Chapter Ǵ: Why Subjectivism? ȁȆSubjectivists know better than to erect efficiency, somehow conceived,
into the overriding criterion either of particular processes or institutions
or of entire economic systems. Ļe principle of comparative advantage
discredits the idea that each product should necessarily be produced wher-
ever it can be produced most efficiently in the technological sense. No pre-
sumption holds, furthermore, that any particular line of production neces-
sarily should be carried on in the technologically most advanced way; for
the resources required in such production are demanded by other indus-
tries also, where they may well contribute more at the margin to consumer
satisfactions, as judged by what consumers are willing to pay.
Efficiency in the sense of Pareto optimality is often taken as a cri-
terion of policy. Pareto efficiency is indeed a useful concept in teaching
and studying microeconomic theory. It is useful in contemplating out-
comes of the market process in the form of particular—but abstractly
conceived—allocations of resources and goods. Economists seldom if
ever face an occasion or opportunity to appraise concrete, specific alloca-
tions, in the real world. As Rutledge Vining properly emphasizes, legisla-
tors and their expert advisors necessarily are choosing among alternative
sets of legal and institutional constraints rather than among alternative
specific results or allocations. (See ViningȀȈȇȄand YeagerȀȈȆȇ.) Such
constraints are rules of the game within which people strive to make the
most of their opportunities amidst ceaseless change in wants, resources,
and technology. Ļe very point of having rules and institutions presup-
poses their having a certain stability and dependability, which would be
undermined by continual efforts to make supposedly optimal changes
in them.
What is useful in policy discussions, then, is not the supposed bench-
mark of Pareto efficiency but, rather, comparison of the economic and
social systems that alternative sets of rules lead to. If we must have a stan-
dard against which to appraise reality, we might well adopt the view of a
competitive market economy as a collection of institutions and practices
for gathering and transmitting information and incentives concerning not-
yet-exhausted opportunities for gains from trade (including “trade with
nature” through production or rearrangements of production).
ŗŚśţŘőŐœő ōŚŐ ŏśśŞŐŕŚōŠŕśŚ
Subjectivists recognize the many kinds of information that market prices
and processes bring to bear on decisions about production and consumption.