Neoclassical Logic

[Brad DeLong]

>
>Fair enough you arrogant prick. Lets go....
>
>
>
>>  > Look. Somewhere I have Ceci Rouse's notes from when she was a section
>>  > leader the last time Larry Summers taught at Harvard, undergraduate
>>  > public finance, Economics 1410. IIRC, one section of them goes
>>  > something like this: "Divergence between maximizing real GDP and
>>  > maximizing social welfare... monopoly... externalities... income
>>  > distribution... the market maximizes *a* social welfare function, but
>>  > unless the distribution of wealth is exactly right there is no reason
>>  > to believe that it maximizes *the* social welfare function..."
>*****************
>Who determines *the* social welfare function in order to generate 
>the utilities
>which are then used to calculate "the equilibrium rate of investment" so that
>the distribution of wealth is "roughly right" [let alone exactly right]? Or is
>it the other way around with "the equilibrium rate of investment" 
>struggling via
>imperfect information that leads to the divergence between maximum 
>GDP and *the*
>social welfare function? What does it mean to say the distribution 
>of wealth can
>be exactly right? Nothing.

I oscillate back and forth between John Rawls's social welfare 
function (social welfare is the utility of a member of the most 
disadvantaged class) and the belief that social welfare values each 
doubling of individual or household material welfare equally--that 
social welfare is raised by as much when a Bengali peasant's lifetime 
income doubles from $6000 to 12000 as when Bill Gates's lifetime 
income doubles from $50 billion to $100 billion.

After all, if you don't have a vision of what a good distribution 
would be, it's kinda hard to criticize current arrangements...

Brad DeLong