On the voluntary exchange of libertarian rights

Harel and Nitzan recently formulated a resolution scheme for Sen's Pareto libertarian paradox, where libertarian decision-making entitlements actually change hands through the voluntary exchange of rights-endowments. Being a rigorous formalization of the strong libertarian tradition of free contract as advocated by Buchanan and Barry, this scheme serves as a natural target for our attempt to evaluate the logical capability and ethical nature of this tradition. It will be shown that this proposed scheme can hardly qualify, logically as well as ethically, as a libertarian resolution of the Pareto libertarian paradox.This paper was presented at the Murphy Conference on Liberty and Rights, Murphy Institute of Political Economy, Tulane University, September 16–17, 1989 and the VIth World Congress of the Econometric Society, Barcelona, August 22–28, 1990. Thanks are due to Professors Wulf Gaertner, Jerry S. Kelly, Prasanta K. Pattanaik, Amartya K. Sen, and K. Suga for their helpful comments and discussions. Thanks are also due to the referees of Social Choice and Welfare, whose comments greatly helped me to improve my exposition. By the time I completed the first draft of this paper, I was unaware of a related paper by Breyer (1990). I will comment on the partial overlap between our works at a later stage.