On Thu, 2 Dec 1999 17:43:11 +0000 DANIEL.DAVIES at flemings.com writes:
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>>Yes, Posner's wealth maximization principle at work. The problem
>>with that is it privileges economic efficiency as a value over
>>everything else including especially distributive justice. For
>>the L & E crowd including Posner, Pareto's optimality principle
>>is everything, even though all that principle says that a
>>given allocation of resources from the standpoint of efficiency
>>if no one's welfare can be improved except at the expense of
>>someone else. As Paul Samuelson (hardly a flaming revolutionary)
>>used to point out in his textbook, the translation from Pareto
>>optimality to what is socially optimal requires us to assume
>>that the initial distribution of resources is normatively acceptable.
>>Pareto's optimality principle cannot tell us if that is so or not.
>>Thus the application of the wealth maximization principle to
>>the law by judges like Posner in effect privileges as a matter
>>of principle, the existing distribution of resources and the
>>economic system which is responsible for it. To ignore
>>questions of distributive justice is to enshrine exisiting
>>economic injustice.
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>It's much, much worse than that.
Undoubtedly so.
> There's actually not much wrong with
>the
>Pareto principle itself -- all it says is that if a decision can be
>made
>which makes someone better off and no-one worse off, then it that
>decision
>should be made.
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>But, of course, in a case where the Pareto principle was applicable,
>why
>would anyone bother taking it to court? As a practical rule of
>justice,
>it's just miles too weak.
>
I suppose that an argument could be made that in many cases people may find that opportunity costs deter them from engaging in exchanges that would otherwise be mutually beneficial for them. I also get the impression that many L & E folk do think that too many disputes wind up in the courts because at least one of the parties involved is convinced that they can get a better deal for themselves than they could by negotiating the situation out of court. I believe that the L & E people have been among the loudest voices contending that our society is overly litigious.
>In order to support "overall maximisation" as a goal, you have to make
>the
>much stronger assumption that there is no diminishing marginal utility
>--
>that a dollar is a dollar whether it goes to Bill Gates or to an
>ordinary
>worker. This is junk economics -- it has provably false implications
>for
>people's risk-taking behaviour. And, of course, it's morally
>repugnant.
Howver, it should be noted that many neoclassical economists have long argued that interpersonal utilities are not comparable. That way they can reject utilitarian arguments for income redistribution which invoke the principle of marginal utility to argue that redistribution of income can increase total utility since a dollar for a pauper has a higher marginal utility than a dollar for Bill Gates or Donald Trump.
However, even putting that issue to the side for the time being, it should be noted that many of the L & E people like Posner draw upon the Chicago School's version of neoclassical economics which typically downplays the extant to which market failures exist in capitalist economies. Even when the existence of market failures are acknowledged, Chicago School economists typically argue that government interventions to correct them are likley to make things worse rather than better. On the other hand there are a good many mainstream economists who would dispute this view, arguing that market failures are more ubiquitous than the Chicago School supposes and that government interventions can be crafted to improve things. Therefore, even accepting the wealth maximization principle it does not follow that the types of solutions favored by many of the L & E crowd including Posner to questions of anti-trust law or contract are necessarioy the most optimal even by their own standards.
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>And in any case, if you could find a wealth-maximising solution that
>involved the breach of someone's property rights, I somehow doubt
>you'd
>find Posner on your side.
Undoubtedly correct.
> Just look at the scientific and economic
>hoops
>that the L'n'E crowd jump backwards through to convince themselves
>that
>environmental regulation is inefficient.
Of course if one opts for Marxian political economy as opposed to neoclassical economics then undoubtedly a good deal of the L & E approach to legal issues must be jettisoned even if we take the principle of wealth maximization as our lodestar.
Jim F.
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>dd
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>>Me thinks that perhaps our Justin may have fallen in
>>with a bad crowd. -:)
>
>Jim F.
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>>
>>Marta Russell
>>
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