3.10 Ideological Stakes of the Transition from Classical to Neoclassical Utilitarianism

Introduction to Edgeworth's Contribution

• Introduction of economist Edgeworth and his innovative diagrammatic approach to economics

• The Edgeworth box diagram encapsulates established economic concepts into a visual format

• Acknowledgment of varied responses to diagrams—some find them helpful while others may find them intimidating

• Emphasis on the idea that nothing new is introduced; it’s a different representation of known material

The Edgeworth Box Diagram

Structure of the Diagram

• Bottom Left Corner: Represents Person A

• Axes:

  • Left axis = Loaves of bread

  • Right axis = Bottles of wine

• Indifference Curves for A: Dotted curves, showing different levels of utility for Person A

• Goal of A: Move towards the northeast along the diagram to achieve higher utility

Mirror Concept

• Edgeworth imagines a mirror cutting through the middle of the box

• Bottom Right: Represents Person B, depicted with solid indifference curves

• Utility Representation: B’s utility is presented upside down in the top right corner

• Both individuals are trying to ascend their respective indifference curves for maximum utility

The Pareto Superior Space

• Status Quo Representation: Denoted as point X in the diagram

• Drawing a football shape around point X marks the Pareto Superior space

• Movement Example:

  • Transitioning from X to Y through trade imposes an improvement for both individuals

• Gradual trade leads to point Z, where no further mutually beneficial trades can occur

• Contract Curve: Line indicating all points of tangency between A's and B's indifference curves

• Signifies points of efficiency where neither can improve their situation without compromising the other

Comparison with Classical and Neoclassical Utilitarianism

Bentham vs. Pareto

• Bentham’s Perspective: Advocates for the greatest happiness principle

• Anything to the right of the 45-degree line on a welfare curve is considered better

• Interpersonal Judgments in Utilitarianism:

  • Classical utilitarians (like Bentham) can make interpersonal comparisons and judgments

  • Neoclassical utilitarians (like Pareto) reject the possibility of such comparisons

• Illustrating Bias: Bentham’s line bisects Pareto undecidable areas, highlighting his subjective comparisons

Redistribution Implications

• Hypothetical scenario: If the status quo is in the bottom left corner, B has everything while A has nothing

• Pareto Principle: Implications suggest radical choices, like the controversial idea of B's demise for efficiency

• Challenges the notion of equitable distribution within utilitarian theory

Philosophical Transition in Utilitarianism

• Shift from classical to neoclassical utilitarianism leaves less room for redistributive arguments

• Early radicalism of classical utilitarianism tempered by a more conservative, status quo-friendly neoclassical viewpoint

• Economic theory and utilitarianism become less concerned with fair distribution

• Discussions about redistributive transactions essentially become moot within a scientific framework

Reflection and Connection to Mill

• Engage with John Stuart Mill’s concepts of harm outlined in 'On Liberty'

• Suggested reflection on the connections between the transitions in utilitarianism and Mill's philosophical inquiries

• Prepare for an upcoming discussion that will center on these themes