I begin, in section 1, with a presentation of the Interpersonal Addition Theorem. The theorem, due to John Broome (1991), is a re-formulation of the classical result by Harsanyi (1955). It implies that, given some seemingly mild assumptions, the overall utility of an uncertain prospect can be seen as the sum of its individual utilities. In sections 1 and 2, I discuss the theorem's connection with utilitarianism and in particular consider its implications for the Priority View, according to which benefits (...) to the worse off count for more, in terms of overall utility, than comparable benefits to the better off (cf. Parfit 1995 [1991]). Broome (1991) and Klint Jensen (1996) have argued that, in view of the Interpersonal Addition Theorem, the Priority View should be rejected for measurement-theoretical reasons. Therefore, it cannot be seen as a plausible competitor to utilitarianism (cf. section 1). I will suggest, however, that a proponent of the Priority View would be well-advised, on independent grounds, to reject one of the basic assumptions on which the Addition Theorem is based. I have in mind the so-called Principle of Personal Good for uncertain prospects (cf. sections 4 and 5). If the theorem is disarmed in this way, then, as a side benefit, the Priority View will avoid the afore-mentioned problems with measurement. (shrink)

This article examines Sagoff's criticisms of 'Four Dogmas of Environmental Economies' and argues that none of them are fatal. Many of the criticisms appear to rest on general misunderstandings about welfare economics. One misunderstanding is that transaction costs are theoretically indistinguishable from regular production costs. The theoretical distinction is that transaction costs vary under alternative policies and institutions whereas production costs are fixed by tastes, technology and endowments. Another misunderstanding is that market failure concerns only Pareto efficiency. Market failure also (...) concerns social efficiency with respect to the 'social welfare function', a device for making explicit ethical judgments about the interpersonal distribution of welfare. A third misunderstanding is that the 'rationality assumption' drives economic theory. In fact, the explanatory power of economic models comes mainly from explicit assumptions about the constraints facing economic agents. A fourth misunderstanding is that welfare economics is used as a mechanism for making legal and political decisions. Rather, welfare economics is used as a method for informing legal and political decisions by evaluating their outcomes on the basis of individual welfare. Used properly, it can improve the democratic process by bringing hidden costs and difficult issues to the attention of both policy-makers and the wider public. (shrink)