Abram Bergson (1914-2003) in memoriam.
Bergson will be remembered for establishing the theoretical foundations of modern welfare economics. His first published milestone article on welfare economics (Quarterly Journal of Economics 1928, reprinted in Bergson, 1982, 2-27), laid out a research program that he advanced for nearly three quarters of a century. In a sympathetic evaluation of Bergson's early contribution, Samuelson noted that the concept "Social Welfare Function" originated with Bergson. This idea has gained so much importance that it can be used to explain the community's social preferences (Dobb, 1968, 110-111). The welfare function allowed equilibrium to be attained at the tangency of a community indifference curve with the production possibility curve. Samuelson, a friend of Bergson, also remarked "Bergson was the first to understand the contributions of all previous contributors, and form a synthesis. He is the first to develop explicitly the notion of an ordinal social welfare function in terms of which the various schools of thought can be interpreted with significance" (Samuelson, 1974, 219).
The abstract and general nature of Bergson's welfare function was not without controversy. Bergson actually wrote out a mathematical welfare function: W = F([U.sup.1], [U.sup.2], [U.sup.3],...) and demonstrated that it is a "... generalization of the Marshall-Pigou formulation; according to the latter, W being the sum of the utilities [U.sup.1], [U.sup.2], [U.sup.3] ... [U.sup.n]. Also, to maximize W would satisfy the criterion of Pareto and Barone" (Ibid., 154). Unforeseen was an old theory of Condorcet ticking like a time bomb waiting to explode in the face of a Pareto-like efficiency frontier. This is now known as Arrow's Impossibility Theorem, which holds that unless there exists a single peak preference system or a benevolent dictator, a welfare function cannot be constructed or determined. Bergson's reaction to Arrow's Impossibility Theorem was "... it is at most only tenuously related to welfare economics. Continued affirmation otherwise can only be at the expense of confusion regarding both Arrow's real contribution and welfare economics" (Bergson, 1982, 52). Others have examined this hypothesis. What is known as the Bergson-Samuelson Social Welfare Function considers questions regarding domains of applicability in areas such as the political versus economic versus ethical in the face of Arrow's Impossibility Theorem. Further, economists such as Sen (1977) have been concerned with the information content of the social ranking of the Impossibility Theorem.
Another important stance of Bergson is in the area of planning, where he brushed against the Austrian school. Bergson picked up the controversy with von Mises, "... as to whether socialism can work at all, and how well." Bergson proceeds on two levels with his argument. First, "Mises' contention is that without private ownership of ... the means of production, the rational evaluation of these goods for the purposes of calculating costs is ruled out conceptually" (Bergson, 1982, 233). To this view Bergson replies that Lange and Schumpeter who favor this interpretation of von Mises, accurately observe that the works of Pareto and Baroue refutes this position. Hence, if taste and techniques are given, we can calculate the values by imputation, without the help of the market.
Second, another point of von Mises underscored by Hayek states that "Imputation is theoretically possible; but once private ownership of the means of production has been liquidated, it cannot be accomplished in practice." Bergson situates Hayek and Robbins on one side of the balance, and Lange and von Mises on the other. He quotes Lange's observation that a "trial and error" method can be employed to value the means and ends. He takes followers of von Mises off the balance, and lets the scale tip in favor of Hayek and Robbins against Lange. Hayek's weight rests on his anticipation that "... output, where the use of the available resources was determined by some central authority, would be lower if the price mechanism of a market operated freely" (Ibid., 189). This put the balance squarely in favor of "competitive efficiency." Bergson requires a "test on efficiency, that is, on the ends according to which the optimum allocation of resources is to be defined" (Ibid., 236). He points to Schumpeter's consumer sovereignty as a measure. This turned out to be not an idle suggestion, considering that consumer and producer surpluses are the staple measure of benefits in the Computational General Equilibrium modeling environment. Bergson also calls for a comparison of "ideals with ideals or facts with facts," implying "Competitive solutions in an established socialist state where there is a unanimity on ends with monopolistic and unstable capitalism in the United States" (Ibid., 236). Such a comparison is complicated by its requirement of comparable data, such as data from the World Bank, ITC, and private sources such as PWT and GTAP, and also CES and Cobb-Douglas a priori specifications on data, with their undermining assumptions of constant returns of scale.
The economics profession will always be grateful to Bergson for asking the hard questions, and leading welfare economists in scientific directions. As the fields he initiated continue to be vigorously researched, we cannot as yet determine which side of the debate has the analytic edge. But those that judge progress based on both structure and performance will appreciate Bergson's work for years to come.
Abram Bergson's major works
* "Real Income, Expenditure Proportionality, and Frisch's New Methods of Measuring Marginal Utility," Review of Economic Studies, Vol. IV, No. 1, (October 1936), 33-52.
* "A Reformulation of Certain Aspects of Welfare Economics," The Quarterly Journal of Economics, Vol. LII, No. 2, (February 1938), 310-334.
* "Socialist Economics," in Ellis, editor, Survey of Contemporary Economics, (Philadelphia: Blakiston Co., & Richard D. Irwin, 1948), 193-236.
* "Market Socialism Revisited," The Journal of Political Economy, Vol. LXXV, No. 5, (October 1967), 655-573.
* "On Monopoly Welfare Losses," The American Economic Review, Vol. LXII, No. 5, (December 1973), 853-870.
* The Structure of Soviet Wages: A Study in Socialist Economics (Cambridge, Mass,: Harvard University Press, 1944).
* Real National Income of Soviet Russia Since 1928 (Cambridge, Mass, Harvard University Press, 1961).
* The Economics of Soviet Planning (New Haven: Yale University Press,1964)
* Essays in Normative Economics (Cambridge, Mass: Harvard University Press, 1966).
* Productivity and the Social System: the USSR and the West (Cambridge, Mass: Harvard University Press, 1978).
* "Comparative Productivity: The USSR, Eastern Europe, and the West," American Economic Review, Volume 77(3), (June 1987), 342-357.
Bergson, Abram, Welfare, Planning, and Employment: Selected Essays in Economic Theory (Cambridge, MA: The MIT Press, 1982).
Dobb, Maurice, Welfare Economics and the Economics of Socialism: Towards a Commonsense Critique (London: Cambridge University Press, 1968).
Hayek, Friedrich A., "The Present State of the Debate," in F.A Hayek, ed., Collectivist Economic Planning, (London: Routledge, 1935).
Lange, Oskar, "On the Economic Theory of Socialism," in B. Lippincott ed., On the Economic Theory of Socialism (Minneapolis: University of Minnesota Press, 1938).
Samuelson, Paul Anthony, Foundations of Economic Analysis (New York: Atheneum, 1974).
Samuelson, P. A., "Reaffirming the Existence of Reasonable Bergson-Samuelson Social Welfare Functions," Economica, New Series, Vol. 44(173), (February, 1977), 81-88.
Sen, Amartya, "On Weights and Measures: Informational Constraints of Social Welfare Analysis," Econometrica, Vol., 45(7) (Oct., 1977), 1539-1572.
Szenberg, Michael ed. Eminent Economists, Their Life Philosophies (London and New York: Cambridge University Press, 1993).
von Mises, Ludwig, "Economic Calculation in the Socialist Commonwealth," In F. A. Hayed ed., Collectivist Economic Planning (London: Routledge, 1935).
|Printer friendly Cite/link Email Feedback|
|Author:||Ramrattan, Lall; Szenberg, Michael|
|Date:||Sep 22, 2003|
|Previous Article:||Chapter roll.|
|Next Article:||Information and the change in the paradigm in economics, Part 1.|