Kantian Optimization, Social Ethos, and Pareto Efficiency
AbstractAlthough evidence accrues in biology, anthropology and experimental economics that homo sapiens is a cooperative species, the reigning assumption in economic theory is that individuals optimize in an autarkic manner (as in Nash and Walrasian equilibrium). I here postulate an interdependent kind of optimizing behavior, called Kantian. It is shown that in simple economic models, when there are negative externalities (such as congestion effects from use of a commonly owned resource) or positive externalities (such as a social ethos reflected in individuals’ preferences), Kantian equilibria dominate Nash-Walras equilibria in terms of efficiency. While economists schooled in Nash equilibrium may view the Kantian behavior as utopian, there is some -- perhaps much -- evidence that it exists. If cultures evolve through group selection, the hypothesis that Kantian behavior is more prevalent than we may think is supported by the efficiency results here demonstrated.
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Bibliographic InfoPaper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1854.
Length: 48 pages
Date of creation: Mar 2012
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Other versions of this item:
- John E. Roemer, 2012. "Kantian Optimization, Social Ethos, and Pareto Efficiency," Levine's Working Paper Archive 786969000000000407, David K. Levine.
- D60 - Microeconomics - - Welfare Economics - - - General
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-21 (All new papers)
- NEP-CBE-2012-03-21 (Cognitive & Behavioural Economics)
- NEP-EVO-2012-03-21 (Evolutionary Economics)
- NEP-HME-2012-03-21 (Heterodox Microeconomics)
- NEP-HPE-2012-03-21 (History & Philosophy of Economics)
- NEP-MIC-2012-03-21 (Microeconomics)
- NEP-SOC-2012-03-21 (Social Norms & Social Capital)
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