Economic theory has generally acknowledged the role that institutions have in shaping economic space. The distinction, however, between physical and institutional descriptions of economic activity has not received adequate attention within the mainstream paradigm. In this paper I show how a proper distinction between the physical and institutional space in economic models will help clarify the concept of externality and provide a better interpretation of the relationship between externality and nonconvexity. I argue that within the Arrow-Debreu framework externality should be viewed as incongruence between the physical and institutional descriptions of the economic space. I also argue that, contrary to conventional wisdom, detrimental externality has no special association with nonconvexity. Starrett's (1972) fundamental nonconvexity has to do with the specific institutional structure of Arrow markets rather than the detrimental nature of externality. Indeed, Arrow markets may not eliminate externalities. In a similar vein, it is not detrimental externality, however intense, that causes the production possibility set to become nonconvex, as argued by Baumol and Bradford (1972), but the particular interpretation of intensity that would make even conventional production possibility sets nonconvex. These points become apparent when one distinguishes between the convexity of the physical and institutional production sets.

The so-called “Levelling Down Objection” is commonly believed to occupy a central role in the debate between egalitarians and prioritarians. Egalitarians think that equality is good in itself, and so they are committed to finding value even in such equality as may only be achieved by “levelling down”–i.e., by merely reducing the better off to the level of the worse off. Although egalitarians might deny that levelling down could ever make for an all-things-considered improvement, they cannot deny that it may make things better in at least one respect. Prioritarians, on the other hand, do deny this; according to them, levelling down cannot make things better in any respect. In this paper I argue that the Levelling Down Objection leans far too heavily on a heretofore unanalysed notion: namely, the notion of “being better in this or that respect.” I propose what I take to be a plausible analysis of that notion, and show that, given the proposed analysis, the prioritarian is no less vulnerable to the Levelling Down Objection than is the egalitarian. I conclude that proponents of the Levelling Down Objection need either to suggest a better analysis or abandon the Levelling Down Objection altogether.

Nobody in this debate questions the point that neuroeconomics remains full of potential, and little else as yet. If so, that really is progress of sorts. I was getting afraid that we would have to open nominations for the Captain Ahab Award for obsessive work on the promotion of neuroeconomics.

This essay is a review of Ronald Dworkin's recent essay on equality of resources (Dworkin, 1981b). Many of the ideas discussed by Dworkin have also been examined by economists with, I believe, considerable insight. Unfortunately, economists tend to write for economists, not for philosophers, and their insights are seldom communicated properly to noneconomists. Of course, the same criticism can be levied on philosophers! But perhaps legal theorists are less subject to this criticism. One of the great contributions of Dworkin is that he is very readable; and the quality of his exposition makes these ideas accessible to a wide audience of philosophers, lawyers, and social scientists in general.

The game theoretic notion of best-response reasoning is sometimes criticized when its application produces multiple solutions of games, some of which seem less compelling than others. The recent development of the theory of team reasoning addresses this by suggesting that interacting players in games may sometimes reason as members of a team – a group of individuals who act together in the attainment of some common goal. A number of properties have been suggested for team-reasoning decision-makers’ goals to satisfy, but a few formal representations have been discussed. In this paper we suggest a possible representation of these goals based on the notion of mutual advantage. We propose a method for measuring extents of individual and mutual advantage to the interacting decision-makers, and define team interests as the attainment of outcomes associated with maximum mutual advantage in the games they play.

I want in this paper to do two things. First, I want to respond to some studies that argue that people are often not rational: that people regularly and systematically depart from rationality. The conclusion itself does not worry me. I pressed for the same in a recent book (Schick, 1984). But the arguments seem to me wrong, and wrong in an interesting way. There may be something to be learned from seeing how and why they fail.

This paper replies to Christian Schubert's critical review of my work on opportunity as a normative criterion. Schubert argues that the criterion I have proposed would not command general assent because it does not recognize the legitimacy of individuals’ preferences for achieving self-development by constraining their future opportunities. I argue that my account of the ‘responsible agent’ is compatible with self-development, and that preferences for self-constraint are less common than Schubert suggests. For the purposes of normative economics, my opportunity criterion is much more generally applicable than Schubert's criterion of ‘opportunity to learn’.

This paper explores the foundations of the theory of exploitation as the unequal exchange of labour (UEL). The key intuitions behind all of the main approaches to UEL exploitation are explicitly analysed as a series of formal axioms in a general economic environment. Then, a single domain condition called Labour Exploitation is formulated, which summarizes the foundations of UEL exploitation theory, defines the basic domain of all UEL exploitation forms, and identifies the formal and theoretical framework for the analysis of the appropriate definition of exploitation.

The following is a set of reading notes on, and questions for, the Neuroeconomics enterprise. My reading of neuroscience evidence seems to be at odds with basic conceptions routinely assumed in the Neuroeconomics literature. I also summarize methodological concerns regarding design, implementation, and statistical evaluation of Neuroeconomics experiments.

Ordeals are burdens placed on individuals that yield no benefits to others; hence they represent a dead-weight loss. Ordeals – the most common is waiting time – play a prominent role in rationing health care. The recipients most willing to bear them are those receiving the greatest benefit from scarce health-care resources. Health care is heavily subsidized; hence, moral hazard leads to excess use. Ordeals are intended to discourage expenditures yielding little benefit while simultaneously avoiding the undesired consequences of rationing methods such as quotas or pricing. This analysis diagnoses the economic underpinnings of ordeals. Subsidies for nursing-home care versus home care illustrate.

In decision-making involving multiple criteria or attributes, a decision maker first identifies all relevant evaluative attributes in making decisions. Then, a dominance principle is often invoked whenever applicable: whenever an option x is better than an option y in terms of some attribute and no worse than y in terms of any other attributes, x is judged to be better than y. If, however, this dominance principle is not applicable, then the decision maker determines the relative importance between the identified evaluative attributes, consults with contextual features of the options under consideration, and makes a decision. It is shown that the combination of these principles runs into problems in the presence of rationality properties, such as transitivity, and a weak continuity requirement on decisions. The paper gives examples from welfare economics, and theories of individual and group decisions.

The nature of basic equality (what it is that makes us all equals) can have implications not only for the question of the currency of egalitarian justice but also for that of its ‘site’. The latter question is raised by G. A. Cohen in his critique of John Rawls's theory of justice. In this paper I argue that Rawlsian liberals might provide an answer to Cohen's critique by establishing two distinct kinds of basic equality, thus providing a ‘twofold account’ of basic equality. A first kind of basic equality gains moral relevance in the context of respectful relations between individuals, and establishes egalitarian duties between them. A second kind of basic equality gains moral relevance in the context of respectful relations between the state and individual citizens, and establishes egalitarian duties of the state toward citizens. The strength of Cohen's critique depends, in part, on the fact that Rawls identified only one kind of basic equality while at the same time wishing to defend a dualist account of individual and state duties.

Recent years have witnessed an increasing number of attempts to reconstruct Marxian theory in forms that can be assessed by reference to currently received standards in various disciplines (economics and “analytic” philosophy, for example). The work has even been said to establish a new paradigm: “analytical Marxism.” One doesn't have to endorse this claim to recognize a good deal of merit in the work. Through creative application of state-of-the-art methods to traditional Marxian issues, researchers have promoted productive cross-fertilization with non-Marxian programs and have revealed many problems that must be resolved for fruitful development of Marxian theory. Marx's work can be relevant to today's problems only if it is examined from vantage points provided by subsequent scientific and philosophical achievements. Moreover, critical engagement with the best science of the day has been an essential part of the Marxian theoretical project from the beginning.

This paper presents Sen's theory of agency, focusing on the role of commitment in this theory as both problematic and potentially illuminating. His account of some commitments as goal-displacing gives rise to a dilemma given the standard philosophical theory of agency. Either commitment-motivated actions are externally motivated, in which case they are not expressions of agency, or such actions are internally motivated, in which case the commitment is not goal-displacing. I resolve this dilemma and accommodate his view of commitment as motivation by developing a broader descriptive theory of agency, which recognizes both agent goal-directed and goal-displacing commitments. I propose a type of goal-displacing commitment, which I call ‘tacit commitment’, that can be seen to fit between the horns. Tacit commitments regulate behaviour without being made conscious and explicit. This resolution suggests a means of bridging the normative/descriptive gap in social-scientific explanation.

The pioneering contributions of Bewley, Gilboa and Schmeidler highlighted important weaknesses in the foundations of economics and game theory. The Bayesian methodology on which these fields are based does not answer such basic questions as what makes beliefs reasonable, or how agents should form beliefs and expectations. Providing the initial impetus for debating these issues is a contribution that will have the lasting value it deserves.

Keynes's A Treatise on Probability (Keynes, 1921) contains some quite unusual concepts, such as non-numerical probabilities and the ‘weights of the arguments’ that support probability judgements. Their controversial interpretation gave rise to a huge literature about ‘what Keynes really did mean’, also because Keynes's later views in macroeconomics ultimately rest on his ideas on uncertainty and expectations formation.

Should social preferences conform to the principles of rationality we normally expect of individuals? Should they, for instance, conform to the consistency axioms of expected utility theory? This article considers one fragment of this question.