Cover

Contents

List of Theorems

List of Figures

Acknowledgments

Introduction

0.1 The Unnoticed Crisis

0.2 Our Argument

Part 1 Limits of Traditional Welfare Theory

1 Traditional Welfare Theory

1.1 Classical Utilitarianism

1.2 Neoclassical Welfare Theory

1.2.1 Manifest Preference and the Robbins Principle

1.2.2 Fundamental Theorems of Neoclassical Welfare Theory

1.2.3 The Unspecified Bergsonian Social Welfare Function

1.3 The New Contractarian Approach

1.3.1 First Principles

1.3.2 Major Social and Economic Institutions

1.4 Neoclassical Objections to Classical Utilitarianism

1.4.1 From Cardinal Utility to Choice Theoretic Framework

1.4.2 Sanctity of the Individual Unprotected

1.5 Neoclassical Incompleteness

1.5.1 Compensation Tests: A Cavalier Critique

1.5.2 Impossibility Theorems

1.5.3 Minimizing the Significance of Incompleteness

1.6 Contractarian Objections to Neoclassical Theory

1.7 Comparing the Three Approaches

1.8 Strengths of Traditional Welfare Theory

1.8.1 Sanctity of the Individual

1.8.2 Welfare as Individual Well-being

1.8.3 Distinguishing Evaluative Theories

1.8.4 Summary

2 The Labor Process

2.1 The Labor Exchange

2.1.1 Karl Marx

2.1.2 Cornelius Castoriadis

2.1.3 Stephen Marglin

2.1.4 Harry Braverman

2.1.5 Herb Gintis

2.1.6 Samuel Bowles

2.1.7 Gil Skillman

2.2 Economic Discrimination

2.2.1 Kenneth Arrow

2.2.2 Michael Reich

2.3 Segmented Labor Markets

2.3.1 Peter Doeringer and Michael Piore

2.4 Influence of the Traditional Paradigm

3 Externalities and Public Goods

3.1 Theory of Public Finance as of 1970

3.2 Previous Treatments

3.2.1 E. K. Hunt

3.2.2 Theodore Groves and Company

3.3 Influence of the Traditional Paradigm

4 Endogenous Preferences and Institutions

4.1 Endogenous Preferences

4.2 Previous Treatments

4.2.1 John Stuart Mill

4.2.2 C. C. Von Weizsacker and Robert Pollak

4.2.3 Herb Gintis

4.3 Evaluation of Previous Treatments

4.4 Institutions and the Neoclassical "Blind Spot"

4.5 Institutional Economics Fails to Come to the Rescue

4.6 What Is at Stake

Part 2 A New Welfare Theory

5 A New Welfare Paradigm

5.1 People and Society

5.2 The Human Center

5.2.1 Huxley Versus Kropotkin

5.2.2 The Laws of Evolution Reconsidered

5.2.3 Human Nature

5.2.4 Natural, Species, and Derived Needs and Potentials

5.3 The Institutional Boundary

5.4 Complementary Holism

5.4.1 Four Spheres of Social Life

5.4.2 Relations Between Center and Boundary and Spheres

5.5 A Qualitative Model of the Economic Sphere

5.5.1 Flow Variables Described

5.5.2 State Variables Described

5.5.3 Flow Variables Formalized

5.5.4 State Variables Formalized

5.5.5 Possibility Sets, Choice, Information, and Incentives

6 A New Welfare Theory

6.1 Formalizing Endogenous Preferences

6.1.1 Model 1: An Individual with Endogenous Preferences

6.2 Endogenous Preferences and Welfare Theorems

6.2.1 Round One: Endogenous Preferences Do Matter

6.2.2 Round Two: Endogenous Preferences Do Not Matter

6.2.3 Round Three: Endogenous Preferences Do Matter

6.3 Evaluating Human Development

6.3.1 Development Patterns and Human Nature

6.3.2 Alternative Ways to Evaluate Human Development

6.3.3 Summary

Part 3 New Results

7 Markets

7.1 Laying Old Debates to Rest

7.2 Misconceiving Public Enterprise Market Economies

7.2.1 Employee-Managed Market Economies

7.2.2 State-Managed Market Economies

7.2.3 An Overzealous Defense of Public Enterprise Market Economies

7.3 New Criticisms of Markets: Snowballing Individualism

7.4 Markets as Cybernetic Disasters

7.5 Market Roles and Incentives

7.6 Market Inefficiency

7.7 The Prevalence of Externalities and Public Goods

7.7.1 Market Incentives to Create Negative External Effects

7.7.2 The Inadequacy of Traditional Solutions

7.7.3 Incentive-Compatible Mechanisms

7.8 An Imperfection Theorem

7.9 "Snowballing" Nonoptimality

8 Private Enterprise

8.1 Ownership and Income Distribution

8.1.1 The Flexibility Theorem Reconsidered

8.1.2 Income Distributions in Practice

8.1.3 Economic Systems and Implicit Maxims

8.2 Weaknesses in Conflict Theory

8.2.1 Rebuttal to "Labor Power" Versus "Labor"

8.2.2 Rebuttal to Asymmetrical Information

8.2.3 Rebuttal to Alienated Labor

8.2.4 Malfeasance Is Universal

8.2.5 Limitations of Single Period Models

8.2.6 The Importance of Human Characteristics

8.3 Reformulating Conflict Theory

8.3.1 Human Characteristics and Conflict of Interest

8.3.2 Competition and Power

8.3.3 Gintis and Katzner's Invisible Hand Revisited

8.3.4 Malfeasance Reconsidered

8.3.5 Reducing Solidarity

8.3.6 Reducing Self-Management Capabilities

8.3.7 Internal and External Labor Markets

8.4 An Imperfection Theorem

8.5 Snowballing Nonoptimality

8.6 A Double Indictment

9 Central Planning

9.1 A Centrally Planned Public Enterprise Economy

9.1.1 Model 4: The Central Planning Problem

9.2 Round One: Efficiency of Central Planning

9.2.1 Calculating the Plan

9.2.2 Distribution of Final Goods

9.2.3 Job Assignment

9.2.4 Summary of the "Old Debate"

9.2.5 the "Old Debate" and Endogenous Preferences

9.3 Round Two: The "Modern Debate"

9.3.1 Discovering the Technical Coefficients of Production

9.3.2 In Search of the Social Welfare Function

9.3.3 Material Incentives for Carrying out the Plan

9.3.4 Summary of the "Modern Debate"

9.4 Round Three: The "New Debate"

9.4.1 Central Planning as a Cybernetic Disaster

9.4.2 Central Planning and Authoritarian Roles

9.4.3 Central Planning's Inherent Bias Against Self-Management

9.5 An Imperfection Theorem

9.5.1 Model 5: An Economy with a Bias Against the Supply of Self-Managed Work

9.6 Snowballing Nonoptimality

9.6.1 An Important Caveat

9.6.2 Summary: Snowballing Authoritarianism

9.7 Central Planning and the Coordinator Class

10 Conclusion

10.1 Limits of Traditional Welfare Theory

10.2 A New Welfare Paradigm and Theory

10.3 New Results

10.3.1 Markets

10.3.2 Private Enterprise

10.3.3 Central Planning

10.3.4 Summary

10.4 Toward a New Economic System

Notes

Index