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Miscellaneous Work in Welfare Economics and Ethics

  • Welfare Economics,” in G.R. Feiwel (ed.) Issues in Contemporary Microeconomics and Welfare (London: Macmillan, 1985), ch. 13, pp. 405–434.

  • Some Assumptions of Contemporary Neoclassical Economic Theology,” in G.R. Feiwel (ed.) Joan Robinson and Modern Economic Theory (Macmillan, and New York University Press, 1989), ch. 4, pp. 186–257; Spanish translation published in Estudios Económicos de el Colegio de México 5 (1990), 3–81.

  • Theoretical Progress in Public Economics: A Provocative Assessment,” Oxford Economic Papers 42 (1990), 6–33; also in P.J.N. Sinclair and M.D.E. Slater (eds.) Taxation, Private Information and Capital (Oxford: Clarendon Press, 1991).


    The following twelve issues are each briefly discussed: the blindness of the invisible hand to injustice; a misleading efficiency theorem; truthful revelation of feasibility constraints; delusions of first best; deadweight losses as sunk costs; markets as failures; the nth best as enemy of the good; intermonetary comparisons of gains and losses; few worthwhile changes are small; surplus economics; surplus econometrics; and unbalanced policies. Unbalanced policy changes should be evaluated by estimating the probabilities of different joint frequency distributions of welfare relevant attributes and welfare net gains for all individuals in the population, together with the budget deficits or surpluses PDF copy

  • The Moral Status of Profits and Other Rewards: A Perspective from Modern Welfare Economics,” in R. Cowan and M.J. Rizzo (eds.) Profits and Morality (Chicago: University of Chicago Press, 1995), ch. 4, pp. 88–123.


    Standard neoclassical welfare economics justifies competitive profit maximization by firms. But when lump-sum transfers are used to achieve distributive justice, a firm’s owners and managers are entitled only to “normal” profits paid for services rendered. Yet with private information about effort or technology, not even efficient production is always desirable, let alone profit maximization. Furthermore, some profits should then be distributed specifically to the firm’s managers as incentive payments. In intertemporal economies these conclusions are reinforced, and profits harder even to define. Finally, it is argued that valuing freedom for its own sake may make profits more acceptable than otherwise.
    PDF file of preprint

  • How to Limit Greenhouse Gas Emissions: Some Lessons from Public Economic Theory,” in H. Abele, T.C. Heller and S.P. Schleicher (eds.) Designing Climate Policy: The Challenge of the Kyoto Protocol (Vienna: Service Fachverlag, 2001), pp. 89–107. PDF file of preprint

  • (with Giovanni Facchini and Hiroyuki Nakata) “Spurious Deadweight Gains,” Economics Letters 72 (2001), 33–37.

    Marshallian consumer surplus (MCS) is generally an inaccurate measure of welfare change because it neglects income effects. Suppose these effects overturn the usual demand response to a price change. Then, the deadweight loss from a distortionary tax or subsidy has the wrong sign, that is, there is a spurious deadweight gain. PDF file of preprint