Wednesday, June 12, 2013

Of Experts and Angels

Joseph Postell reviews, Design for Liberty: Private Property, Public Administration, and the Rule of Law, by Richard A. Epstein, at the Claremont Review of Books.

"He concludes, 'a natural-law theory based on libertarian principles has nothing to say about' such issues as anti-competitive practices, and 'it becomes imperative to articulate a more systematic way to analyze the costs and benefits of different social arrangements.'

"That systematic way, he explains, is a combination of Pareto optimality,' the 'Kaldor-Hicks criterion,' and 'proportionate-gain standards.' In English, this means that government policies must meet three standards: that a social arrangement must leave at least one individual better off without making any other individual worse off (Pareto optimality), that those who may gain by the new arrangement are so much better off that they can compensate those who are worse off and still be better off than before (Kaldor-Hicks), and all gains from the new arrangement are divided among the participants in the project proportionate to their investment in it."
See In Defense of Theory: Notes on the Production of Legal Scholarship, by Samuel Estreicher, The Green Bag, Autumn 2006, pp. 55-56.