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Posner’s Wealth Maximization for Welfare Maximization: Separating Efficiency and Equality Considerations

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  • Yew-Kwang Ng

    (Division of Economics, Nanyang Technological University, 14 Nanyang Drive, Singapore 637332.)

Abstract

Posner’s proposal for wealth maximization in judiciary decisions has not been widely accepted, but the influence of the economic analysis of law it propelled has increased tremendously. In the face of criticism, Posner himself has retreated into a pragmatism with wealth maximization not the only principle used. This leads to a lack of both moral justification and consistency. This paper argues that, if not used as the ultimate objective, but as an instrument for welfare maximization, wealth maximization is much more acceptable, if it is also supplemented by appropriate redistribution in the general equality policy. This is especially so as efficiency supremacy in specific issues including the judiciary (close to wealth maximization) would then make every income group better off. This is so despite the presence of disincentive effects in general redistribution. The separation of the judiciary and the legislative may then also be justified.

Suggested Citation

  • Yew-Kwang Ng, 2016. "Posner’s Wealth Maximization for Welfare Maximization: Separating Efficiency and Equality Considerations," Economic Growth Centre Working Paper Series 1611, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
    • Handle: RePEc:nan:wpaper:1611
    as

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    File URL: http://www3.ntu.edu.sg/hss2/egc/wp/2016/2016-11.pdf
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    References listed on IDEAS

    as
    1. Ng, Yew-Kwang, 1984. "Quasi-Pareto Social Improvements," American Economic Review, American Economic Association, vol. 74(5), pages 1033-1050, December.
    2. Posner, Richard A., 1984. "Wealth maximization and judicial decision-making," International Review of Law and Economics, Elsevier, vol. 4(2), pages 131-135, December.
    3. Kaplow, Louis & Shavell, Steven, 1994. "Why the Legal System Is Less Efficient Than the Income Tax in Redistributing Income," The Journal of Legal Studies, University of Chicago Press, vol. 23(2), pages 667-681, June.
    4. Sen, Amartya K, 1973. "On Ignorance and Equal Distribution," American Economic Review, American Economic Association, vol. 63(5), pages 1022-1024, December.
    5. Ng, Yew-Kwang, 1997. "A Case for Happiness, Cardinalism, and Interpersonal Comparability," Economic Journal, Royal Economic Society, vol. 107(445), pages 1848-1858, November.
    6. Yew-Kwang Ng, 1975. "Bentham or Bergson? Finite Sensibility, Utility Functions and Social Welfare Functions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 42(4), pages 545-569.
    7. Ng, Yew-Kwang, 1990. "Welfarism and Utilitarianism: A Rehabilitation," Utilitas, Cambridge University Press, vol. 2(2), pages 171-193, November.
    8. Veljanovski, Cento G., 1981. "Wealth maximization, law and ethics--On the limits of economic efficiency," International Review of Law and Economics, Elsevier, vol. 1(1), pages 5-28, June.
    9. Ng, Yew-Kwang, 1989. "What Should We Do About Future Generations?," Economics and Philosophy, Cambridge University Press, vol. 5(2), pages 235-253, October.
    10. Yew-Kwang Ng, 1996. "Happiness surveys: Some comparability issues and an exploratory survey based on just perceivable increments," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 38(1), pages 1-27, May.
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    More about this item

    Keywords

    Wealth maximization; efficiency; welfare; utilitarianism; judiciary.;
    All these keywords.

    JEL classification:

    • K0 - Law and Economics - - General
    • H0 - Public Economics - - General

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