In this chapter we consider supply chains, meaning the sequence of markets in an industry. For example, when the artist Damien Hirst hosted an auction of his own work at Sotheby’s London in 2008, he bypassed his dealers, leapfrogging over a stage of the typical supply chain. Supply chains are also sometimes vertically integrated markets, meaning the same firm owns many stages of these sequential markets. Vertical integration is the process by which a firm enters into the business area of its supplier or its customer, via acquisition, competition, or long-term contract. Vertical market power is often motivated by power or avoidance of different forms of market failure. Here, we are not (as in Chapter 4) talking about failure of the alignment of price and value but failure to transact reliably and without risk or undue cost. We explore related concepts of asset specificity and then business strategy models that take the supply chain as their spine.

If economics focuses on price representing value, we now shift to finance, which focuses on the connection of risk and return. We begin with the story of Wynn Kramarsky, a collector of works on paper (with his wife Sarah-Ann). Kramarsky’s parents had also owned Vincent van Gogh’s Portrait of Dr. Gachet. We go through a market primer including terminology of asset allocation and the logic of discounting cash flows and performing net present value analysis. We then review art market studies that use repeat sales and hedonic regression methods. The questions of this chapter try to connect the ephemeral, risk-taking, deeply uncertain work that happens in artists’ studios and to track the artwork from there to its status as part of an asset class.

This chapter argues that, although Samuelson developed much of the standard welfare theory based on individualism and the Pareto criterion, he attached great importance to ethical judgments that went beyond welfarism. Following his teacher, Frank Knight, he consistently argued that welfare judgments had to be based on ethical assumptions, his social welfare function providing a way that the implications of alternative ethical judgements could be analyzed. He attached great importance to the distribution of income and his own ethical values involved non-consequentialist elements.

We re-examine Pigou’s ethics in welfare economics with respect to welfarist or non-welfarist (more broadly, utilitarian or non-utilitarian) concepts based on various perspectives, such as incommensurability among utility and people, basic need information approach, non-welfarist justification of the national minimum, and methodological individualism in axiology. Consequently, we could detect certain non-welfarist approaches in his welfare economics, which squarely challenges the orthodox understanding of his works. We can assert that the deviation from simple welfarism was a result of practical considerations. Furthermore, apart from the dichotomy about welfarist and non-welfarist viewpoints, we present novel assessments of Pigou’s welfare notion: a hybrid strategy for the enhancement of people’s well-being. We show that his overall welfare idea involves both subjective and objective accounts and has a three-layered welfare strategy: bare and raw preferences turn into educated and refined ones via objective needs.

John Hicks played a crucial role at birth of the “new” welfare economics founded on the informational basis of interpersonally non-comparable and ordinal utilities. Toward the end of the 1950s, however, Hicks took a bold step by declaring his farewell to the welfarist informational basis of normative economics altogether. The purpose of this paper is to gauge the depth and reach of Hicks’s farewell to the welfaristic approach to normative economics.

This paper characterizes Kenneth Arrow’s contribution to justice issues in economics. When he established the fundamental theorems of welfare economics and the general impossibility theorem, his approach was seen as “welfarist”; however, he gradually came to accept that the consequences of economic and political decision-making are not always just, even when Pareto-optimal. The paper begins with some of his contributions to formal theory. Second, this paper illustrates how Arrow designed political and economic decisions using the same framework in the 1950s, and how he recognized that the significance of justice cannot be reduced to economic efficiency, as neither could it be defined in the strict welfarist informational framework. Finally, this paper argues that Arrow insisted that a criterion of justice can be deduced from the collective decision-making process in the hypothetical original position, because this position assumes equality. The paper concludes that Arrow’s idea of justice is based on a variety of values beyond utility, including non-welfaristic aspects such as freedom, equality, and fundamental rights.

Most Ruskin studies deal with his art theory and economic theory separately. This chapter intends to interpret both discourses in a unified way from the viewpoint of romanticism. While his economic theory is famously summarized in a thesis ‘No wealth but life’ the art theory he worked on can be formalized as a thesis ‘No beauty but life’. Thus we have a unified thesis, ‘Neither wealth nor beauty but life’, which may be called ‘Ruskin’s triangle’. I argue that the concept of life is vital for Ruskin’s unified knowledge. It is identified with its three aspects (capability, composition, and labour) and linked with its six symbolic determinants (admiration, hope, and love; air, water, and earth).

The chapter reflects on reasons economists have departed from welfarism when considering practical problems. Economists generally accept that using ethical values other than individual utility requires departing from neutrality but, if confronted with political contexts involving issues such as distribution, the environment or discrimination, they find it hard not to take an ethical position. Merit or public goods cannot be reduced to the satisfaction of individual utilities insofar as they are meaningful only in a social context. The individualism imposed by welfarism is also debatable when facing the interdependencies that exist between real-world individuals. Lastly, while welfare economics aims to avoid paternalism, reliance on preferences alone can be problematic. The paternalism implied by going beyond welfarism raises issues regarding democratic values such as agency and public reasoning that suggests that, instead of merely substituting non-welfarism for welfarism, there is a need for public debate on moral values. We conclude that economics, when inspired by theory and involved in practices with political consequences, should become more of a moral science.

Richard A. Musgrave (1910-2007) is the architect of modern public finance. Born and educated in Germany, Musgrave was a widely read scholar who fought attempts to narrow the scope and methods of economics. He had always been critical of what we now call welfarism, and more generally of strict methodological individualism. This chapter reviews the history of Musgrave’s connection with the idea of community. Musgrave’s limited opening – often implicit – for the idea of community provides a basis for an alternative conception of welfare. He realised the importance of a social or communal frame late in his life and left cursory remarks. Musgrave never fully articulated a coherent vision of what the idea of community belonging might entail for a democratic theory of the government’s budget. Yet, securing an ontological status for societies or communities allowed him to theorise a larger scope for public interventions than other economic models of the state. It provided a new meaning to his concept of merit wants. Reframing merit wants as ‘community wants’ is explained by the revival of moral and political philosophy in the 1970s and revisiting older German theories.

Marshall’s contribution to welfare economics is often summarized in the analytical tools developed in his Principles of Economics. This paper places Marshall’s views on welfare or rather ‘wellbeing’ in more broad perspective including his notes on ‘Economic Progress’; how Marshall thought of ‘economic, as well as the moral, wellbeing’, in his ‘high theme of economic progress’ or ‘organic life-growth’. It shows how he thought of the progress and ‘wellbeing’, economic as well as ‘physical, mental and moral’, in relation to ‘standards of life’ and to ‘quality of life’, ‘fullness of life’; and it aims to shed a fresh light to reconsider the welfare economic thought of Marshall.

Léon Walras is often assumed, at least implicitly, to be a welfarist on the grounds that his work is generally considered to be the origin of the first social welfare theorems and therefore a forerunner of Pareto optimality. This chapter argues that such a view contradicts the basic foundations of Walras’s economic and social philosophy and especially his conceptions of society and of individuals. If we take seriously Walras’s distinction between “general social conditions” (“conditions sociales générales”) and “specific personal positions” (“positions personnelles particulières”), we can develop an alternative interpretation of his views on welfare, which leads in turn to a different, non-welfarist, conception of the Walrasian view of the state.

Though economists typically eschewed non-welfarist arguments in the post-WWII period, there is at least one prominent instance in which such arguments were very much in play, both directly and as underpinnings for welfare-related arguments: The debate over the Coase theorem. This debate saw the Coase theorem regularly challenged on both welfarist (efficiency) and non-welfarist grounds. This then raises the question of what it was about the Coase theorem that led economists into this non-welfarist territory. This essay revisits the early debates over the Coase theorem, where non-welfarist arguments featured prominently, in order to bring out the nature of those arguments and attempt to understand the rationale(s) for their deployment. As we shall see, this move was a function of forces internal and external to economics, including the environmental turn in society and the profession, a concern with issues of fairness and equity in the evaluation of how to resolve externality problems, and a view, prominent in certain quarters, that the environment and environmental preservation is an end in itself.