Value Judgements, Positivism and Utility Comparisons in Economics

The issue of interpersonal comparisons of utility is about the possibility (or not) of comparing the utility or welfare or the mental states in general, of different individuals. Embedded in the conceptual framework of utilitarianism, interpersonal comparisons were admissible in economics as part of the theoretical justification of welfare policies until the first decades of the twentieth century. Under the strong influence of the scientific philosophy of positivism as reflected in the works of early neoclassical economists and as epitomized by Lionel Robbins, utility comparisons were subsequently rejected as a value judgement. Robbins’ methodological stance is still prevalent among mainstream economists. Despite the explicit rejection of comparability by the majority of economists, interpersonal comparisons are necessary for many key policy issues, such as progressive taxation, social welfare policies, GDP based welfare comparisons, cost-benefit analysis, and public goods provision. In this paper, the case of interpersonal utility comparisons is discussed as an illustrative example of the usefulness of the study of the role of value judgements, and generally of the interrelationship between ethics and economics. It is also argued that the current tension between theory and policy practice might be resolved through the efforts of prominent economists and philosophers to challenge positivism, and especially its problematic treatment of value judgements and of ethical assumptions in general

Interpersonal comparisons of utility and the policy paralysis problem

Several "Paretian" welfare rules are equivalent when policymakers know agents' characteristics, e.g., a policy is optimal if (a) any other policy making someone better off harms some agent, or (b) it is the maximum of some social welfare function. This paper extends these and other rules to environments where policymakers have a probability distribution over a state space of possible models. Under weak conditions, rule (a), which postulates ex ante preferences for agents, recommends some change from almost every status quo policy. Unfortunately, (a) requires a demanding form of interpersonal welfare comparability. Rule (b) labels all policies optimal if the state space obeys a weak diversity condition. Since the probabilities of states are irrelevant for this result, only a small perturbation of a model with no uncertainty generates policy paralysis.