Abstract
Defined in the way that conforms with professional and popular understanding and creates a concept that is most useful, the impact of a choice on economic efficiency equals the difference between the equivalent-dollar gains the choice confers on its beneficiaries (the winners) and the equivalent-dollar losses it imposes on its victims (the losers). More controversially, in this formulation, a winner’s equivalent-dollar gain equals the number of dollars that would have to be transferred to him to leave him as well-off as the choice would leave him if
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- 1.
I use the expressions equivalent-dollar gains and losses because many of the relevant effects of the choices whose economic efficiency is analyzed are not direct monetary effects. Indeed, in some instances, a winner may not even be able to capitalize his equivalent-dollar gain. Take, for example, the equivalent-dollar gain that the owner of swampland who values it positively (for sentimental reasons) despite the fact that its market value is zero obtains from an environmental policy that cleans up the water in the swamp and/or the air over the swamp. If the policy does not improve the property sufficiently for it to have a positive market value post-policy, this winner will not be able to capitalize his equivalent-dollar gain.
- 2.
For example, in a Pareto-imperfect world, allocative-transaction-costless money transfers can affect economic efficiency by altering the amount of misallocation their winners and losers cause by making externality-generating consumption decisions by changing their wealth and thereby the consumption choices that are in their individual interests. For an example that illustrates this possibility, see the paragraph of the text that precedes the paragraph to which this note is attached.
- 3.
I believe this condition will often be fulfilled. In my judgment, an evaluative protocol that combines the distortion-analysis approach to economic-efficiency analysis that is third-best allocatively efficient (which THE WELFARE ECONOMICS OF ANTITRUST POLICY AND U.S. AND E.U. ANTITRUST LAW will delineate in detail) with an analysis of the characteristics of a choice’s winners and losers that bear on the relative magnitudes of the average util-value of their respective equivalent-dollar gains and losses will promote the utilitarian goal of maximizing total or average utility more than would an evaluative protocol that seeks to determine the effect of choices on total or average utility directly.
- 4.
Rights-based societies are societies whose members and governments (1) draw a strong distinction between prescriptive-moral discourse about moral rights (about the just) and prescriptive-moral discourse about what morally ought to be done when justice considerations are not determinative (about the good) and (2) are committed to instantiating their justice-commitments even when the good as legitimately conceived must be sacrificed to do so.
- 5.
In my usage, liberalism is a moral norm that gives lexical priority to individuals’ having and seizing the opportunity to lead a life of moral integrity—i.e., to individuals’ taking their moral obligations seriously and taking seriously as well the dialectical task of choosing a conception of the good and leading a life that conforms to this conception. On this account, liberalism commits its adherents and the members of, participants in, and governments of liberal, rights-based societies to treating all moral-rights bearers with appropriate, equal respect and for showing appropriate (in the case of individuals) or appropriate, equal (in the case of government) concern for them as well, in part for their utility as economists understand this concept but pre-eminently for their having and seizing the opportunity to lead a life of moral integrity. For a more detailed discussion of liberalism and its concrete corollaries, see Richard S. Markovits, Matters of Principle: Legitimate Legal Argument and Constitutional Interpretation 34–53, 196–209, 274–96 (hereinafter Matters of Principle) (NYU Press, 1998) and Richard S. Markovits, Liberalism and Tort Law: On the Content of the Corrective-Justice-Securing Tort Law of a Liberal, Rights-Based State, 2006 ill. l. rev. 243 (2006).
- 6.
Not all societies are moral-rights-based, and not all moral-rights-based societies are committed to a liberal conception of justice. As to the first point: (1) some societies of moral integrity (i.e., societies that have moral commitments and fulfill them to a sufficient extent to deserve this characterization) are moral-goal-based (i.e., are committed to achieving a goal that qualifies as “moral” but do not draw a strong distinction between the just and the good) and (2) other societies (which are not societies of moral integrity) are (A) immoral—i.e., are committed to securing an immoral goal—or (B) amoral—i.e., are committed to securing a goal that is neither moral nor immoral or vary the alleged moral justification of their choices in an ad hoc way. As to the second point: (1) although I am aware of attempts to derive an “objectively‐true” and hence universally-applicable concept of justice from the concept of the moral, from the concept of human flourishing, from the concept of freedom, and from the concept of human nature, I have never been convinced by any such Foundationalist, Aristotelian, Kantian, or Natural-Rights argument, and (2) in light of that fact, I feel compelled to admit that my own predilection for a liberal conception of justice cannot ultimately be justified—that rights-based societies can legitimately base their justice-commitments on other defensible moral norms (for example, on various nonliberal conceptions of egalitarianism). The point of the last part of the sentence of the text to which this footnote is attached is that, in immoral societies, amoral societies, and rights-based societies whose justice-commitments are not liberal, it will still be possible to evaluate the moral desirability of a choice from a liberal perspective (though, in nonliberal rights-based societies, it will not be morally permissible—i.e., it will be moral-rights-violative—to make choices that liberalism commends if they violate the justice-commitments of the societies in question).
- 7.
For an account of proper legal interpretation and application, see matters of principle 57–76.
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Markovits, R.S. (2014). Chapter 1 The “Correct” Definition of “the Impact of a Choice on Economic Efficiency”. In: Economics and the Interpretation and Application of U.S. and E.U. Antitrust Law. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-24307-3_1
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