Forms of the social welfare function

1998 ◽  
Keyword(s):  
Social Welfare ◽  
Social Welfare Function ◽  
The Social

scholarly journals Optimal Policy with Heterogeneous Preferences

2008 ◽  
Vol 8 (1) ◽  
Author(s):  
Louis Kaplow
Keyword(s):  
Social Welfare ◽  
Public Goods ◽  
Optimal Policy ◽  
Income Tax ◽  
Social Welfare Function ◽  
Income Taxation ◽  
Heterogeneous Preferences ◽  
Commodity Taxation ◽  
Policy Rules ◽  
The Social

Abstract Optimal policy rules—including those regarding income taxation, commodity taxation, public goods, and externalities—are typically derived in models with homogeneous preferences. This article reconsiders many central results for the case in which preferences for commodities, public goods, and externalities are heterogeneous. When preference differences are observable, standard second-best results in basic settings are unaffected, except those for the optimal income tax. Optimal levels of income taxation may be higher, the same, or lower on types who derive more utility from various goods, depending on the nature of preference differences and the concavity of the social welfare function. When preference differences are unobservable, all policy rules may change. The determinants of even the direction of optimal rule adjustments are many and subtle.

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.

Equilibria Under Negligence Liability

2021 ◽  
Vol 17 (1) ◽  
pp. 1-33
Author(s):  
Allan Feldman ◽  
Ram Singh
Keyword(s):  
Standard Model ◽  
Social Welfare ◽  
Social Welfare Function ◽  
Strict Liability ◽  
Formal Proof ◽  
Activity Level ◽  
Future Research ◽  
Liability Rules ◽  
The Social ◽  
The Standard Model

Abstract In many accident contexts, the expected accident harm depends on observable as well as unobservable dimensions of the precaution exercised by the parties involved. The observable dimensions are commonly referred to as the ‘care’ levels and the unobservable aspects as the ‘activity’ levels. In a seminal contribution, Shavell, S (1980). Strict liability versus negligence. J. Leg. Stud. 9: 1–25 extended the scope of the economic analysis of liability rules by providing a model that allows for the care as well as activity level choices. Subsequent works have used and extended Shavell’s model to predict outcomes under various liability rules, and also to compare their efficiency properties. These works make several claims about the existence and efficiency of equilibria under different liability rules, without providing any formal proof. In this paper, we re-examine the prevalent claims in the literature using the standard model itself. Contrary to these prevalent claims, we show that the standard negligence liability rules do not induce equilibrium for all of the accident contexts admissible under the model. Under the standard model, even the ‘no-fault’ rules can fail to induce a Nash equilibrium. In the absence of an equilibrium, it is not plausible to make a claim about the efficiency of a rule per-se or vis-a-vis other rules. We show that even with commonly used utility functions that meet all of the requirements of the standard model, the social welfare function may not have a maximum. In many other situations fully compatible with the standard model, a maximum of the social welfare function is not discoverable by the first order conditions. Under the standard model, even individually optimum choices might not exist. We analyze the underlying problems with the standard model and offer some insights for future research on this subject.

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.

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.

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