The Problem of the “Social Welfare Function”

Abstract

One of the problems with the mechanistic approach which has dominated mainstream economic thought since the late 19th century is its neglect of the social and socio-psychological context in which the economic system functions. It simply assumes that people behave in the same way at all times and everywhere. This assumption is not restricted to economics. John Rawls developed an entire theory of justice on the basis of the idea that if choices are made without the chooser being aware of the eventual consequences of his choice for himself personally his choice would be “fair”. What Rawls is taking for granted is Aristotle’s assumption that it is “a peculiarity of men that they possess a sense of the just and the unjust”. Willy-nilly this implies that what he or the current American middle class assumes to be fair is fair. Aristotle believed that this “common understanding of justice as fairness makes a constitutional democracy,” and that “the basic liberties of a democratic regime are most firmly secured by this conception of justice”. Aristotle lived in a society which accepted slavery as a normal condition. Had Rawls lived in another era, or even today in a tribal West African environment, he would hardly have adopted this kind of assumption. To believe that behind the “veil of ignorance” (that is, ignorance about their own position in society) people would elect to live in a society in which each individual enjoys equal rights, and inequalities would only be justified on the basis of competition and in so far as they operate to everyone’s advantage, presupposes an egalitarian competitive culture in which changes in inequality can be justified only if they do not reduce the welfare of the worst-off. But this was the specific historical product of postwar Capitalism. Take out this presupposition and Rawlsian justice becomes a travesty. As said before, an egalitarian society is not inscribed into any historical plan, and people consider “just” what they have been accustomed to regard as such. The same is true for competition. Members of Guilds did not and were not allowed to compete with each other. They did not find their places in society on the basis of economic competitive proficiency. Kings were born into their status and their privileges were considered fair. Tribal chiefs are selected from particular families and their elevated social position is taken to be self-evident.