Let us take any historical or contemporary economic society. Would economic efficiency become better if such society erects and enforces institutions that prohibit its members from the exploitation of excludable groups that can be defined by race, ethnicity, etc.? This question actually makes no sense. One must first identity the boundary of society, i.e., who make up the objective function. Irrespective of how one defines efficiency, one cannot assess the efficiency of institutions without determining who is covered and who is excluded. Efficiency judgments can make sense only when one defines the social boundary.
- Collective Welfare Function
- Externality vs. Pecuniary Externality
- Hicks-Kaldor Welfare Criterion
- Inter-society Utility Comparison
- Radical Social Theory