2 - The Common Good and the Role of Government in Regulating Markets

Summary

The common good is a term used in different ways in different contexts and, depending on the context, can be defined aggregatively or holistically. In economics, notably welfare economics, the common good is typically defined aggregatively. That is, the whole or common good of a group of people is determined by aggregating the good enjoyed by each of its individual members. In this conception, the common good can be represented by a social welfare function specifying how the economic welfare of a society is comprised of the levels of economic welfare enjoyed by its constituent individuals. This device is utilitarian in concept and indicates how social welfare rises or falls with increases or decreases in the welfare of individual consumers, where welfare is defined in its narrow economic sense to depend exclusively on the consumption of material goods and services. For the economist, then, the relationship between the common good and government regulation of markets consists in identifying circumstances in which government regulation alters the economic welfare of individual consumers in ways that raise social welfare as measured by the social welfare function.