Individual Agents and the State: A Different Conception of Social Welfare?

Contrary to what the Elements dEconomie Pure could suggest, individ­ual behavior is not sufficient to understand the working of the economic system and the society. The reason of this statement is obviously related to the influence played by the existence of general social conditions common to various agents.

These conditions do not depend on contracts or social interactions but on social rules or institutions that preexist agents and must be respected by them. A large part of them are protected by law and therefore by the state. According to Walras, the state is not “the pure and simple set of individuals” (Walras, 1896/1990: 136) but much more than this set:

The state has its own existence which exceeds the sum of the existences of all individuals who are a part of it.... As far as I am concerned I argue that when the state is creating and applying laws, when it is building a road or digging a canal, when it is opening libraries and museums, it is acting for the interest of all the members of a society, some being alive and others, more numerous, being still out of this world; this interest has to be connected to its own nature and not to the individuals which it includes [italics added]. Societybeing a natural and necessary fact (and not a conventional and free one), the individual and the state are two equivalent social types and for all the social categories, the state natural law is as important as the individual natural state. (L’Etat a une existence qui lui est propre et qui depasse meme la somme des existences de tous les individus qui en font partie.... Je soutiens, pour ma part, que quand l’Etat fait des lois et les applique, quand il perce des routes et creuse des canaux, quand il ouvre des bibliotheques et des musees, il agit dans Linteret de tous les membres d'une societe desquels les uns sont vivants, mais desquels un plus grand nombre d'autres ne sontpoint encore de ce monde, et, par suite, en vertu d'un droit qu'il tient non point du tout des individus dont il se compose, mais de sa nature meme [italics added].

This conception of the relation between individuals and the state has important economic consequences.

First, state rationality is not based at all on standard individual rational­ity but on public interest. The state is therefore considered as an organiza­tion guided by a collective or public form of rationality and by the preoccupation of social justice. Second, public interest is defined by the state and not as some form of social welfare based on some type of agent preferences aggregation.

Third, the state has its own ends but also its own incomes (land rent essentially) and, among its main objectives, it must include the implementation of the conditions of social justice through the equality of individual initial positions.

Fourth, public and individual morals have to be clearly distinguished, the first one being dedicated to the achievement of what Walras called the “Ideal Social.” Walras therefore introduced in his picture of pure, social and applied economics a conception of the state that strongly contrasts with modern views on standard public economics.

Moreover, it is clear that for Walras, the process of equalization of raretes or ratios of marginal utilities - that provides the unique foundation of the use of rational choice theory in Walras’s economic analysis - is not always possible; it requires the use of the context of “a perfectly organized market from the standpoint of competition” (Walras, 1900/1976: 45). Therefore, rational choice as such, namely marginal utility maximization, can only be used as a norm in order to show which are the conditions of achievement of what Walras called the “Ideal Social.” But the state has to play its role in this context and help to the practical realization of this norm.

As Jaffe stressed it, “uniformity of competitively determined price rep­resented for Walras not only an analytical ideal, but an ethical ideal as well, constituting an indispensable pillar of social justice” (Jaffe, 1977/1983: 330).

This view is first related to a French national tradition that we could call Colbertism and considers the state as both a supervisor and a mediator. But it also foreshadows some of the features of the usual conception of the welfare state of the twentieth century, especially, the principles of equality of opportunity and of equitable distribution of wealth that are explicitly and deeply investigated by Walras through the difference between justice com­mutative and justice distributive. It strongly contrasts with the Utilitarian and the Paretian conceptions of the state (Dockes, 1996: ch. II).

First, social justice is the main foundation of society far before utility. For instance, even if slavery could increase the social satisfaction (of free individuals!!) it still had to be blamed and forbidden because it is contrary to the principle of social justice.

Second, in Walras’s conception, there is nothing analogous to a classification of societies according to their types of social optimum or their aggregated utility function: as we already noted, society is autono­mous and different from individuals. According to Dockes, “Leon Walras is at the Antipodes of the construction of a collective utility function based on individual utilities as well as of the Pareto optimum.

Third, in Walras, the state is first a supervisor since it determines the rules of market economies, and secures and controls their application, provided that these rules are not contrary to justice and interest. It is a supervisor because no other “collective person” (distinct from “individual persons”) or organization has the abilities and the means of supervision. The state not only corrects market failures, it has its own area of interven­tion in favor of a public interest because it disposes of the maximal scientific knowledge and the maximal clear-sightedness (“clairvoyance”) to avoid short-termism and takes the best decisions for purposes related to long-run and social general conditions.

Finally, the state is also a mediator because it is not submitted to specific individual own interests. It expresses the real social needs (“moral” as well as “utilitarian”). This is why it also disposes of its own means and re­sources. This explains the kind of economic policy defended by Walras in his Economie appliquee and based on social justice: payment of the state for land in order to give back to society what are its common resources (Dockes, 1996: 169); no direct and progressive tax on individuals (173); monopolistic supply of public services (210).

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