General Equilibrium and Social Justice: Neoclassical Theory as a Political Philosophy?

We study the willingness of some authors, including H. Varian in the 70’s, to elaborate a theory of justice that would fit standard general equilibrium theory in its Pareto’s canonical version. We first show, through an analysis of market socialism in the 30’s, that the Paretian ethic is based on the value judgment of consumer sovereignty. Then we are able to discuss the specific contribution of Varian, who, by introducing the criterion of equity as envy-freeness, produces a – very specific – theory of justice that seems compatible with this value judgment and can stand at the heart of standard general equilibrium analysis.