57 Pages Posted: 18 Dec 1999
Date Written: December 1999
Amartya Sen has shown how liberal rights can produce outcomes that everyone would prefer to avoid, thereby violating the Pareto principle. Similarly, Louis Kaplow and Steven Shavell identify potential conflicts between the Pareto principle and notions of "fairness" which give weight to considerations other than the overall utility level of each individual. Whereas Sen claims that the conflict he identifies shows the unacceptability of the Pareto principle as a universal rule, Kaplow and Shavell claim that the conflict they identify suggests a critique of all fairness notions (including liberal rights). I will argue in this paper that both claims are based on questionable premises. This paper proposes a middle course that I will argue resolves the supposed conflicts while remaining faithful to both liberal fairness principles and the Pareto principle. This paper will present an example of a social welfare function that can incorporate fairness principles and still comply with the Pareto principle.
JEL Classification: K00, D60, D63
Suggested Citation: Suggested Citation
Chang, Howard F., A Liberal Theory of Social Welfare: Fairness, Utility, and the Pareto Principle (December 1999). University of Pennsylvania Law School, Institute for Law and Economics, Working Paper No. 272. Available at SSRN: https://ssrn.com/abstract=173768 or http://dx.doi.org/10.2139/ssrn.173768