Would there be money in a social choice economy?
Mood:  spacey
Topic: Social Choice
Arrow says in "Social Choice and Individual Values": "In the present study the objects of choice are social states. The most precise definition of a social state would be a complete description of the amount of each type of commodity in the hands of each individual, the amount of labor to be supplied by each individual..." and various other things such as collective activity, municipal services and "the erection of statues to famous men."

The social choice then would be the amalgamation of all the individual choices in some optimum way. The question is would everybody work in order to receive a commodity bundle or would individuals get paid in money (euros, dollars, pounds etc.) for their work and then purchase their commodities on the open market? It seems that any practical social choice economy would have to be a money rather than a barter economy. People would get paid in currency and then purchase their goods on the open market. But wouldn't this invalidate the purpose of social choice? After all, it is supposedly assumed that all the individual labor bundles would add up to exactly produce all the individual commodity bundles.

My answer is that social choice could still work in a money economy. There would have to be a translation of each commodity bundle into an amount of currency. Workers would get paid in currency exactly the amount that it would take to purchase their socially chosen commodity bundle. Of course they would be free to spend their earnings as they saw fit which would presumably and hopefully have some realistic and meaningful relationship to the commodity bundle they selected in their preference ordering. To the extent that there is not an exact correlation there will be a surplus or deficit of production which can be anticipated and corrected over time.

Looked at in this way the individual preference orderings and the social choice are more in the manner of a survey than an exact prescription insofar as the amount of goods and services produced.

How is the currency value of a commodity determined and how would the exchange rate be determined? The currency value of a commodity could be determined in various ways one of which would be based on the cost of production compared to other commodities. The exchange rate could be determined as it is today by floating the currency against other currencies.

The general idea is that a social choice economy would have to function in many ways as a general capitalist economy functions today. I doubt if many people would accept an economic system in which their commodity bundle was predetermined even if by their own preferences, and they weren't free to change their mind and spend their money as they pleased.