ABSTRACT
In regards to the role of individuals' preferences, two features stand out. One, they are not fixed and independent from external influences; and two, what counts is the aggregation of the preferences of different individuals. Economic interpretation of five indicates that each individual's marginal rate of substitution of any two commodities must be equal to the marginal rate of transformation of these commodities. Economic interpretation of six indicates that the ratio of marginal utilities of different individuals must be equal for all commodities. This chapter explores how a solution for the problem of value and distribution can be obtained, and what are the characteristics of such a solution. Efficiency has to do with producing 'goods', not 'bads'. The requirement of formal productive efficiency may be a necessary, and a clearly insufficient, condition to determine the best outcome. This is openly accepted within welfare economics.
