Sandra J. Peart
In his 1981 Richard Ely Address to the American Economics Association, Lionel Robbins reasserted his conviction, originally posed in his famous 1932 essay, that policy analysis, and indeed applied economics more generally, necessarily relies on value judgments and therefore lies outside the scope of scientific (“value-free”) economics. Instead of repudiating policy analysis on these grounds, however, Robbins called for the (re)creation of “political economy”—“covering that part of our sphere of interest which essentially involves judgments of value. Political economy, thus conceived, is quite unashamedly concerned with the assumptions of policy and the results flowing from them” (1981: xxvii). 1 In the face of a seemingly intractable measurement problem created by the impossibility of interpersonal comparisons of utility or welfare, Robbins’s recommendation is that economists redirect their efforts away from welfare economics in the tradition of the felicific calculus and into “political economy” as such.
Not all economists, however, have shared Robbins’s conviction that welfare is unmeasurable and that attention should therefore be directed to issues other than measurement; “cardinalists” have reemerged in welfare economics during the past few decades. Relying in part on the justification that economists are better equipped than ethicists or politicians to measure social welfare, these economists have attempted to estimate welfare empirically. Their procedure is to assume that individuals are the same in their capacity for enjoyment, but not in their circumstances; utility is presumed to be the same function of various determinants of utility for all individuals (or households), while parameters characterizing individual functions are allowed to differ (Tinbergen 1991:7). These empirical endeavors are grouped by Jan Tinbergen into the American procedure (associated with Dale Jorgenson), which has used a translog utility function where the log utility is a quadratic function of the logs of three or five determinants of utility (consumption goods or services). 2 Family size, age of head, region of residence, race and type of residence are the parameters that characterize