The Impossibility of a Paretian Libertarian: a Solution through the Imposition of a Rationality Condition on Individual Preferences on Conjunct Alternatives

Abstract

In this article I present the Impossibility of a Paretian Libertarian theorem (Sen) and I discuss its significance with regard to the problem of externalities. I introduce two conditions for the selection of an “acceptable” solution for this impossibility result: efficacy for real societies and ideological fidelity. I present Hillinger-Lapham, Gibbard, Blau and Saari solutions and I classify them according to the two conditions mentioned above. I extend the social choice literature by introducing a new solution consisting in a reformulation of the libertarian at the minimal-rational libertarian preferences. In this formulation the only relevant kind of preferences are those that are “minimal-rational libertarian”. This solution satisfies both the efficacity for real societies and the ideological fidelity conditions.

Keywords

• externalities
• ideological fidelity
• social welfare function
• social decision function
• minimal-rational libertarian preferences.