Georgetown University Law Center

2001 Working Paper Series

in

Business, Economics, and Regulatory Law

and

Public Law and Legal Theory

Working Paper No. 264335

Value Pluralism and Rational Choice

by

David Luban

This paper can be downloaded without charge from the

Social Science Research Network Electronic Paper Collection at

http://papers.ssrn.com/paper.taf?abstract_id=264335
 VALUE PLURALISM AND RATIONAL CHOICE1

David Luban
Georgetown University Law Center

We live in a world where many very different sorts of things are rightly valued: money and

power, family and friends, art and music, body and soul, vigor and contemplative calmness, simplicity

and complexity, loyalty and fairness, tradition and innovation, romantic love and raunchy sex, Chateau

d'Yqem and chicken-fried steak, birdwatching and dirt biking. In personal life as in public policy we

are constantly compelled to square the circle, to trade off apples and oranges, by honoring some of

these values at the expense of others. In legal decision-making, courts routinely adjudicate competing

value-claims by articulating tests according to which each value is assigned its proper "weight" and the

weighted values are balanced against one another.

Philosophers and lawyers have come in recent years to reflect that values are not merely plural

but incommensurable. By this they mean to reject the most typical approach taken by welfare

economists, which is to find a single quantity or numeraire, ordinarily utility or money, by which to

measure all these values. They insist on this point in order to show that there is no mechanical

procedure, no moral cost-benefit analysis, that would allow us to arrive by mechanical means at unique

rational decisions among apples and oranges. I call this the "Incommensurability-Undecidability Thesis"

(IUT): Because values are incommensurable, rational decision among them is impossible. One

conclusion value pluralists draw from the incommensurability of values is that real-life deliberation

requires traits of character quite different from calculative proficiency or "smartness" -- traits of

character that go under the names of phronesis, practical wisdom, good judgment, by which is meant

1
I would like to thank Avery Katz for helpful discussion of an earlier draft.
the ability to assess the merits of a situation without appealing to rules.

Another conclusion that value pluralists draw from the incommensurability of values is that a

familiar property of decision-making, often taken to be the very definition of rationality, is suspect. This

is the property of transitivity, which says that if choice A is preferable to B, and B is preferable to C,

then A is preferable to C. Though it is neither necessary nor apparent, there is a connection between

the critique of transitivity and the appeal to practical wisdom. Transitivity is an assumption commonly

made by theorists of rational choice, and rejecting transitivity motivates the abandonment of rational-

choice theory in favor of practical-wisdom based accounts.2 (This movement parallels the recent

emphasis in practical philosophy on character and virtue over "smartness," getting one's moral sums

right.)

John Finnis, for example, argues that Ronald Dworkin's theory of legal decision-making cannot

yield unique decisions, because it requires us to combine two radically different dimensions of judgment

-- judgments of legal fit (i.e., fit between the decision and the authoritative legal materials) and

judgments of moral soundness -- which are incommensurable.

Thus there emerges what theorists of rational choice call "intransitivity", a phenomenon which

theories of rational choice (such as game and decision theory) confessedly cannot handle:

2
A point of terminology. In this paper, I shall use the term "rational choice" as a term of art to refer
to the kind of practical reasoning studies by decision theorists, social choice theorists, game theorists,
and others of the mathematical persuasion. That is, rational choice refers to practical reasoning
accomplished by appeal to well-defined mechanisms, typically combining algorithms with lotteries. I do
not mean to beg any questions by this utterly standard use of the term "rational choice." That is, I don't
mean to suppose that intuitive or "phronetic" choice utilizing inarticulable procedures or criteria is non-
rational, nor that those attracted to practical-wisdom accounts of deliberation believe that deliberation is
not a rational process.
In the same way, I use terms like "rational preferability" and "rational decidability" as terms of
art referring to "preferability (decidability) according to some version of rational choice theory."
 solution A is better than solution B on the scale of legal fit, and B than C, but C is better than A

on the scale of moral soundness; so there is no sufficient reason to declare A overall "legally

better" than C, or C than A, or B than either.3

Similarly, Richard Pildes and Elizabeth Anderson argue at great length and with considerable

sophistication that the plurality of incommensurable values that political systems must deal with requires

us to abandon the assumption of transitivity of choice.4 And Anthony Kronman has argued that value

pluralism requires us to exercise the faculty of judgment, of finding right answers without appeal to any

mechanical or fully articulable decision-mechanism.5

Now, one way to make the argument against the commensurability of values is to argue against

mensurability. That is, if it turns out that many of the things we value cannot be assigned quantitative

measures, such as real-valued utilities, then rather obviously they cannot be assigned common

quantitative measures (though it may still be possible to rank-order them). But in that case the

incommensurability of values poses no special problem to vex rational decision-making: even along a

single dimension of value we may have to appeal to hard-to-articulate standards of judgment rather than

algorithmic criteria in order to choose among goods. Writers who find the phenomenon of

incommensurability of values particularly salient seem to be worried about a rather different idea than

the non-quantifiability of value. They seem to believe what I will call the

Incommensurability/Intransitivity Thesis (IIT), that even if each of our values could be quantitatively

3
John Finnis, Natural Law and Legal Reasoning, 38 CLEV. ST. L. REV. 1, 8 (1990).
4
Richard Pildes and Elizabeth Anderson, Slinging Arrows at Democracy: Social Choice
Theory, Value Pluralism, and Democratic Politics, 90 COLUM. L. REV. 2121 (1990).
5
ANTHONY T. KRONMAN, THE LOST LAWYER (1994).
measured, the lack of a numeraire or common measure, induced by the plurality of values, makes

choice intransitive.

By and large I agree with the arguments against the helpfulness of rational choice models. But

that is because I believe that many of our most important values cannot be quantified. That is, in line

with the observations in the preceding paragraph, I think that the real problem is immensurability, not

incommensurability. To put it another way, the problem with turning deliberation over to the bean

counters is that values are not beans and there is no reasonable way to count them. The problem is not

chiefly that we confront an irreducibly plural and incommensurable variety of beans. For this reason I

think that the problem of incommensurability is a marginal, not a central, problem of practical

philosophy. It is neither necessary nor sufficient to motivate the turn from bean-counting to practical

wisdom.

The basis for this conclusion is that the IUT and IIT are both false. For, if each individual value

can be quantified -- assigned a "weight," in the standard judicial jargon, even though the weights of

different values remain incommensurable -- then it will frequently be possible to find, by mechanical,

rational-decision methods, a single best choice. Moreover, it will be possible to construct a transitive

preference ordering of choices as well. Or so I will argue here.

Commensurability and Decision

As the word itself suggests, to call items "commensurable" is to say that they share a common

measure. All distances are commensurable because they may be measured in meters; all commodities

are commensurable because they may be priced in dollars. Some things, however, are

incommensurable. Phenomenological colors do not admit of common measurement (although their

corresponding wave-lengths are measured in angstroms, and their brightnesses in lumens). There is
nothing other than blueness that blue is "more" of than green.

Talk of common measures implies quantitative ordering, but quantitative ordering may involve

different degrees of mathematical structure. It makes sense to say that "Old Man River" is a more

complex song than "Louie Louie"; complexity is a common measure, a quantitative ordering, of songs.

But it makes no sense to say that "Old Man River" is eight times as complex as "Louie Louie": though

complexity induces a quantitative ordering, that ordering does not possess multiplicative structure.

(Maybe “Old Man River” has eight times as many harmonic changes than “Louie Louie.” But

complexity is a more subtle phenomenon than lots of chord changes.)

Formally, we may say that items are commensurable with respect to a certain property

(distance, fame, etc.) when that property induces a function6 placing the items in one-to-one

correspondence with elements in some ordered set. The ordered set provides the common measure of

the items. That ordered set, in turn, can possess whatever mathematical structure we wish to impose

on it. For the purposes of economic analysis, the ordered set will have the full panoply of properties

possessed by the real numbers, and by assuming the usual axioms we can regard the function assigning

a real number to each item of interest as a utility function. Let us say that items are R-commensurable

if and only if they can be assigned real-valued utilities. If no utility function exists, the items are R-

incommensurable.

R-commensurability is what we usually mean by commensurability. Correspondingly, the

incommensurability-of-values thesis is typically taken as the denial that disparate goods are R-

commensurable. But it is important to realize that items may be commensurable in a weaker sense, if

6
More precisely, an isomorphism.
their common measure (like musical complexity) does not possess the rich mathematical structure of the

real numbers. Goods may be ordinally commensurable, for example, if they are isomorphic to some

set whose sole mathematical structure consists of an order-relation or partial-order relation.

Now there is a trivial sense in which all goods are commensurable: one can arbitrarily assign

numbers to them and thereby order them quantitatively. In the same way, we could rank-order

different colors according to the wave-lengths of their light. But such ad hoc rank-orderings lack

significant rationale. What we want is not an ad hoc rank-ordering, but a rank-ordering induced by

some significant or even essential property of the items. We make a judgment that "amount" is an

essential property of money, but wave-length is not an essential property of phenomenological color.

Judgments about commensurability and incommensurability thus presuppose an underlying metaphysical

and axiological structure -- a division of properties into essential and inessential, value-relevant and

value-irrelevant, etc. -- just as they presuppose an underlying mathematical structure. There is nothing

whatever objectionable or question-begging about this, and I will be assuming the existence of some

such structure throughout the subsequent argument.

The connection between commensurability and rational choice is straightforward. If goods are

commensurable, they possess a common measure, and we may choose among them by a simple

algorithm: More is better, less is worse. So much is unproblematic.

Those philosophers who believe that the incommensurability of values dooms the very prospect

of rational-choice accounts of practical reason believe the converse of this thesis as well, i.e., that if

goods are incommensurable then there can be no algorithm for choosing among them. They may argue

as follows: if alternative O1 is rationally preferable to O2 (in the sense of rational-choice theory), then

O1 must be better than O2 in some relevant respect. But that is to say that O1 and O2 are in some
respect commensurable -- not necessarily R-commensurable, but at least ordinally commensurable.

Thus rational decidability implies (at least ordinal) commensurability, and this is logically equivalent to

the thesis that incommensurability implies rational nondecidability.

This argument may seem irresistible, but we shall see that we ought to resist it nevertheless. O1

may be rationally preferable to O2 without being superior to O2 in any interesting evaluative sense

except the trivial one: that O1 is superior to O2 in respect of rational preferability. Thus, there may

well be no nontrivial version of the thesis that incommensurability implies rational nondecidability.

Bargaining, Arbitration, and Choices

Suppose that each of the incommensurable values can be quantified "intramurally." In that case,

I have said, it will frequently be possible to find, by rational-decision means, a single best choice. The

guiding idea is that when we confront plural values, our task is to find a best compromise, or trade-off,

among the values. And this is an eminently solvable problem.

Suppose that there are k distinct, incommensurable values at play in a decision. As a thought-

experiment, imagine a group of k fanatic fiduciaries, one for each value, each of whom cares exclusively

about his or her value to the exclusion of all others. These, we specify, are rational fanatics, in the

decision-theorist's sense that they each aim to maximize their value. In a sense, of course, they are

altruists, because they are fiduciaries: they are not trying to get the most of anything for themselves;

rather, they are committed to maximizing the total amount of the value that they care about whenever

the opportunity arises. But when it comes to the value they care about, they are egoists. They are True

Believers, calculating monomaniacs, rational fools.

Let us now ask whether it is possible to arbitrate their claims by trying to determine what should

count as a fair compromise among them. Let us lay down whatever conditions we wish to ensure that
the compromise is fair and rational. This allows us to specify the form that rational decision among

incommensurable values will take. If there is a unique best outcome to the arbitration, that will

count as the rational decision.

Problems of this sort are grist for the mill of bargaining theorists, who have demonstrated that

under a variety of possible constraints on what counts as fair and rational bargaining it is often possible

to find a unique solution to bargaining problems. I will follow Howard Raiffa and describe these as

arbitration problems rather than bargaining problems. Bargaining usually turns on tactical and

psychological factors in the negotiation process, whereas arbitration tries to ascertain what would be a

fair compromise abstracted from the idiosyncratic play of bluffing and puffing that marks the bargaining

process. If our subject were real-world bargaining, a theory that takes full account of these

idiosyncracies of process would perhaps be most appropriate. Remember, however, that ours is

merely a thought-experiment designed to shed light on the appropriateness of different compromise

packages among incommensurable values. For our purposes, abstracting from the process-based

character of bargaining is essential.7

Nash Bargaining Among Incommensurable Values

In this paper I will focus on the best known solution to the arbitration problem, that of John

Nash. Abstracting from the dynamic aspect of bargaining -- the strategy, tough talk, give-and-take --

7
This responds to David Gauthier's argument for the Kalai-Smorodinsky solution to the bargaining
problem, which he prefers, over the better-known Nash solution that I will be relying on in the
subsequent argument here. Gauthier objects that the Nash solution doesn't model the serial, give-and-
take, character of an actual bargaining process, whereas his own proposal does. DAVID GAUTHIER,
MORALS BY AGREEMENT 146-50 (1986). I agree with Gauthier's diagnosis, but turn it around:
precisely because it ignores the give-and-take character of the bargaining process, the Nash approach
is a better solution to an arbitration problem than Gauthier's generalization of Kalai-Smorodinsky.
Nash proposed several conditions on a fair and rational bargain, and found a unique solution to the

arbitration problem when those conditions were satisfied.

Suppose that there are k quantifiable but incommensurable values, and that each point in the

choice space can be assigned a real-valued utility (or "weight") Lk, measuring its amount of the k-th

value, so that each choice may be represented by the vector L = (L1,...,Lk). The different compromise

packages among our k values are therefore a subset W -- the choice set -- of k-dimensional Euclidean

space (the choice space Ek). Suppose also that the choice set includes a status quo point -- a vector

L* = (L*1,...,L*k) representing the amount of each value in existence at the moment of decision. (This

corresponds to the utility-level each bargainer would achieve if they failed to reach an agreement.) A

bargaining game or, as I will call it, an arbitration game consists of a choice set and a status quo point,

and may be represented as the ordered pair (W, L*). For any such ordered pair, the problem is to find

an element of the choice set that represents the best compromise among the values, given certain

constraints on what counts as a fair and rational compromise. Nash's bargaining theorem proves that

the unique best compromise among the values is the vector in which the product of the marginal

increases of the components over the status quo,

Ji = 1,...,k (Li - L*i)

attains a maximum (the "Nash solution").8

Nash's constraints on what counts as a fair and rational compromise are given by the following

assumptions:

8
See John Nash, The Bargaining Problem, 18 ECONOMETRICA 155 (1950); using Nash's
theorem as an approach to value-incommensurability was proposed in David Luban,
Incommensurable Values, Rational Choice, and Moral Absolutes, 38 CLEV. ST. L. REV. 65, 71-73
(1990).
 1. Symmetry. Suppose that the arbitration game is symmetric, by which is meant (1) that all

the L*i are equal, and that (2) that if L = (L1,...Lk) belongs to the choice set, then every vector that

permutes the components of L does as well. Then the solution to the arbitration game must not favor

any dimension, so that it must be a vector of the form (µ, µ,..., µ). In other words, if x1, x2,..., xk are the

names of the coordinate axes, then the solution to the arbitration game must lie on the line x1 = x2 = ... =

xk. This is a "fairness" condition, roughly tantamount to the assumption that all of the incommensurable

values are equally important. In his original paper, Nash interpreted the symmetry condition as the

requirement that all bargainers are of equal skill; when we treat the situation as an arbitration problem

rather than a bargaining problem, the counterpart to bargaining skill is the degree to which the values

are morally compelling, or, more briefly, their importance. The assumption of equal bargaining skill

translates in the context of value-arbitration to the assumption of equal importance of the values.

2. Linearity. The arbitration game is invariant under linear transformation. That is, suppose

that f is a linear transformation on Ek, and W is our choice set. Then L is a solution to the arbitration

game (W, L*) if and only if f(L) is a solution to (f(W), f(L*)), where f(W) = {f(x): x 0 W}.

This assumption captures our intuition that the different dimensions of value are genuinely

incommensurable, so that we cannot say that one "unit" of value 1 is identical to one "unit" of value 2.

The assumption is a strong one, however, for it assumes that the value scales are simple multiples of

each other, rather than being related by fancier mathematical relations. It also assumes that the marginal

weight of each unit of a value is the same as that of each other unit of the same value, i.e., that the

choice set would be the same regardless of the origin.

3. Pareto. If a choice is better than another along at least one dimension of value, and no

worse than that other along all the other dimensions, we will say that it is Pareto-superior to the other.
The Pareto requirement stipulates that if L is in the choice set and is Pareto-superior to L', then L'

cannot be a solution to the arbitration game.

4. Independence of irrelevant alternatives. Suppose that if additional options are added to

the choice set, then it has a "best" point, a solution; suppose further that this solution is one of the

original options L, before the additional options were added. Then the solution to the original problem

is also L. More briefly, if an arbitration game (W, L*) has a solution L, then if W' f W and L 0 W', L is

also a solution to (W', L*).

5. Convexity and compactness. (i) The choice set is convex. Geometrically, this means that

the line-segment connecting any two points in the choice set is contained wholly within the choice set;

practically, convexity is equivalent to the assumption that the choice set includes all possible lotteries

between pairs of options. (ii) The choice set is compact (a topological property that rules out certain

shapes of the choice set , such as a set consisting of infinitely many discrete points, or an unbounded

set).

6. Individual rationality: No point L … L* in the choice set is a solution unless it is Pareto-

superior to the status quo point L*. No bargainer would agree to an outcome in which she does worse

than no agreement at all. Thus, for all i between 1 and k, Li $ L*i; and, of course, for at least one

such i, Li > L*i, since otherwise the point < is identical to the status quo point.

To repeat: Nash's theorem states that one and only one point in the choice set satisfies all these

assumptions, namely the point where the product of the increases in weights of all the options over the

status quo attains a maximum. Notice that if the status quo point is the origin, (0,..., 0), then Nash's

theorem states simply that the unique best compromise among the values is the vector in which the

product of the components,

 Ai = 1,...,kLi

attains its maximum.9

Nash's Theorem in the Two-Dimensional Case

It will help to motivate the subsequent discussion by reviewing the Nash solution's derivation in

the simplest case, that of two dimensions (two bargainers, two values). Thus, let us take a compact

convex choice set W' located on the Euclidean plane. Recall that an arbitration game is an ordered pair

(W', L*) consisting of a choice set W' and a status quo point L*. The linearity assumption allows us to

move W' and readjust the scale, yielding a new choice set W satisfying three key properties:

(i) The status quo point L* rests on the origin O = (0,..., 0).

(ii) No point in W lies northeast of the line x + y = 2.

(iii) W's northeast frontier contains the point (1, 1).

The situation is illustrated in Figures 1 and 2: Figure 1 represents the arbitration game before moving

W', while Figure 2 represents the arbitration game after W' has been moved and the scale readjusted.

We have transformed the arbitration game (W', L*) to the game (W, O). We will describe a bargaining

game satisfying (i) - (iii) as a game in normal form, or as a normal bargaining game; and we will call

the linear transformation that brings a bargaining game into normal form the normalizing

transformation N.

Because the status quo point in (W, O) is the origin O, the assumption of individual rationality

implies that all possible solutions to the arbitration game lie in the first quadrant, and indeed the Pareto

9
The existence of the maximum follows from the compactness of the choice set, and its uniqueness
follows from convexity.
Figure 1
Figure 2

WI (1, 1)
W’

υ* 0 0
principle implies that only points on the northeast frontier of W (indicated by heavy shading in Figure 2)

can be solutions to (W, O). Consider the smaller arbitration game whose choice set WI consists of

first-quadrant points (including points on the coordinate axes) contained in W and whose status quo

point is O. By the independence of irrelevant alternatives, any solution to (W, O) is also a solution to

this smaller bargaining game (WI, O); conversely, individual rationality implies that any solution to (WI,

O) is also a solution to (W, O). Thus, when the status quo point is the origin we need only analyze (WI,

O). For this reason, the subsequent discussion will consider only arbitration games in normal form in

which the entire choice set lies within the first quadrant -- that is, arbitration games in which W = WI.

Now consider one particular arbitration game, which we shall refer to as the canonical

arbitration game. This is one in which the status quo point is O, whose choice set consists of the

triangle (boundary together with interior) whose vertices are (0, 0), (2, 0), and (0, 2), and whose sides

are consequently the lines x = 0, y = 0, and x + y = 2. This arbitration game is symmetric, so by the

assumption of symmetry its solution must lie on the line y = x. Indeed, its solution is the point (1, 1),

where y = x intersects the northeast frontier x + y = 2. See Figure 3.

However, the canonical arbitration game contains arbitration game (WI, O), and the solution to

the canonical problem, the point (1, 1), is contained in WI. See Figure 4. Therefore, by the

independence of irrelevant alternatives, (1, 1) is the solution to (WI, O) and therefore to (W, O) as

well.

Finally, it is easy to see that (1, 1) represents the point in W where the product of the x and y

coordinates attains a maximum. Clearly the product xy attains a maximum somewhere on the first-

quadrant line segment x + y = 2. Take any point (x, 2 - x) on this segment. The product of its

coordinates is 2x - x2, and the function y = 2x - x2 attains a maximum at x = 1, the point where dy/dx =
 Figure 3 Figure 4

(0, 2) x+y=2
(0, 2)

x+y=2

(1, 1)
(1, 1)

WI

0 (2, 0) 0 (2, 0)
2 - 2x = 0.

The point (1, 1) in Figure 2 is the image under N of the point (a, b) in the original choice set W'

depicted in Figure 1; (a, b) is thus the Nash solution to the original arbitration game (W', L*), and

represents the point of W' where the product of the increases over the status quo point attains a

maximum. This argument is the proof of Nash's theorem in the two-dimensional case.

Hyperbolas, Tangents, and the Nash Solution

For purposes of our subsequent discussion, it is worth observing one other feature of this

construction: the line x + y = 2 is the tangent to the right hyperbola xy = 1 at (1, 1). See Figure 5.

Right hyperbolas of the form xy = K will figure prominently in our subsequent construction of a

transitive preference-relation based on the Nash solution.

Suppose that (W, O) is an arbitration game that contains the point (/K, /K), and therefore

intersects the hyperbola xy = K (where K > 0). Suppose as well that W does not intersect any

hyperbola "northeast" of xy = K, i.e., any hyperbola xy = K' where K' > K. Clearly, in this case we

can normalize (W, O), and the point (/K, /K) will be transformed to the Nash solution (1, 1). Let us

consider any other point (a, b) … (/K, /K) lying on xy = K.

Now construct the tangent to xy = ab at the point (a, b). It is the line L given by

bx + ay = 2ab,

which cuts the x-axis at (2a, 0) and the y-axis at (0, 2b). Let us call the segment of L bounded by (2a,

0) and (0, 2b) -- the first-quadrant segment of L -- LI. The point (a, b) is the midpoint of LI. See

Figure 6.

It is easy to see that if W is any compact convex set "southwest" of LI that intersects LI at (a, b)

and contains the origin, then (a, b) is the Nash solution of (W, O). (Again see Figure 6.) For we can
 Figure 5

x+y=2
(0, 2)

(1, 1)

xy = 1
WI

0
(2, 0)

Figure 6
(0, 2b)

(a, b)

bx + ay = 2ab

WI xy = ab
LI
0
(2a, 0)
normalize (W, O) to an arbitration game (W', O) by the following linear transformation:

x' = x/a,

y' = y/b,

which carries the point (a, b) into (1, 1), and carries the line L into the line x' + y' = 2; in that case, (1,

1) is the Nash solution of (W', O), and thus (a, b) is the Nash solution of (W, O). For we have

transformed Figure 6 into Figure 5. We have proven:

Lemma 1. If W is any compact convex set "southwest" of LI that intersects LI at (a, b) and

contains the origin, then (a, b) is the Nash solution of (W, O).

The Nash Solution in Higher Dimensions

In higher dimensions matters are precisely analogous. Take a compact, convex subset W of k-

dimensional Euclidean space, and assume Nash's axioms. There is a unique point in W -- that point

where the product of increases of each coordinate over the status quo attains a maximum -- that

satisfies all the axioms. If W is in normal form, then the Nash solution will be the point where the k-1

dimensional hyperplane given by the equation

Ei = 1,...,k xi = k

is tangent to the hyperbolic surface given by the equation

Ji = 1,...,k xi = 1.

That point, of course, is (1,..., 1).

 The Consistency of Rational Choice and Incommensurability

This bargaining-theory-based analysis shows something singularly important about the

connection between the commensurability of values and the possibility of making rational choices

among different mixes of them. Earlier in this paper I rehearsed the argument that if O1 is rationally

preferable to O2, then O1 must be better than O2 in some respect, and thus the two options must be

commensurable. I claimed that this tempting argument is fallacious, for O1 may be better than O2 only

in the trivial sense that O1 is better than O2 in respect of rational preferability. We are now in a position

to see why this is so.

Bargaining theory studies the possibility of rational compromise among incompatible demands,

such as the demand to maximize each of several incommensurable values. Solutions to the bargaining

(arbitration) problem, such as Nash's, allow us to say that one compromise-package of values is

rationally preferable to all others. The Nash solution is better than any other simply because it is a

better compromise among the incommensurable values than any other possible compromise

among them. There is no other evaluative sense in which the Nash solution is better than the remaining

options. In particular, the Nash solution need not be superior to the remaining options along every

dimension, and, when it is not, some other option will be better than the Nash solution with respect to

one or more of the values in question.

But what is it to say that the Nash solution is the best compromise among several

incommensurable values, though it is not better than other options in any other evaluative sense? Surely

this says nothing more than that the Nash solution is rationally preferable to the other options. In any

sense other than this, the Nash solution is incommensurable with the other options. In other

words, by proving the existence of a best compromise among incommensurable values, we prove that
rational choice is possible even when commensurability fails.

Interpreting the Nash Solution

Is there an intuitive reason for regarding the Nash solution as an appropriate "best" compromise

among the competing claims represented by the dimensions of the choice space? I believe the answer

is yes.

Consider the two-dimensional case of an arbitration game in normal form. Suppose that one

could choose between two points of the choice set: (a, b) and (ca, b), where c > 0. From the point of

view of whatever the y-coordinate represents, (a, b) and (ca, b) are indistinguishable; a bargainer or

fiduciary aiming to maximize y should be indifferent between the two points. For this reason, a

comparison of (a, b) with (ca, b) should disregard the y-coordinate, and consider the choice only from

the standpoint of x (or x's fiduciary). From this standpoint, (ca, b) is precisely c times as good as (a, b),

since ca is precisely c times as good as a. Thus, there is a natural sense in which (ca, b) can be said to

represent a package that is c times as good as that represented by (a, b): the amount of y is the same in

both, but (ca, b) provides c times as much of x, which in this comparison is the only genuine variable.

In the same way, (a, cb) is a package c times as good as (a, b). From the standpoint of x or x's

fiduciary, (a, b) and (a, cb) are indistinguishable, and thus the two pairs should be compared only from

the standpoint of y or y's fiduciary, from which (a, cb) is c times as good as (a, b) because cb is c times

as good as b.

We have stipulated that x and y represent incommensurable values, and there is thus no

univocal standpoint for comparing points along both dimensions at once. Nevertheless, the preceding

argument provides a natural reason to think of (ca, b) and (a, cb) as equally good packages: each of

them is c times as good a package as (a, b).

 Now consider any two first-quadrant points (a, b) and (a', b'). Are there circumstances under

which they can be considered equally good packages? The answer is yes: they will be equally good

packages whenever ab = a'b'. Why is this? The reasoning in the preceding paragraphs implies that the

point (a, b), which can be rewritten as ((a/a')·a', b), is a/a' times as good a package as (a', b).

However, if ab = a'b', then b' = (a/a')·b, so the point (a', b'), which may be rewritten as (a', (a/a')·b), is

a/a' times as good a package as (a', b). Therefore (a, b) is as good a package as (a', b'), because both

of them are packages a/a' times as good as (a', b).

The converse is true as well: If ab … a'b', then although (a, b) is a/a' times as good as (a', b),

(a', b') is not a/a' times as good as (a', b). It follows that (a, b) and (a', b') are equally good packages if

and only if ab = a'b'. In short, the product of the coordinates in a package measures the goodness

of the package.

This is the intuitive idea behind regarding the Nash solution as the best package in a choice set:

the Nash solution is simply the point at which the measure of goodness of a package -- the product of

its coordinates -- attains a maximum.

We can interpret this argument geometrically. The product of the coordinates of a first-

quadrant point (a, b) represents the area of the rectangle whose diagonal vertices are (0, 0) and (a, b).

Consider all the rectangles whose diagonal vertices are (0, 0) and (a', b'), where a'b' = ab. These are

the rectangles whose southwest vertex is (0, 0) and whose northeast vertices lie on the hyperbola xy =

ab. (See Figure 7.) All these rectangles have the same area, and the preceding argument for regarding

all of them as equally good packages is simply a way of demonstrating the truisms that the height and

width of a rectangle both contribute to its area, and that it makes no sense to ask which contributes

more. The area of these rectangles measures the "amount" of height and width in the package; thus,
 Figure 7

xy = ab

(a, b)

(a’, b’)

0
even though height and width represent incommensurable (orthogonal, linearly independent) dimensions

of value, their product measures the total "amount" of value in a compromise-package.

These argument generalize to k dimensions: Given 1 # i # k, the point x = (x1, ..., cxi, ..., xk)

represents a package c times as good as that represented by x' = (x1, ..., xi, ..., xk), because the

amounts of each value other than the i-th is the same in both points, but the amount of the i-th value is c

times greater in x than in x'. If x'' = (x1, ..., cxj, ..., xk), where i … j, then x'' represents as good a

package as x, because both represent packages c times as good as that represented by x'. It follows,

given a point x = (x1, ..., xk), that all points the product of whose coordinates equals

Ji = 1,...,k xi

are indifferent to x; thus, the appropriate measure of goodness of k-dimensional packages is the

product of their respective coordinates, and

Ji = 1,...,k xi

-- the k-dimensional volume of the rectangular hypersolid whose diagonal points are O and x --

measures the "amount" of the amalgamated value of the k dimensions.

The Nash Preference Relation

In the discussion that follows, I will assume that all choice sets are compact. Among the

assumptions required for Nash's theorem is the assumption that the choice set is convex. If the choice

set W is not convex, then we can construct its convex hull C(W), the intersection of all convex sets

containing W.10 C(W) is the "smallest" convex set containing W. Given the Nash axioms, C(W) will

have a Nash solution, that is, a best point, which may not, however, belong to W itself. Though this

10
It may be shown that the convex hull of a compact set is compact, so we can continue to neglect
specifying the compactness of sets under discussion.
may not seem to help much, it allows us to think critically about the claim that value-pluralism makes a

transitive ordering impossible.

Indeed, contrary to this claim, the Nash approach induces a natural transitive ordering on the

subset Ek+ of the k-dimensional Euclidean choice space Ek in which all values are non-negative (the

multi-dimensional equivalent to the first quadrant of the real plane, i.e., the first 2k-ant). To illustrate

how this is done, let us construct such an ordering in the two-dimensional case. We will generalize to

any number of dimensions in the subsequent section. We carry out the construction in four steps.

Step 1. Consider the family of "upward facing" hyperbolas given by the equation xy = K for

each positive real number K. Plainly, every point (a, b) of the first quadrant except the origin lies on

precisely one member of the family, namely the hyperbola xy = ab. Let (a', b') be another point on the

same hyperbola; that is, let ab = a'b'. The line-segment L connecting them lies "northeast" of xy = ab,

and thus there is no convex set containing both (a, b) and (a', b') of which either is the Nash solution

(for any possible status quo point), since the convex set contains L, and the product of the coordinates

of all points on L other than (a, b) and (a', b') is greater than ab.11 Since neither (a, b) nor (a', b') is the

Nash solution to any convex set containing the other, it is not the case that (a, b) represents a better

package of values than (a', b'), nor that (a', b') represents a better package of values than (a,b). This

suggests that we should regard the two points as indifferent to each other. Consequently, every

hyperbola xy = K will be an indifference curve among compromises between the values represented by

the x- and y-coordinates. We therefore define an indifference relation I as follows:

Let (a, b) and (a', b') be two points in the northeast quadrant of the Euclidean

11
This is true even if xy = ab does not lie in the first quadrant. For normalizing the arbitration game
leaves this argument unaffected.
 coordinate plane. We say that (a, b)I(a', b') if and only if ab = a'b', that is, if and only if

both points lie on the hyperbola xy = ab.

This step of the construction simply recapitulates our earlier argument that ab = a'b' if and only if the

points (a, b) and (a', b') represent equally good compromise-packages.

Step 2. Let (a, b) lie in the first quadrant, and let L be the line bx + ay = 2ab, the tangent to xy

= ab through (a, b). Let (c, d) be any point in the first quadrant southwest of L but not on the line

connecting O to (a, b); that is, let (c, d) be such that bc + ad < 2ab and bc … ad. The triangle-plus-

interior T whose vertices are O, (a, b), and (c, d) is compact and convex; moreover, T lies entirely

southwest of L. By Lemma 1, therefore, (a, b) is the Nash solution to (T, O). That means that (a, b)

represents a compromise-package of values superior to (c, d). The same holds if O, (c, d), and (a, b)

are colinear, for in that case (a, b) is Pareto superior to (c, d). In either case, we can define a natural

preference-relation P, by stipulating that (a,b)P(c, d). See Figure 8.

Step 3. Now consider any hyperbola xy = K where K > ab. xy = K lies northeast of xy = ab.

We can always find a point (e, f) on xy = K such that the line segment connecting (a, b) to (e, f) lies

entirely southwest of the tangent to xy = K at (e, f). See Figure 9. Our argument in Step 2 shows that

(e, f) is the Nash solution to (T, O), where T is the triangle-plus-interior with vertices O, (a, b), and (e,

f); thus, in a natural sense (e, f)P(a, b). This shows that for any point (a, b), if K > ab some point on the

hyperbola xy = K represents a better compromise-package of values than (a, b). At the same time,

recall that from the standpoint of better and worse packages of values, all points on xy = K are

indifferent to each other. It therefore makes sense to regard every point on xy = K as preferable to (a,

b). Thus, any point (a', b') in the first quadrant where a'b' > ab is preferable to (a, b).

One might object that this argument begs the question by assuming that the preference relation
 Figure 8
xy = ab

(0, 2b)
(c, d)

(a, b)

bx + ay = 2ab

0 (2a, 0)

Figure 9

ex + fy = 2ef

(a, b)
(e, f)

T (a', b')
xy = k

xy = ab

0
we are defining is transitive. After all, I have just concluded that every point on xy = K is preferable to

(a, b) merely because every point on xy = K is indifferent to (e, f) and (e, f) is preferable to (a, b); this

conclusion follows only by assuming transitivity.

But there is nothing wrong with assuming transitivity here. The argument I am offering is that a

rational arbitrator would prefer (e, f) to (a, b) but be indifferent between (e, f) and any other point lying

on xy = ef. To call the arbitrator "rational" assumes, or so I believe, that the arbitrator's preferences are

transitive. The construction we are engaged in here is simply a formal model capturing the structure of

the rational arbitrator's decisions. The argument here is nothing more than an attempt to motivate the

claim that the preference relation we are constructing accurately models the structure of the arbitrator's

decisions, the transitivity of which is assumed. It is not a proof that the arbitrator's decisions are

transitive. Or rather, it is a proof that the arbitrator's decisions are transitive (and thus that the IIT is

false) only when we reverse the order of argument: if we suppose that the model presented here

captures the Nash-based structure of the arbitrator's decisions, then -- because the model constructs a

transitive preference relation -- we may conclude that the arbitrator's decisions are transitive.

Step 4. We have now defined a preference-relation between (a, b) and all points (x, y)

satisfying either bx + ay < 2ab or xy $ ab. What of the remaining points in the first quadrant, i.e., all

points (x, y) such that bx + ay $ 2ab and xy < ab? Let (c, d) be such a point. It is always possible to

find some point (a', b') on the hyperbola xy = ab such that the line segment connecting (c, d) to (a', b')

lies southwest of b'x + a'y = 2a'b', the tangent to xy = ab at (a', b'). As we have seen, Lemma 1 shows

that (a', b') is the Nash solution of the bargaining game (T, O), where T is the triangle-plus-interior

whose vertices are (a', b'), (c, d), and (0, 0). By the definition of our preference-relation P, it follows

that (a', b')P(c, d). But it is also the case that (a, b)I(a', b'), and the argument of Step 3 shows that we
can therefore regard (a, b) as a better compromise of values than (c, d), for (a, b) is indifferent to (a',

b'), which represents a better compromise of values than (c, d). In light of these observations it seems

natural to extend our previously-defined preference relation P to the pairs (c, d) and (a, b), stipulating

that (a, b)P(c, d).

We have thus defined a preference relation on the entire first quadrant of the choice space. We

have motivated the entire construction of this preference relation by the argument that the Nash solution

to an arbitration game represents the best compromise-package among conflicting values. For this

reason, we may refer to the preference relation just defined as the Nash preference relation, defined

as follows:

A point (a, b) 0 Ek+ is Nash-preferable to (c, d) 0 Ek+ if and only if ab > cd. (a, b) is

Nash-indifferent to (c, d) if and only if ab = cd.

Obviously, the Nash preference relation is transitive.

To summarize the argument for regarding the Nash preference relation as a plausible and

natural ordering of first-quadrant value-vectors: If two points are Nash-indifferent to each other, then

neither represents a compromise-package among conflicting values superior to that represented by the

other, because neither is the Nash solution to an arbitration game containing the other. If, however,

point A is Nash-preferable to point B, then point A represents a compromise-package among

conflicting values that is superior to the compromise-package represented by some point C that is

Nash-indifferent to B. That is because we can construct an arbitration game containing A and C to

which A is the Nash solution.

 Generalizing From Two Value-Dimensions to Many Value-Dimensions

Let (W,O) be an arbitration game in non-negative k-dimensional Euclidean space Ek+, and let

C(W) be the compact convex hull of W, i.e., the intersection of all compact convex sets containing W.

Let L = (L1,..., Lk) and L' = (L'1,..., L'k) be two points in C(W). Then we can define the Nash

preference relation R (read R as the relation "...is at least as Nash-good as") by stipulating that LRL' if

and only if (JiLi) $ (Ji L'i). In the usual manner, we can define the strict preference relation P ("is

Nash-preferable to") and the indifference relation I ("is Nash-indifferent to") in terms of R: LPL' if and

only if LRL' but not L'RL, while LRL' if and only if LRL' and L'RL. In terms of our definition of R, this

means that LPL' if and only if (JiLi) > (Ji L'i), while LIL' if and only if (JiLi) = (JiL'i). Note that all

points on the hyperbolic surface HK defined by Jixi = K (where K is a positive constant) are Nash-

indifferent to each other. The HK are the family of Nash-indifference curves.

R, so defined, is clearly a transitive preference relation on C(W). The restriction of R to W is

likewise a transitive preference relation. (It is necessary to use this two-step procedure -- defining the

Nash preference relation on the compact convex hull of W and then restricting it to W -- because

Nash's theorem holds only for compact convex choice sets.) Intuitively, a vector L is the Nash "best"

point in the subset of C(W) consisting of all points L' such that (JiLi) $ (Ji L'i), i.e., all points "on or

below" the hyperbolic surface HL defined by Jixi = JiLi. It is "best" in the following sense: L will be

the Nash solution of every compact convex subset of C(W) satisfying Nash's axioms and containing L,

but whose intersection with all the HK where K > JiLi is empty.

All such sets are contained within the k-1-dimensional simplex bounded by the k-1-dimensional

hyperplane tangent to HL and the hyperplanes formed by the coordinate axes. (Observe that if a
convex set contains L then it cannot contain any other point on the (concave) hyperbolic surface HL.

That is, it will not contain any vector Nash-indifferent to L.) In particular, if X f W, and L 0 C(X) such

that X1HK = M for all K > JiLi, then L is the Nash solution for C(X). Note, however, that although L

0 C(X), L may not belong to W. If so, however, L will be an accumulation point of X and therefore of

W: points in W may be found arbitrarily close to L.

The Unimportance of the Foregoing

Perversely, one fair conclusion about these constructions is that they are unimportant. My

argument so far has been this: If we assume that values can be measured by non-negative real-valued

utilities, then Nash's bargaining theorem demonstrates that the incommensurability of values poses no

obstacle to rational choice or transitive preferences. Nash's assumptions -- symmetry, linearity, Pareto,

independence of irrelevant alternatives, convexity and compactness, and individual rationality -- capture

plausible and important features of value-incommensurability and rational choice, and from them it

follows that we can often find a unique best compromise-package among incommensurable values.

This conclusion in turn shows us how to construct a plausible and natural transitive ordering of the non-

negative portion of the choice space. The incommensurability of values turns out to be a slighter

obstacle than theorists have supposed.

All that is true, I have said, if we assume that values can be measured by non-negative real-

valued utilities. If they can't, however, Nash's ingenious solution to the arbitration problem doesn't

apply. In my view it is not merely true but clearly true that our most important values cannot be

assigned real-valued utilities except in an arbitrary way. That fact, and not the fact of

incommensurability, is why deliberation is a problem of wisdom and not a problem of computation.