The Normative Economics of Unanimity and Equality: Equity, Adequacy and Fundamental Dominance with Applications to Matchings and Wages

Abstract

Normative economics is applied social ethics. It should thus first of all rest on a sound philosophical basis. For instance, rational social choice has often emphasised consistency rationality in the sense of a social ordering (since Pareto’s Social Welfare Function, 1913), while it is more basic to abide by epistemic rationality, that is, the best use of all information (about both facts and ethics, ‘is’ and ‘ought’). Rational normative economics — like rationality in any complex decision problem — thus results from what John Rawls aptly calls ‘considered judgement in reflective equilibrium’. This implies several things:

• 1. Use of principles or criteria, which are more or less general (be they ‘scientific laws’ or moral rules or principles or ‘maxims’, in particular application of the ‘generalisation principle’ of meta-ethics, or even ‘rules of thumb’, norms or traditions).

• 2. For each principle, evaluative consideration back and forth be- tween its general formulation and its applied consequences until ‘equilibrium’ is reached (this is Rawls’s use of the expression, for determining principles of social ethics).

• 3. For each principle, evaluative consideration of all its aspects, meanings, requirements, implications and applications, and its domains of meaningfulness, relevance, acceptability, and decisiveness.

• 4. Use of several criteria: this is what characterises a ‘complex’ choice situation.

• 5. Analysis of the relations among the criteria, in particular the logical relations: is their set inconsistent (as with Arrow’s five social-choice criteria), or on the contrary do they surprisingly imply one another, are they unexpectedly equivalent, so that their different formulations enrich their meaningfulness (as the com- parisons of inequalities in Kolm, 1966, 1976, 1977); are they complementary in specifying the choice; or does one imply the other so that the former is a specification of the latter and the latter can be taken as an extension of an interesting former criterion beyond its domain of applicability?¹

I wish to thank Gabrielle Demange and Kenneth Arrow for helpful advice in the preparation of this paper.