Inefficient Unanimity

Journal of Applied Philosophy, Vol. I, No. I , 1984 151

Inefficient Unanimity

GEOFFREY BRENNAN & LOREN LOMASKY

ABSTRACT The notion of consensus plays an important epistemological role in modern welfare economics, in that unanimous consent is a (unique) conceptual test for those changes that are ‘Pareto-desirable’ (that is, make someone better off and no-one else worse). In this paper, we seek to show that unanimous consent does not logically imply Pareto-desirability-that a rational individual may fail to veto policy changes that make him/her worse off. The central element in the proof of this proposition is the observation that in social agreements involving a significant number of participants, any one individual’s veto is decisive if it is the only veto. If the individual does not expect to be dmisive, he will rationally exercise his vote ‘expressively’, and without sole regard to its consequences. When all individuals so act, a sort of prisoners’ dilemma interaction may emerge, even u d r explicit consensus.

I

The triumph of contemporary welfare economics and normative political theory over the more ambitious utilitarian programme of the preceding century seems complete. Despite significant rumblings in high places (mostly under the rubric of ‘optimal tax theory’ in economics) [ 11 the Paretian welfare framework in its several variants now clearly dominates the field [2].

Within economics, this revolution was secured almost entirely on the grounds of the ‘unscientific nature’ of interpersonal comparisons of utility [3] . How can one know, challenged the sceptics, that transferring income from A to B increases Bs utility more than it decreases A’s? How can one elevate the status of such conjectures to the full glory of the tested and non-rejected hypothesis? These questions were taken by the economics profession to be unanswerable, and their unanswerability was taken as decisive grounds for rejecting the utilitarian system. Although other objections to utilitarianism are possible and in our view persuasive [4], these were not widely canvassed: it was enough to demonstrate that the utilitarian enterprise was ‘unscientific’.

If these are the grounds on which utilitarianism is to be rejected, it seems reasonable to ask whether the Paretian welfare framework is itself susceptible to the same charge. What, in other words, is the epistemological status of claims that a particular change makes someone better off and noone else worse off? Can such claims be supported without recourse to the ‘reading of agents’ minds’ that was deemed so objectionable in the utilitarian case? What purely ‘scientific’ observation of agents’ behaviour would constitute decisive evidence that a particular change in the prevailing state of affairs does indeed satisfy the strict Pareto test? Or, under other variants of the ‘new welfare theory’, such as the hypothetical compensation scheme of Hicks and Kaldor [ 5 ] , how can one know that gainers can compensate losers, without independent knowledge of utility functions?

Strangely enough, such questions seem not to have much disturbed modern

152 G. Brennan & L. Lomasky

welfare economists. And this is strange, because much of the last fifty years of welfare economics scholarship can be interpreted as demonstrating just how trouble- some those questions are. Consider, for example, the paradigmatic case of voluntary two-person exchange. It is, of course, entirely true that we can conclude that the two parties to this exchange are made better off-or at least no worse off-in the relevant expected sense [6], especially if we accept their own judgments of their well-being as the best available [7] . But we cannot thereby conclude that these two parties are the only ones affected by the exchange. We may of course hypothesise that this is the case-that such a market is ideal-and then use the model of exchange in ideal markets as a conceptual benchmark to exemplify the notion of Pareto-desirability. But from an epistemological viewpoint this surely begs all crucial questions. How, as a matter of fact, do we recognise that the market is ‘ideal’? Even if the goods exchanged have all the technical characteristics of ‘privateness’, how can we know that some third party (or parties) are not affected via ‘psychic externalities’ in a Pareto-relevant fashion? Equally, how can we know that the trade in question does not lead, via cross-substitution effects, to greater distortions in other markets where distortions already exist? If, for example, not all Samuelsonian public goods are provided in exactly Pareto optimal quantities-whether via the political process or o t h e r w i s d o not second-best considerations alert us to the possibility that markets which are ‘perfect’ in isolation may create larger distortions than otherwise in imperfect markets [8] ? More generally. how can we determine, merely by observation, whether the emergent equilibrium in a social process is the outcome of a prisoners’ dilemma or not? Once we deny the possibility of acquiring information about individuals’ preferences by some form of mind-reading-ance we insist on individuals’ behaviour as the only authoritative source of information about their utility functions, thereby accepting the Robbinsian critique of ‘old’ welfare economics on its own ground+then we are bound to recognise that familiar propositions in the new welfare economics are on extremely thin ice epistemologically. And the failure of most economists to recognise this fact should not blind us to it. Of course, it might be claimed that reading individuals’ minds to obtain information about all the elements in their utility functions and the relative values placed on each is somehow less exacting than reading them to obtain information about each individual’s marginal utility of income. But it is not at all obvious how such a claim can reasonably be entertained.

The simple point is that individuals’ preferences are accurately revealed only in institutions that are ‘ideal’. If a priori logic is incapable of demonstrating that particular institutions are ideal (as modern welfare theory purports to show is the case with markets), then that logic is also incapable of showing that preferences can be induced merely from observations of behaviour within the context of those institutions. More generally, the Paretian welfare framework requires some conceptually ideal institutional setting to give normative propositions within that framework the full epistemological authority that simple utilitarianism lacks and for which lack it has been dismissed.

All this is by way of preliminary stage-setting to emphasise the crucial role that unanimity plays in establishing the epistemological legitimacy of Paretian welfare economics. As Buchanan has repeatedly (91 stressed, there is a conceptual test of Pareto-desirability of a purely behavioural sort, not available to the utilitarian. This test is the unanimity test. If all of the relevant group is assembled, and a proposition to make some change is given unanimous approval by this group, then that change must be Pareto-desirable. Unanimity is to be seen as an extension of a simple

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Inefficient Unanimity 153

bilateral exchange to include all the potentially affected parties whose preferences are deemed to be of normative relevance. Just as we can conclude for simple bilateral exchange that the contracting parties are made better off in the relevant expected sense, so in a multilateral exchange we can conclude that all parties are made better off if all consent.

There are of course difficulties with the unanimity test. For one thing, a proposal may founder because some individuals who are genuinely indifferent to its imple- mentation vote against it: an individual who is indifferent between A and B will also be indifferent between a positive, negative or neutral vote, and hence may veto the proposal despite its Pareto-desirability. More importantly, since all individuals possess the power of veto, it may be rational for at least some to behave strategically-to veto proposals that make them better off in the expectation of securing a yet better deal. Such strategic considerations may well prevent Pareto-desirable policies from securing unanimous consent-or at least may serve to raise the decision- making costs associated with unanimity above tolerable levels. And there is, of course, the question of how inclusive the group should be: who is to determine, and on what grounds, the identities and number of individuals who compose the normatively relevant ‘society’?

Some of these problems have previously been addressed in some detail-in particular, by Buchanan himself. In large measure, the constitutional orientation of much of Buchanan’s work is attributable to a desire to extend the range of the consensus test. It is, of course, precisely the issue of decision-making costs that leads in The Calculus of Consent [ 101 to the rejection of unanimity in favour of some non- unanimity role for in-period political decisions. Individuals at the constitutional level will predictably accept a modified majority rule for use at the in-period level, Buchanan and Tullock claim, and will do so unanimously. Unanimity becomes much more feasible at the constitutional level because individuals are highly uncertain as to their own future positions over the sequence in which the constitutionally agreed rules will apply. The argument here is conceptually akin to the use of the veil-of- ignorance construction by Rawls [ 111 to justify his ‘difference principle’: a particular rule to evaluate patterns of social outcomes is supported by appeal to the claim that it is what individuals would have consented to in some conceptual ‘original position’.

However, whatever the level at which unanimity is secured, and however difficult it may be to secure it, we do at least have a conceptual test of Paretodesirability that is entirely behavioural in nature. Once we observe consensus on some change among all the relevant parties, we k n a e w i t h all the knowingness that a scientist qua scientist can ever possess-that the change in question is Pareto-desirable.

Or, at least, this is the claim. And for the epistemological structure of modern welfare economics it seems to be a crucial one. Our central proposition here is that this claim is false. Our argument depends on the observation that, as the number of individuals in the relevant group increases, the probability that any one of them will be the decisive voter becomes so small that each has-an incentive to vote with an eye to the expressive returns from the voting act rather than to his evaluation of the outcomes that are being put to a vote. For this reason, we cannot rule out the possibility that individuals will fail to veto policies that make them worse off. Non- Pareto-desirable policies can slip through the consensus net. Therefore, not only is it not true that all Pareto-desirable policies will achieve unanimous support (a proposition widely recognised in the literature) but it is also not true that unanimous support entails Pareto-desirability. In other words, any purely logical connec-


tion between consensus and Pareto-desirability is severed. The only way in which one might establish such a connection is on empirical grounds, and it is unclear that one can amass relevant empirical evidence given the behaviouristically inspired requirement that only persons’ ‘revealed preferences’ in the context of social decision-making be admitted as bona fide evidence of underlying preference. Once one accepts the epistemological authority of other evidence (e.g. what people say) , then the .particular grounds for rejection of utilitarianism, grounds apparently widely supported within the economics profession, seem shaky indeed.

In short, we are left with two possibilities: either accept the Robbins epistemological position, and reject Paretian welfare theory along with utilitarianism; or reject the Robbins epistemological position, and argue for Paretian welfare theory (as against utilitarianism) on other grounds.

Given this as background, the main object of this paper is to present and argue for a single analytic proposition-that unanimous consent does not imply Pareto- desirability. In order to demonstrate this proposition, we begin in the next section with an examination of electoral choice under majority rule. This examination can be brief because we have explored the analytics of this case in much greater detail elsewhere. The virtue of beginning with majority rule is that it makes the line of reasoning with respect to the unanimity case clearer. We turn then in the third section to the case of political process with an explicit unanimity rule, to show how policies that fail the test of the Pareto-desirability may nevertheless pass the consensus test. Section IV suggests that the model of inefficient unanimity may have significant practical application. In the final section we briefly examine some alternative grounds for contractarian or quasi-contractarian theories, and indicate the implications of our reasoning for those alternative grounds.

I1

Consider some arbitrarily selected citizen, k, deciding on his electoral behaviour in a large-number election between two exogenously given alternatives, A and B. The prevailing outcome will be that which receives a simple majority of votes cast. In casting his vote, citizen k must reckon on the fact that the final emergent outcome will depend hardly at all on how he votes, and crucially on the voting behaviour of everyone else. Specifically, there are these possible contexts which the citizen can imagine will prevail in the majoritarian election:

(i) a majority of other voters votes for A; (ii) a majority of other voters votes for B;

(iii) there is an exact tie between others’ votes for A and B. We can assume, without loss of generality, that the total number of votes is odd, SO

that the third possibility is feasible. This also implies that the voter, k, cannot alter the outcome in cases (i) and (ii), because the majority among other voters will always be at least two votes. Given this, there is only one contingency in which k will exercise any influence at all on the outcome of the election: where there is an exact tie among other voters. As the number of voters in the election increases to values that are realistic for ordinary democratic elections, the probability of such a tie becomes very small. For example, if the electorate is of the size ( 2 n + l ) voters, the probability of an exact tie is [ 12) :

2n!

n!n! h = ---p“ ( 1 - p )

where p is the probability of any voter voting for A. It can be shown that this is approximately:

2 h=----p”(l -p)” . v=


(1)

This is maximised when p = + (that is, when the outcome of the election is an even- money bet), and is then:

So, for example, in an election involving roughly half a million voters, the probability of a tie is less than one in 800, and possibly very much less.

The point to be concluded from this is the simple and obvious one that the probability that voter k’s vote will have any effect at all on the outcome of the election is very small-a fact that k will naturally reckon with in the decision as to how to vote. He will clearly recognise that he is not choosing between political outcomes in the way that he can be said to choose among objects of choice in a market setting. The opportunity cost of exercising a vote in favour of A is not at all B forgone, because the voter does not expect to be decisive. In the market setting by contrast, the choice of A does imply forgoing B, because k is decisive with respect to his own choices.

Therefore, if there is any reason at all for k‘s ‘expressing a preference’ for A rather than B (or vice versa), independently of any considerations that make him desire that A rather than B (or vice versa) prevail, such reasons will naturally predominate in his voting calculus. There are two general arguments that suggest that such reasons may exist. The first is the simple fact that voters do vote in settings where they cannot expect to be decisive, and hence, where the return to the voter in terms of securing a preferred political outcome is almost certainly negligible. Of course, individuals may derive satisfaction from the act of voting independently of how they exercise their vote, but this does not seem to accord with casual observation: individuals appear to care how they vote even when they do not expect to bring about a particular political outcome.

The second involves extrapolation from other activities individuals undertake which have the characteristic that they involve an expression of preference where that expression does not work (or is not seen as working) to secure an outcome in line with that preference. Cheering for one’s chosen team at a football game is one such example: the observer expresses a preference for one team over the other, but his cheering is not to be construed as an attempt to secure the victory of the team he supports. Equally, when one sends an ailing friend a get-well card, one expresses a

156 G. Brennan G, L. Lomasky

preference that the friend‘s health should improve; but one certainly need not believe that receipt of the card will itself effect the desired recovery.

It is not intrinsic to the expression of a preference that it be instrumental in bringing about that which is preferred. That is, one can express preferences both in contexts where that expression is decisive, and in contexts where no effect on outcomes is to be expected. Market transactions are instances in which expression and efficacy typically go together; one who expresses support for A over B with his dollar thereby gets A. By way of contrast, a person who casts a vote for A rather than B in a large number election will have no reason to predict that he is thereby producing the outcome of A emerging victorious. Because voting largely separates expression from efficacy, it is clear that purely expressive factors will loom much more importantly in voting behaviour than in market behaviour.

It is a necessary implication of this fact that a group of voters together may rationally vote for policies or candidates that no one of them would individually select if his choice were decisive. Consider, for instance the following simple matrix example. Each voter is depicted as choosing how to exercise his vote between A and B in the light of the various possible actions that may be undertaken by other voters. The individual voter, k, chooses the row: ‘all other voters’ choose the column. The pay-off in each cell of the matrix indicates the total return (including both the intrinsic return from casting a vote in a particular way and the return from the political outcome that prevails) to the individual voter, k. In the example, k would prefer that B win the election (perhaps because his income will be higher or his taxes lower if B is in office). This is reflected in the size of the pay-offs that accrue to k in column 1 and column 2 of the matrix: if, for example, k votes for A he gets a pay-off of 5 if A wins and a pay-off of 105 if B does. It is also reflected in the pay- offs in column 3, where k is decisive: here k derives a higher pay-off from voting for B than for A.

In this matrix example, there is no single dominant strategy for k. In order to maximise his pay-off, k must estimate what everyone else will do. However, if the probability of a tie among other voters is remote, which it will be for plausibly relevant values of electorate size, then the pay-offs in columns 1 and 2 will predominate, and these do admit a dominant strategy-to vote for A. Specifically, if k is risk-neutral, and if the probability of a tie, h, is less than

where a is the pay-off k derives from voting for A, and b is the benefit k would derive from B s victory, then k will vote for A.

Matrix 1

Other voters’ behaviour

Majority vote Majority vote Tie among k‘s voting for A for B other voters

1 2 3

for A 5 105 5 ( 0 )

for B 0 100 100 ( b )


We may conceive of a community of identical voters, all facing pay-off structures as a matrix 1, and all therefore exercising their votes in favour of A. We have then a unanimous result in favour of A, despite the fact that all would be better off under outcome B. Each will rationally vote for an outcome that no one of them wants.

Of course, this hardly meets the claim that analysts have made for the explicit unanimity rule. It is one thing for everyone under majority rule to be led to vote for an outcome that no-one wishes to see prevail, and another entirely to show that individuals will not veto outcomes they do not want when that veto would be decisive-as it would be under the explicit consensus test. The discussion of majority rule does, however, alert us to the fact that one cannot interpret a larger plurality as even presumptive evidence of a more ‘efficient’ outcome. And it also provides us with a useful point of departure for our discussion of the unanimity case.

111

The crucial feature of our discussion of majority rule, and the feature which makes it possible for all voters to vote for outcomes that no-one wants, is the fact that the individual voter takes due account of the very small prospect of being decisive. He is thereby led to exercise his vote so as to derive intrinsic benefits from the expression of a preference rather than to try to procure a favoured outcome. It may seem as if this feature is absent under explicit unanimity, simply by virtue of the fact that the individual can always veto an outcome that he does not wish to prevail.

However, it remains the case under a rule of unanimity as it was for majority rule that a negative vote by k determines the political outcome only in one special case, namely that his is the only veto. Otherwise, the proposal will be rejected whatever he does. As before then, a fully informed decision by k concerning whether to vote for or against proposal A must reckon on what other voters will do; and in particular k contemplates two possible settings in which his own vote can be cast:

(i) where some other voter or voters veto A; (ii) where no-one else casts a ballot against A.

If we conjecture that the probability of each other voter vetoing A is v, then the probability in an electorate of (s+l) voters that no-one else will veto A is:

(1-v)s.

This is the probability that k will be decisive if he vetoes. Even if (1 - v) is relatively large, for plausibly large electorates ( 1 - v)l is very small. Accordingly, k will, just as in the previous case of majority rule, have an incentive to vote expressively, and this may lead him to fail to veto a proposal that he would prefer not to prevail. Again, a simple matrix example indicates the pay-offs that k confronts. In matrix 2, we depict the calculus of the voter, k, under a structure of pay-offs similar to that in matrix 1. Provided k is risk-neutral, and provided that the probability of at least one other voter exercising a veto is more than

a

b’ then k will rationally cast a positive vote, even though he prefers that the project be vetoed.

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158 G. Brennan & L. Lamasky

Matrix 2

All other voters ~ ~~~

Voter k Someone vetoes No-one vetoes

votes for 105 5 ( a ) vetoes 100 100 ( b )

There is however an important difference between the analysis here and the analysis of majority rule. Under majority rule, if all individuals were to vote for A over B, this would generate no incentive for anyone to change his vote since none could thereby influence the outcome. This is not so here. If all voters act as k does, then voters' expectations about the likelihood of some other voter exercising his veto will be disappointed and the voter will exhibit regret that he did not vote otherwise [ 131 . One might conjecture on this basis that there is a probabilistic strategy that is stable for all voters and which is consistent with the pattern of outcomes that emerges. In a community of ( s+1) exactly identical voters, for example, suppose that each vetoes the proposal with probability v. Then the probability that the proposal is not vetoed is:

( 1 -v)5+1. (4)

The expected pay-off to each voter is then:

E ( P ) = p . b + ( l - v ) a ( 5 )

where p is the probability that the project is vetoed by someone, b is the benefit to each if the project does not go ahead, and a is the intrinsic return from a vote for the proposal. Now, differentiating ( 5 ) with respect to v we have:

E(P)= [ I - ( 1 -u ) '+~] b+( l - V ) U (6)

d E ( P )

d v and -= (s+l) [ l - v ] : b - a

a

b ( s + l ) = O iff [l-v]s=-

#E(P)

dv2 and -- - - s ( s + l ) [ I - v ] il-')b<O

(7)

(9)

so (8) represents a local maximum.


And, if (8) holds, then the expected pay off becomes:

U E(p*)= [ l - ( l -v*)- ] b + ( l - v * ) a

b(s+l) s

= b+u( 1 - v*) - s+ 1

where P* and v* are the values of P and v respectively for which (8) holds. Now, this is clearly better for k than the strategy of exercising his veto at every

trial, since that would return only b. But given that everyone else exercises his veto with probability o*, can k do better by never exercising his veto? If k adopts this strategy, he will receive a return of a, plus b times the probability that someone else will exercise the veto-that is, his expected pay-off is:

E(PJ = (1 - (1 -v*)q b+a s

=b+a->E(P*) since v*>O. s+ 1

In other words, if the v* strategy were expected to be played by everyone else, each would rationally refrain from exercising their veto at all.

In a somewhat similar vein, if there exists some stable independent adjustment equilibrium strategy for an electorate of size n( =s+1), then an analogous equilibrium strategy will exist for n’( =s); and the rational voter, by declaring ex unte an intention never to exercise his veto when there are expressive gains from voting positively (i.e. whenever a is positive), can secure for himself those expressive gains at negligible cost. He simply foists the cost, a, of exercising the veto on to someone else. For what each voter would ideally like in this context is for someone else to do the vetoing, and each will rationally attempt to secure that desired outcome by strategically refusing to veto.

There is a clear analogy here between exercising the veto and providing a public good under unanimity. The proposition that individuals may, in the provision of positively valued public goods, veto any proposal that involves a positive cost share for themselves in the hope of receiving the benefits at everyone else’s expense, is a familiar criticism of a rule of unanimous voting. Here, exercising the veto provides public goods to all other voters because they can then vote expressively and all will have an incentive to ‘free ride’ on someone else.

Of course, the example given here where preferences over votes and outcomes are the same for all voters and known by all is rather stylised. Nevertheless, it is clear that all voters in this case may be led to vote for a proposal that all would prefer to have vetoed, because all would prefer (and expect) that the vetoing be done by someone else. If so, then a proposal may secure unanimous consent even though all are made worse off by it. In less striking cases, someone who is made worse off by a proposal may fail to veto it because he expects someone else to do so.

The problem here seems most likely to be severe in cases where the proposal makes many voters worse off. If a voter expects to be the only person made worse off by A, he will rationally exercise his veto. Unanimity does therefore seem likely to


protect citizens against that sort of policy in which some individual’s rights are violated in the interests of the community at large-in those cases for example where it is expedient that one man should die for the people.

But where there are many losers, each may rationally fail to exercise his veto because each expects not to be decisive (i.e, to be the only vetoer). Not only therefore can we not, in general, induce individuals’ preferences over outcomes from the way in which they exercise their votes under unanimity, but non-Pareto desirable policies may well survive the consensus test. Unanimity may itself be inefficient.

IV The argument that unanimity may prove inefficient has been presented as a theoretical extension of rational decision theory. No claim has been put forth that the institutional structures and individual motivations specified in the model have significant practical application. Nor is any such claim necessary. The primary thrust of the paper is to call into question the epistemological postulates underlying Paretian welfare economics and for this purpose attention to the formal properties of the model seem sufficient. That is not, however, to confess total lack of empirical relevance; there is reason to conjecture that inefficient unanimity (and even more so, inefficient near-unanimity) is significantly encountered in practice. One striking example involves the murder of Catherine ‘Kitty’ Genovese.

During the evening of March 13 1964, a 28-year-old woman named Kitty Genovese was assaulted and stabbed to death in front of her home in the Kew Gardens district of Queens, New York. Her killer proceeded slowly with his efforts, and for some 35 minutes her screams were audible to at least 38 residents of that neighbourhood, most of whom actually saw the murder taking place. Nonetheless, not one of the witnesses phoned the police to notify them of the crime in progress. Had any one of them done so, it is likely that Kitty Genovese would have been saved (or at least so all commentators seem to have agreed at the time).

Sociologists, psychologists and theologians who were consulted in the aftermath of the killing admitted themselves unable to explain why 38 persons who could have easily and safely telephoned the police all failed to do so. We conjecture that this much-publicised failure represents an instance of inefficient unanimity. Let it be supposed that each of the onlookers assigned negative value to the action of calling the police (or, alternatively, assigned positive value to not calling the police). Assume further that each one assigned greater disvalue to Kitty Genovese being killed. Given that each was aware of the many other spectators to the event, all of whom could be presumed not to want the murder to occur and all of whom had the opportunity to telephone the police, and given that each knew that his or her action . of calling the police would be decisive only if everyone else refrained from telephoning, then each faces a choice calculus exactly identical to that analysed in matrix 2. The exercise of the veto here corresponds to telephoning the police. All prefer that Kitty Genovese be not killed. Yet all fail to exercise the veto, entirely rationazly, and the victim meets her death ‘don’t call police’ is the strategy with the larger expected pay-off, if all believe it likely that someone else will telephone the police. Although it cannot be proven that the Kitty Genovese murder was the product of inefficient unanimity, the facts of the case fit that hypothesis remarkably well. Frequently voiced complaints about the incidence of ‘apathy’ and ‘depersonalisation’ in large


number groups may be making reference to a phenomenon that can, in part, be explained via the model presented in this paper [ 141 .

Matrix 3

All other spectators

Someone Nc-one Spectator K calls police calls police

Call police 100 100 Do not call police 105 5

V The thrust of our argument so far has been that it is not possible to conclude, simply on the basis of the logic of rational behaviour, that proposals which satisfy the consensus test are necessarily such that they make everyone better off. We cannot, therefore, use the consensus apparatus as the criterion of Pareto-desirability. This is, as we see it, a crucial charge against the epistemological claims of Paretian welfare proponents.

What was deemed finally and irremediably defective in the utilitarian programme was its inability to put forth any sufficiently ‘scientific’ basis for reading off individual‘s cardinal utility measures. Whether a proposed policy would advance one individuals’ utility more than it would retard the utility of someone else could not be empirically established by any possible set of observations. The new welfare economics by contrast claims to let the ghost of cardinal utility fly free; not for it any such inscrutable basis on which to ground normative judgments. Instead, it claims austerely to restrict its social decision procedure to preferences, as ‘revealed’ by persons involved in acts of individual choice. Underlying utility functions may be opaque, but individual behaviour is transparent. Paretian welfare economics, it is claimed, does not require any appeal to preferences that cannot be directly inferred from the observable behaviour of individuals.

What we have shown here is that the more stringent epistemological posture of Paretian welfare economics is illusory. Individuals’ ‘real’ preferences remain as inscrutable as ever they were in the old utilitarian program. There is simply no good reason to assume that individuals’ behaviour reveals their preferences in the arena of social decision-making. That assumption is well grounded in the case of market choice because there, by definition, the individual chooses over outcome-d does so decisively [ 151. But voting in an election is not to bring about the outcome for which one votes. The connection between having a preference and acting to realise it is severed. Therefore, the inference that Paretian unanimity connotes efficiency is invalid. Does it follow then that the consensus test has no normative authority? Not

necessarily. There are two possible bases for assessing the normative status of consent that merit consideration. The first is the familiar criterion of Pareto- desirability: one who consents to an outcome thereby reveals that he is rendered better off by that outcome (in the predicted sense). If everyone consents, then the’ outcome is chosen because it is Pareto-desirable. Consent so construed serves merely

162 G. Brennan Q L. Lomasky

as a proxy for efficiency. Its normative status stands or falls by virtue of whether it is a reliable barometer of individuals’ underlying preferences. As we have argued, it falls.

But there is another possible way to appraise the significance of consent. It is to deny that consent matters simply as an instrumental mechanism for arriving at judgments of efficiency. Rather, consent has normative authority precisely because an act of voluntary consent is to put oneself under an obligation to comply-hether or not one in fact prefers that to which one consents. This is to take the normative thrust of consent as &ontological rather than teleological.

The analogy that comes immediately to mind is a promise. One who promises to do x thereby places himself under an obligation to do x even if he subsequently finds out that keeping the promise is more costly than had been expected. Even more importantly, the normative force of a promise to do x is not that the promiser has reliably indicated that doing x will advance his welfare; promises are not binding because-and to the extent that-they are efficient. The normal way to construe the normative force of promises is as intrinsic to the act of promise-giving rather than as instrumental.

One who through his vote consents to some policy where he has the power to veto it unilaterally can be understood as doing more than indicating (perhaps reliably, perhaps unreliably) the direction of his preference; he is agreeing to the imposition of A. Whatever obligation he has to comply with A derives from the act of consent itself, and not from any imputation of A’s efficiency.

If one accepts this deontological interpretation of the consensus test, then a unanimity rule can be reclaimed as a tool for normative contractarian theory. Unanimity will then be seen as having moral force because it secures consent from all relevant parties-and not because it is, in any sense, a guarantor of efficiency [ 161 .

Correspondence: G. Brennan and L. Lomasky, Faculty of Economics, Australian National University, PO Box 4, Canberra, ACT 2600, Australia.

NOTES AND REFERENCES

[l]See for example, FAIR, R.C. (1971) The optimal distribution of income, Quarterly Journal of Economics, 85, pp. 551-575; MIRRLUS, JAMES A. (1971) An exploration in the theory of optimum income taxation, Review of Economic Studies, 38, pp. 179-208, or FELDSTEIN, MARTIN (1973) On the optimal progressivity of the income tax, Journal of Public Economics, 2, pp. 357-376.

[2]A useful survey is provided by HEAD, JOHN (1974) Public Goods and Public Wulfare, chapter 1 (Durham, Duke University Press).

[3]The decisive attack was executed by ROBBINS, LIONEL (1932) The Nature and SignijicCnce of Economic Science (London, Macmillan). See LITTLE, M.D. (1959) A Critique of Welfare Economics (Oxford University Press) for an evaluation of Robbins’ position somewhat more sympathetic to the possibility of interpersonal welfare comparisons.

[4] See for example LOMASKY, LOREN E. (1984) Refutation of utilitarianism, Journal of Value Inquiry. [ 51 The classic works are KALDOR, NICOLAS (1939) Welfare propositions of economics and interpersonal

comparisons of utility, Economic Journal, 49, pp. 549-552 and HICKS, JOHN (1940) The valuation of social income, Economics, 7, pp. 105-124. The hypothetical compensationkt variant of the Paretian framework is the norm that underlies cost-benefit analysis.

[6]There is, of course, always the possibility that agents may turn out to have made ‘mistakes’ about what will enhance their well-being.

[7] Doubts about the authority of individuals’ assessment of their own well-being can be raised, but are


set aside here as lying outside the Paretian/Wicksellian welfare economics tradition as normally conceived.

[8] The seminal contribution to the theory of second-best is LIPSEY, R.G. & LANCASTER, K. (1956-57) The general theory of the second-best, Revieur of Economic Studies, 24, pp. 11-32.

[9]And, one might add, almost single-handedly. See in particular, BUCHANAN, JAMES (1959) Positive economics, welfare economics and political economy,Journal of Law and Economics, 2, pp. 124-138, and The relevance of Pareto optimality,Journal of Conflict Resolution, 6 (1962), pp. 341-354. In this, Buchanan follows the ‘voluntary-exchange’ tradition associated with WICKSELL, KNUT (1950) A new principle of just taxation, in: MUSGRAVE, R. & PEACOCK, A. (Eds) Classics in the Theory of Public Finance (London, Macmillan). For a discussion of the connection between Pareto and Wicksell, covering much Buchanan territory, see HENNIPMAN, P. (1982) Wicksell and Pareto, History of Political Economy, 14, pp. 37-64.

[ 101 BUCHANAN, JAMES & TULLOCK, GORDON (1962) The Calculus of Consent (Ann Arbor, University of Michigan Press).

[ 111 RAWLS, JOHN (1971) A Theory of Justice (Cambridge, Harvard University Press). (12IFor a more detailed exposition of the analytics, see BRENNAN, GEOFFREY & BUCHANAN, JAMES (no

date) Voter choice and the evaluation of political alternatives (mimeo) and BECK, NATHANIAL (1975) A note on the probability of a tied election, Public Choice, 18, pp. 75-80.

[ 131 Note that such regret will not necessarily induce the voter to alter their behaviour. He will do so only if he expects to exercise the decisive vote on the next ballot. We should also note that such regret also occurs if the voter does exercise his veto but is not the only voter to do s c - h e will then also have ‘made a mistake’, because he would have had a higher pay-off if he had not exercised his veto. Such regret is exactly analogous to the regret that all voters might feel under majority rule after voting expressively when a bare majority wins. However, in the unanimity case, such regret is a necessary feature of all occasions in which a non-Pareto-desirable change is approved. In other words, whenever the social outcome is affected by an expressively motivated failure-to-veto, there is necessarily ‘regret’ on the part of some voter-and consequent incentives to alter behaviour (if any) are activated.

[ 141 For an account of the details of the Genovese murder, see ROSENTHAL, A.M. (1964) Thirty-Eight Witnesses (New York, McGraw-Hill).

[ 151 The difficulty here is, of course, that individuals other than the parties to market exchanges may be affected in Pareto-relevant ways. Certainly, such possibility cannot be rejected on the basis either of a priori logic, or observed behaviour.

1 161 A philosophically interesting corollary of this argument is that theories based on hypothetical consent are put very much at risk. The inference that a person would consent to that which s/he most prefers is seen to be erroneous. The Rawlsian account in A Theory of Justice of hypothesised consent behind a veil of ignorance seem to rely on just this inference. Therefore, it confronts a dilemma: either the argument concerning that to which people would consent must be rejected, or else the normative significance of the Rawlsian original position must be taken as based on preference itself, and not at all on (hypothetical) consent. We note this result, but shall not pursue it further.

Inefficient Unanimity

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