Beyond Keynes, Volume One
Edited by Shelia C. Dow and John Hillard
Chapter 8: Classical liberalism in an environment of rational choice involving commitment and security as we as agreed
8. Classical liberalism in an environment of rational choice involving commitment and security as well as greed M.C. Howard and R.C. Kumar1 I INTRODUCTION This chapter examines the liberal theory of voluntary contract and violent conﬂict. Section II provides an outline of the theory, followed by ﬁve sections that subject it to criticism. The standard of evaluation throughout is rational choice analysis, and four deﬁciencies are emphasized: private information, bounded rationality, indivisibilities and the absence of other Debreuvian characteristics in goods. In section VIII we conclude by discussing some of the implications of our results. II LIBERALISM ON VOLUNTARY EXCHANGE AND VIOLENT CONFLICT From the very beginning, liberalism has celebrated voluntary contract on the grounds that violent predacity necessarily involves deadweight losses, while mutual gains can result from specialization joined to exchange.2 Coupled with claims justifying very speciﬁc forms of egalitarianism, these arguments have aﬃrmed the eﬃciency and justice of free market relations organized on capitalist lines. Social contract theories of political authority have also been similarly founded, and even a ‘withering away’ of centralized states has been entertained as feasible by some liberals, thereby allowing markets to organize human activities comprehensively.3 Recent results in game theory can be woven together in support of these positions. We might sketch the liberal case in the following way. Imagine a set of agents, each of whom has preferences representable by a continuous utility function that is deﬁned over the same divisible commodities. All agents face the...
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.