No-harm principle, rationality, and Pareto optimality in games

TL;DR

This paper introduces the concept of no-harm equilibrium in n-person games, demonstrating its connection to Pareto efficiency and providing a welfare economics perspective on liberty constraints.

Contribution

It develops the no-harm equilibrium concept and proves its equivalence to Pareto efficiency in game settings, extending welfare economics principles.

Findings

No-harm equilibrium is Pareto efficient.

Every Pareto efficient point can be supported as a no-harm equilibrium.

The framework links liberty principles with game-theoretic efficiency.

Abstract

Mill's classic argument for liberty requires that people's exercise of freedom should be governed by a no-harm principle (NHP). In this paper, we develop the concept of a no-harm equilibrium in $n$-person games where players maximize utility subject to the constraint of the NHP. Our main result is in the spirit of the fundamental theorems of welfare economics. We show that for every initial `reference point' in a game the associated no-harm equilibrium is Pareto efficient and, conversely, every Pareto efficient point can be supported as a no-harm equilibrium for some initial reference point.