Some Fundamentals of the Economic Role of Government
The objective of this chapter is to answer the question, ‘What are the most fundamental things that can be said about the economic role of government?’ The question should be understood, first, to ask what can be said of government at the truly most fundamental level and, second, to require a positive, non-normative answer. The chapter constitutes a precis, as it were, of my answer. The answer is subjective, but it is intended to be non-normative.
Economic Activity and Institutions: Taking Stock
If we start from the premise that institutions are socially constructed (Berger and Luckmann 1966) and that economic activity is socially instituted (Polanyi 1957) and a situated process (Granovetter 1992), we may argue that economic phenomena are, in one form or another, also institutional phenomena. The intertwined relationship between institutions and human (including economic) activity has captured the imaginations of economists, political scientists, and sociologists since the late nineteenth century. In economics, attempts to adopt the "scientific method" were challenged unsuccessfully by economists of the German historical school led by Gustav Schmoller in the early 1900s. Drawing on the ideas of Immanuel Kant and Georg Wilhelm Friedrich Hegel, the group asserted that simplistic assumptions about the "rational man" and economic equilibria were unfounded and the quest for a set of universal laws for economics fruitless. Following the lead of their German contemporaries some American institutionalists, notably Thorstein Veblen, were also suspicious of abstract universal principles, interested in solving practical problems, and aware of the role of events and historical contingencies (Scott 2001). Early institutionalists pointed to pervasive market power and to indeterminacy even under perfect competition; the role of social institutions in shaping individual preferences (and hence the importance of institutions as the subject of economic analysis); the usefulness of pragmatic and psychologically realistic models of economic moti-
Multi-Dimensional Utility and the Index Number Problem: Jeremy Bentham, J. S. Mill, and Qualitative Hedonism
This article develops an unconventional perspective on the utilitarianism of Bentham and Mill in at least four areas. First, it is shown that both authors conceived of utility as irreducibly multi-dimensional, and that Bentham in particular was very much aware of the ambiguity that multi-dimensionality imposes upon optimal choice under the greatest happiness principle. Secondly, I argue that any attribution of intrinsic worth to any form of human behaviour violates the first principles of Bentham's and Mill's utilitarianism, and that this renders both authors immune to the claim by G. E. Moore that they committed a ‘naturalistic fallacy’. Thirdly, in light of these contentions, I find no flaw in Mill's ‘proof of utility’. Fourthly, I use the notion of intrapersonal utility weights to provide an interpretation of Mill's qualitative hedonism that is entirely consistent with his value monism.