Search Results

The utilitarian commitment to the “greatest happiness of the greatest number” established a powerful, if somewhat vague, norm that continues to push public decision making toward radicalism. The early history of the norm is usually traced to Adam Smith’s mentor, Francis Hutcheson, who first wrestled with its meaning. Somewhat surprisingly Adam Smith, although sympathetic, did not use the credo. Helvetius came close, but the form that Bentham used is usually ascribed to the Italian Beccaria. In its earliest manifestations, including much of Jeremy Bentham’s work, the credo generated little more than apologetics. Like Bentham, Mill remained reluctant to explicitly identify the “greatest number” with the working classes, but the utilitarian logic pushed him toward a materialist understanding of the credo.

This chapter examines the ideas elaborated specifically in the refinement and defense of the classical tradition in economics. There were points of vulnerability and fault that required a defense of the classical tradition, including the pronounced difference between the wages and resulting living standard of the workers and those of the employers or capitalists, the unequal distribution of power inherent in the system, and the phenomenon referred to as a panic, crisis, depression or recession, with its associated unemployment and general despair. The chapter considers how the classical tradition dealt with inequality and oppressive power, focusing on the initial defense advanced for the low wages of the laborer in comparison with the revenues of the employer and landlord. It also discusses the defense from Utilitarianism, led by Jeremy Bentham, and the views of John Stuart Mill, Herbert Spencer, Nassau Senior, and William Stanley Jevons.

A person living in complete isolation will serve society’s interests when she serves her own interests because she constitutes all of her society. When multiple people share a society, however, we can no longer be guaranteed that an individual’s choices will promote social well-being. Law can help form a successful society, a cohesive one-out-of-many, by encouraging people to take the interests of others into account when making decisions. If different people have different preferences, it is not obvious what constitutes society’s overall interests. Law and Economics follows in the footsteps of utilitarian philosopher Jeremy Bentham (1748‒1832), associating the social good with a type of economic efficiency. As long as people can negotiate and forge agreements at low cost, they will choose non-wasteful rules, rules that result in efficiency. This insight lies behind the most famous Law and Economics result, termed the Coase Theorem after Professor Ronald Coase (1910‒2013).

Property is what’s exchanged in markets, and this chapter examines its nature, introduces the ideological dispute between Locke and Bentham over its origins and the implications of their views for government and individuals, and shows how and to what effect property is exchanged in explicit markets. Rights are distinguished from objects, and property is defined as rights to control specific objects for specific uses at specific times, so different people may own different property rights in a single object at the same time. For Locke, individuals have these rights naturally and create government to protect them, while Bentham argues that government creates rights and can allocate them coercively toward its proper ends. The creation of new rights to resolve disputes is considered, and movement of property rights to higher-valuing owners by voluntary exchange in perfectly favorable conditions is illustrated by a hypothetical dispute over the use of a house.

In order to illustrate the broad intellectual context within which the early discussions of utility measurement took place, chapter 1 reviews the history of the understanding of measurement in philosophy, physics, psychology, mathematics, and areas of economics before and beyond marginal utility theory. This review reveals that between 1870 and 1910, all these disciplines were dominated by the unit-based or, equivalently, ratio-scale conception of measurement. According to this conception, measuring the property of an object consists of comparing it with some other object that is taken as a unit and then assessing the numerical ratio between the unit and the object to be measured. This chapter also shows that late-nineteenth-century discussions of measurement in mathematics established the cardinal–ordinal terminology that later passed into economics. However, the mathematical concept of cardinal number is different from the economic concept of cardinal utility, which entered the scene only in the 1930s.