Introduction
This paper characterizes Kenneth Arrow's contribution to justice issues in economics. Arrow is famous for establishing the fundamental theorems of welfare economics (Arrow and Debreu 1954), according to which general equilibrium in competitive market satisfies Pareto optimality under some conditions, and the general impossibility theorem (hereafter, Arrow's theorem), which is the foundation of social choice theory (Arrow 1963).
The latter discusses the existence of desirable aggregation of individual preferences as the criterion of individual welfare in order to create a social preference as the criterion of social welfare. To prove his theorem, Arrow defined a criterion of social welfare as a consequence restricted to a function of individual preferences, and stressed that only noncomparable utilities are considered. Because of these two important restrictions, his approach was regarded as “welfarist.”[124] [125]Gradually, however, Arrow transitionedto stating that theconsequences of both economic and political decision-making are not always just, even when they are Pareto optimal. Arrow ultimately concluded that social choice theory can be useful in deducing a standard of justice with non-welfaristic aspects.
This paper clarifies the non-welfarist features of Arrow's idea of justice,[126] beginning with some of his contributions to formal theory: Arrow's theorem and the fundamental theorems of welfare economics (Section 11.1). Second, this paper illustrates how Arrow designed political and economic decisions using the same framework in the 1950s (Section 11.2), and how he gradually realized that the consequences of both economic and political decisions justified in this narrow framework are not always just in the real world. He notably appreciated the differences among welfare, equality, freedom, and fundamental rights by considering a variety of different case studies of public actions. Accordingly, he recognized that the significance of justice cannot be reduced to economic efficiency, neither could it be properly or sufficiently defined in the strict welfarist informational framework (Sections
11.3 and 11.4). Finally, this paper argues that Arrow insisted that a criterion of justice can be deduced from the collective decisionmaking process in the hypothetical original position, because this position assumes equality (Section 11.5). We conclude that Arrow's idea of justice is based on a variety of values beyond utility, including non- welfaristic aspects such as freedom, equality, and fundamental rights.
11.1
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