Welfare economics is the heart of neoclassical economics. Together with the descriptive theory of self-adjusting markets, it provides the ideological foundation upon which the entire edifice of elaborate neoclassical apologetics for capitalism is constructed. Conventional economics has been criticized persistently for over a century for its grotesquely unrealistic assumptions about homogeneous, maximizing, economic man and the socially beneficial constraints imposed upon him by atomistic competition. Yet these assumptions have remained at the core of orthodox theorizing. They are the indispensible axioms of neoclassical welfare economics, and, as yet, no alternative ideology of capitalism has been able to provide an equally rigorous and elegant justification of the status quo.

The hedonistic foundations of welfare economics

Welfare economics rests squarely on hedonistic preconceptions. It contains both a psychological hedonism and an ethical hedonism. The psychological hedonism was, in the late nineteenth century, a rather crude theory of human behavior. Utility was conceived as a cardinally quantifiable relationship between a man and external consumable objects. This relationship was treated as though it were metaphysically given and fixed, and not a proper subject for further investigation. All human behavior was then reduced to attempts to maximize utility through the use or exchange of the commodities and productive resources with which the individual had been endowed (the source and propriety of the endowment, like the utility relationship was beyond the purview of analysis).

Psychological hedonism, however, had been thoroughly discredited by the late nineteenth century. The development and refinement of the behavioral assumptions of welfare economics over the last half-century represent attempts to obviate the objections against psychological hedonism while continuing to draw conclusions identical to those derivable from the discredited theory.