Economics with(out) ethics? An interdisciplinary encounter between public economists and John Rawls in the 1970s

Abstract

This article analyses selected interdisciplinary exchanges between analytical political philosophy and public economics in the United States during the 1970s. It focuses on three core themes in which public economists interpreted, discussed, and incorporated concepts from John Rawls’s A Theory of Justice (1971), namely: (1) the limits and uses of utilitarianism as a useful framework for capturing social welfare; (2) the ethics of promoting justice and fairness; and (3) how to promote redistribution through taxation. An exploration of published and unpublished sources (personal correspondence, articles, and books) following the publication of Rawls’s magnum opus reveals an intense engagement from public economists with key Rawlsian concepts in the 1970s, in particular the “maximin.” Whilst such exchange offered important thematic inspiration for making the field more ethically driven and engaged with justice-related issues, generating policy discussions on promoting redistribution through optimal taxation, their exchange remained within the economist’s formal toolbox and way of reasoning. Political philosophy made public economics to become ethical without challenging the core epistemic-methodological foundations of economic reasoning.

Keywords:

• Public economics
• analytical political philosophy
• John Rawls
• interdisciplinarity
• utilitarianism
• ethics
• redistribution

JEL CODES:

• A12
• B29
• H00

1. Introduction

In what ways is public economics an interdisciplinary field? The emergence and development of public economics represent an internalisation of the economic rationale within a government’s discourse and practice. Often considered as a hybrid product of public finance, welfare economics and public choice, it formalises concepts and proposes economic models to inform government action. Discussions over welfare measurement and maximisation, provision of public goods, distributive efficiency, optimal taxation, and correction of market failures have become the “gold standard” of the field, mainly disseminated through the works of Richard M. Musgrave, James M. Buchanan, Tony Atkinson, Kenneth Arrow, Paul Samuelson, and many others. Writing the history of public economics, however, is less of an easy task (Faccarello and Sturn 2010) and still under development. While trying to build such history, many of the histories of public economics have focused on the development of key concepts or the contributions of individual economists (for instance, Pickhardt 2006; Desmarais-Tremblay and Johnson 2019), but less has been said about the interactions between public economists with other disciplines – or public economics as a collective field – with “outsiders.”

Amongst these outsiders lies political philosophy, in particular the “new” (or analytical) political philosophy developed during the 1970s in the United States. Broadly, the field saw a “Rawlsian revolution” with the publication of John Rawls’s A Theory of Justice (1971). It led to an important shift towards “liberal egalitarianism” when discussing the ideal bases of a just society, as well as increased public impact with the consolidation of the post-war capitalist dream of a just and liberal society (Forrester 2019). Rawls’s work echoed the political sentiment of the 1950s-1970s and crystalised the unification of political philosophy with social liberalism (Coman 2020), causing significant impact with a theoretical framework that contained ideal societal goals within formal political structures (the state, civil rights, the rule of law). The reception of Rawls’s work is noteworthy across the social sciences, namely political science, social theory, and international relations.

Other fields, such as economics, are also considered to be affected by the Rawlsian revolution (Little 2014), in particular by Rawls’s normative discussions of how a modern economy could achieve a collectively desired level of fairness. Hawi (2016) states that it was through his dialogue with economics that Rawls clarified his theories. Nonetheless, this came at the expense of miscommunications and challenges between economists and Rawls, notably due to a conceptual narrowing (Duhamel 2012), and Rawls’s later disenchantment with economists (Igersheim 2023). Less is said about the interdisciplinary exchanges between Rawls and specific fields in economics, as well as the usages and applications of Rawlsian principles in sub-disciplines as it is the case of public economics.

Thus, this article documents some of the interdisciplinary exchanges between Rawls and public economists during the 1970s in the United States. It focuses on three main areas to explore the ways in which Rawls was interpreted, discussed, and incorporated within the theories and models of public economics: namely, the limits and uses of utilitarianism as a useful framework for capturing social welfare; the ethics of promoting justice and fairness; and how to promote redistribution through taxation. We survey published and unpublished letters, archives, books, and articles written by public economists through an archaeological¹ exercise, focusing on key themes that motivated their dialogue in the 1970s, rather than addressing them in chronological order.

Interdisciplinary exchanges are complex interactions: whilst some may consider them a complete unification of fields and disciplines, evidence shows that they may occur without substantive integration. That is, while some aspects of their identity may be affected, not necessarily two distinct fields will merge into a third (Grüne-Yanoff 2016, 346). Whilst we do not argue that public economics experienced a “Rawlsian turn”, we claim that documenting their exchange through key themes sheds important light on how Rawls was incorporated and used by public economics, how it brought ethical issues into public economics analysis, reinforcing its normative content about which ethical principles should govern a given society; and discuss how this exchange has brought inspiration to public economics to discuss pressing theoretical and social issues (utilitarianism, social justice, state action, inequality, taxation). Our findings point out to important methodological, thematic, and policy-related implications of such exchange, in particular the ethical inspiration that Rawls caused over normative principles of public economics whilst maintaining the economist’s formal “toolbox” and “style of reasoning” (Berman 2022) based on mathematical formalism and neoclassicism.

The article is structured as follows. Section 2 offers a historical roadmap of the main foundations of public economics within the history of economic thought, as well as the importance of utilitarianism in shaping debates in both fields. Section 3 documents three key themes (utilitarianism, ethics in promoting justice and fairness, and how to promote redistribution) in which Rawls’s works sparked discussion within public economics, drawing from published and unpublished material. Section 4 critically discusses two core implications of the interdisciplinary exchange with Rawls for the shaping and delineation of public economics as a field: both methodological/theoretical, as well as consequences for policy discussions. Finally, the concluding remarks are presented.

2. Building an external history of public economics

Formally, public economics is a recent field, yet with a dispersed and non-linear trajectory. Indeed, “there is no simple narrative which can accommodate the joint evolution of economics and theories of the public economy” (Faccarello and Sturn 2010, 537) given how economic issues have always been incorporated into governmental practice without relying on a formal, economic language. Historians of public economics have uncovered two main historical trails that helped to define the field as an independent body of knowledge.

First, the histories that sit within the internal boundaries (or scholars) of the field, or an “insider” approach to the history of public economics. It focuses on the biographies, life stories, ideas, debates, and theoretical contributions of public economists. These can be approached either from an individual perspective that highlights a certain concept, school of thought or body of ideas – e.g. Atkinson’s (1987) intellectual review of James Buchanan as a product of Wicksell and the Italian tradition of public finance; Peacock (2010) on his own intellectual life; Desmarais-Tremblay on the concept of merit goods (2019) and on Musgrave (Desmarais-Tremblay and Johnson 2019); Johnson (2022) on the influence of classical political economy in Buchanan –, or from a comparative/interactive angle, in which two or more economists are explored together. The latter covers interactions, discussions, or disagreements over key concepts; for instance, Desmarais-Tremblay (2014) contrasting Buchanan’s positive view of public finance with Musgrave’s normative ideal type of public household.

Second, the histories which investigate how public economics has influenced or interacted with other fields, institutions, policymakers, or intellectuals outside the economics domain (an “outsider” approach). Such reading allows one to better grasp how public economics has shaped itself from the outside, namely how certain economic concepts and models have entered the government lexicon, how public economists have offered advice to public institutions, and to what extent has public economics drawn from outside fields (such as finance, philosophy, accounting, public administration, and politics). On this, the historical evidence put forward by key scholars help to shed light on how public economics entered government institutions. For example, Peacock (2010) describes how the National Bureau of Economic Research (NBER) had recruited him to discuss public sector growth given their increasing demand for that particular type of analysis; Coats (1981) documents how the creation of the Government Economic Service in the United Kingdom in 1965 has allowed for higher specialisation of economists and the usage of microeconomic tools applied to specific policy issues, particularly planning and regional development.

Whilst some emphasise the technicalities of how public economics entered the public debate, others claim that behind process rests a social-ethical dilemma within state action: “A characteristic of public economics as it developed is its frequent normative dimension. It would even make sense intellectually and be faithful to the history of ideas to classify theories of public action as ‘public economics’, when they are applied social ethics” (Kolm 2010, 692, our highlight). If a policymaker must make a choice that has a social ethical dimension and needs to find a criterion for it, according to which criteria should they choose? There is crucial importance of public economics for educating civil servants given the normative dimensions of economic choices based on certain ethical principles, justice, and societal goals, in which decision-makers should “learn to choose properly” for the common good.

This begs the question of how public economists understand abstract ethical concepts of fairness, distribution, and equality, and have drawn them from political philosophy through an “interdisciplinary exchange” (Grüne-Yanoff 2016). Concomitantly, one can attest cases of other interdisciplinary connexions in economics during the same period. Namely, with the economic analysis of law as initiated by Posner in the early 1970s and his debates with Ronald Dworkin (Harnay and Marciano 2009), and evolutionary game theory, which evolved from biology and economics (Grüne-Yanoff 2016).

It is noteworthy to say that we do not argue for a full integration of political philosophy into public economics, which would mean an absorption and merging of philosophical theories, methods, and explanations by economists, nor we focus at specific and constrained interdisciplinarity instances in the form of specific program collaboration (as Simon and Goode (1989), for example). Instead, we suggest how such exchange took place in the form of a “conversation” through a surveying exercise, in a form of shared interdisciplinarity (Klein 2010) in which certain concepts were brought into the economist’s toolbox and entered their lexicon without abandoning traditional epistemological and methodological barriers. The next section offers a thematic approach to such exchange, illustrating three key themes in which public economists engaged with Rawlsian theory.

3. Bringing Rawls in: how public economists read Rawlsian theory

Drèze² (1995, 112) argues that public economics “has gained acceptance over the past 20 or 30 years to designate the economics of the public sector,” emerging as a transition from public finance and incorporating the neoclassical apparatus offered by post-war welfare economics. Unlike public finance, public economics is deemed to be more “technical” and rigorous (Dome 2004), drawing from a more sophisticated set of tools to address theories and policy dilemmas. For instance, Atkinson and Stiglitz (1980) emphasise the importance of studying economic justice and the reduction of distortions within society, aiming to formulate core principles by which economic decisions can be done in order to reduce inequalities. Rather than assessing the merits of these principles, they are better understood as a foundational aspect for theoretical formalisations and policy solutions.

Such context suggests that it is no accident that Rawls was brought into economics for wider discussion. Rawls’s methodology was appealing to economists, mainly drawing from mathematically formalised concepts discussed in post-war neoclassical economics. Between the 1950s and the 1970s, Rawls was aware of recent developments in economics scholarship, particularly in decision theory, game theory, and social choice theory, having repeatedly used economics concepts and arguments – event some the most prominent ones in the Theory of Justice - to illustrate his philosophical elucidations (Little 2014). His appreciation of economic jargon and theory³ and their incorporation into some of his philosophical discussions allowed for a common discussion ground (Sahota 1978, 36).

Herein, we survey selected unpublished correspondence between Rawls and leading public economists between 1971 and 1980, as well as their published scholarship that discusses or expands core concepts stemming from Rawlsian theory. Table 1 (below) summarises the economists surveyed in our archival and bibliographical analysis:

Table 1. Scholarly engagement of key public economists with John Rawls’s works (1970s).

Economist	Institutional Affiliation in the 1970s	Area of expertise	References (Letters and/or published works)
Sidney Alexander	MIT (1956-)	Mathematical economics Economic growth International trade	“Social Evaluation Through Notional Choice”, The Quarterly Journal of Economics (vol. 88, issue 4, 1974)
Kenneth Arrow	Harvard University (1968-79)	Social choice theory Mathematical economics Public economics	“A Utilitarian Approach to the Concept of Equality in Public Expenditures”, The Quarterly Journal of Economics (vol. 85, issue 3, 1971) Letter to Rawls (1972) “Rawls’s Principle of Just Saving”, The Swedish Journal of Economics (vol. 75, issue 4, 1973a) “Some Ordinalist-Utilitarian Notes on Rawls’s Theory of Justice”, The Journal of Philosophy (vol. 70, issue 9, 1973b)
Anthony Atkinson	University of Essex (1971-76) MIT (1973 Visiting) University College London (1976-79)	Social justice Public policy Political economy Public economics	“La “Maxi-Min” et l’imposition Optimale Des Revenus”, Cahiers Du Séminaire d’Économétrie, (vol. 16, 1975) The Design of Tax Structure: Direct versus Indirect Taxation’. Journal of Public Economics (with Joseph Stiglitz) (vol. 6, issues 1–2, 1976) Lectures on Public Economics (with Joseph Stiglitz) (1980)
Michael Boskin	Stanford University (1971-) NBER (1971-, Research Associate)	Economic growth Tax and budget theory and policy	“Estate Taxation and Charitable Bequests”. Journal of Public Economics (vol. 5, issues 1–2, 1976) “Some Lessons from the New Public Finance” (with Joseph Stiglitz), published in 1978 (NBER working paper) and at American Economic Review (vol. 67, issue 1, 1977) “Optimal Redistributive Taxation When Individual Welfare Depends upon Relative Income” (with Eytan Sheshinski), published in 1976 (NBER working paper) and at The Quarterly Journal of Economics (vol. 92, issue 4)
James Buchanan	Virginia Tech (1969-83)	Political economy Public choice Constitutional economics	Letter to Rawls (1972)
David Colander	Columbia University (1970-76)	Macroeconomics Economic methodology Economics education	Letter to Rawls (1974)
Partha Dasgupta	LSE (1971-75) University of Cambridge (Fellow, 1971-74)	Welfare and development economics Environmental economics Game theory	Letter to Rawls (1972)
Peter A. Diamond	MIT (1966-2011)	Social security Taxation Welfare economics	“Optimal Taxation and Public Production I: Production Efficiency”, The American Economic Review (vol. 61, issue 1, 1971) (with James A. Mirrlees) “Taxation and Public Production in a Growth Setting”. In: Models of Economic Growth, J. A. Mirrlees and N. H. Stern (eds.)
Martin Feldstein	Harvard University (1969-2019)	Macroeconomics Public finance Social insurance Public economics	“Incidence of a Capital Income Tax in a Growing Economy with Variable Savings Rates”, Review of Economic Studies (vol. 41, issue 4, 1974) “On the Theory of Tax Reform”, Journal of Public Economics (vol. 6, issues 1–2, 1976) “Tax Incentives and Charitable Contributions in the United States: A Microeconometric Analysis”, Journal of Public Economics (vol. 5, issues 1–2, 1976) (with Charles Clotfelter)
John Harsanyi	Uni. of California, Berkeley (1964-90)	Game theory Mathematical economics Welfare economics	A review of Rawls’s A Theory of Justice, published as: “Can the Maximin Principle Serve as a Basis for Morality? A Critique of John Rawls’s Theory”, The American Political Science Review (vol. 69, issue 2, 1975)
Richard A. Musgrave	Harvard University (1965-81 Emeritus)	Public finance Fiscal policy and taxation	“Maximin, uncertainty, and the leisure trade-off”, The Quarterly Journal of Economics (vol. 88, issue 4, 1974)
Edmund Phelps	Columbia University	Macroeconomics Economic growth Unemployment discrimination	Letter from Rawls (1972) Letter to Rawls (1973) “Taxation of Wage Income for Economic Justice”, The Quarterly Journal of Economics (vol. 87, issue 3, 1973) Letter to Rawls (1974) Letter from Rawls (1974) “Rawlsian Growth: Dynamic Programming of Capital and Wealth for Intergeneration ‘Maximin’ Justice”, The Review of Economic Studies, (vol. 45, issue 1, 1978) (with John G. Riley)
Robert Solow	MIT (1949-95 Emeritus)	Economic growth	“Intergenerational Equity and Exhaustible Resources”, The Review of Economic Studies (vol. 41, 1974) Letter to Rawls (1973) Letter from Rawls (1973)

Besides Rawls’s familiarity with 1940s-1960s economic theory, Rawls also engaged and followed mainstream economic debates more closely, with evidence of reciprocity from his peers in economics. For instance, in his talk for the American Economic Association in 1973, he acknowledges the economist’s aversion to moral philosophy:

Some economists may be averse to moral theories; they may say that they do not belong in economics. In some sense this is true, by definition. But in another important sense it is false. For the distribution of income and wealth, and the economic organization of a society generally, is surely affected by the moral perceptions of its citizens. (Rawls 1973a, 27)

Whereas for Rawls political philosophy focused on general moral investigations about the promotion of fairness in society, economics represented the translation of these theoretical issues into practical social policies (Rawls in reply to Colander 1974a). Hence, this section explores three key themes in which public economists engaged with Rawlsian theory; namely, (2.1) the use and limits of utilitarianism for social analysis; (2.2) the ethics of promoting social justice; and (2.3) distributional issues and taxation policy.

3.1. The use and limits of utilitarianism

Utilitarianism is commonly understood as a family of moral and political philosophies that assess the merit of human institutions according to the extent to which they serve human welfare (Riley 2008; Alexander 1974) It gained prestige in economic theorising with some political economists (e.g. Jeremy Bentham, and John Stuart Mill), and later with early marginalists, who adopted a subjective theory of value based on utility, seeking its maximisation. Within discussions about social welfare, utilitarianism allows for the possibility of interpersonal comparability of individual welfare, comparing the sums of individual welfare levels for distinct alternatives and disregarding interpersonal differences or the ordering of alternatives (Sen 1970).

Rawls’s formally questioned utilitarianism (1967, 1971) as a single useful principle for determining justice and what is considered to be “fair” in a given society, starting from the following premise: assuming that conflicting views of justice exist, how can society order them and weight them fairly⁴? Other than the principle of utility, there is no other criterion by which we can reasonably make a judgement – normally, balancing satisfactions and dissatisfactions between persons (Kliemt 2013). Being an insufficient criterion for promoting justice, Rawls makes a case for the adoption of two alternative principles, which derive from an original position, behind a veil of ignorance, so they do not know what their own position in society is (and therefore have insufficient information to calculate their own expected utility):

1. the principle of equal liberty, in which each person has an equal claim to a fully adequate scheme of equal basic liberties;

2. the twofold principle of fair equality of opportunity (which assumes that social and economic inequalities are to be attached to positions and offices open to all under conditions of fair equality of opportunity), and the principle of difference (they are to the greatest advantage of the least advantaged members of society) (Rawls 1971).

For Rawls, the position of individuals is not compared in terms of utility, but according to an index of primary goods, which are essential for developing and exercising the principles of a good life, namely: basic rights and liberties; freedom of movement and choice; powers of offices and positions of responsibility; income and wealth; and sense of self-worth and self-respect, provided by social institutions (ibid.).

Before the publication of A Theory of Justice (ibid.), Rawls delivered a course on social justice⁵ together with Kenneth Arrow and Amartya Sen in the fall of 1969 at Harvard. Rawls’s opening seminar notes (1969, 13) highlight the possibility for thinking beyond utilitarianism within social analysis:

“A. Introduction:

1. there is a natural affinity between economics and moral phil(osophy) [sic]. This shows in the tradition: Hume, A. Smith, Bentham, Mill, Sidgwick, all moral phils [philosophers, sic] and economists. There is also a natural affinity between economists and utilitarianism: all these phils [philosophers] were u-ians [utilitarians]. And so were many leading economists, e.g. Marshall, Edgeworth, Pigou, many others.

2. Even recent welfare econ [economics] tends to be u-ian [utilitarian] as far as its intellectual scruples permit. It is the worry about inter-personal comparisons of utility that prevents it. Thus, u-ism [utilitarianism] persists, but in variants adjusted to the demands of current thinking: e.g. in the form of the SWF [social welfare function] (the property), in the reliance as far as possible in the Pareto-(Wicksell) principle.

3. Now I believe that u-ism in all its classical forms any way is mistaken. Even obviously [original highlight] mistaken. Its fundamental error, I think, is to take the principle of choice for one person as the principle of social choice as well, as the principle of many persons. (…) It conflates all persons into one, either by the idea of the impartial spectator, or by randomizing rational choice of one person.

4. Now there is no point in refuting directly natural moral views, es one so attractive as u-ism. Therefore, in J as F [Justice as Fairness] I try to construct an alternative theory.” (Rawls 1969, 13)

The reception of Rawls’s theory by public economics lends important weight to the application and usefulness of utilitarianism when thinking about collective fairness and social welfare dilemmas. Despite Rawls’s departure from utilitarianism and emphasis on the need for a more ethically just theory, published works and unpublished correspondence suggests that public economists have put Rawls closer to utilitarianism, questioning the difficulties in moving away from it and replacing it with a more convincing alternative. While some were more sympathetic to his theoretical endeavours (Phelps 1973; Musgrave 1974), others questioned, inter alia, the applicability of moving away from utilitarianism for social justice (Arrow 1971), the judgements of value to the outcomes of justice (Arrow 1973a, Alexander 1974), the applicability of the maximin criterion (Mueller, Tollinson, and Willett 1974), and the (im)possibility to move away from individual self-interest to achieve fairness (Harsanyi 1975). We now refer to each of those points in more detail.

Some public economists acknowledged Rawls’s efforts in bringing moral philosophy closer to economics (Musgrave 1974). More specifically, when deriving the implications of Rawls’s criterion of justice for the taxation of wage incomes, Phelps (1973) calls the Rawlsian approach as “the first complete principle of social choice to command wide and serious interest since the time of sum-of-satisfactions utilitarianism” (ibid., 332), being comparable to “the modern-day analogue of Aquinas: Everything for the greater utility of the poor” (ibid., 333). Estimating a Rawlsian principle for wage income taxation (Phelps, ibid.) represented a departure from utilitarianism as interpersonal comparisons of sums-of-utility (Harsanyi 1955) and allowing for an ethical consideration of the “least well-off individuals.”

Nonetheless, some emphasised the practical difficulties in replacing utilitarianism in public economic analysis. For instance, whilst accepting the limitations of the utilitarian approach, Arrow (1971) suggests how utilitarianism can be used as methodological tool and as a good form of measurement for fairness and equality. He claims:

The utilitarian approach is not currently fashionable, partly for the very good reason that interpersonally comparable utilities are hard to define; nevertheless, no simple substitute has yet appeared, and I think it will be useful to pursue this line of study for whatever clarification it will bring. (Arrow ibid., 409)

Similarly, Arrow’s (1973b) review of Rawls exposes some acknowledgement in his efforts, particularly in bringing the foundations of justice closer to economists’ attention. Despite emphasising the importance and sophistication of Rawls’s moral philosophy, Arrow questions the Rawlsian misinterpretation of utilitarianism, claiming to have an “ambivalent attitude” towards it (ibid., 255) as well as demonstrating some scepticism towards the maximin theory as not being a better solution than the “sum-of-utilities" criteria. Overall, Arrow’s criticisms focus on Rawls’s misinterpretation of individual incentives to perform justice that goes beyond self-interest (for example, when an individual is expected to be truthful, but the consequences are seen as negative); and on the possibility of providing a universal theory of justice given individual heterogeneity. As Arrow says, (1973b, 246): “there has been more emphasis on their operational meaning [utility concepts], but perhaps less on their specific content; philosophers have been more prone to analyse what individuals should want, where economists have been content to identify ‘should’ with ‘is’ for the individual (not for society).”

Echoing Arrow’s criticisms to Rawls’s alleged departure from utilitarianism and its impact over the analysis of social choice is Sidney Alexander’s piece to a symposium held in the Quarterly Journal of Economics in 1974:

While Rawls offers his theory as an alternative to utilitarianism, I shall argue that he is advancing a particular utilitarian theory and that his quarrel is not with utilitarianism as such, but only with other variants of utilitarianism. (…) Rawls’s theory is utilitarian in that it takes the satisfaction of human wants as the criterion for the evaluation of social arrangements. His challenge to utilitarianism is, in one aspect, a challenge to the use of an equally weighted sum in the conflation of individual welfares into a measure of social welfare. He supports instead a maximin principle of conflation, though he denies this maximin mode of conflation to be conflation at all. I shall argue that the challenge to equally weighted welfare summation as a utilitarian mode of conflation is well founded, but a maximin principle is not acceptable either. Some intermediate mode of conflation is appropriate, whose exact specification requires more precision than the subject matter can support (Alexander 1974, 598-599).

By questioning Rawls’s interpretations of utilitarianism and how it conceives welfare, Alexander defends the maintenance of a “rational desire” concept of welfare (ibid., 599) as a superior approach to the maximin, given the wide variety and non-homogeneity of human desires.

Perhaps the most critical reception from public economists on Rawls’s approach to utilitarianism and the maximin comes from Harsanyi’s (1975) review of A Theory of Justice, claiming that “Rawls’s attempt to suggest a viable alternative to utilitarianism does not succeed” (ibid., 594). While Harsanyi acknowledges the merit and power of Rawlsian theory as a “powerful analytical tool for clarifying the concept of justice and other aspects of morality” (ibid., 595), he questions the usefulness, applicability, and potential social consequences of the maximin principle as a decision rule for the participants in the original position. Further, he argues that for practical applications, Rawls’s ideas were not significantly different from utilitarian ones. Notably, he claims:

[The] maximin principle violates an important continuity requirement: It is extremely irrational to make your behavior wholly dependent on some highly unlikely unfavorable contingencies regardless of how little probability you are willing to assign to them. (…) Rawls is right when he argues that in some situations the maximin principle will lead to reasonable decisions (Rawls 1971, 154–156). But closer inspection will show that this will happen only in those situations where the maximin principle is essentially equivalent to the expected-utility maximization principle (in the sense that the policies suggested by the former will yield expected-utility levels as high, or almost as high, as the policies suggested by the latter would yield). (…) Indeed, it is my impression that in most situations the practical implications of Rawls’s theory would not be very different from those of utilitarian theories. (Harsanyi 1975, 595-606).

While some public economists were more sceptical in replacing utilitarianism and widely incorporating Rawls’s principles for social welfare analysis, others attempted to bridge them together. On this, Mueller, Tollison and Willett’s (1974) provide a formalisation of Rawls’s framework in combination with a utilitarian approach, claiming that “the Rawlsian and utilitarian contracts have far more in accord than in contraposition” (ibid., 364). By assuming both theories are not incompatible, they develop a utilitarian contract model in which each individual in the original position has the same information about tastes and positions, and is ignorant of their own characteristics. When attempting to maximise all their expected utilities, all individuals would make the same evaluations of the possible states of the world (by being rational, egoistic, and without envy), and unanimous agreement on a social contract be obtained. (ibid., 350-354).

The evidence put forward herein questions the wider implications of Rawls’s theory for development of the scope and method of public economics, given that economists were sympathetic to Rawls’s wider inquiry, albeit less willing to give up the formal methodological pillars represented by utilitarianism and the concept of utility as a measure of value. Section 4.1 will further discuss these implications.

3.2. The applicability of ethical principles in economic analysis

The publication of Rawls’s A Theory of Justice also sparked significant discussion with regards to the notion of justice, and how (and to what extent) formal institutions should promote it. Discussions – mainly in unpublished correspondence – promoted by public economists regarding key themes provide evidence on how Rawlsian theory was received by the field, namely: the applicability of Rawls’s theoretical framework for social choice for current and future generations (Dasgupta 1972; Phelps 1973); assumptions about ethical behaviour and individual judgements (Arrow 1972; Alexander 1974; Musgrave 1974); and understanding the foundations of the social contract for promoting justice (Buchanan 1972b). These debates also shed some light on how public economists understood ethics and how it should enter economic analysis, questioning the limitations of a general theory of justice.

The first theme relates to the definitions and applicability of Rawls’s principles to current societies. Dasgupta (1972) questions Rawls’s discussion of the original position and how much weight should one give to the preferences and average utility of future generations in comparison to the current one. By arguing that it is hard to “draw the line” on the social contract for upcoming generations, Dasgupta says that it would be impossible to estimate and measure their social preferences, arguing that if we are “discussing embryos,” there could be an infinite number of them, and it is impossible to estimate “their” preferences. Whilst largely sympathetic to Rawls’s works, Phelps (1973, 350) questions what is considered the “bottom class” in the Rawlsian system, and why the least-advantaged class in a given society cannot be considered as earning a market income, or if it should be left uncounted in the census of utilities.

Additional concerns rely on the implications of Rawls’s works for individual judgements and the possibility of ethical behaviour in the economy. On this, some public economists reveal a puzzled feeling about a universal approach to ethics and justice, claiming social coordination issues and a lack of concrete rules and elements to establish convincing bases for a just society. In a letter to Rawls in July 1972, Arrow reinforces:

I am more and more troubled, frankly, about the idea of universalizability in any form as a basis (or at least as a sufficient basis) for ethical behavior. It is only to a limited extent that we can imagine ourselves to be in other people’s positions; it is not asking too much of justice that it should require knowledge that people do not have and are not motivated to require? (Arrow to Rawls 1972)

Similarly, Alexander (1974) argues that there is some fuzziness in Rawls’s theory when it comes to establishing clear guidelines and ethical principles: “our problem is not with language, but with epistemology. On the basis of what experience are we justified in believing a normative belief – that human institutions should serve human welfare, for instance? Here we merely have our ways of judging, and our way of judging those judgements and so on” (ibid., 602). Rather than simply substituting choice for contract as the foundation for justice, Alexander says one must need to reinterpret Rawlsian theory: not as a theory of justice based on fairness, but “along with fairness as an input went individualism, egalitarianism, and utilitarianism. The output is not justice alone, but all social virtues” (ibid., 605). Rather than imposing a narrow set of normative judgements, Alexander (ibid., 599) calls for a “pluralism of standards.”

Some concerns over the assumptions about social reality and the existence of conflicts and inequalities also challenged Rawls’s theory. On this, Musgrave (1974) questions both the assumptions of the veil of ignorance, as well as the Rawlsian rule of maximin. The former represents an unlikely assumption given existing inequalities on bargaining skills and differentials in earnings capacity (ibid., 628). The latter (maximin), which is achieved via utility maximisation under uncertainty (a veil of ignorance) “is the outcome of natural harmony” yet “hardly the foundation of a contemporary theory of justice, applicable to a world that is above all characterised by conflict” (ibid., 626).

This concern is also shared by Buchanan (1972a), who demonstrates scepticism towards Rawls’s intentions to derive a universal theory of justice as the basis for social action in practice. He says:

If he [Rawls] is advancing ‘justice as fairness’ as a basis for discussion, as an input in some process of reasoning together, with consensus as an ultimate objective as well as constraint, I should grant his work high marks indeed. If, however, he is holding up ‘justice as fairness’ as the embodiment of ‘truth’, which judges and legislators in their ‘superior wisdom’ are to force upon us, Rawls’s book deserves to gather dust on the idealist bookshelf. (Buchanan 1972a, 127).

While Buchanan (ibid.) shows initial sympathy for Rawls’s analysis of justice as fairness, he raises important concerns about Rawls’s contractualist (rather than contractarian) approach, which assumes a given set of judgements of value as the outcomes of the social contract; namely, a Kantian notion of social cooperation with individual respect and following moral standards (Krasnoff 2014). For Buchanan, a Hobbesian contractarian interpretation would be more suitable, given it assumes social order as the product of a rational and self-interested process (Colin-Jaeger et al. 2022), rather than universal values (echoing Arrow 1972). Therein, social outcomes would be “non-specified,” mainly due to uncertainty and the impossibility of providing a judgement of value for whatever is achieved collectively.

3.3. Distributional issues and taxation

The 1970s public economics literature experienced a blooming period of scholarship focused on distributional issues after Rawls’s (1971) A Theory of Justice, with most discussions revolving around redistribution and its optimality, as well as the role of taxation in promoting social justice. Namely, the emerging scholarship from Atkinson and Stiglitz (1976), Atkinson (1975), Boskin and Sheshinski (1978), Diamond and Mirrleess (1971) and in Solow (1974) when modelling taxation systems and their implications; Diamond (1973) and Feldstein (1974) on the dynamics of capital and its distributive implications when capital stock is owned and accumulated by a minority of society; and in Feldstein and Clotfelter (1976) and Boskin (1976) when analysing the optimality of charitable public provisioning.

While most of the interactions between the philosopher and economists were on those themes, the historical and academic evidence suggests that their engagement was less focused on discussing the foundations and applications of distributional justice, and more on developing specific applications or conditions for simulating a few of Rawls’s principles (see Duhamel 2012, 15), with some commentators claiming misrepresentations or the narrowing of Rawlsian theory when it was brought to economics (Duhamel 2012; Little 2014; Hawi 2016; Igersheim 2023). After all, for Rawls, the maximin only applies to decisive principles of justice, when the state or decision-makers ought to establish the institutions where later economic activity is to happen (Rawls 1971, 38). Indeed, when it came to the interactions regarding the issues of distribution and taxes, most only focused on the maximin, with indirect mentioning of the difference principle.

While some questioned the usefulness of the maximin and criticised its applicability by seeing no difference in comparison to a utilitarian criterion (e.g. Harsanyi 1975, as mentioned in section 3.1, or the discussion around the assumption of extreme risk aversion in the original position), others were able to integrate it within economic theory as a particular case within redistributive measures, mainly via taxation when considering both current and future generations (Arrow 1971, 1973b; Phelps 1973; Solow 1974; Atkinson 1975; Feldstein 1976; Boskin and Sheshinski 1978; Atkinson and Stiglitz 1980). The uses, interpretations, and expansions of the maximin contributed to populate the “formal toolbox” of public economics, being an integral part of most models and formalisations as an important condition or hypothetical situation. Echoing Mirowski’s (2002) note on the formalisation and scientisation of economics as a new form of discourse, public economics took the maximin “to the lab” by playing with it, isolating it, extending it, and testing it incessantly throughout the remainder of the 1970s.

Some illustrations below list the formal uses of maximin by the public economics lexicon:

1. As a formal “Rawlsian condition” or criterion. Some models incorporated it as a special case of treating welfare functions (in particular, Atkinson 1975, as cited in Feldstein 1976⁶, Atkinson 1975), representing the maximising of min_i U_i (c_i), assuming that there exists for each individual i an interpersonally meaningful cardinal utility function U where c_i is the consumption of the ith individual (Arrow 1973b). The condition would “maximise the welfare of the least well-off member of the society,” as it “could be any of them” (ibid., 323).

2. As one of the conceptual “extremes” of approaching individual utility maximisation (Stiglitz and Boskin 1977, 296), assuming it as the least egoistic approach to welfare and distribution, or the preferred choice under extreme risk aversion.

3. As a particular condition within training incentive models when designing optimal taxation of wage income. While the analytical approach is similar to what has been defined in (1), here the maximin criterion is related to the welfare capacity in terms of individual effort, instead of the immediate welfare-based consumption, in which the “‘maximin’ tax function causes the second-order condition for a relative maximum to be satisfied” (Phelps 1973, 340).

4. As a flexible concept⁷ that could be widely applied, including in intergenerational issues when discussing optimal capital accumulation (Solow 1974). The foundational conception of the maximin as established in (1) was extended for modelling the growth of capital accumulation, refuting an “anti-growth” assumption that intergenerational justice under the maximin criterion would harm economic expansion (Phelps and Riley 1978). This was used to model the conditions for which a generation was entitled to issue debt, taking the maximising min_τ≥t U_t (c_t, ·) form, but in a dynamic setting – substituting the ith subindex by the temporal t subindex and applying the criterion at every period from all the subsequent ones – including stock of capital, k_t-1, left over by the previous generation, and the claim it has in terms of consumption when they are surpassed in the productive sphere of the labour market by the new generation, x_t-1.

Some mentioning of the difference principle, or the idea that social and economic inequalities are only permissible if they benefit the least advantaged members of society, are also quoted by public economists in the context of the application and extension of the maximin. However, such principle was claimed to be “unclear” based on Rawls’s guidance, which therefore required more exploration from some economists. On this, Feldstein (1976, 80) says:

Rawls’s “difference principle” states that the distribution of incomes should be equal unless departures from equality increase the well-being of the worst off. Note that strict application of this requires only ordinal information (who is worst off and whether a given change improves his condition) and provides no guidance for choosing between options that do not affect the worst-off individual. Atkinson’s (“How progressive should income tax be? ,” 1973) reformulation of Rawls therefore has a greater informational requirement and provides additional results in return.

Also, noteworthy is the economists’ own acknowledgement of not being accurate or faithful to Rawls’s original theory, trying to expand it and test it widely. Arrow (1973a, 323) claims that “John Rawls has informed me that he did not intend to supply any form of the maximum principle to intergenerational justice. But it appears to me that the logic which derives the maximum principle from the ‘original position’ is equally applicable to intergenerational comparisons” (Arrow 1973a, 323, footnote 1). Additionally, Phelps (1973) adds Rawls’s own remarks on the usage of maximin by economists:

In a letter of comments on the present paper, Rawls writes: “We should not accept a standard, it seems to me, whatever the implications of it. Therefore how [the maximin criterion] applies to economic questions like taxation is not a matter of mere application. One is testing the viability of the conception of distributive justice itself, perhaps not as decisively in this sort of question as some others, but still one is testing it. This kind of exploration you present is necessary if we are to determine whether the criterion is really reasonable. (Phelps 1973, 337, footnote 9)

While economists also revolved around other principles of the Theory (e.g. Alexander 1974; Musgrave 1974; Arrow 1973a, 1973b; Harsanyi 1975), most of these discussions focused on a post-institutional setting, that is, they did not discuss the institutional arrangements or ideals themselves, but worked on a “de-normatised” level, being more concerned with the applications and potential extensions of Ralwsian theory. For example, the difference principle should not have been reduced to the maximin, which is something Rawls emphasised in his writings (Duhamel 2012, 25), showing that welfare economics incorporates a “denatured and sanitized shred of Rawls’s system of thought, essentially as a footnote” (Edgren 1995, 333). As it will later be discussed in section 4.2, this particular interpretation and incorporation of Rawls also had policy implications when considering his impact over redistributive action.

4. A fruitful dialogue? Key implications of the Rawls-Public economics exchange

In what ways the debates and exchanges between Rawls and public economists shed some light on economic theory, method, and potential policy implications? The thematic historical analysis addressed in the previous section leads to key implications which are discussed in more detail herein; namely, 1) the incorporation of ethical analysis within economic theory, largely presented as a formal exercise using key Rawlsian concepts and without the rejection of the principle of utility; and 2) by bringing ethical discussions to economic policy regarding redistribution and wider social welfare whilst maintaining the economist’s formal way of reasoning through mathematisation and model-building.

4.1. Theory, scope, and method of public economics

The reception and discussion of Rawlsian concepts by economists suggest the recognition of ethical discussions within economic theory. Nonetheless, the ways in which economists interpreted Rawls’s works had important implications for the scope and method of public economics. The evidence for this relies on three main thematic discussions. Firstly, on the use and insistence on the notion of utility for social welfare and promotion of justice, maintaining core principles from utilitarianism in spite of Rawls’s critique and development of the notion of “primary goods,” as raised by the evidence put forward in section 3.1. Secondly, on the ethical motivations and purpose of economic analysis for promoting fairness in public action, conceived within the “formal toolbox” of economics, echoing the evidence from section 3.2. Thirdly, on the historical context that enabled such dialogue to take place in the United States during the 1970s.

4.1.1. The maintenance of the notion of utility for social welfare

Rawls never hid his criticisms of utilitarianism. He was clear about the limitations of using aggregation (sum-of-utilities) when measuring social welfare, given it neglects the rights and interests of individual persons and can lead to the sacrifice of certain individuals for the greater good (1967, 1969, 1971). From this, other underlying drawbacks would emerge, in particular the failure of utilitarianism to appropriately account for justice, equality, and demand self-sacrifice from some individuals in a given society in the name of the greater good, which may harm the positioning of the least well-off (Scheffler 2002).

A less discussed aspect of Rawls’s critique is, however, his methodological approach in formalising an alternative to utilitarianism (such as the original position and the maximin), which contained some core aspects of mid-20^th century neoclassical economics. Notably, the assumptions of individual rationality, self-interest, utility as a subject measure of value and welfare, and mathematical formalism rendered a foundational role in his philosophy, which derived from his training and exploration of 1940s-1950s economic theory. As Forrester claims:

“Much of Rawls’s political education came from following debates in the new welfare economics, theories of utility, consumer behavior, and general equilibrium, and from his encounter with the utilitarian tradition of ‘institutional design’ (in which Rawls placed Hume, Adam Smith, and Bentham)” (Forrester 2019, 12).

Similar arguments are put forward by Little’s (2014) analysis of the sources behind Rawls’s economic insights, which stem primarily from 1950s economic theory: welfare economics, social choice theory, and game theory. Most of Rawls’s engagement with economics was used for assessing social welfare, the formal procedures of democracy, and the theory of rational decision-making in the presence of multiple rational agents, rather than discussing general equilibrium theory, macroeconomics, or microeconomics (ibid.). Similarly, Coker (2023) emphasises Rawls’s mechanistic formulation and a high level of abstraction similar to economic models when explaining hypothetical situations, such as the original position, the veil of ignorance, and the maximin.

What, then, does this say about the theory, method, and scope of public economics, seen from the perspective of its interdisciplinary exchange with Rawls? Having a common economic lexicon and method may represent one of the reasons behind Rawls’s reading and acceptance by early public economics. After all, Rawls wanted to be heard and understood by economists, hoping that his work “continues to provide fruitful to examine and that you [Phelps] and other economists can work it far beyond the sketchy and vague notions that are found in the book” (Rawls to Phelps 1973, see also Igersheim 2023). However, it also represented a limiting factor in constraining him to a particular framework. That is, despite Rawls’s criticisms to utilitarianism and its conception of justice through the fair distribution of primary goods, his adoption of core epistemological and methodological elements from neoclassical economics - rationality, utility theory of value/welfare, self-interest, mathematical abstract formalism - led him to maintain the utilitarian paradigm without causing a broader epistemic-methodological rupture with the dominant economic approach of his time.

On this, some suggest how economists made of Rawls’s principle of justice and the social contract a case within rational choice theory (see inter alia Duhamel 2012), in particular founding public economists: Arrow, Buchanan, Harsanyi, and Sen. Or, some economists themselves (Alexander 1974) made it clear that the mechanism that Rawls designed to embody justice as fairness actually “embodies utilitarianism as well because Rawls endowed his test-men in the metastate with the basic incentive of providing for the optimal satisfaction of the interests they will come to have in the object state” (ibid., 607). Thus, some concepts of Rawls’s theory entered public economics as a special case, rather than the norm:

“Rawls’s own arguments for a maximin conflation seem to me invalid. He makes much of the point that either - summation or averaging conflate the welfare measures of many individuals into one, and so fail to ‘take seriously the distinction between persons’. I have implicitly contradicted Rawls’s argument, treating (along with Arrow and Solow and I suspect just about everybody else but Rawls) the maximin as just another, albeit limiting, mode of summation: Our object is to evaluate social institutions, and if we use any welfare function it will, in the neighborhood of any point in its argument space, yield implicit trade-offs among the arguments of the function. (ibid. 615, our highlight).

4.1.2. Bringing an ethical purpose with formal economics tools

As for the second point regarding the scope and field of action of public economics, economists focused on incorporating ethics as a conceptual motivation without a methodological rupture on how the analysis was carried out. Rather than leading to an “anti-utilitarian turn” in public economics, Rawls offered a conceptual inspiration and some interest in the promotion of justice from a philosophical lens (see, inter alia, Buchanan 1972b; Arrow 1973b); so much that it influenced the agenda of public economics to consider issues of justice and to discuss what is considered “fair.” As Musgrave (1974, 625) puts it, “the magnificent edifice erected in Rawls’s A Theory of Justice has been of great interest to economists, partly because a major wing of the structure is assigned to economics issues, but mostly because an economic way of thinking enters into much of its grand design.”

Nonetheless, Rawls did not provide a methodological viable alternative that challenged the economist’s formal method of reasoning. For instance, Phelps’s (1973) modelling of taxation of wage income for economic justice is largely sympathetic to Rawlsian theory on the ways in promoting social justice and a fairer economy, giving central importance to the application of the maximin. This is done, however, through the maintenance of utility – understood as an “empty box,” rather than reflected in a combination of primary goods – as the fundamental principle behind measuring interpersonal welfare and promoting justice when improving the conditions of the worse-off. Thus, one outcome of the interdisciplinary exchange between both parties is associated with a higher level of formalisation of Rawls’s theory at the expense of reducing broader, fundamental questions about societal principles and goals. On this, when exchanging correspondence with Rawls, Phelps (1974) claims:

It seems to me that the maximin criterion does not come off badly in these intergeneration models, but I suppose I tend to lose track of some of the larger questions and desiderata. It would be nice if a small group of philosophers and economists could sit down and discuss intergenerational justice with you sometime. (Phelps to Rawls May 28th, 1974, our highlight)

To which Rawls (1974b) replies to be “amazed by the speed and ingenuity that you (Phelps) and other economists display in working out the consequences of the maximin criterion in various models.”

4.1.3. Normativity with formalisation: the historical context of 1970s US academia

Lastly, the context also matters for shaping the theory and method of public economics. The acceptance and readability of Rawls by economists is not only due to his method or engagement with the economic lexicon, but it also reflects a broader intellectual “consensus on utilitarian marginalism” (Lerner 1978), which suggests the importance of unpacking certain conditions of the 1970s US intellectual environment in the social sciences and humanities.

In the case of public economics, this is the product of three main historical causes. First, the new social and political demands that emerged from the post-war period, which changed the ways economists were requested by the government as experts in public issues (Peacock 2010) and led to a new public-epistemic positioning of economists. Second, the epistemological shift in the economist’s toolkit, educating and assisting policymakers in achieving optimal choices via technical-quantitative tools (Backhouse 1998; Sent 2006). Third, the political context in the West during the Cold War, which suppressed certain approaches or topics in economic analysis which were regarded as “dangerous, wrongheaded or even treasonous” (Bernstein 2001, 105), and prioritised technical/mathematical knowledge (Mirowski 2002) as politically harmless. In a time when more interventionist or left-wing thought was suffering significant backlash in the United States (Mata 2010; Giraud 2014), evidence on the US academic environment in 1970s suggests many scholars had to seek a more “middle-of-the-road” position when discussing economic issues.

Similar conditions happened to political philosophy in Anglo/US contexts. The 1970s saw a transformation of moral philosophy into analytical philosophy and applied ethics, aiming to understand how the institutions and politics in place are required by the general moral principles that help to conceptualise justice (Forrester 2019). The dominance of such approach has also led to a narrowing of scope and aims of philosophers: the insistence of a liberal-egalitarian paradigm reduced the possibility of discussing “utopias” (Kolakowski 1990) that did not conform to the social institutions that became consolidated in the post-war: the market, the social contract, democracy, and the welfare state, echoing an ideal of “property-owning democracy” (Meade 1964). In the case of the interactions between economists and philosophers, history offers curious evidence on their institutional affiliations: Musgrave, Arrow, and Feldstein, three of the most influential public economists, as well as Rawls, were all faculty members of Harvard University. Despite the popularity and spread of public economics in the following decades as good economic governance, its origins point out to an international effort from academics in the beginning of the 1970s, but with a few universities playing a key role (Harvard, MIT, Cambridge).

4.2. “Economics was made ethical, and analytical philosophy was made political”⁸: key implications for policy discussions in public economics

Rawls’s aspirations to see his work becoming an inspiration for social policy and greater equality are an ongoing theme of his published and unpublished writings. In A Theory of Justice, Rawls (1971, 228–229) claims that “a doctrine of political economy must include an interpretation of the public good, which is based on a conception of justice.” Similarly, when replying to Atkinson (1973c), Rawls says: “when I wrote the book I hoped that economists might take an interest in the idea and spell out its consequences and compare it with other criteria, which I am unable to do.” But in what ways were Rawls’s insights translated into policy? Amongst the legacy of Rawls’s interactions with economists, we highlight two main implications: firstly, by influencing on the agenda of equality and justice via redistribution (in comparison to predistribution), thus bringing an ethical aspect to the discussion of welfare and social provisioning in public economics. Secondly, within economic policy by influencing taxation models, primarily as a “Rawlsian maximin condition,” as described in section 3.3.

Rawls’s influence over the policy can be seen from its ethical purpose and scope. The context of the “great redistribution” of the 1940s-1980s, which characterised post-war economic and social policies, enabled a particular “mission-oriented” state to promote fairness. Its emphasis on fiscal progressivity and the growth of the state via social welfare expenditure made equality and investment in human capital pivotal elements of national agendas (Piketty 2022). This has been attributed to major events in the 20^th century, which have contributed to a rethinking of the role of the state and the importance of public provisions; for example, the World Wars changed the public understanding about the issue of poverty, shaping the ideal of a post-war welfare state (O’Connor 2020; Zamora Vargas 2020; Alves and Guizzo 2023). Other universal principles, such as democracy and equality, were also added to the agenda: “historically, it is the battle for equality and education that has made economic development and human progress possible, and not the veneration of property, stability, and inequality” (Piketty 2022, 139).

Despite such influence over social and economic policies, making them more “ethically engaged,” it is noteworthy to point out that public economists interpreted Rawls mainly from a redistributive perspective, rather than predistributive. The former relates to implementing corrections to tackle undesired outcomes of poverty and social deprivation mainly through taxation. The latter involves the distributional position that seeks to prevent inequalities a priori by affecting an individual’s initial endowments. For Rawls, redistribution is a more specific aspect of broader distributive measures⁹, which ought to include inter alia fundamental rights and duties, the regulation of social and economic inequalities, and ensuring that the average individual has a chance to actively participate in the market economy around them (1971, 84).

Such principles derive from the notion of “property-owning democracy,” as suggested by James Meade (1964), or a regime of pre-allocative (“predistributive”) policies to reach a more just society through a rearrangement of institutions to prevent domination through capital accumulation (Thomas 2017). Nonetheless, the interdisciplinary exchanges between Rawls and public economists suggest the latter preferred to focus primarily on redistributive solutions, mainly through taxation policies and the viability of applying a Rawlsian maximin.

Policy and research papers published by the US Office of Tax Analysis (OTA) and the National Bureau of Economic Research (NBER) in the mid-1970s can offer some evidence on how the maximin was put forward for discussion in private and governmental bodies, signalling a novel policy interest in the topic beyond the academic debate. Mainly written by academics or Treasury officials focusing on an emerging body of literature in “public economics” and on the potential policy consequences of the maximin, they hint on ethically inspired arguments in economic decision-making, as well as how the agenda of public economics was shaped in the form of technical reports with conclusions derived from models and seldom acknowledging a balance between efficiency and intervention. The ethical lexicon was incorporated in their economic arguments and justifications behind the issue of optimal taxation, distribution, and public action, as well as a new form of economic reasoning that was distinct from public finance.

For instance, Bradford and Rosen (OTA n. 8, 1975) discuss the urge to advance on taxation research and propose a framework for taxing commodities and income, claiming past research has disproportionally focused on modelling efficiency rather than distribution. The authors incorporate Rawls, the idea of maximin, and fairness as technical instruments when judging the need for tax updates. Similarly, Boskin and Sheshinski (WP n. 144, NBER, 1976) contextualise what is the appropriate role of the government in redistributing income and what is the role of income over welfare, simulating redistribution plans combined with investment in human capital with maximin cases, and what would be the optimal level of intervention and stimulus. A more general report (Stiglitz and Boskin, WP n. 151, NBER, 1977)¹⁰ refers to the growing literature of “new public economics,” emphasising normative aspects for discussing ethical decisions, including comparing utilitarian principles with Rawls’s maximisation of utility of the worse off individual for more informed government decisions.

Whilst they confirm the much-documented shift of economic theorising as increasingly technical and mathematical, they also suggest that economists began to focus on abstract philosophical issues (efficiency, equality, broader social justice) when thinking about wider economic applications, mainly through the adoption of a specific “economic style of reasoning” (Berman 2022) for normative decision-making that combined ethical aspects with neoclassical tools. Indeed, the fact that Rawls was approached from a rather narrow perspective by public economics suggests the reluctance in adopting or searching for other methodological approaches in spite of their broader political agreement. On this, Rawls’s (1974c) contribution to the American Economic Review suggest his impressions on the wider political implications of the maximin beyond the economists’ usage and testing of it. He says:

The application of the maximin criterion to optimal income taxation is, then, perfectly in order, since an income tax is part of the basic structure. But the maximin criterion is not meant to apply to small-scale situations, say, to how a doctor should treat his patients or a university its students. For these situations different principles will presumably be necessary. Maximin is a macro not a micro principle. I should add that the criterion is unsuitable for determining the just rate of savings; it is intended to hold only within generations (Rawls, sec. 44, 291–292, Kenneth J. Arrow 1973a, and Robert M. Solow). (Rawls 1974c, 142)

Rawls’s inquiry leaves important open questions on how his work was interpreted and taken forward by public economics when framing policy discussions. Some, as Duhamel (2012) insist on fact that economists (in particular, Harsanyi, Arrow, and Buchanan) deliberately ignored the wider applications of Rawlsian theory, claiming several ambiguities and the wider generality of the philosopher’s work to depict an “apocryphal Rawls.” Others, as Piketty (2023), suggest that economists were not able to successfully translate abstract Rawlsian concepts into practical economic measures when considering wider policy implications. This included a more democratic access to universal rights and the promotion of social justice, which would explain the failure of some of Rawls’s discussions impacting policymaking in the fight against inequality.

The interdisciplinary exchange discussed herein demonstrates that some of Rawls’s insights had an impact over public economics during the 1970s, especially the maximin. Nonetheless, economists were less open to change their method, style of reasoning and reliance on core concepts, as it was the case of utility for understanding social welfare. As Rawls himself acknowledged, the impact of his work would largely depend on how economists would understand it and propose it. In a reply to Colander (1974a), Rawls says:

My perturbation [to discuss the issue of justice] was at best very primitive form the standpoint of economic theory. Whether such a theory is of any use of social policy is a matter that will depend in large part to what some economists can make of it. For me, it has a number of philosophical and other advantages. (Rawls 1974a)

5. Concluding remarks

The interdisciplinary exchange between John Rawls and public economists exposed some ways in which the latter have interpreted, applied, and tested Rawlsian concepts for the advancement of public economics literature. By focusing on the key notions of maximin, the difference principle, and the veil of ignorance, public economics engaged with analytical political philosophy and acknowledged its relevance for understanding pressing social issues of inequality, unfairness, and social injustice. The archival and bibliographical evidence suggests how economists (such as Sidney Alexander, Kenneth Arrow, Anthony Atkinson, James Buchanan, John Harsanyi, Richard Musgrave, Edmund Phelps, and others) approached key elements of Rawls’s theory and discussed them in a critical way - either dismissing them, or incorporating them in their works about social welfare, the promotion of justice, and the specificities of redistribution through taxation.

Amongst the main popular themes that stemmed from Rawlsian theory were the discussion of utility and utilitarianism as a useful concept when understanding and promoting justice; the importance of considering ethical issues in social justice; and the expansion and adaptation of the maximin by extending and adapting it to many different settings and with different assumptions. Whilst it is clear that Rawls did have a thematic impact over public economics, bringing an ethical flavour to its lexicon and agenda by considering justice and social fairness, intergenerational inequalities, income taxation, and fairness under uncertainty, they were less willing to give up the formal methodological of economic expertise, founded under the umbrella of neoclassical-utilitarianism. The fact that some public economists (e.g. Alexander, Arrow, and Harsanyi) even questioned Rawls’s critical approach to utilitarianism demonstrates the lack of agreement within the field’s methodological pillars: while some acknowledged Rawls’s criticisms, others preferred to maintain the utilitarian-neoclassical framework untouched.

Hence, their exchange clarified some of the core implications for better understanding the theory, scope, method, and policy implications of the blooming field of public economics during the 1970s. In addition to the maintenance of the notion of utility for social welfare and the practice of approaching ethical issues with formal economic tools, the historical context under which most of their discussions took place also matters for such comprehension. Namely, the context of 1970s US academia indicates how both economics and philosophy had their disciplinary boundaries and scope changed, becoming more technical and mathematically formalised in the case of the former, and more focused on a libertarian-egalitarian paradigm in the case of the latter.

With Rawls, “economics was made ethical” (Forrester 2019, xv), meaning that his theory made issues of social justice through redistribution as one of the core objects of public economics, transcending to the policy debate and becoming an institutionally accepted topic of inquiry. Nonetheless, this took place under a specific methodological framework and “way of reasoning” (Berman 2022) of economists. Therefore, philosophy offered a conceptual background, a thematic inspiration for supporting the economist’s discussion. It provided important grounds for socially relevant discussions whilst maintaining the epistemic-methodological boundaries of economics.

Acknowledgments

We thank Maxime Desmarais-Tremblay, Marianne Johnson, and Richard Sturn for their useful comments on earlier versions of this article, as well as the participants and organisers of the “From Public Finance to Public Economics” Workshop at the Graz-Schumpeter Centre (University of Graz, Austria) in September 2022, as well as the comments from two anonymous referees. We also thank the Harvard University Archives for kindly providing us with the Rawls Archives, as well as Alicja Kobayashi for assistance with archival research. The usual disclaimers apply.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 For this, we build on some of the principles proposed by Michel Foucault’s (1926–1984) and his contributions to historiography of economics and political economy (see inter alia Lima 2010; Guizzo 2021). By offering a form of “philosophical history” (O’Farrell 1989), archaeology helps to investigate what made possible for a certain scientific discourse (discourse-as-knowledge) to be made possible and acceptable as truthful in a given time, within a specific cultural-social context, and which relations were necessary and sufficient conditions for this to happen (Lima 2010). One example of this is by looking into the histories of a field as practices (Maas, Mata and Davis 2011) and how they led to a change of discourse.

2 Quoting Atkinson and Stiglitz (1980, 3).

3 See 12^th part, chapter 2 of A Theory of Justice (1971) where Rawls relies on the economic modelling of efficiency to go on and argue for the necessity of a principle of justice.

4 Rawls (1971, 30–31) claims that in the utilitarian formulation, we have the unplausible requirement that “if men take a certain pleasure in discriminating against one another, in subjecting others to a lesser liberty as a means of enhancing their self-respect, then the satisfaction of these desires must be weighed in our deliberations according to their intensity, or whatever, along with other desires”.

5 For a detailed context on this interaction, see Igersheim (2023, 7–8).

6 Feldstein cites a previous unpublished version of a 1973 manuscript entitled “Maxi-min and optimal income taxation”.

7 On this, Solow (1974, 30) says: “I am going to be plus Rawlsien que le Rawls: I shall explore the consequences of a straightforward application of the max-min principle to the intergenerational problem of optimal capital accumulation. It will turn out to have both advantages and disadvantages as an ethical principle in this context. The disadvantages are primally those that led Rawls to shy away from it, though I shall be able to characterize them in more detail.”

8 Forrester (2019, xv).

9 In a letter to Buchanan replying to an invite to speak at the American Economic Association Meeting in 1973, Rawls reveals his puzzling sentiment on redistribution, and asks why economists are calling his session at the AEA as “redistribution” (rather than simply distribution): “You suggest in your title that the subject might be “redistribution theory”. Is this different from distribution theory in general; or is it a subpart of the latter, as it might seem? There is no need to clarify this unless I’m wrong in thinking that the two are pretty much the same and that I can discuss distribution in general, assuming some reference is make to redistribution as part of the whole picture.” (Rawls to Buchanan, February 6th, 1973b)

10 Later published in the American Economic Review (vol. 67, issue 1, 1977).