Hicks’s Non-welfarist Manifesto: Its Depth and Reach

Capitalizing on many twists and turns in the brief history of welfare econom­ics, “old” and “new,” an unsympathetic wind blew toward welfare economics in the late 1950s. In his survey of welfare economics over the past twenty years, Edward Mishan (1960, p.

While it continues to fascinate many, welfare economics does not appear at any time to have wholly engaged the labours of any one economist. It is a subject which, apparently, one dabbles in for a while, leaves and, perhaps, returns to later in response to a troubled conscience - which goes some way to explain why, more than other branches of economics, it suffers from an unevenness in its develop­ment, a lack of homogeneity in its treatment and, until very recently, a distressing disconnectedness between its parts.

Almost simultaneously, Hicks (1959/1981, essay 6) published an intri­guing reflection on the contemporary state of welfare economics by de­claring an emotional farewell to what he called economic welfarism:

The view which, now, I do not hold I propose... to call “Economic Welfarism”; for it is one of the tendencies which has taken its origin from that great and immensely influential work, the Economics of Welfare of Pigou. But the distinction which I am about to make has little to do with the multifarious theoretical disputes to which the notion of Welfare Economics has given rise to. One can take any view one likes about measurability, or additivity, or comparability of utilities; and yet it remains undetermined whether one is to come down to one side or other of the Welfarist fence. The line between Economic Welfarism and its opposite is not concerned with what economists call utilities; it is concerned with the transition from Utility to the more general good, Welfare (if we like) itself.

7.4.1 Consequences, Opportunities, and Procedures

As an auxiliary step in our analysis of Hicks’s intriguing manifesto, let us examine an agent who is engaging in normative social evaluations on alternative economic systems or economic policies.

Lest we should be misunderstood, let us observe that the non- consequentialist stance does not mean that all information on the consequence of economic system or economic policy is completely excluded from consideration. Quite to the contrary, it simply means that at least some non-consequentialist information is invoked along with consequentialist information.^[58]

There are alternative methods of describing consequential outcomes. If we depend on the description of consequences only by means of the ex post welfare accruing to individuals, our stance will be called welfarist conse- quentialism, or welfarism for short. Alternatively, if we require some further information on consequences beyond ex post welfare, our stance will be called non-welfarist Consequentialism, or non-welfarism for short.^[59]

The next point of bifurcation is whether a welfarist agent adheres to the ordinal concept of welfare, or he/she accepts the cardinal concept of welfare. In the former case, he/she stands on the informational basis of ordinalist welfarism, whereas in the latter case, he/she stands on the informational basis of Cardinalist welfarism.

This classification of informational bases can be further elaborated by means of the nature of the welfare concepts involved, viz., whether welfares are interpersonally comparable or non-comparable, and whether welfares are ordinal or cardinal in nature.

The discriminating power of this classification may be illustrated as follows. The informational basis of the “new” welfare economics, viz., the social welfare function school of Bergson and Samuelson and the compen- sationist school of Kaldor and Hicks, is based in common on ordinalist welfarism without interpersonal comparability. It is also noteworthy that the vulgar variant of Pigou's “old” welfare economics, which utilizes the social sum-total of individual utilities as its flag mark, is the conspicuous example of cardinalist welfarism with interpersonal comparability.

We may now resume our inquiry into Hicks's non-welfarist manifesto.

7.4.2 What Sense Can We Make of Hicks's Non-welfarist Manifesto?

To cut our way through this territory, we decompose our query into two subqueries:

(Q₁) Did Hicks's manifesto focus on economic welfarism as such, but not on welfarism in general? In other words, was Hicks resigned to stay within welfarism even after liquidating his commitment to economic welfarism, or was he ready to cross over even the welfarist fence and proceed toward non-welfarism?

(Q₂) Supposing that Hicks was ready to leave the familiar kingdom of welfarism, to what extent was he ready to make his farewells to the informational straitjacket of welfarism? In other words, was he resigned to remain within consequentialism, or was he prepared to cross over even the consequentialist fence and proceed toward non- consequentialism?

The first step in answering the subquery (Q₁) is to scrutinize the concept of welfare vis-a-vis that of economic welfare in Pigou (1920/ 1932/1999, pp. 10-11). In Pigou’s own parlance:

Welfare...

How did Pigou try to limit his subject matter? His contrivance for simpli­fication was straightforward:

In doing this we are naturally attracted towards that portion of the field in which the method of science seems likely to work at best advantage. This they can clearly do when there is present something measurable, on which analyt­ical machinery can get a firm grip. The one obvious instrument of measure­ment available in social life is money. Hence, the range of our inquiry becomes restricted to that part of social welfare that can be brought directly or indir­ectly into relation with the measuring-rod of money. This part of welfare may be called economic welfare.

Pigou (1920/1932/1999, p. 11) was certainly not unaware of possible difficulties of separating economic welfare in this sense from welfare in general. These difficulties notwithstanding, Pigou argued “though no pre­cise boundary between economic and non-economic welfare exists, yet the test of accessibility to a money measure serves well enough to set up a rough distinction. Economic welfare, as loosely defined by this test, is the subject-matter of economic science.”

With this background in mind, it may be natural to surmise that Hicks’s choice was to reject Pigou’s contrivance of separating economic welfare from general welfare, thus joining hands with numerous contemporary critics of Pigou’s idea. We contend that it is this banal misperception of the nature of Hicks’s manifesto that is mainly responsible for the long neglect of his far-reaching farewell.

To see how deep-rooted is Hicks’s manifesto, it maybe of some help if we quote the following passage from Hicks (1959/1981, p. 137): “It is impossible to make ‘economic’ proposals that do not have ‘non­economic aspects,’ as the Welfarist would call them; when the economist makes a recommendation, he is responsible for it in the round; all aspects of that recommendation, whether he chooses to label them economic or not, are his concern.” We believe that Hicks’s manifesto is not just a resurrection of the mundane criticism on Pigou’s separation of economic welfare from general welfare; it is a declaration that we should go back all the way along the informational bifurcation of normative social evalu­ations to the non-consequentialist node.

To substantiate this bold contention, we begin by citing the following “one strong example” due to Hicks:

One of the issues that can be dealt with most elaborately by Welfarist methods is that of Monopoly and Competition: the theory of the social optimum which would be reached in a (practically unattainable) condition of all-round perfect competition, and of the departures from the optimum which must occur under any form in which a system of free enterprise can in practice be organized, is one of the chief ways in which the Welfarist approach has left its mark. I do not question that we have learnt a great deal from these discussions; but they leave me with an obstinate feeling that they have failed to penetrate to the centre of the problem with which they are concerned.... Why is it, for instance, that anti-monopoly legislation (and litigation) get so little help, as they evidently do, from the textbook theory? Surely the answer is that the main issues of principle - security on the one side, freedom and equity on the other, the issues that lawyers, and law-makers, can understand - have got left right out. (Hicks 1959/1981, p. 137)

Hicks’s “one strong example” seems acute enough to support our reasoned answer to the subquery (Q₁) to the following effect: Hicks was not only ready to go beyond economic welfarism and move toward welfar­ism in general, but he was also ready to cross over the welfarist fence per se, and move toward the territory of non-welfarism.

So far so good, but Hicks went on to pose a further problem of weighing up welfarist values against non-welfarist values in the follow­ing statement: “I have... no intention, in abandoning Economic Welfarism, of falling into the ‘fiat libertas, ruat caelum’ which some latter-day liberals seem to see as the only alternative. What I do maintain is that the liberal goods are goods; that they are values which, however, must be weighed up against other values” (Hicks 1959/1981, p. 139). It seems to us that Hicks thereby turned over a new leaf in the evolution of normative economics, because weighing up the liberal values against the welfarist values may lead us to the passage toward opening Pandora’s Box. Indeed, these values, if juxtaposed, may bring about a serious problem of logical incompatibility between these values.

To see that this anxiety is not just a fancy mirage, but a harsh reality, it suffices if we refer to a class of the Impossibility Theorems of a Paretian Liberal due to Amartya Sen (1970a, chapter 6 and chapter 6*; 1970b).^[60] Sen’s liberal value may be phrased in terms of the pair (x, y) of social states, where the only difference between x and y consists of a personal feature of some individual. Suppose that the relevant individual prefers x to y and the society is going to make a social choice from an oppor­tunity set S that includes x. If, in this case, the society chooses y, Sen’s liberal value is violated. The reason is that, if a pair of social states are distinguished only by features personal to an individual, according to Sen’s definition of liberalism, society should respect that individual’s preferences over the two social states. In addition to the liberal value in this sense, Sen introduces the Paretian - hence welfarist - value to the effect that if all individuals prefer a social state z to another social state w, then the social choice from the opportunity set that includes z should not choose w. Then Sen’s impossibility theorem asserts that there exists no universally applicable social choice rule satisfying Sen's liberal value and the Paretian value. A part of the large literature subsequently evolved tried to criticize Sen’s liberal value and/or his impossibility theorem, but the basic problem of the incompatibility of liberal value and democratic value has persisted ever since.

Although Sen’s Impossibility of a Paretian Liberal caused a persistent stir in the social choice circle, Robert Nozick (1974, p. 166) pointed out that

a more appropriate view of individual rights [than Sen’s view] may go as follows. Individual rights are co-possible; each person may exercise his rights as he chooses. The exercise of these rights fixes some features of the world. Within the constraints of these fixed features, a choice may be made by a social choice mechanism based on a social ordering.

In this alternative view, “[r]ights do not determine a social ordering but instead set the constraints within which a social choice is to be made, by excluding certain alternatives, fixing others, and so on.” It is worthwhile to emphasize that this Nozickean view of libertarian rights, which assigns rights a completely different role of specifying some personal features of the world before the social choice mechanism starts its function, may be traced back all the way to the long libertarian tradition of John Stuart Mill, Isaiah Berlin, and many others. Furthermore, this alternative view led to the modern theory of libertarian rights in terms of game forms developed by Robert Sugden (1985), Wulf Gaertner, Prasanta Pattanaik, and Kotaro Suzumura (1992/2016), and subsequent social choice theorists, where the essence of individual libertarian rights are captured by the freedom of choosing admissible strategies in the game-theoretic interactions among individuals.^[61]

It deserves emphasis that the game form articulation of rights has no intrinsic relation with individual preferences over consequential outcomes. Thus, the articulation of the game form rights by means of respecting each individual’s freedom of choice in his/her private sphere of admissible strategies represents a purely procedural value, which is not only non- welfaristic, but also non-consequential in nature.^[62] This crucial contrast between the Sen rights and the game form rights makes us wonder whether replacing the Sen rights with the game form rights dissipates or maintains the Impossibility of a Paretian Liberal. An unambiguous answer to this natural question is provided by Rajat Deb, Prasanta Pattanaik, and Laura Razzolini (1997), who proved that the welfaristic value of the Pareto principle and the non-consequentialist value of the game form rights are incompatible in general.

To sum up, the phantom of the logical conflict between the claim of libertarian rights and the Pareto principle cannot be exorcised even after Sen’s rights are replaced by the game form rights, so that the gate opened wide by Hicks’s manifesto led us into the new rich field of research of post­exodus welfare economics.

Gathering all pieces together, we are now in the position to submit our final answer to the subquery (Q₂), which goes as follows: Hicks was in effect ready to go back along the informational bifurcation of normative evalu­ations and proceed to the non-consequentialist node by means of his em­phasis on the non-consequentialist principles of “freedom and equity.”

7.4.3 Whence and Whither: After the Non-welfarist Manifesto

So much for our verdict on the contents and extents of Hicks's non- welfarist manifesto. There is one further query to be asked and answered in this context. To assert that Hicks was ready to escape from the welfarist node and climb up along the informational bifurcation of social evalu­ations to the non-consequentialist node is one thing, and to identify and suggest the method of analysis after exodus from welfarism is another thing altogether. Let us briefly examine Hicks's own attempt of post­exodus welfare economics.^[63] In Section 7.5, we will be concerned with John Rawls's (1971/1999) theory of justice and Amartya Sen's (1980, 1985, 1993) capability approach to well-being, freedom, and equality so as to exemplify the contents and extents of the post-exodus welfare economics.

To kick off his sketch of the post-exodus welfare economics, Hicks proposes to “put the Paretian theory... on one side, and go back to Pigou. And let us now attend to the whole of his book - to the structure of the whole book, not merely to the title and to the opening chapters” (Hicks 1975/1981, p. 212). He points out that the subject of Pigou's welfare economics is not the Economic Welfare as in the post-Pigou welfare economics, but the Real Social Product, or the National Dividend in Pigou's parlance. The subject of Part I of The Economics of Welfare is the definition and measurement of the Real Social Product, and Part II is focused on what makes the Real Social Product large or small, and what makes it grow. In Hicks's opinion, Part III on Industrial Relations between employers and employees “is loosely attached and may... be disregarded,” whereas part IV “sets the crown upon the whole work” by discussing the question of the Distribution of Real Social Product. A conspicuous feature of this skeleton of Pigou's treatise is that it does not refer to welfare at all. According to Hicks (1975/1981, pp. 222-223), Pigou took over this frame­work “from his predecessors, economists who did not think that they were doing ‘welfare economics' at all. It was the classical theory of Production and Distribution which Pigou was taking over and turning into the Economics of Welfare. The Economics of Welfare is The Wealth of Nations in a new guise.”

It is true that Adam Smith was thought by later scholars to have underemphasized distribution, but Hicks points out that David Ricardo rectified this alleged lacuna in his Principles of Political Economy and Taxation, by declaring in the Preface that the determination of “the laws which regulate distribution is the principal problem of Political Economy.” To fortify this point of view, Hicks adds that “Mill begins his Principles with Book I on Production and Book II on Distribution; Distribution in Mill is well to the fore. There is continuity between the shape of Pigou’s book and the shape of Mill’s” (Hicks 1975/1981, p. 224).

Hicks’s insight into the parallel nature of the classical theory of Production and Distribution, on the one hand, and Pigou’s Economics of Welfare, on the other, is not an atavism, but an attempt to locate Pigou’s “old” welfare economics in proper historical perspective. What role can Hicks legitimately assign to utility, or more generally welfare in this scheme? Since Pigou’s Economics of Welfare in Hicks’s recapitulation does not refer to welfare at all, this is a proper question to ask. Recollect that “the point of the ‘labour theory of value’, which Ricardo largely (but by no means entirely) uses, is that it gives him a means of reducing heteroge­neous commodities to a common measure in terms of cost.” Although Pigou was also concerned with Production and Distribution just as the classical economists, he chose to differ from them in his method of valuation: “Instead of valuing by cost, he valued by utility - marginal utility” (Hicks 1975/1981, pp. 225-226). Thus, “[t]he questions that were asked by the Classics in their theory of Wealth and those which were asked by Pigou in his theory of Welfare were broadly the same; so the Cost theory and the Utility theory fall into corresponding parts” (Hicks 1975/1981, pp. 227).

So far so good. I have no hesitation in accepting Hicks’s statement to the following effect: “I have tried... to put ‘welfare economics’ back into the frame in which it was set by Pigou; for I think that when it is reinserted, we understand it better” (Hicks 1975/1981, p. 230). However, we found very little, if any, constructive suggestions in Hicks (no date; c. 1955), Hicks (no date; c. 1963), and Hicks (1975/1981) that orient the future research of post-exodus welfare economics in clear awareness of Pigou’s founding philosophy of welfare economics as well as the logical and ethical difficul­ties encountered by the “old” and “new” welfare economics, neither are we aware of any work that explored this vista of the post-exodus welfare economics. For this reason, we now leave the Hicksian ground and explore elsewhere for some alternative attempts.

7.5