August, 2008

Can Economics Rank Slavery Against Free Labor In Terms of Efficiency?

  • Lawrence H. White

    Distinguished Senior Fellow, F. A. Hayek Program for Advanced Study in Philosophy, Politics and Economics
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The standard allocative efficiency criteria used by economists (Pareto efficiency and Kaldor-Hicks efficiency) are fundamentally unable to rank a slave-labor system against a free-labor system. Given either set of initial property rights assignments the market can reach (or fail to reach) allocative efficiency (that is, allocate resources to their highest-valued uses), but welfare economics provides no meta-framework for ranking initial assignments. This finding underscores the limits to the usefulness of efficiency criteria: they cannot settle all questions, and unfortunately are least decisive just where the stakes are greatest (namely, where wealth effects of alternative assignments are greatest). Explicitly ethical criteria are needed to make the ranking.

Read the full article at Ppe.org.

Citation (Chicago Style)

White, Lawrence H. 2008. "Can Economics Rank Slavery Against Free Labor In Terms of Efficiency?" Politics, Philosophy & Economics vol. 7 no. 3. (August 2008): 327-340.