I-CDDFP

I think David Friedman puts the case well. This if from The Machinery of Freedom---you can find the entire chapter webbed here.

A fourth possibility, and the last which I will consider, is that libertarianism is wrong and we should accept utilitarianism instead. According to the strict utilitarian position, rules, actions, ethics, must be judged solely by their effect on the sum (some utilitarians would say the average) of human happiness. Whatever increases happiness is good; whatever decreases it is bad. Libertarian principles are then valued only as a means, a set of rules that frequently lead to increases in total utility and should be rejected when they do not. This again is a possible interpretation of arguments that claim to derive libertarian principles from the nature of man, although not, in my experience, an interpretation that those who make such arguments are willing to accept.

One argument against utilitarianism is that it cannot be a correct moral rule because there is no way we can tell whether we are following it. We cannot observe other people's utility and are therefore unable to judge what will increase it. Even if we could observe individual utilities, we do not know how to compare the utility of different people and so have no way of judging whether a gain in happiness to one person does or does not balance a loss to another.

I find this argument unconvincing. Consider the act of buying a present. If you really have no knowledge at all about what makes other people happy, then buying a present is pure guesswork; you might just as well open a page of the Sears catalog at random, throw a dart at it, and buy whatever you hit. Nobody believes that; if we did, we would not buy presents.

Consider a court awarding damages. If we really know nothing at all about other people's utility, how can a court decide how much someone owes me for breaking my arm? For all the judge knows, I enjoyed having my arm broken. Assuming that I disliked it, he has no way of knowing whether my disutility for a broken arm is measured by a penny or a billion dollars.

We give presents and award damages, and we do not believe that other people's utility is entirely unobservable. What we do believe, or at least what many of us believe, is that each of us knows more about his own values than most other people do, and that people are therefore usually better off deciding what they want for themselves. That is one of the main arguments in favor of a free society. It is a long step from that to the claim that we know nothing at all about other people's values.

Even if we were entirely unable to observe other people's values, that would not necessarily prevent us from constructing a society designed to maximize total utility. Each person knows his own values, so all of us put together know everybody's values. In order to maximize the total utility of the society, we would construct rules and institutions that utilized all of that information via some sort of decentralized decisionmaking system, with each person making the decisions that require the particular knowledge he has.

This is not, of course, merely an abstract possibility. One of the strongest arguments in favor of letting people interact freely in a market under property rights institutions is that it is the best known way to utilize the decentralized knowledge of the society--including the knowledge that each individual has about his own values. The field of welfare economics largely consists of the analysis of the rules that lead to optimal outcomes under specified circumstances, where the outcomes are evaluated in terms of the preferences of the individuals concerned. One originator of modern economics, including much of welfare economics, was Alfred Marshall, an economist and utilitarian who viewed economic theory in part as a way of figuring out how to maximize total utility.

Even if individual preferences can be observed, either directly or as reflected in actions, we are still left with the problem of comparing them. How can we say whether something which makes one person worse off and another better off produces a net increase in human happiness?

The answer, I believe, is that we may not be able to make such comparisons very well or describe clearly how we make them, but we still do it. When you decide to give ten dollars worth of food and clothing to someone whose house has just burned down instead of sending a ten dollar check as an unsolicited gift to a random millionaire, you are expressing an opinion about which of them values the money more. When you decide where to take your children for vacation, you are making a complicated judgement about whether their total happiness will be greater camping in a forest or wading on the seashore. We cannot reduce the decision to a matter of precise calculation, but few of us doubt that the unhappiness A gets from the prick of a pin is less than the unhappiness B gets from being tortured to death.

Utilitarianism is a possible moral rule. The difficulties of applying it to real world problems are substantial, but so are the difficulties of applying an alternative rule such as minimizing coercion.

Friedman and I differ (I believe) in that I'm less skeptical of moral truths---or rather, more skeptical of economic truths.

Related posts:

Why IUCs?
Cardinal Schmardinal, Ordinal Schmordinal
Encoding Happiness
IUCs and the Law of Large Numbers
No Soul Suggests IUCs
Futilitarianism
I-CUP
Love and Intrapersonal Utility Comparison
What color does a submarine weigh? (True or False?)
Exploding IUCs on the roadside
Interpersonal Utility Comparisons
Pareto Efficiency and Justice
Can the Paradox of the Non-Comparability of Interpersonal Utility be Resolved?