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The Tyranny of UtilityBehavioral Social Science and the Rise of Paternalism$
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Gilles Saint-Paul

Print publication date: 2011

Print ISBN-13: 9780691128177

Published to Princeton Scholarship Online: October 2017

DOI: 10.23943/princeton/9780691128177.001.0001

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Economics: The Last Bastion of Rationality

Economics: The Last Bastion of Rationality

Chapter:
(p.19) 3 Economics: The Last Bastion of Rationality
Source:
The Tyranny of Utility
Author(s):

Gilles Saint-Paul

Publisher:
Princeton University Press
DOI:10.23943/princeton/9780691128177.003.0004

This chapter examines how the assumptions underlying economic theory lead to a presumption of laissez-faire, and why this apparatus is fragile because those assumptions are not grounded on empirical observations but on methodological requirements instead. Many people traditionally think of economists as advocates of laissez-faire, that is, letting the free operation of markets determine how resources are allocated throughout society. This presumption comes from some central results of economic theory which predict that, in some sense, free markets lead to desirable outcomes from the point of view of global efficiency. Essentially, these results come from two observations. First, competitive markets allow all voluntary transactions to take place. Second, all voluntary transactions are mutually advantageous and therefore increase the welfare of both parties.

Keywords:   economic theory, laissez-faire, free markets, global efficiency, competitive markets, voluntary transactions

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