The members of an economy—the firms, the consumers, the investors, and the government—make choices. To give a common name to them all, I will refer t… - Kenneth Arrow

Information, one of the fundamental determinants of production, laps over from one firm to another, yet the firm has so far seemed reasonably sharply defined in terms of legal ownership. It seems to me there must be increasing tensions between legal relations and fundamental economic determinants. Small symptoms are already appearing in the legal and economic spheres. There is continual difficulty in defining intellectual property. The United States courts, at least, have come up with some strange definitions of property.

The conventional view among economists is that education adds to an individual's productivity and therefore increases the market value of his labor. From the viewpoint of formal theory, it does not matter how the student's productivity is increased, but implicitly it is assumed that the student receives cognitive skills through his education. Educators, on the other hand, have long felt that the activity of education is a process of socialization, with the latent content of the process—the acquisition of skills such as the carrying out of assigned tasks, getting along with others, regularity, punctuality, and the like—being at least as important as the manifest objectives of conveying information. This last doctrine has been revived by radical economists, though with a negative rather than a positive valuation. But from the viewpoint of economic theory, the socialization hypothesis is just as much a human capital theory as the cognitive skill acquisition hypothesis. Both hypotheses imply that education supplies skills that lead to higher productivity. I would like to present a very different view. Higher education, in this model, contributes in no way to superior economic performance; it increases neither cognition nor socialization. Instead, higher education serves as a screening device in that it sorts out individuals of differing abilities, thereby conveying information to the purchasers of labor.

This is by no means a "formal" matter. Clearly, the intuition behind the continuity requirement is a small step in the direction of utilitarian ethics; even the worst-off member of the society might be made to suffer if there is enough benefit to others. The assumption of diminishing marginal utility implies with regard to usual policy alternatives that there are better ways of improving the lot of better-off members than by hurting the worst-off.
But there is one striking case, of great practical importance, where our intuition is in favor of utilitarianism is some form as against any minimax rule. I refer to allocation over time. Typically, we expect future generations to be better off than we are. Should we save for them either directly or in the form of public investments? A maximin rule would surely say no. But if investment is productive, so that, in terms of goods, the next generation gains more than we lose, we usually feel that some investment is worthwhile even though the recipients will be better off than we are.