Efficiency, Equality, and Happiness: On the Ethical Foundation of Public Policy

Abstract:     
Discussing fundamental issues on the ethical foundation of public economic policy, this paper arrives at conclusions that will surprise most economists. While reviewing relevant contributions, it argues for happiness as the ultimate objective, in contrast to economists' preference for preference. It sanctions utilitarianism and the apparently extremely right-wing principle of 'treating a dollar as a dollar' whomsoever it goes to, except in the general tax/transfer system. This principle largely frees us from the paradox of interpersonal cardinal utility - the practical difficulty of obtaining interpersonal cardinal utilities necessary for social choice. The arguments are based on compelling ethical and positive logic, not dogmatic ideology.

JEL Classifications: D63, H00

Working Paper Series