69 Pages Posted: 11 Jan 2006 Last revised: 27 Apr 2010
In an attempt to cabin the open-endedness of weasel words, traditional law and economics purports to offer certainty. This article, however, argues that this scholarship deeply misunderstands modern welfare economics and suggests, contrary to the usual economic denigrations of public bureaucracy, that a robust public administrative state is essential to improving social welfare.
The article first argues that the 'wealth maximization' standard of traditional law and economics is fundamentally flawed. It then addresses issues central to the economic literature of social welfare, which have yet to make their way meaningfully into the law and economics discourse. The shift in welfare economics from interpersonal comparisons of marginal utility to ordinal rankings has made the discipline fall under the spell of seemingly intractable theoretical puzzles. Yet, if welfare economics accepts that it is not an exact science, it can begin to outgrow its puzzles and provide useful input to policymakers. Just like lawyers must deal with weasel words, welfare economists must deal with weasel numbers. While both are useful, neither will provide a first-best solution.
The article concludes by suggesting a framework within which to analyze social welfare based on mathematical sets, arguing that since elegant solutions to this social welfare function may not exist, institutional choice becomes paramount. Private contractual ordering does not provide a satisfactory resolution. For their part, majority voting and judicial countermajoritarianism, while essential, have inherent institutional limitations that prevent them from being complete solutions to the puzzle of social welfare. Revamped public administrative law presents a start.
Keywords: welfare economics, law and economics, social welfare, social choice
JEL Classification: D60, D61, D63, D71, D73, K00
Suggested Citation: Suggested Citation