The Liberal Paradox

[sj2010]

I was reading the wikipedia page for Amartya Sen yesterday when i came across the "The Liberal Paradox". It basically states that individual freedom does not always lead to a Pareto optimal solution . For example:
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Suppose Alice and Bob have to decide whether to go to the cinema to see a chick flick, and that each has the liberty to decide whether to go themselves. If the personal preferences are based on Alice first wanting to be with Bob, then thinking it is a good film, and on Bob first wanting Alice to see it but then not wanting to go himself, then the personal preference orders might be:

* Alice wants: both to go > neither to go > Alice to go > Bob to go
* Bob wants: Alice to go > both to go > neither to go > Bob to go

There are two Pareto efficient solutions: either Alice goes alone or they both go. Clearly Bob will not go on his own: he would not set off alone, but if he did then Alice would follow, and Alice's personal liberty means the joint preference must have both to go > Bob to go. However, since Alice also has personal liberty if Bob does not go, the joint preference must have neither to go > Alice to go. But Bob has personal liberty too, so the joint preference must have Alice to go > both to go and neither to go > Bob to go. Combining these gives

* Joint preference: neither to go > Alice to go > both to go > Bob to go

and in particular neither to go > both to go. So the result of these individual preferences and personal liberty is that neither go to see the film.

But this is Pareto inefficient given that Alice and Bob each think both to go > neither to go.

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I'm curious what the libertarian/Austrian response would be to this. I have a vague feeling that some of the assumptions of the example or it's wider applicability to the marketplace is flawed, but i'm not versed enough in economics to solidly back up my suspicions.

[Copernicus]

What difference does it make? Pareto optimality is a fiction that allows the psuedo-intellectuals to raise a discussion to a theoretical plane above real world practicalities, obfuscating the real meaning to their constituencies.

[Borodog]

[ QUOTE ]
I was reading the wikipedia page for Amartya Sen yesterday when i came across the "The Liberal Paradox". It basically states that individual freedom does not always lead to a Pareto optimal solution . For example:
[ QUOTE ]

Suppose Alice and Bob have to decide whether to go to the cinema to see a chick flick, and that each has the liberty to decide whether to go themselves. If the personal preferences are based on Alice first wanting to be with Bob, then thinking it is a good film, and on Bob first wanting Alice to see it but then not wanting to go himself, then the personal preference orders might be:

* Alice wants: both to go > neither to go > Alice to go > Bob to go
* Bob wants: Alice to go > both to go > neither to go > Bob to go

There are two Pareto efficient solutions: either Alice goes alone or they both go. Clearly Bob will not go on his own: he would not set off alone, but if he did then Alice would follow, and Alice's personal liberty means the joint preference must have both to go > Bob to go. However, since Alice also has personal liberty if Bob does not go, the joint preference must have neither to go > Alice to go. But Bob has personal liberty too, so the joint preference must have Alice to go > both to go and neither to go > Bob to go. Combining these gives

* Joint preference: neither to go > Alice to go > both to go > Bob to go

and in particular neither to go > both to go. So the result of these individual preferences and personal liberty is that neither go to see the film.

But this is Pareto inefficient given that Alice and Bob each think both to go > neither to go.

[/ QUOTE ]

I'm curious what the libertarian/Austrian response would be to this. I have a vague feeling that some of the assumptions of the example or it's wider applicability to the marketplace is flawed, but i'm not versed enough in economics to solidly back up my suspicions.

[/ QUOTE ]

I suspect it has something to do with there being no such this as "joint preference."

Also, the example is patently ridiculous, since Alice and Bob could go through the same exact "logic", divine that it is "inefficient", and just choose to go to the damn movies.

[sj2010]

The point is, if libertarianism can't provide for the most efficient solution (and a restriction of freedom can), then from a consequentalist point of view intervention in the marketplace is justified. Of course that's completely eschewing morality, but the majority of society only cares about the results of policies rather than the means used to achieve them.

[Borodog]

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The point is, if libertarianism can't provide for the most efficient solution (and a restriction of freedom can)

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Well there's your problem. A pareto superior action requires at least one party be made better off and none be made worse off. The second condition is impossible to meet under coercive action/exchange. It is only voluntary actions/exchanges that can possibly be "Pareto optimal".

[Borodog]

I see upon reading the wiki article that this arises out of game theoretical attempts to attack libertarianism. Just off the top of my head I would point out that the world does not conform to the rules of the game. As I've already said, Bob and Alice could go through the exact same logic as the writer of the example did, decide that it is "inefficient", and simply decide to go to the movies. In fact, I've had this exact conversation with my wife countless times, and never been trapped in a "paradax" of "Pareto inefficiency." She wants to spend time with me more than she wants to see a chick flick I don't want to see, I want her to see it and I want to spend time with her more than I don't want to see it. Hence we go to the movies. Perhaps I'm just too dumb to realize that we should have stayed home, trapped in out logical inefficiency.

I mean, really. Is this the best that the interventionists can come up with to justify their violence?

[John Kilduff]

[ QUOTE ]


..."Suppose Alice and Bob have to decide whether to go to the cinema to see a chick flick, and that each has the liberty to decide whether to go themselves. If the personal preferences are based on Alice first wanting to be with Bob, then thinking it is a good film, and on Bob first wanting Alice to see it but then not wanting to go himself, then the personal preference orders might be:

* Alice wants: both to go > neither to go > Alice to go > Bob to go
* Bob wants: Alice to go > both to go > neither to go > Bob to go

There are two Pareto efficient solutions: either Alice goes alone or they both go. Clearly Bob will not go on his own: he would not set off alone, but if he did then Alice would follow, and Alice's personal liberty means the joint preference must have both to go > Bob to go. However, since Alice also has personal liberty if Bob does not go, the joint preference must have neither to go > Alice to go. But Bob has personal liberty too, so the joint preference must have Alice to go > both to go and neither to go > Bob to go. Combining these gives

* Joint preference: neither to go > Alice to go > both to go > Bob to go

and in particular neither to go > both to go. So the result of these individual preferences and personal liberty is that neither go to see the film.

But this is Pareto inefficient given that Alice and Bob each think both to go > neither to go....The point is, if libertarianism can't provide for the most efficient solution (and a restriction of freedom can), then from a consequentalist point of view intervention in the marketplace is justified. Of course that's completely eschewing morality, but the majority of society only cares about the results of policies rather than the means used to achieve them.

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This is worse than "Who's On First", and probably has about as much point.

[ QUOTE ]
The point is, if libertarianism can't provide for the most efficient solution (and a restriction of freedom can), then from a consequentalist point of view intervention in the marketplace is justified. Of course that's completely eschewing morality, but the majority of society only cares about the results of policies rather than the means used to achieve them.

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"Efficient" or "inefficient" aren't adjectives that would spring to my mind regarding the above scenarios.

If I might offer a mild suggestion, you would likely do well by refraining from attempting to draw sound conclusions from conjectured nonsense.

[Borodog]

And what, might I ask, is supposed to be the coercive intervention that "resolves" this "paradox of liberalism"? Who is the third party that will force Bob and Alice out of their logical inefficiency and into the movie theater at gunpoint? How, exactly, does he know what Bob and Alice's personal preference scales are, beyond what they reveal after the fact by their actions?

Furthermore, from the wiki article:

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The example shows that liberalism and Pareto-efficiency conflict and cannot be attained at the same time. Hence, if liberalism exists in just a rather constrained way (see Sen, 1970a), externalites could arise . . . For instance, one individual is free to go to work by car or by bicycle. If the individual takes the car and drives to work, whereas society wants him to go to work by bicycle there will be an externality. However, no one can force the other to prefer cycling. So, one implication of Sen's paradox is that these externalities will exist wherever liberalism exists.

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This is more of the "externality" claptrap that I have talked about before. Under this definition of "externality" any action at all can have both positive and negative externalities, since such an "externality" is completely subjective. One neighbor hates my rosebushes; I should be taxed to compensate him! My other neighbor loves my rosebushes; he should be taxed to subsidize me. The only sense of "negative externality" that has any founding in the objective world is if physical property is damaged.

Not to mention, "Society" wants me to ride a bicycle, does it? Come on. You've got to be kidding me. "Society" doesn't want any more than Alice and Bob "jointly prefer". Methodological individualism FTW.

[sj2010]

[ QUOTE ]
I see upon reading the wiki article that this arises out of game theoretical attempts to attack libertarianism. Just off the top of my head I would point out that the world does not conform to the rules of the game. As I've already said, Bob and Alice could go through the exact same logic as the writer of the example did, decide that it is "inefficient", and simply decide to go to the movies. In fact, I've had this exact conversation with my wife countless times, and never been trapped in a "paradax" of "Pareto inefficiency." She wants to spend time with me more than she wants to see a chick flick I don't want to see, I want her to see it and I want to spend time with her more than I don't want to see it. Hence we go to the movies. Perhaps I'm just too dumb to realize that we should have stayed home, trapped in out logical inefficiency.

I mean, really. Is this the best that the interventionists can come up with to justify their violence?

[/ QUOTE ]Thanks for clearing this up. I agree that the whole idea of "joint preference" does seem pretty fallacious.

[sj2010]

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If I might offer a mild suggestion, you would likely do well by refraining from attempting to draw sound conclusions from conjectured nonsense.

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I was merely explaining the implications of Sen's premise, not agreeing with it. I'm a libertarian, and treat anything that a proclaimed expert of "welfare economics" says with skepticism. I just wanted some clarification.