The Possibility of Rational Social Choice in an Economy

This paper examines the implications of an error or oversight in the statement and proof of Arrow's celebrated General Possibility Theorem. Besides showing that, strictly speaking, the theorem is false, we show that the force of the correctly stated theorem and of most of its descendants applies only to a class of election procedures and not to social choice in an economy. A Bergson welfare function can be constructed that satisfies all the stated Arrow axioms and conditions, although the construction is unnecessary for consistent, effective social choice.