Intuitions About Welfare—Under the Constraint of Computability

There appears to be a growing pressure on businesses to take responsibility for sustainability on a local as well as a global scale. Narrow profit optimization or optimizing shareholder value no longer suffice—other stakeholders in a wide respect need to be considered in decision-making, the argument goes. This demand also holds consequences for economics—in particular for welfare economics that claims to theorize about utilizing resources to the benefit of society without the use of any moral standards or benevolence. Welfare theory started out talking about the wealth of nations but ended up with a recommendation that businesses should just mind their own business. We must ask whether economics can and should assist businesses in their new endeavour to promote sustainability. In answering this question, we identify the confluence of value creation, governance and agent’s behaviour as being of vital importance. Governance must aim to govern the way value creation takes place and the way agents actually behave in real markets. But markets as governors, as described in neoclassical theory, do not appear to be up for the task of helping us understand the function of real markets. We realize this in making a simple requirement that theoretic proofs should be constructive. It turns out that there is not only a bug in the system—there are several uncomputabilities. Therefore, businesses as well as private agents should not neglect the need for moral standards in promoting social welfare, since they could fill the void left by uncomputabilities in “optimal” behaviour.