Economics and the Good Life

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Economics and the Good Life

The coercive acts of government do not increase welfare, de Jouvenel argues. In this masterful book, the author reduces statist welfare economics to rags and tatters.

Modern welfare economics has been infected by the quantitative delusion, he argues. A society should be judged, welfare economists contend, by the extent to which it maximizes individual satisfactions. But of course we cannot in practice compare the satisfactions of one person with those of another. Is welfare economics then doomed? (Attempts to avoid the problem, e.g., through appeal to the Pareto criterion, have only very limited use in practice.) Here the quantitative temptation proves too strong for many economists.

Since we cannot directly assess satisfaction, why not use money as a proxy for utility? To increase a society's wealth more than any available alternative becomes the goal of policy. (In sketching this view, de Jouvenel anticipated the precise position advanced by Richard Posner, of "law and economics" fame, in his voluminous works.)

If by welfare we mean individual choice, nothing beyond the actions of free individuals counts. If one challenges these preferences, one has shifted to a new notion of welfare. Thus (and here at last is the point) the "choices" of the State cannot be assessed by the criteria used in individualist welfare economics.

De Jouvenel is a master of the example that clarifies a difficult concept.

David Gordon writes: "Many people understand what is wrong with rent control and similar misguided measures; but few possess de Jouvenel's willingness to accept the consequences of what they grasp in theory: the government programs must be immediately ended. For his clear view of this point, and for his penetrating criticism of applying welfare economic criteria to the state, de Jouvenel deserves the attention of everyone interested in Austrian economics."

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