Lester considers a choice between the Pareto criterion regarding institutional change and permitting interpersonal utility comparisons (IUCs) to make up for its defects:
By the Pareto criterion we cannot say that it is a welfare improvement to move from a society with rent control and a terrible accommodation shortage to one without rent control and a flourishing rented sector if even one tenant feels himself to be worse off. The Pareto criterion disallows the welfare evaluation of changes from any status quo in an existing society, including one with slavery, if even one person objects to the change — and there is usually a powerful lobby of special interests to object. (153)
Now there is an attempted fix for this. It may be permissible, an economist might argue, to initiate a change that harms some people if the winners will be able to compensate the losers by paying them money, so that overall, there are still some winners while the losers have been fully placated and are no worse off. Of course, the compensations are purely hypothetical and never actually take place. So, in practice, an appeal is made to IUCs.
Lester then claims that “we cannot help making some IUCs. We do it all the time. If we did not then we would never forgo any benefit to ourselves on the grounds that others would appreciate it more. We would never help people for their own sakes for we would only be sure that we were losing but not know whether others were gaining more, gaining at all, or even losing as well.” (154) This argument is revealing in that it presumes that we make IUCs when we consider others as ends in themselves. As I have already argued, this is fully equivalent to loving them as friends. Charity does make IUCs possible. But charity belongs not to natural but to Christian human life. It comes from God in the form of sanctifying grace. But economics is a social science that studies man in his natural state. It does not venture beyond pure nature into describing how a communion of saints united spiritually with interpersonal Christian love would work. As a result, economics considers men to be mutually disinterested and disallows IUCs at the outset.
(If there is merely natural love, of which Christian charity is an upgrade, then between complete strangers, whose cooperation economics describes, it is extremely weak and can be without much loss reduced to mere absence of hatred and fulfilling the precepts of libertarian justice. Disinterested benevolence, whether natural or grace-enhanced, has a wider scope, but has the whole society rather than any individual as its object.)
If both the Pareto option and IUCs are futile in welfare economics, then what is to be done? Let us admit that any reform presupposes the status quo. We indeed start wherever we start. But we can justify an institutional reform like abolition of rent controls by appealing not to “welfare” as such but to the speed (and acceleration, etc., if any) at which welfare increases with economic progress as time goes on. Through that, we do end up maximizing overall welfare from now until kingdom come.
Presumably everyone would want a quickly improving economy in general, even at the cost of less welfare right now. This is because no Smith faces a choice between 100% laissez-faire and 99.9% laissez-faire where he personally and only he is privileged. In such a case, Smith grows fat and happy, while the damage to the economy as a whole is negligible. Smith might not be willing to sacrifice his own ill-gotten gains for the sake of a trivial increase in the speed of economic growth. In reality, however, Smith must choose between 100% laissez-faire and perhaps 20% laissez-faire where numerous people, who may or may not include Smith, are viciously privileged. Former US presidential candidate Harry Browne proposed his Great Libertarian Offer, “Would you be willing to give up your favorite federal government program if it meant never having to pay income tax again?” That well sums up our actual choice which I think is rather easy.
I have shown that socialism can succeed only when it forces perfect economic stagnation, a world in which nothing new ever happens, as exemplified in actual practice by the socialism of the Cuban pattern. Almost every government intervention decreases the speed of overall economic development or even stops progress altogether. If we take the maximum possible rate of bettering ourselves as a society as the welfare desideratum, then a radical reform toward laissez-faire capitalism stands justified.