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1、SelfishnessandAltruism14OneofthekeyfeaturesofHomoeconomicusisanutterdisregardforanyoneelse.Generally,economicmodelsfeatureactorswhochoosetomaximizetheirownwell-being,beitutilityorprofit,whileignoringthewell-beingofothers.Suchbehaviorisnotrequiredforrationality,butitisofte
2、nassumedbecauseitmakesmathematicalmodelsofbehaviormuchsimpler.Someofthebasicconceptsinwelfareeconomics,astudyofhoweconomicpoliciescanaffecttheoverallwell-beingofallactorsinaneconomy,restupontheassumptionofselfishactors.Thefirstfundamentalwelfaretheoremstatesthatunderaseto
3、fstrictconditions,includingtheconditionthatallactorsintheeconomydonotconsiderothersintheirpreferences,acom-petitiveequilibriumisaParetooptimum.Unlessthereisinterferenceinthemarketthroughtaxesorotheractions,thisresultdoesnotholdwithactorswhoarenotutterlyselfish.Inthiscase
4、,actorsinthemarketwhocareabouttheoutcomesofothersleadtoamarketequilibriuminwhichsomeonecouldbemadebetteroffwithoutmakingothersworseoff.Ifonlyeveryonecouldbealittlemoreselfish.ThefirstwelfaretheoremwasfirstprovedbyGerardDebreu.DebreuwonaNobelPrizefor,amongotherthings,hispro
5、ofofthefirstwelfaretheorem.WhenDebreureceivedhisprizehewasextolledbythepressasthemanwhohadprovedthatfreemarketsgetthingsright.One(possiblyapocryphal)storyrelatesthatwhenhewasaskedtocommentonhisproofthatmarkets“getitright,”herepliedthatthenumberofquestionableconditionsand
6、caveatsnecessarytoprovethatmarketsareParetooptimalwassogreatthathealmostwonderedifinfacthehadn’tproventhatmarketsalmostcertainlygetthingswrong.Economistsgenerallyrefertopeoplewhoarewillingtopaytomakeothersbetteroffasaltruistic.Altruismisasubclassofother-regardingprefere
7、nces,alsocalledsocialpre-ferences,orpreferencesthattakeintoaccountthewell-beingoractionsofothers.Beingaltruisticdoesnotimplyirrationality.Itiscertainlypossibletohavecompleteandtransitivepreferencesandstillcareaboutothers.However,manyofourtheoriesconvenientlyassumethatpe
8、opleonlycareabouttheirownoutcomessoastosimplifythetheoryortomakemeasurementofimportantoutcomesusingstatistical
