianism is political in the same way that Rawls’s “political” liberalism is political. The central task when it comes to developing such a conception of equality is to determine what constraints a (...) principle of equality must satisfy in order to qualify as “freestanding,” or to be justifiable in a way that does not presuppose the correctness of any one member of the set of reasonable yet incompatible “religious, philosophical and moral” doctrines that attract large numbers of adherents in our world.2 (Rawls uses the analogy of a “module” in order to describe the way that a properly political conception of justice “fits into and can be supported by various reasonable comprehensive doctrines that endure in the society regulated by it.”3 Political egalitarianism would be “modular” in this sense.) Rather than getting embroiled in the controversies that have arisen over Rawls’s formulation of this idea, I would like simply to accept the intuition, widespread among political philosophers, that equality is the sort of principle that – if given a proper formulation – could satisfy the requirements of a political conception of justice. After all, regardless of what peoples’ projects, values, or conceptions of the good life may be, it should be possible to design a set of arrangements that would provide equal opportunity to pursue these goals, or that would treat each conception of the good with equal respect, etc. From this perspective, the principle of equality resembles the principle of Pareto-efficiency, or certain formulations of the principle of liberty – it is one that everyone should be able to endorse, insofar as it does not privilege, or presuppose the correctness of, any particular set of projects, values.. (shrink)

The market failures approach is amongst the most influential theories of business ethics. Its interest within the field is, in large part, a result of its rejection of moralism and any sort of applied ethics approach, favouring, in contrast, a focus on the institutionally embodied goal of economic activity, which it takes to be that of Pareto efficiency. From this articulation of the goal, or purpose, of markets, a set of efficiency imperatives are derived that are taken (...) to comprise the implicit morality of the market. However, the market failures approach has not adequately explained the basis of market actors’ moral motivation, that is, the reasons individuals have to self-consciously adhere to moral norms governing market transactions. This failure, I argue, stems from its misspecification of the purpose of the market. After explaining this failure to address the problem of moral motivation, I argue that a distinctive mode of freedom understood as a form of self-authorship is better seen as the purpose of the market, a goal that actually animates individual market participants. I then argue that this notion of freedom is intrinsically linked to a conception of responsibility and that this notion of responsibility can be more adequately conceptualized as involving a set of market virtues focused on promoting mutually beneficial transactions. Thus, the link between freedom and responsibility, stemming from an individual’s need to legitimize their freedom in a market context, provides the basis for a self-conscious sense of moral motivation. As such, this approach better captures the implicit morality of the market while also addressing the problem of moral motivation. (shrink)

Heath’s paper on privatization defends a broadly welfarist-economic approach in thinking about the legitimacy of privatizations. This approach is ‘instrumentalist’ (in contrast to deontological approaches). In this response, I accept the value of an instrumentalist approach to privatization, but argue against Heath’s welfarist version of it, and argue in favor an alternative. First, the ends we seek when thinking about socially vital goods (our theory of public interests) should go beyond Pareto-efficiency. Second, as to the means we employ (...) to realize these ends, we need a view of markets which takes into account not just their competitiveness, but also the distribution of power. This means we need to differentiate market types. Third, we need to differentiate ownership types beyond the standard shareholder-owned company. Alternative ownership structures may be able to realize public interests more easily and hence make privatization less problematic. On these three issues, the picture Heath sketches leaves out too many of the variables that, in the end, may be decisive in whether or not a privatization is acceptable. (shrink)

A number of recent authors, most notably Joseph Heath, have persausively defended a market‐centered account of corporate responsibility that grounds standards of business conduct upon the normative presuppositions of the market. They have us focus on two important items: first, the value of welfare, or Pareto efficient outcomes, which underwrites the legitimacy of market arrangements; and second, the behavioral requirements needed to assure that corporations conduct business in a manner consistent with this value. This article critically examines the aspirations (...) of this literature by embracing its basic method but questioning how well it understands the aim of the market. It puts forth a limited case for corporate responsibility anchored in other dimensions of the public good, distinct from the value of efficiency, and argues that a plausible understanding of corporate responsibility arises from the notion that market arrangements are sites of delegated social authority to provision other aspects of the common good. (shrink)

General Equilibrium Theory: An Introduction treats the classic Arrow-Debreu general equilibrium model in a form accessible to graduate students and advanced undergraduates in economics and mathematics. Topics covered include mathematical preliminaries, households and firms, existence of general equilibrium, Pareto efficiency of general equilibrium, the First and Second Fundamental Theorems of Welfare Economics, the core and core convergences, future markets over time and contingent commodity markets under uncertainty. Demand, supply, and excess demand appear first as functions, then optionally as (...) correspondences. The mathematics presented includes a real analysis, the Brouwer fixed point theorem, and separating and supporting hyperplane theorems. Optional chapters introduce the existence of equilibrium with set-valued supply and demand, the mathematics of upper and lower hemicontinuous correspondences, and the Kakutani fixed point theorem. The treatment emphasizes clarity and accessibility to the student through use of examples and intuition. (shrink)

Two players bargain to select a utility allocation in some set X⊂R+2\documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$X\subset {\mathbb {R}}_+^2$$\end{document}. Bargaining takes place in infinite discrete time, where each period t is divided into two sub-periods. In the first sub-period, the players play a simultaneous-move game to determine that period’s proposer, and bargaining takes place in the second sub-period. Rejection triggers a one-period delay and move to t+1\documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$t+1$$\end{document}. For (...) every x∈X∩R++2\documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$x\in X\cap {\mathbb {R}}^2_{++}$$\end{document}, there exists a cutoff δ<1\documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$\delta <1$$\end{document}, such that if at least one player has a discount factor above δ\documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$\delta $$\end{document}, then for every y∈X\documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$y\in X$$\end{document} that satisfies y≥x\documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$y\ge x$$\end{document} there exists a subgame perfect equilibrium with immediate agreement on y. The equilibrium is supported by “dictatorial threats.” These threats can be dispensed with if X is the unit simplex and the target-vector is Pareto efficient. The results can be modified in a way that allows for arbitrarily long delays in equilibrium. (shrink)