A new article was recently published by the journal Cahiers d’économie politique/Papers in Political Economy:
Irène Berthonnet & Vincent Desreumaux, “La coordination par le marché dans Social Choice and Individual Values : mérites normatifs ou mérites techniques ?” (CEP, vol. 66 (June 2014), pp. 95-126).
Abstract: The paper tries to clarify the status of the market in Social Choice and Individual Values. It shows how Arrow at first intended to propose a third theorem of welfare economics (Feldman ), which would show that the market achieves not only Pareto-optimality, but also equitable social allocations. The impossibility theorem proves this is impossible. Arrow’s solution to impossibility is interpreted here as a further limitation of the market’s objectives. At the end of the book, the market is presented as a technical mechanism that guarantees economic efficiency, if it doesn’t take individual values into consideration.
Keywords: impossibility theorem, welfare economics, values, social welfare function, economic efficiency.