CHAPTA I

INTRODUCTION

1, THE TYPES or SOCIAL CHOICE

In a (Epitalist democracy there are essentially two by which
soei81 choices can be made: voting, typically used to make
decisions, and the market mechanism, typically usd to make
decisions. In the emerging democracies with mixd economic systems,
Great Britain, France, and Scandinavia, the same two modes of making
social choices prevail, though more scope is given to the
of voting
and decisions based directly or indirectly on it and Ie8 to the rule of
the price mechanism. Elsewhere in the world, and even in smaller
social units within the
social decisions are sometimes made
by single individuals or small groups and sometimes (more and mole
rarely in this modern world) by 8 widely encompassing set of traditional
rules for making the
in any given situation, e.g., a religious

The last two of making social choicæ are in senn extrenp

developments of tendencies in democracy. The rule of the ingle indi-
vidual is the atreme of administrative discretion, NIe of a sa0Nl

of rule bylaw. Butin dynamic üations the rule of a

to dictatorship. The ccRe needs interpretation, for condiüons change,theextremeand,no
matter how explicit the code may have bæn in the first place in determining how

society code ledg by i.rrnsible

act in different circumgtan(B, its mezning
ambiguous with
the. pegé of üme. It might
hgppai that the job
interpretation
to neiety as
whole, LCting througb gome democratic
populi,
vox dei." Or it can
individuBlly ud not that interpretation pæ to ue hand* of the »ple
in this u differ@æs of opi.nion ariæ,
the reliöou.ß code
811 it' force as a guide to oci&l action. Sæ, for aam.ple,
the ulUmau
in the field of economic ethica of the
on right of ech individual to inurpret the Bible himself (R H. Tawney, Rdigion
cnd the Riee of Capüaåem, London: J. Murray, 1926, pp. 97—10. But more likely,
in view of the authoriOriN1
of the ucred
the inurprétäon will paz
into the hands of a dngle individual or a
group
qualified.
Che clauification of methods of wcial choice given here Profeæor
Knight's disånéon nong custom, Luthority, and conunA18, except that I have

conæsus into the two eategoriæ of voäng and the market (F. H, Knight,
' 'Human Nature and World Democracy," in Frødom Worm, New
Hzrper
1947, pp. 0-310).
1
 [CHAP.
2 INTRODUCTION
The last two methods of social choice, dictatorship and convention,
have in their formal structure a certain definiteness absent from
voting or the market mechanism. In ideal dictatorship there is but one
will involved in choice, in an ideal
ruled by convention there is but
the divine will or perhaps, by aæumption, a common will of all indi-
viduals concerning social decisions, BO in either cue no conflict of in-
dividual wills is involved.2 The methods of voting and the ma*et, on the
other hand, ore methods of amalgamating the tastes of many indi-viduals
in the mak.ing of social choices. The methods of dictatorship and
convention are, or can be, rational in the sense that any individual can be
rational in his choices. Cao such consistency be attributed to collective
modes of choice, where the wills of many people are involved?
It should be emphaaiæd hew that the pregent study is concerned
only with the formal aspects of the above question. That is, we ask if it
is formally possible to construct 8
for passing from a set of
known individuel tagteg to a pattern of social
the
procedure in question being required to satisfy certain natural condi-
tions. An illustration of the pmblem is the following well-known "para-
dox of voting." Buppoeethere is a community consisting of three voters,
and this community must ohooæ among three alternative modes of
social action (e.g., dionnament, cold war, or hot war). It is expected
that choice* of this type have to be made reputedly, but sometimes not
all of the three altematives will be available. In ana10U with the usual
utility analysis of the individuol consumer under conditions of constant
want and variable price-income situations, rational behavior on the
part of the community would mean üi8t the community orders the
three alternativæ according to ita collective preferences once for all,
and then choosæ in any given case that alternstive among those octually
available which stands highat on this list. A natural way of arriving
at the collective preference scale would be to say that one altemative iB
preferæd to another if a majority of the community prefer the first
s It is usu.* af course, that the dictator, Eke the um.zal ecmomic man,
always ma.ke decision when confrmted with 8 range of altmnatives and that he
will m.Bke the •me deüon aeh time
faced with the ume ruge ot alternatives.
The ability to make
deciions is one of the
of an
personality. When we pac social decißion methods involving m.any individualB
(voting or tlw market), tho problem of arriving at consistent decisions might

gously be
to 88
of åe existence of integrated society. Whether or
not thiß psychistrio analog is tsefnl rem.ai.ns to be en. The formal existence of
methods of
choices, 'be problem posed in tbi8 study, is certdnly
a
condiäon for an
eodety in the above æ»e; but whether the
of such ig Bumciot or even forme an important put of the suffcient
condition far integration iB dubious.
sr,c. OF eocr.AL cnorcE 3
altemative to the second, i.e., would choose the first over the econd if
those were the only two alternatives. Let A, B, and C be the three
alternativæ, and 1, 2, and 3 the three individuals. Suppose individual I
prefers A to B and B to C (and therefore A to C), individual 2 prefers
B to C and C to A (and therefore B to A), and individual 3 prefers C to
A and A to B (bnd therefore C to B). Then b mojority prefer A to B, and
8 majority prefer B to C. We may therefore say that the community
prefers A to B and B to C. If the community is to be regarded as
tEhaving rationally, we are forced to say that A is preferred to C. But in
fact a majority of the community prefer C to A.a So the method just
outlined for passing from individual to collective tastes foils to satisfy
the condition of rationality, as we ordinarily understand it. Can we find
other methods of aggregating individual tutee which imply rational
behavior on the part of the community and which will be satisfactory
in other ways?
If we continue the traditional identification of rationality with maxi-
mization of some sort (to be discussed at greater length below),
then the problem of achieving
social maximum derived from
individual desires is precisely the problem which has
central to the field of
welfare economics. There is no need to review the history of this subject
in detail.' There hag been controversy as to whether or not the econo-
It may be added thBt the method of decision Bket&d above is e—nually that
used in deliberative bodies, where
whole range of
umslly eomes up
for decision in the form of ancceæive pair-vise omparisons. The phenomenon
described in the text
be seen in a pure torm in the disposition of the proposals
before recent Congressæ for federal aid to 'tate education, the three alterngtivea

being no federal aid, federal bid public

only. and federal Bid to both publio
and parochial schools. The "paradox of voting" seems to have been first pointed
out by E. J. Nanson (Trcnudicn8 and Proæedings of the Royd Society of Victria,
VoL 19, 1882, pp. 197—240). I am indebted for this referenee to C P. Wright,
University of New Brunswick.
The problem af eollecåve rationality ha8 been discuæed by Knight, but chiefly
in terms of the eooic.ychological prerequisites. See "The Planful Act: The Pt»si-
bihties and limitations of Collective Rationality," in Freedom and Reform, op. cit.,
pp. 335-369, æpeeiany pp. 846-365.
b Good sketche will be found in P. X Samuelson's Founao$ione of Economic
Analysi8, Cambridge, Maoachusette: Harvard University Pre—, 1947, Chapter VIII;
and A. Beræon (Burk), "A ReformulBtion of Certain Aspects of Welfare Economics,"
Quarterly Journal of EØnomiæ, Vol. 52, February, 1938, pp. 310—334. A summary
of recent developmente will be found in the article, "Socialist Economiæ," by
A. Bergon, in A Survey of Contemporary Economia, H, S.
ed., Philadelphia:
The Bbki8ton Co., 1948, Ohæpter XIL In Addition to the above,
of
the preent state of the
will be found iD O. Lange, 'The Foundations of Welfare
Econom&ica, Vol. 10, July—October, 1942, pp. 2ib—E8; ud M. W.
Reder, Studia i"
Theory of Welfare Ecnnomic.8, Ngw York: Colu.nbia
Pr.
1947, Chapters I—V.
4 INTRODUCTION [CRAP. 1

mist qua economist could make statements saying that one social state is
better than another. If we admit meaning to interpersonal com-poisons of
utility, then presumbbly we could order social state8 according to the
gum of the utilities of individuals under each, and this is the solution of
Jeremy Bentham, accepted by Edgeworth and Marshall.' Even in this cage
we have a choice of different mathematical forms of the social utility
function in terms of individual utilitie8; thus, the social utility might be the
sum of the individual utilities or their product or the product of their
logarithmg or the gum of their products taken two at a time. So, as
Profwsor Bergson has pointed out, there
value
judgments implicit even at this level.7 The case is clearly much woræ
if we deny the
of making interpersonal comparisons of utility.
It was on the latter grounds that Professor Robbins 80 strongly attacked
the concept that economist* could make any policy recommendations,'
at least without losing their status as economists and passing over into
the realm of ethics. On the other hand, Mr. Ka.ldor and, following him,
Professor Hicks have argued that there is B meaningful sense in which
we can say that one state is better than another from a.n economic point
of view,' even without assuming the reality of interpersonal eom-parison
of utilities. The particular mechanism by which they propose to
•ooomplish the comparison of different social statæ, the compensation
principle, will be examined in more detail in Chapter IV.
The controversy involves 8 certain confusion between two levels of
argument. There can be no doubt that, even if interpersonal comparison is
assumed, a value judgnent is implied in any given way of making social
choices based on individual utilities; 80 much Bergson has shown
clearly. But, given these basic value judgments as to the mode of
aggregating individual
the economist should investigate those

F. Y.
Ptychiæ, landon•. C. Kegan Paul
co., 1881,
pp. 56—82,
p. 57; "The Pure Theory of Taxation," in Papers Relating to
Political Economy, Loudon: Mocmillan and (h, 1925, Vol. II, pp. 63—1" apeci811y
pp. 100—122.
The interpretation of
utüity as the sum of individual • utilities
is implicit in Manhßü'8 use of the doctrine of eonmmew' surplus, though otber
asumptions are also involved. (A. MB18hAIl, Principles of Economic8, New York:
The Macmillan Co., eighth ediäon, 1949, pp. 130-134, 467—476.)
Bergmn, "A Reformulaäon .
. Samuelson, op. cit,
pp. 219-252. op. cit., panim. See
 8 L. RobblM, An"Euav on the Nature ond Significance of Economic Science, second

ediUon, landon: Macmillan •ud Co., 1935, ChB.pt« VI

Comparisons
of Utüity: A
Economic Journal, Vol. 43,
1938, pp. 636-641.
N. Kaldor, "WelfBN Propositions of Economics and Interpersonal Comparisons
of Utüy," Ecnomic Journal, Vol. 49, September, 1939, pp. 549-552; J. R. Hicks,
"The Foundationg of Welfare Eeonomf08," Economic Journal, VoL 49, Docamber,
1939, PP. 6%-no, 711-712.
 11 TRE TYPES OF SOCIAL CHOICE 5
mechanisms for which Bbtisfy the value judgnents and
should cheek their consequences to ee if still other value
might be violated. In pzrticular, he should ask the question whether
or not the value judgments are consistent with each other, i.e., do there
exist any mechanisms of social choice which will in fact satisfy the value
judgments made? For example, in the voting paradox discussed above,
if the method of maiority choice is regarded as itself a value judgnent,
then we are forced to the conclusion that the value
in question,
applied to the particular situation indicated, is self-contradictory.
In the matter of consistency, the question of interpersonal comparison
of utilities becomes important. Bergson considers it possible to establish
an ordering of social states which is baæd on indifference maps of indi-
viduals, and Samuelson has agræd.10 On the other hand, Profesor
Lange, in hiB discussion of the social welfare function, has a—umed the
interpersonal mæsurability of utility,ll and elsewhere he has insisted on
the absolute neeæsity of measurable utility for normative N)ci81 judg-
ments.l*
Inner similarly has assumed the meaningfulnec of
an
comparison of intensitiæ of utility in his recent work
on welfale economics.13
In the following discussion of the consistency of various value judg-
menta as to the
of social choice, the distinction between voting
and the market mechanism will be disregarded, both being
as
special cases of the more general category of collective social choice.
The analog betwæn
choice aud political choice has been
pointed out o number of timæ. For example,
Zassenhaus
the structure of
planned economy by considering the free
market
by influence conceivd generally 8B 8 mems of di8-
tributing the social prcduct.14 He
that, under conditions
gous to free
the market for exchanging influence for goods
would come to
in a manner analogous to that of the ordinary
market, political influence taking the place of initial distribution of goods.
His
however, is
only in very general terms, and it is not
easy to sæ how it would operate in a socialist derncm•acy, for example.
Sæ tbe discusiou of the Fundamental Value PrmxNiåons of
Preferenw
in Bergson, ' 'A Reformulaåcm . . . ," op. ea., pp. 318—320; Samuelson, cp. cit., p.
U Lange, Q. cit., pp. 219—24, —pedal.ly top of p. 222; but there are mntradictory
on p. 23 ud at the top of p. 224.
O.
"The D&rmin8tena.B of the Uålity FuneUon,"
of Econonü
Studies, Vol. 1, June, 1934, pp. 224-225.
A. P. Lemer,
of Coaled, New York: The Macmi.l.lui
1944,
Chapter
u H. Zaenhatz, "thr die ökonomigohe Theorie dar
Zed8du•ift
5,
pp.
6 [CHAP. r
Dr. Howard Bowen has eonxidered voting as the demand for collective
consumption." In his treatment he regards distribution of income and
costs as given, and other simplifying assumptions are made. Close
analogies are found with the ordinary market demand curve.
Knight has also stressed the analog' betwæn voting and the market
in that both involve collective choice among a
range of alterna-
tivæ.ae Hc has also stressed certain differenc*B, particularly that there
is likely to be 8 greater tendency toward
under voting than
under the market; thæe
are, however, largely of a
psychological type rather than of the formal type which One ig relevant
here.
More recently, there has
a series of
by Profasor Duncan
Hack, de81ing with various
of the theory of political choice
under wrtain
assumptions and emphuizing the close similarity
between the problems of market and electoral choiee.i7 His work will
be dealt with in greater detail in Chzpter VII, &ction 2. There is also
8 literature on the technical problems of election. The chief relevant
point here is that virtually every particular scheme propoæd for election
from Bingle-member constituenciæ has been Bhown to have wrtain arbi-
tra.ry featureg. The problem of choosing by eleetion one among 8 num-
ber of candidate for a Ringle
such as the
of the
Unitzl States or membership in
legislative
when each district
retumg only a single member, ig clearly of the same
8.8 choosing
one out of a number of alternative
policies; indæd, selection among
is presumsbly a device for achieving ælection unong policia.

2. SOME LIMITATIONS or ANAXYSIS

It has bæn stated above that the pruent study confines itself to the

formal
of collective social choice. The not discussed
may be conveniently described as the
 especially since
that term has
a double
In the first p18% no con-
R. Bowell "The InterpNt8tion of Voting in •une Allocation of
Quarterly Journal
Bmnomiæ, Vol.
November,
pp. 27—48.
F. H. Tbwry and Notion.Blixm," in The Bt.hiæ of
Wier Egaye, New York: Hu•per and Bros. , 1931, pp.

D, Black, "On Rationale of Group Deüon-M8king," Jov•ul of Pdiiicd

Vol. 56, February, 10S, pp. "The Decisions of A
Using
Special Majority," EcmwmetrÜn, Vol. 16, July, 199, pp.
' The Elasticity
of Committee Decisions with
and "Un appr«wio alls Altering Sze of Majority," N, pp. %2-270;
dene deciioni di Gia•tu2e doli
e
annali di economica, VOL 7, Nuova Serie, 198, pp. 26204. For
analog
voüng oud the market,
'The of
Gong . . . , ' pp. E, 270; and "Un approodo ... , pp. 262-n.
 son LIMITATIONS OF THE ANALYSIS 7
siderotion is to the enjoyment of the decision procas a form
of play. There is no need to stress the obvious of the deüe
t.,o play and win the game as such in both economic behavior and rnliti-
CBI.18 mat such considerations are real and should be considered in
determining the mechanics of social choice is not to be doubted; but
this is beyond the scope of the present study.
The other meaning of the temn "game" is that which has brought
to the attention of economists by Professors von Neumann and Morgen-
stern.19 The point here, broadly
is that, once a machinery
for making social choices from individual tastes is established, individuals
will find it profitable, from a rational point of view, to misrepresent their
tastes by their actions, either because such misrepresentation is somehow
directly profitable m or, more usually, because some other individual
will be made so much better off by the fint individual's misrepræenta-
tion that he could compensate the first individual in suah a way that
both are
off than if everyone really acted in direct accordance with
his tastes. Thus, in an electoral system
on plurality voting, it is
notorious that an individual who æally favors a minor party candidate
will
vote for the less undesirable of the maj or party candidatæs
rather than ' 'throw away his vote." Even in a case where it is possible
to construct a
showing how to aggregate individua.l tastes
into a consistent social preference pattern, there still remains the problem
Of devising rules of the game 80 that individuals wil.l actually express
their true tastes even when they are acting rationally. This problem is
allied to the problem of constructing gamæ of fair division, in which
the rules are to be such that each individual, by playing rationally, will

succæd in getting a preassigned fair share; in the of two

a.nd
equal division, the game iB the very familiar one in which one player
divides the total stock of goods into two parts, and the second player
choæes which part he likes.n
In addition to iæoring game aspects of the problem of social choice,
we will also acume in the præent study that individual values are taken
as data ond are not capable of being altered by the nature of the decision
proæss itælf. This, of course, is the standard view in economic theory
life; the imrn•tnnce of play motiva in human
K.night h88 wn.stant&
for
 the reference in fn. 16. The importuce of emulbtive motiva
bag mwhere
so foræfu.lly
aa by T. Veblen (The Theory
CZaae, New York: The Macmillan Co., 1899). u.e Leisure
J. von Neumann and O. Morgenstern, Theory of Games and
aecond edition, Princeton: Princeton University Preæ, 1947. æaatior,
A imilar iB made by Bowen, Q. cit., pp. 45, 48.
n sO H. Steinbaw, "The Problem of Fair Division" (abüut),

Vol. 16, Januzry,

pp. 101—104.
8 INTRODUCTION
(though the unreality of this assumption has a—erted by such
writers as Veblen, Profægor J. M. Clark, and Knight z) and also in the
clessicol liberal cræd.*' If individual valuæ ran be by the method of
social choice, it becomes much more diffcult to what is meant by
one method's being preferable to another.
Finally, it is assumed that all individuals in the society
rational.
The precise meaning of this assumption will be enlarged on in the next
chapter.
s T. Veblen, The Theory of r.nieure CZau, op. ea., and 't Why 1B Not
an Evolutionmry Saianæ?" in Thc of Science in and Other
Euave, New York: B. W. Huebsch, 1919, pp. 73—74; J. M. Oark, "Economies and

Modern Psycholog, " in Preface to Swid Economies, New York: Farrar and
pp.
and "Rzi.ism and Relevance in the Tbu)ry of Demand," Journal
Economy, vol. 54, August, 1946, pp. 347-351; P.
Knight, "Ethiæ
and the Ewnomic
in The Ehiæ of Co•mpddion
Othr Euave,
op. cit., pp. 19—40,
takea the individual a.8 giw•n, and views tbe eocial
of
right relations
given individuak." (Italiæ in tbe original.) F. H. Knight,
and Economic Reform," in Predom ond Reform, op. d, p. N.