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that perceive the economic well-being of society as expressible in terms (such as physical output) that are unrelated to the valuations and choices made by individuals.

(Kirzner 1986, p. 19)

Such requirements, of course, would make welfare economics impossible in all but the most trivial circumstances where a number of persons benefit and no one is hurt. Using strict forms of subjectivism and methodological individualism as our foundational postulates implies that aggregation will never be possible.

‘So much the worse for welfare economics’ is a tempting reply, but such a reply ignores the necessity of normative comparisons between different states of economic affairs. Claiming that such comparisons are outside the realm of scientific discourse is a dubious escape from the problem at hand. Even in the unlikely event that a demarcation criterion for science could be found, the scope of our endeavour would simply be accordingly redefined. The enterprise of welfare economics would then be concerned with making sense of our ‘nonscientific’ conversations about economic well-being. Under this set of circumstances, ‘non-science’ would be a richer realm of exploration for welfare economics than the domain of ‘science’, and our endeavour could be accordingly relabelled with no necessary stigma. Terminologically excluding or including our sins from the realm of science cannot alter their perniciousness.

Aggregation is a different type of problem within the non-Paretian approaches examined here. Welfare economics is not seen as a science which must build from the bottom up and excoriate all judgements of wellbeing which cannot be derived from the underlying foundations. Instead, a welfare framework may consist of a web of interwoven propositions, each with a significant empirical (and aggregative) content. The decision concerning which propositions we decide to accept and use will contain our aggregative judgements. In many cases, these propositions will contain elements of economic intuition that cannot be reduced to any further microjustification.

WHAT AN ACTUAL STANDARD MIGHT LOOK LIKE

I now wish to outline briefly some details of what a non-foundationalist normative approach would look like. In doing so, I will examine a hypothetical tripartite standard based upon discovery/innovation, complexity, and provision of consumer goods. I will discuss the question of which empirical propositions would have to be true to make this tripartite standard a good one. I will not, however, argue that these propositions are actually true; this discussion intends only to flesh out the structure of one possible approach— not to advocate a specific approach. The following discussion is thus heuristic in nature.

Under the tripartite standard, policies would be evaluated with respect to the degree to which they furthered innovation, complexity, and provision of consumer goods. The policy which fared best in these regards would receive the

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highest ranking.3 We now examine each standard in turn, with a particular eye upon which empirical propositions would have to be true for the choice of standard to be a good one. For purposes of simplicity, I shall not phrase these statements in the subjunctive, although they should be read as ‘if-then’ statements rather than actual claims about reality.

Discovery and innovation

The discovery problem has a number of separate, though interrelated aspects, which include incentives for discovery, implementation of the discovery, and dissemination of the discovery. The last two features may also be expressed under the heading of innovation. In general, discovery refers to the expansion of the opportunity set occasioned by changes in the state of knowledge. Discovery is not restricted to the unveiling of unknown variables from a given distribution but also includes changes in the parameters of choice and the maximization problem which the individual faces (see Nelson and Winter 1982 for analyses of discovery).

One desirable property of a discovery standard is the incentive-driven nature of discovery. Such incentives may include money, fame, prestige, and altruism. Social systems that do not provide proper incentives for economic activity will perform poorly with respect to discoveries. Looking at discoveries thus gives an indirect handle on the kind of incentive system in the economy. Economies which allow participants to reap the benefits of welfare-improving activity will also generate significant quantities of innovation.

Another suitable property of discovery is that it cannot easily be forced upon an economic system beyond a certain limit. Attempts to increase the amount of resources devoted to discovery beyond some plausible limit will usually backfire. Let us imagine, for instance, that the government con-scripted half of America’s manpower resources for the service of scientific innovation. The empirical history of entrepreneurship and the creative process indicates that such a policy would yield fewer discoveries than current American policy. Other economic policies, however, such as the relaxation of anti-trust laws for joint research and development ventures, would be approved under this standard if they increased innovation.

The possibility of such policies leading to an ‘overinvestment’ in discovery is given little weight under this standard. This judgement is based upon the significance of the uninternalized externalities which attend most discoveries; the underlying empirical claim is that the greatest attainable (and sustainable) amount of discovery is likely to be the optimal amount. The best standards can be described as those whose practical maximum equals, or approximates, their normative optimum.

A final desirable property of discovery is the fact that unbalanced, singlesector spurts of discovery are unlikely to possess long-run sustainability. Economies with many varied and diverse sources of discovery, on the other hand, will be

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able to sustain this pattern for discovery for long periods of time. We are thus saved from having to make potentially difficult comparisons between economies which produce a great number of discoveries in a few limited areas and economies which produce a more varied and wellbalanced pattern of discovery. Another way of stating this point is as follows: the best method of achieving growth in a specialized area is to adopt the policy which leads to the healthiest all-round pattern of growth. This view is based upon such factors as the importance of cross-fertilization between businesses, industries, scientific disciplines, etc. in the process of economic growth.

Complexity

A well-known concept in general systems theory, the issue of complexity is gaining increasing attention within the economics profession. Complexity is generally considered to be a ‘cluster concept’ which consists of a number of interrelated features (see Warsh 1984). These features include the number of different parts in a system, the number of interrelationships between these parts, the number of types of parts, the definiteness of function of each part (specialization and division of labour), the ‘redundancy’ of a system, and the functional interdependencies between parts of an order.4 Perhaps complexity can be best visualized as the ability of a system to combine coordination and growth.5 Herbert Spencer has offered the following useful comment on complexity:

At the same time that evolution [of all sorts, including social] is a change from the homogeneous to the heterogeneous, it is a change from the indefinite to the definite. Along until an advance from simplicity to complexity, there is an advance from confusion to order—from undetermined arrangement to determined arrangement. Development, no matter of what kind, exhibits not only a multiplication of unlike parts, but an increase in the clauses with which these parts are marked off from one another.

(Spencer 1930, p. 293)

Policies which increase complexity are identified with the progressive development of an economic system, as empirical evidence indicates that successful economies are generally characterized by an extraordinarily high degree of complexity. Complexity has several properties which make it a desirable welfare standard. Like discovery, the greatest possible amount of complexity may also be the optimal amount of complexity. Additional ‘inefficient’ doses of complexity are difficult to sustain for a number of reasons. Perhaps, most importantly, marginal increments of complexity must always survive a profit-and-loss test.6 Additional complexity always involves a resource cost, and if it does not yield corresponding benefits it is likely to disappear.

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The above argument may appear to beg the question by assuming an identity between the private and social costs of complexity. Is it not possible that individuals may invest in increasing complexity for the purpose of seeking rents? At least in the proximity of the first-best solution, this danger may not be significant. Societies possessing large amounts of rent-seekinggenerated complexity will (ceteris paribus) be less complex than societies that do not permit such activities. Societies with less rent-seeking will have more wealth and be able to sustain complex patterns of organization considerably better than the societies with more rent-seeking. If this were true, then complexity would possess the desirable property of having its practical maximum coincide with its normative optimum.

Another advantage of the complexity standard is its close relationship with innovation and discovery. Complexity and innovation are two coexisting forces which supplement and encourage each other’s development. Complexity helps innovation by giving potential innovators a highly developed network of ideas, resources and support to draw upon. Likewise, innovation encourages complexity by providing a continual stream of new ideas, resources and support to be incorporated into existing economic relationships. This not only increases the number of parts in the system but allows for new and previously unseen ways of rearranging old components and resources.

The complementary nature of complexity and innovation implies a strong presumption that the first-best outcome or policy will dominate in both areas. This does not imply, however, that only one of these standards is needed. Both characteristics are complementary pieces of information concerning the desirability of a given policy alternative. Demonstration that a particular alternative is superior in both spheres offers considerable evidence that we are at, or approaching, the first-best solution, information which is not yielded by any single attribute.

Provision of consumer goods

Perhaps our strongest intuitive judgement with respect to the success of economic systems is that provision of consumer goods is a mark of fundamental success. Systems which do not manage to procure consumer goods for citizens must be judged as failures, regardless of any other virtues the system may have. Policies which increase the number or availability of consumer goods receive a positive evaluation, while policies which do the opposite receive a negative evaluation.

Apart from its intuitive appeal, using consumer goods as one of the three welfare standards may fit well with the other two standards of innovation and complexity. Both of these features play a critical role in the mechanism which delivers consumer goods to those who value them. Discovery provides for a continual stream of new goods as well as new ways of making these goods available and new ways of enjoying existing goods. Complexity allows an