Toward a Libertarian Reconstruction of Neoclassical Welfare Theory

by Liberty and Power

The latest issue of the Journal of Private Enterprise, v. 24, n. 1 (Fall 2008) contains my article:"Toward a Libertarian Reconstruction of Neoclassical Welfare Theory." Unfortunately, the issue is not available online except through library subscriptions.

Here is the abstract: Many libertarians, especially those inclined toward the Austrian school of economics, counter the market-failure justification for government intervention by denying any legitimacy whatsoever to the neoclassical concept of efficiency. But properly interpreted, neoclassical efficiency,rather than providing an open-ended justification for all sorts of government intervention, provides one of the most powerful and comprehensive objections to government coercion in general.

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Jeffrey Rogers Hummel - 12/23/2008

If they did, I wouldn't have needed to write the article in the first place. But what I can say is that, except for my anarchist conclusion (summarized in my comment below), nearly everything I've argued has probably been explicitly embraced by one neoclassical economist or another. I've suggested some reasons why many economists have resisted these implications within the article itself. But I would add, in economics as in other disciplines, it often takes long, drawn out discussions and debates before the full implications of any theory are completely worked out and accepted.

Jeffrey Rogers Hummel - 12/23/2008

Outside of suggesting you read the entire article (which I know in your case you have already done), the best I can do is reprint the penultimate paragraph:

"Relying upon preferences will no more yield perfect efficiency
than will relying on market incentives or on government policy. Yet, this option reveals an inner contradiction in looking to government
to correct market failures. If transaction costs such as the free-rider problem are decisive obstacles, a strictly limited government might be necessary to solve some market failures, but is unattainable. If transaction costs are not decisive, a strictly limited government becomes attainable but no longer necessary. The fact that people
eschew the free-rider incentive to limit government coercion implies
that they can also eschew the free-rider incentive to provide
themselves market efficiency voluntarily"

Daniel B Klein - 12/18/2008

The abstract doesn't indicate the reconstruction. Can you elaborate on that?

David T. Beito - 12/18/2008

Is there any good evidence that significant numbers of neo-classical economists themselves interpret their welfare theory in this way? If not, why don't they?