Theory and Practice
In the Introduction to this volume we focused on various definitions of welfarism in order to create a list of ways in which economists might depart from it. Whichever definition we adopt, welfarism implies that the only information relevant to social welfare is the utilities of individuals: that if no one’s utility is affected by some change then social welfare cannot be affected.
Conversely, non-welfarism occurs when economists start to depart from such informational restrictions. For example, it is possible to remain an individualist, but to take account of information that goes beyond individuals’ utilities. It is also possible to question individualism, taking the position that social welfare may have a social dimension, not reducible to the utilities of individuals making up the society. Once the move from welfarism has been made, numerous ethical issues arise, from whether to embrace non- consequentialist ethics to the dangers of paternalism when welfarism is abandoned.Economists often talk of “the fundamental theorems of welfare economics”: that, subject to certain conditions, every competitive equilibrium is Pareto-efficient, and that every Pareto-efficient allocation can be achieved as a competitive equilibrium provided that endowments can be suitably allocated.[170] Such language places Pareto-efficiency at the heart of welfare economics, which makes sense if, and only if, a welfarist approach is adopted. Thus, in as far as economists emphasize the concept of Pareto-efficiency, it is natural to conclude that their approach is welfar- ist. In contrast, as the Introduction tried to make clear, the chapters in this volume show that economists, including some of those most closely associated with the emergence of the mainstream of economics, have repeatedly engaged in non-welfarist analysis.
We also made the claim that these departures from welfarism occurred when economists engaged with practice but in the Introduction we did not explain why this was the case. Why should consideration of practice make it more difficult to sustain a welfarist position than when engaging with pure theory?[171] It is easy to explain the appeal of welfarism when economists remain at the level of theory. Individualism has obvious attractions and when combined with the analytical tractability of the concept of Pareto-efficiency, or utilitarianism, there is a strong incentive to adopt a welfarist perspective. In contrast, when economists turn to practice, they face problems that push them away from welfarism.
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