2 - A Contextualized Proof of the First Fundamental Theorem of Welfare Economics

Summary

In this chapter, we begin to consider responses to our first question:

Can a population of strict rational egoists achieve efficient allocations of commodities in the absence of moral normative constraints?

To determine the role that moral normative constraints play in the achievement of efficient outcomes of trade, I first develop a framework for analyzing types of social situations. I specify some of the variables in the framework so as to depict a social situation in which moral normative constraints are rigorously excluded. I then present a version of the First Fundamental Theorem of Welfare Economics given a set of standard assumptions under which efficient allocations of commodities are socially achieved. Finally, I compare the assumptions of the First Welfare Theorem with those of the social situation in which moral normative constraints are absent. A thorough understanding of any proof of the First Welfare Theorem must include the role of every relevant assumption. However, my project here is not quite so strong. I only examine some relevant implicit assumptions. My intention is to compare a microeconomic model of social interaction to a model of a specific type of social situation so as to distinguish carefully some, but nevertheless very important, of their respective assumptions.

In the chapters that follow, I argue a Moral Thesis; for strict rational egoists, Pareto-optimal equilibrium allocations of commodities achieved through market interaction are not attainable without moral normative constraints. However, even though proving the Moral Thesis is important in itself, this thesis is not our ultimate objective.