COWLES FOUNDATION FOR RESEARCH IN
ECONOMICS Box 208281
COWLES FOUNDATION DISCUSSION PAPER NO. 1854 Kantian Optimization, Social Ethos, and Pareto Efficiency John E. Roemer March 2012 Although evidence accrues in biology, anthropology and experimental
economics that homo sapiens is a cooperative species, the reigning assumption in
economic theory is that individuals optimize in an autarkic manner (as in Nash and
Walrasian equilibrium). I here postulate an interdependent kind of optimizing behavior,
called Kantian. It is shown that in simple economic models, when there are negative
externalities (such as congestion effects from use of a commonly owned resource) or
positive externalities (such as a social ethos reflected in individuals’
preferences), Kantian equilibria dominate Nash-Walras equilibria in terms of efficiency.
While economists schooled in Nash equilibrium may view the Kantian behavior as utopian,
there is some — perhaps much — evidence that it exists. If cultures evolve
through group selection, the hypothesis that Kantian behavior is more prevalent than we
may think is supported by the efficiency results here demonstrated. |
