ABSTRACT
For neoclassical welfare economics, in accordance with the dogma of methodological individualism,1 the preference systems of individuals are the foundation and the starting point of the analysis (preference sovereignty2). It is assumed that every economic agent seeks to maximize his utility, and orients his behaviour rationally towards this goal. This implies that the individual will support a measure of economic policy, such as, for instance, the introduction of free trade, precisely if and when it increases his individual utility by enabling him to consume a more valuable bundle of goods. The aggregation of the individual utility systems into a social welfare function in line with the postulate of preference sovereignty, is purported to make possible the evaluation by the whole of society of the various bundles of goods and of the various economic policies, each opening different consumption possibility spaces. This line of argument leads to three main problems, to be outlined in the following with regard to the free trade postulate: (1) the problem that individual preferences may be distorted due to rational ignorance (3.1); (2) the fact that some of the preferences will be of a noneconomic nature (3.2); and (3) the unsolved dilemma of preference aggregation (3.3). Finally we argue that even narrowing down welfare to economic welfare or the national income cannot reveal a way out of this impasse (3.4). Probably the most questionable assumption of the neoclassical approach, namely that all people possess complete knowledge of all marketrelevant circumstances (both of the objective data and of the economic plans of all other market participants), will be considered in Part II in a broader context (5.1).
