New Horizons in Law and Economics series
Chapter 2: The Foundation: A New Measure for Economic Efficiency
2. The foundation: A new measure for economic efﬁciency 2.1 WHY A NEW MEASURE IS NEEDED In Chapter 1, I suggested that criticisms of normative economic analysis have eroded its use and particularly its moral authority. In this chapter I offer a set of seven axioms to address these shortcomings, based on considerations of usefulness and acceptance, on which a new normative criteria can rest. These axioms are then the social welfare function promised in Chapter 1. 2.2 CRITERIA FOR A NEW MEASURE OF EFFICIENCY Sen (1995, p. 11) notes that it is difﬁcult to agree upon a rule for measuring social welfare because of the disparate considerations that pull us in different directions when we attempt to evaluate policies or welfare procedures. The goal I set for myself here is ambitious; it is to suggest a set of principles and accompanying procedures which will provide an ethical basis for beneﬁt– cost analysis.1 The failure of ‘the New Welfare Economics noted in Chapter 1 was guaranteed, as its objective was the unattainable one of a value-free measure’ (Chipman and Moore 1978, p. 581). Both the undesirability and impossibility of such value-free measures are now well recognized (ibid.; Sen 1995; Hammond 1985). Criteria that are used to determine what is ‘good,’ or ‘better,’ or ‘best’ must encompass a deﬁnition of ‘good,’ or ‘better,’ or ‘best.’ Determining what is ‘good’ cannot, by deﬁnition, be a value-free process. Who would wish it to be...
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