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The Moral Conditions of Economic Efficiency

The Moral Conditions of Economic Efficiency The Moral Conditions of Economic Efficiency. by Walter J. Schultz. Cambridge: Cambridge University Press, 2001. 144 pp. $50.00. In his preface Schultz writes, “I hope this book contributes to a better understanding of the interconnection between morality and economic behavior” (xi). I believe he achieves his purpose. Schultz explores two questions. The first relates to what he refers to as “Adam Smith’s so called Invisible Hand Claim” (1): “Can a population of strict rational egoists achieve efficient allocations of commodities through market interaction in the absence of moral normative conditions?” (1; emphasis in original). His device for exploring question 1 is “the First Fundamental Theorem of Welfare Economics [(FWT)] . . . which is commonly understood to be a proof of the Invisible Hand Claim” (4). With admirable rigor Schultz lays out his definitions and proceeds to a proof of the FWT “given a set of standard assumptions under which efficient allocations of commodities are socially achieved” (15). Then having completed the proof he says, in effect, Ah ha! But we’ve assumed away noncompetitive behavior and externalities that lead to Pareto-inferior outcomes. With respect to noncompetitive behavior, Schultz demonstrates that people will have every incentive to pursue any http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png History of Political Economy Duke University Press

The Moral Conditions of Economic Efficiency

History of Political Economy , Volume 35 (3) – Sep 1, 2003

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Publisher
Duke University Press
Copyright
Copyright 2003 by Duke University Press
ISSN
0018-2702
eISSN
1527-1919
DOI
10.1215/00182702-35-3-575
Publisher site
See Article on Publisher Site

Abstract

The Moral Conditions of Economic Efficiency. by Walter J. Schultz. Cambridge: Cambridge University Press, 2001. 144 pp. $50.00. In his preface Schultz writes, “I hope this book contributes to a better understanding of the interconnection between morality and economic behavior” (xi). I believe he achieves his purpose. Schultz explores two questions. The first relates to what he refers to as “Adam Smith’s so called Invisible Hand Claim” (1): “Can a population of strict rational egoists achieve efficient allocations of commodities through market interaction in the absence of moral normative conditions?” (1; emphasis in original). His device for exploring question 1 is “the First Fundamental Theorem of Welfare Economics [(FWT)] . . . which is commonly understood to be a proof of the Invisible Hand Claim” (4). With admirable rigor Schultz lays out his definitions and proceeds to a proof of the FWT “given a set of standard assumptions under which efficient allocations of commodities are socially achieved” (15). Then having completed the proof he says, in effect, Ah ha! But we’ve assumed away noncompetitive behavior and externalities that lead to Pareto-inferior outcomes. With respect to noncompetitive behavior, Schultz demonstrates that people will have every incentive to pursue any

Journal

History of Political EconomyDuke University Press

Published: Sep 1, 2003

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