The Social Welfare Function

2021 ◽  
pp. 155-178
Author(s):  
Matthew D. Adler
Keyword(s):  
Social Welfare ◽  
Social Welfare Function ◽  
Cost Benefit Analysis ◽  
Cost Benefit ◽  
Well Being ◽  
Policy Recommendation ◽  
The Social ◽  
The Status ◽  
Significant Divergence ◽  
Policy Impacts

The social welfare function (‘SWF’) framework is a methodology for assessing governmental policies that originates in theoretical welfare economics and is now widely used in various economic literatures. The framework translates the possible outcomes of policy choice into patterns of well-being among the population of interest, represented by interpersonally comparable well-being numbers. Policies are then ranked in light of some rule for ordering these well-being patterns (such as a utilitarian or prioritarian rule), taking account of the probability that a given policy will lead to a given outcome. This chapter presents the SWF framework, illustrates how it can be used for regulatory policy analysis, and compares the methodology to cost-benefit analysis (‘CBA’), currently the dominant policy-analytic tool in governmental practice. CBA eschews interpersonal comparisons and, instead, translates policy impacts on each person into a monetary equivalent relative to the status quo; these monetary equivalents are then added up. While CBA and the SWF framework are broadly similar in being consequentialist and welfarist, and in adopting a preference view of well-being, they employ distinct analytic structures for integrating information about preferences and possible outcomes to arrive at an assessment of the various policies that government might adopt. As the chapter demonstrates, the structural differences between the SWF framework and CBA can yield significant divergence at the level of policy recommendation.

Cost-Benefit Analysis and Social Welfare Functions

2019 ◽  
pp. 397-422
Author(s):  
Matthew D. Adler
Keyword(s):  
Social Welfare ◽  
Policy Analysis ◽  
Moral Philosophy ◽  
Social Welfare Function ◽  
Cost Benefit Analysis ◽  
Cost Benefit ◽  
Well Being ◽  
Benefit Analysis ◽  
Important Policy ◽  
The Social

This chapter describes and compares the two most important policy-analysis methodologies in economics: cost-benefit analysis (CBA) and the social-welfare-function (SWF) framework. Both approaches are consequentialist and welfarist; both are typically combined with a preference-based view of well-being. Despite these similarities, the two methodologies differ in significant ways. CBA translates well-being impacts into monetary equivalents, and ranks outcomes according to the sum total of monetary equivalents. By contrast, the SWF framework relies upon an interpersonally comparable measure of well-being. Each possible outcome is mapped onto a list (vector) of these well-being numbers, one for each person in the population; the ranking of outcomes, then, is driven by some rule (the SWF) for ranking these well-being vectors. The utilitarian SWF and the prioritarian family of SWFs (each corresponding to well-developed positions in moral philosophy) are especially plausible. The case for using CBA rather than one of these SWFs is weak—or so the chapter argues.

Measuring Social Welfare

2019 ◽  
Author(s):  
Matthew D. Adler
Keyword(s):  
Social Welfare ◽  
Cost Benefit Analysis ◽  
Probability Distributions ◽  
Cost Benefit ◽  
Well Being ◽  
Risk Regulation ◽  
The Social ◽  
Policy Impacts ◽  
The Difference

The social welfare function (SWF) framework is a powerful tool for evaluating governmental policies in light of human well-being. The framework originates in theoretical welfare economics and is widely used in contemporary economic scholarship, although not (yet) in governmental practice. This book is intended to provide an accessible, yet reasonably rigorous overview of the SWF approach. The framework has three components: an interpersonally comparable measure of well-being, which functions to translate outcomes into lists (“vectors”) of well-being numbers, one for each person in the population; a rule (the SWF) for ranking well-being vectors, such as the utilitarian SWF (which simply adds up well-being numbers), a continuous-prioritarian SWF (which gives greater weight to the worse off), or some other; and a procedure for ranking policies, understood as probability distributions across outcomes. Each component of the SWF framework is reviewed in detail; in doing so, the book engages both the economic literature on SWFs and philosophical scholarship regarding individual well-being, ethics, and distributive justice. The book also clarifies the difference between the SWF approach and cost-benefit analysis (CBA), which uses money rather than an interpersonally well-being measure as the scale for quantifying policy impacts. The book includes a detailed case study of risk regulation—illustrating how the SWF framework can be used in practice and how it contrasts with CBA. The book is written to be accessible to readers without much mathematical training, but is backed up by an extensive mathematical appendix.

The Social Welfare Function

2019 ◽  
pp. 7-40
Author(s):  
Matthew D. Adler
Keyword(s):  
Social Welfare ◽  
Social Welfare Function ◽  
Cost Benefit Analysis ◽  
Probability Distributions ◽  
Cost Benefit ◽  
Well Being ◽  
Benefit Analysis ◽  
Arrow’S Theorem ◽  
Ethical Evaluation ◽  
The Social

This chapter provides a synopsis of the social welfare function (SWF) framework. It presents the key components of the framework, which are then developed in greater detail in subsequent chapters: an interpersonally comparable measure of well-being, which converts each outcome into a list (“vector”) of well-being numbers, one for each person in the population; a rule (the SWF) for ranking well-being vectors, such as the utilitarian SWF or a continuous-prioritarian SWF; and a procedure for ranking policies, understood as probability distributions across outcomes. The chapter then discusses the relation between the SWF methodology and ethics. This framework provides an ethical evaluation of governmental policies—an evaluation that is consequentialist and, specifically, welfarist. Finally, the chapter contrasts the SWF framework with cost-benefit analysis (CBA); and explains how the framework succeeds in producing a well-behaved ranking of outcomes and policies, notwithstanding Arrow’s theorem.

Social Welfare Functions

2019 ◽  
pp. 123-142 ◽  
Author(s):  
Matthew D. Adler
Keyword(s):  
Health Care ◽  
Cost Effectiveness ◽  
Probability Distribution ◽  
Social Welfare ◽  
Social Welfare Function ◽  
Cost Benefit Analysis ◽  
Cost Benefit ◽  
Well Being ◽  
Individual Preferences ◽  
The Social

The social welfare function (SWF) framework is a core methodology of welfare economics. This chapter describes the approach, discusses its application to health priority-setting, and illustrates this application with a concrete example. The SWF framework conceptualizes any given policy as a probability distribution over outcomes, with each outcome in turn a pattern of well-being among the population of concern. The well-being measure can be derived from utility functions representing individual preferences with respect to the attributes that determine well-being (e.g., health, longevity, income). Different rules for ranking well-being patterns are possible, including both “utilitarian” and “prioritarian” rules. Unlike cost-effectiveness analysis, the SWF framework is sensitive to the way in which a given individual’s income, health, and longevity interact to determine her lifetime well-being. Unlike cost-benefit analysis, the utilitarian and prioritarian SWFs take account of the declining marginal utility of income. Health scholars’ traditional concerns about considering income in allocating health care are mitigated by this feature of both SWFs and, even more so, by the extra concern for the well-being of the worse off that is characteristic of prioritarianism.

Evaluation of Non-marginal Projects

2012 ◽  
Author(s):  
Christian Gollier
Keyword(s):  
Social Welfare ◽  
Social Welfare Function ◽  
Cost Benefit Analysis ◽  
Investment Project ◽  
Cost Benefit ◽  
Cash Flows ◽  
The Social ◽  
Macroeconomic Effects ◽  
The Cost ◽  
Future Cash Flows

This chapter shows that the cost-benefit analysis can be used only if the actions under scrutiny are marginal, that is, if implementing them has no macroeconomic effects. Otherwise, one needs to go back to the basics of public economics to evaluate these actions. The chapter examines the error that one makes by following the classical discounting approach when evaluating non-marginal projects. The evaluation of non-marginal projects must be done by measuring their impact on the social welfare function. A non-marginal investment project with positive future cash flows will have an impact on welfare that is smaller than when estimated by using the standard discounting method.

Measuring Well-Being

2019 ◽  
pp. 41-82
Author(s):  
Matthew D. Adler
Keyword(s):  
Social Welfare ◽  
Social Welfare Function ◽  
Well Being ◽  
Utility Functions ◽  
Equivalent Income ◽  
Von Neumann ◽  
Individual Preferences ◽  
Good Account ◽  
The Social ◽  
Income Measure

This chapter discusses the well-being measure: a key component of the social welfare function (SWF) framework. This measure, w(·), assigns well-being numbers to individuals in outcomes so as to reflect admissible well-being comparisons (of well-being levels and/or well-being differences). In order for the SWF framework to function, these admissible comparisons must include interpersonal as well as intrapersonal comparisons; the chapter explains why. It then shows how von Neumann/Morgenstern (vNM) utility functions can be used to construct an interpersonally comparable well-being measure that respects individual preferences. A different preference-based well-being measure, the equivalent-income measure, is also reviewed. Although the preference view of well-being is dominant in the SWF literature, w(·) may instead be based upon a non-preference view of well-being, such as an hedonic or objective-good account. The chapter concludes by considering why some economists have been skeptical about interpersonal comparisons.

Introduction

2019 ◽  
pp. 1-6
Author(s):  
Matthew D. Adler
Keyword(s):  
Social Welfare ◽  
Social Welfare Function ◽  
Well Being ◽  
Policy Choice ◽  
Redistributive Taxation ◽  
Multiple Dimensions ◽  
The Social ◽  
Wide Range ◽  
Climate Change And Health

This chapter is a brief introduction to Measuring Social Welfare. The book provides an overview of the social welfare function (SWF) framework for assessing governmental policy. This introductory chapter motivates the framework via some stylized examples of policy choices involving environmental protection, redistributive taxation, infrastructure planning, climate change, and health policy. These examples illustrate recurring features of policy choice: that policies affect multiple dimensions of individual well-being; have “losers” as well as “winners”; produce a range of well-being changes (losses or gains) to individuals starting at a range of well-being levels; and may require a tradeoff between overall well-being and inequality. The SWF framework is able to take account of these recurring features of policy choice, and is applicable to a wide range of policy domains.

scholarly journals The impact of the COVID-19 pandemic on socio-economic and sustainability

2021 ◽  
Author(s):  
Xueli Wei ◽  
Lijing Li ◽  
Fan Zhang
Keyword(s):  
World Economy ◽  
Social Economy ◽  
Secondary Data ◽  
Well Being ◽  
Cross Sectional ◽  
The Social ◽  
The World ◽  
The Status ◽  
Sectional Analysis ◽  
The Impact

Pumping elephantThe COVID-19 pandemic has adversely affected the lives of people around the world in millions of ways . Due to this severe epidemic, all countries in the world have been affected by all aspects, mainly economic. It is widely discussed that the COVID-19 outbreak has affected the world economy. When considering this dimension, this study aims to examine the impact of the COVID-19 pandemic on the world economy, socio-economics, and sustainability. In addition, the research focuses on multiple aspects of social well-being during the pandemic, such as employment, poverty, the status of women, food security, and global trade. To this end, the study used time series and cross-sectional analysis of the data. The second-hand data used in this study comes from the websites of major international organizations. From the analysis of secondary data, the conclusion of this article is that the impact of the pandemic is huge. The main finding of the thesis is that the social economy is affected by the pandemic, causing huge losses in terms of economic well-being and social capital.

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