Abstract
Two theorems are presented that show the following: Assume that preferences are influenced by past consumption. If and only if preferences are adaptive, it is the case that all improvement sequences are acyclic and thus can be a basis for doing welfare economics. It is further argued that adaptive preferences are a prerequisite for the stability and legitimacy of institutions. Thus, welfare economics is possible whenever institutions are reasonably stable and therefore legitimized. The anthropology corresponding to the hypothesis of adaptive preferences has already been enunciated by Johann Wolfgang von Goethe.
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