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Published online by Cambridge University Press: 23 November 2009
This work is a rigorous analysis of the moral conditions of economic efficiency and these two central questions focus its argument:
Question 1. Can a population of strict rational egoists achieve efficient allocations of commodities through market interaction in the absence of moral normative constraints?
If not, then we must ask:
Question 2. What are the moral normative constraints and other types of normative conditions of market interaction leading to efficient outcomes?
Adam Smith's so-called Invisible Hand Claim has been subject to two centuries of theorization that has intensified in the last two decades. Yet in this time we have not achieved any consensus on the possible moral conditions of economic efficiency. My analysis provides a way to frame the issues rigorously and to answer the two central questions.
The first question defines my first task: to determine whether economically efficient outcomes of market interaction require moral (in contradistinction to legal) normative constraints; that is, whether the constraints needed for efficiency are normative, moral, and rational. I will demonstrate that efficient outcomes of market interaction cannot be achieved without a system of moral normative constraints for securing competitive behavior and a set of conventions for facilitating exchange, for coordinating supply and demand, and for internalizing certain types of externalities. After this is established, the second question defines my second goal: to specify a set of normative conditions that make efficient outcomes of trade possible.
Answers to these central questions affect not only basic concepts in economic theory but also fields for which economic analysis is important, including legal theory, moral philosophy, political theory, and policy analysis.
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