When 'Fairness' is Efficient: The Role of the Judiciary in Maximizing Aggregate Social Welfare

In their recent seminal work, Kaplow and Shavell demonstrate that any metric for policy evaluation that takes into account factors other than individual welfare is Pareto-inefficient; in particular, they argue at length that notions of fairness - insofar as they do not directly contribute to individual welfare - should be eschewed as a basis for policy assessment. Kaplow's and Shavell's proposition is fundamentally a normative one, and one with which much of the policymaking process rooted in the notions of fairness and equality appears to be at odds with. But is it? In this essay we seek to make a positive assessment of political decisionmaking in a federalist democracy with an independent common law federal judiciary, and its consistency with a welfarist model of policy formulation. To this end, we begin with a taxonomy of goods that individuals in a society demand or consume; a fruitful distinction for our purposes is between private, public, and social goods. Next we consider the mechanisms through which each of these categories of goods are typically or can feasibly be provided, including markets, majoritarian governance, and dictatorial governance. The latter two are discussed in substantial detail. We suggest that various forms of majoritarian decisionmaking tend to produce welfarist - and thus presumably efficient - results respective of policies that affect the supply and regulation of private and most public goods, where individual utility functions tend to be roughly homogeneous throughout the population. With regard to social goods, however, where individual utility functions are likely to be highly disparate among various subsets of the populace, we illustrate that traditional means of pluralistic or majoritarian decisionmaking are prone to welfare-inefficient outcomes. Judicial intervention could be seen to remedy the inefficiency in such cases; alas, judicial decisionmaking is notoriously mired in fairness-based analysis, which would appear to be the quintessence of anti-welfarism and therefore inefficient. We postulate, however, that the judicial use of notions of fairness is a linguistic construct or analytical shorthand that justifies the substitution of judicial judgment in instances where majoritarian decisionmaking appears to produce an inefficient outcome. Thus, the verbiage associated with lofty judicial notions such as justice, fairness, and intrinsic rights are nothing more than a pretext for judicial inference and weighting of the utility functions of the majority and minority and attempting to maximize social utility. We provide textual and circumstantial support for this proposition. Furthermore, we posit that the substitution of the judgment of an erudite judiciary for that of the majority - in the particular instances where supply and regulation of social goods are concerned - is a plausible means of arriving at near-efficient social outcomes. The structure, composition, and historical behavior of the federal appellate judiciary are cited to lend credence to this hypothesis. We suggest a positive model of the judicial role in democratic policymaking, and caution strongly against normative prescriptions drawn on its basis without empirical substantiation and careful consideration of where the limits on judicial intervention in majoritarian policymaking processes appropriately lie. We invite empirical investigation of our hypothesis.