Utility, informed preference, or happiness: Following Harsanyi's argument to its logical conclusion

Harsanyi (1997) argues that, for normative issues, informed preferences should be used, instead of actual preferences or happiness (or welfare). Following his argument allowing him to move from actual to informed preferences to its logical conclusion forces us to use happiness instead. Where informed preferences differ from happiness due to a pure concern for the welfare of others, using the former involves multiple counting. This “concerning effect” (non-affective altruism) differs from and could be on top of the “minding effect” (affective altruism) of being happy seeing or helping others to be happy. The concerning/minding effect should be excluded/included in social decision. Non-affective altruism is shown to exist in a compelling hypothetical example. Just as actual preferences should be discounted due to the effects of ignorance and spurious preferences, informed preferences should also be discounted due to some inborn or acquired tendencies to be irrational, such as placing insufficient weights on the welfare of the future, maximizing our biological fitness instead of our welfare. Harsanyi's old result on utilitarianism is however defended against criticisms in the last decade. Harsanyi (1997) argues, among other things, that in welfare economics and ethics, what are important are people's informed preferences, rather than either their actual preferences (as emphasized by modern economists) or their happiness (as emphasized by early utilitarians). The main purpose of this paper is to argue that, pursuing Harsanyi's argument that allows him to move from actual to informed preferences to its logical conclusion forces us to happiness as the ultimately important thing. The early utilitarians were right after all! Since I personally approve of Harsanyi's basic argument, I regard myself as his follower who becomes more Catholic than the Pope. (It is not denied that, in practice, the practical difficulties and undesirable side-effects of the procedure of using happiness instead of preferences have to be taken into account. Thus, even if we ultimately wish to maximize the aggregate happiness of people, it may be best in practice to maximize their aggregate preferences in most instances. This important consideration will be largely ignored in this paper.) The secondary objective is to give a brief defence of Harsanyi's (1953, 1955) much earlier argument for utilitarianism (social welfare as a sum of individual utilities) that has received some criticisms in the last decade. The argument (e.g. Roemer 1996) that Harsanyi's result is irrelevant to utilitarianism is based on the point that the VNM (von Neumann-Morgenstern) utility is unrelated to the subjective and interpersonally comparable cardinal utility needed for a social welfare function. Harsanyi's position is defended by showing that the two types of utility are the same (apart from an indeterminate zero point for the former that is irrelevant for utilitarianism concerning the same set of people). Received: 29 May 1997 / Accepted: 3 November 1997     

Consistency between tastes and values: A universalization approach

The object of this paper is to propose a consistency test for an individual involved in collective choice process. Collective choice processes considered in the paper are those that transform individuals ‘tastes’– which reflect the self-interested view point of the individuals – into (social) ranking of alternatives. In addition to her tastes, an individual has values about the way by which collective decision should be made. We distinguish two categories of such values. First, there are end-values that restrict the class of social rankings that the individual considers ethically acceptable. Second there are aggregation-values that specify the way by which the social ranking should depend upon the individuals tastes. The consistency test stands on an hypothetical operation of universalization of the individual tastes to everyone. Five illustrations of the potential usefulness of our approach for interpreting social choice theory and welfare economics are proposed. These illustrations deal with utilitarian aggregation in the presence of income inequality aversion, the so-called ‘ethics of responsibility’ and the aggregation of individual ranking of opportunity sets based on their freedom of choice. A discussion of the relevance of the consistency test for addressing the problem of ‘laundering’ individual preferences is also provided. Received: 25 June 1998/Accepted: 16 March 1999     

Deprivation,welfare and inequality

We provide a characterization of the generalised satisfaction—in our terminology non-deprivation—quasi-ordering introduced by S.R. Chakravarty (Keio Econ Stud 34:17–32, (1997)) for making welfare comparisons. The non-deprivation quasi-ordering obeys a weaker version of the principle of transfers: welfare improves only for specific combinations of progressive transfers, which impose that the same amount be taken from richer individuals and allocated to one arbitrary poorer individual. We identify the extended Gini social welfare functions that are consistent with this principle and we show that the unanimity of value judgements among this class is identical to the ranking of distributions implied by the non-deprivation quasi-ordering. We extend the approach to the measurement of inequality by considering the corresponding relative and absolute ethical inequality indices. This is a shortened version of Magdalou and Moyes (2008), which contains the details of the proofs as well as an empirical illustration.     

Intersecting generalized Lorenz curves and the Gini index

As is well known, the use of the Gini coefficient in comparisons is inconsistent with an utilitarian approach. This paper analyzes the Gini coefficient's normative significance in welfare comparisons evaluating income distributions according to Yaari dual social welfare function. When generalized Lorenz curves cross once, the Gini coefficient is decisive in determining welfare rankings if we strengthen the Principle of Transfers applying a Positional version of the Principle of Transfer Sensitivity. This result can also be extended to the case of multiple crossings. Received: 28 August 1996 / Accepted: 22 October 1997     

Discrete choice models of labour supply,behavioural microsimulation and the Spanish tax reforms

The aim of the present study is to show the potential of behavioural microsimulation models as powerful tools for the ex ante evaluation of public policies. We analyse the impact of recent Spanish income tax reforms upon efficiency and household and social welfare and study the effects of various (basic-income and vital-minimum) flat tax schemes. The analysis is performed using a microsimulation model in which labour supply is explicitly taken into account. Instead of following the traditional continuous approach (Hausman, Labour supply, Aaron and Pechman (eds.), How Taxes Affect Economic Behaviour, The Brooking Institution, Washington, DC, 1981; Econometrica, 53: 1255–1282, 1985; Taxes and labour supply, Auerbach and Feldstein, (eds.), Handbook of Public Economics, North-Holland, Amsterdam, vol. 1, 1979), we estimate the direct utility function employing the methodology proposed by Aaberge et al. (Scand. J. Econ., 97: 635–659, 1995) and Van Soest (J. Hum. Resour., 30: 63–88, 1995). We maintain population heterogeneity by applying a social welfare analysis to the complete sample, rather than merely focusing on the active population. The source of our data is a sample of Spanish individuals in the 1995 wave of the EC Household Panel. We find that the redistribution policies considered have only had a minor impact on economic efficiency but, by contrast, have significantly affected social welfare. An erratum to this article can be found at     

Reconciling normative and behavioural economics: the problems to be solved

We review the problem of reconciling normative and behavioural economics. In conventional welfare economics, individuals’ preferences are assumed to be coherent, and the satisfaction of those preferences is the normative criterion; but this approach breaks down if preferences are incoherent. Traditionally, the preference-satisfaction criterion has been interpreted in three conceptually different ways, emphasising respectively the normative value of happiness, self-assessed well-being, and freedom. If individuals’ preferences are incoherent, these interpretations diverge, leading to fundamentally different strategies for dealing with the reconciliation problem, and new questions are raised about whether normative economics should be addressed to governments or individuals.     

The distribution problem and Rawlsian reasoning

The difference principle of Rawls has been wrongly translated in the formal literature on welfare economics and social choice theory. The difference principle is concerned with the welfare of the members of the least advantaged segment, and, thus, does not – as frequently argued – assign dictatorial power to the person in the worst off position in society. This distinction is important, and the focus on a leximingroup rule makes the Rawlsian position more plausible than it is in the `disguise' of the conventional leximin rule. However, there is a difficulty with this approach, to wit how to understand the least advantaged segment in society. Various definitions are considered in the paper, but it turns out that in most cases these definitions imply that we have to accept the leximin rule. We suggest one line of reasoning that makes the Rawlsian leximingroup rule a genuine alternative to the leximin rule. In this approach, an independent norm level is imposed on the analysis (i.e. a cut off line that is independent of the distribution of welfare under consideration), and the least advantaged segment is identified as those who have less than this minimum stipend. Received: 21 December 1994/Accepted: 15 June 1998     

Metabolism, energy, and entropy in Marx's critique of political economy: Beyond the Podolinsky myth

Until recently, most commentators, including ecological Marxists, have assumed that Marx's historical materialism was only marginally ecologically sensitive at best, or even that it was explicitly anti-ecological. However, research over the last decade has demonstrated not only that Marx deemed ecological materialism essential to the critique of political economy and to investigations into socialism, but also that his treatment of the coevolution of nature and society was in many ways the most sophisticated to be put forth by any social theorist prior to the late twentieth century. Still, criticisms continue to be leveled at Marx and Engels for their understanding of thermodynamics and the extent to which their work is said to conflict with the core tenets of ecological economics. In this respect, the rejection by Marx and Engels of the pioneering contributions of the Ukrainian socialist Sergei Podolinsky, one of the founders of energetics, has been frequently offered as the chief ecological case against them. Building on an earlier analysis of Marx's and Engels's response to Podolinsky, this article shows that they relied on an open-system, metabolic-energetic model that adhered to all of the main strictures of ecological economics – but one that also (unlike ecological economics) rooted the violation of solar and other environmental-sustainability conditions in the class relations of capitalist society. The result is to generate a deeper understanding of classical historical materialism's ecological approach to economy and society – providing an ecological-materialist critique that can help uncover the systemic roots of today's “treadmill of production” and global environmental crisis. Paul Burkett is Professor of Economics at Indiana State University, Terre Haute. He is the author of Marx and Nature: A Red and Green Perspective (1999), and the co-author, with Martin Hart-Landsberg, of China and Socialism: Market Reforms and Class Struggle (2005). John Bellamy Foster is Professor of Sociology at the University of Oregon in Eugene, Oregon, and co-editor of Monthly Review (New York). He is the author of The Vulnerable Planet (1994, 1999); “Marx's Theory of Metabolic Rift: Classical Foundations for Environmental Sociology,” American Journal of Sociology (September 1999); Marx's Ecology (2000); Ecology Against Capitalism (2002); and Naked Imperialism (2005).     

Axiomatizations of the normalized Banzhaf value and the Shapley value

A cooperative game with transferable utilities– or simply a TU-game – describes a situation in which players can obtain certain payoffs by cooperation. A solution concept for these games is a function which assigns to every such a game a distribution of payoffs over the players in the game. Famous solution concepts for TU-games are the Shapley value and the Banzhaf value. Both solution concepts have been axiomatized in various ways. An important difference between these two solution concepts is the fact that the Shapley value always distributes the payoff that can be obtained by the `grand coalition' consisting of all players cooperating together while the Banzhaf value does not satisfy this property, i.e., the Banzhaf value is not efficient. In this paper we consider the normalized Banzhaf value which distributes the payoff that can be obtained by the `grand coalition' proportional to the Banzhaf values of the players. This value does not satisfy certain axioms underlying the Banzhaf value. In this paper we introduce some new axioms that characterize the normalized Banzhaf value. We also provide an axiomatization of the Shapley value using similar axioms. Received: 10 April 1996 / Accepted: 2 June 1997     

Top-Pair and Top-Triple Monotonicity

We say that a social choice function (SCF) satisfies Top-k Monotonicity if the following holds. Suppose the outcome of the SCF at a preference profile is one of the top k-ranked alternatives for voter i. Let the set of these k alternatives be denoted by B. Suppose that i’s preference ordering changes in such a way that the set of first k-ranked alternatives remains the set B. Then the outcome at the new profile must belong to B. This definition of monotonicity arises naturally from considerations of set “improvements” and is weaker than the axioms of strong positive association and Maskin Monotonicity. Our main results are that if there are two voters then a SCF satisfies unanimity and Top-2 or Top-pair Monotonicity if and only if it is dictatorial. If there are more than two voters, then Top-pair Monotonicity must be replaced by Top-3 Monotonicity (or Top-triple Monotonicity) for the analogous result. Our results demonstrate that connection between dictatorship and “improvement” axioms is stronger than that suggested by the Muller–Satterthwaite result (Muller and Satterthwaite in J Econ Theory 14:412–418, 1977) and the Gibbard–Sattherthwaite theorem.     

Towards a historical sociology of constitutional legitimacy

This article has two primary objectives. First, it sets out the methodological argument that the conventional antinomy between normative and sociological approaches to questions of state legitimacy depends on a series of false constructions, and that normative and sociological – or specifically historical–sociological – analyses of states and the processes by which they obtain legitimacy can be (and ought to be) mutually reinforcing. This argument hinges on the claim that historical sociology should renounce some of its common presuppositions regarding the coercive functions of state power and reformulate itself as a normative social science, identifying and promoting models of statehood likely to obtain legitimacy in modern differentiated societies. Second, it sets out the more substantive argument that the legitimization of states can be observed both as an evolutionary or adaptive dimension of state formation and as a process of theoretical self-reflection in which the societies where states are located construct and refine the most adequate form for the transmission of the power they designate as political. In this respect, the article questions common assumptions about politics and legitimacy and makes a case for a change of paradigm in the analysis of these concepts. Through this change of paradigm, politics itself and the methods used for securing legitimacy for politics are constructed as abstracted articulations of a society’s own needs and exigencies. The article borrows elements from the systemic-functionalist sociology of Niklas Luhmann to develop the argument. In this context, the article also uses historical case studies to outline a theory of constitutions and constitutional rights. This theory explains how constitutions and constitutional rights help to generate legitimacy for states by enabling modern political systems, both normatively and functionally, to reflect and stabilize their position in society, to control the volume of politics in a society, and to elaborate socially adequate techniques for applying and restricting political power. The article concludes by suggesting that historical–sociological analyses of the functions of rights and constitutions can provide a key to proposing both normatively and sociologically founded models of legitimate statehood.

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Consequentialism,rights, and the new social welfare theory

Traditional consequentialist social welfare theory [SWT] is intendedly value-free and institutionless. It follows that, while unattenuated exchange and property rights are assigned an implicit, instrumental role in the achievement of first-best Paretian optima, little attention has focused on alternative rights construals, on their associated, correlative duties, and on the implications for SWT. This is true, even among economists who regard “freedom” as morally exigent.This paper argues that the rights which social welfare theorists regard as instrumentally important—and, therefore, legally sanctioned—need not, in consequentialist theory, be respected: The duties which are correlative to social welfare theorists' implicitly sanctioned rights may, in consequentialist terms, be overcome by purely utilitarian considerations. It follows, pari passu, that reliance on a goal-based efficiency standard is irreconcilable with respect for the rights which most economists either take to be intrinsically important or seek to justify. Granting this, normative analysis must take account of the logical and other tensions among consequences, rights, duties, and other dimensions of moral evaluation.     

Non-anonymous growth incidence curves, income mobility and social welfare dominance

The distributional incidence of growth is generally analyzed by comparing the quantiles of the pre- and post-growth income distribution—e.g. the so-called Growth Incidence Curves. Such an approach based on an implicit re-ranking of individual incomes ignores income mobility by assuming that only post-growth income matters in social welfare. By contrast, this paper takes the view that “status quo matters” and that social welfare should logically be defined on both inital and terminal income. This leads to consider ’non-anonymous’ Growth Incidence Curves that plot income growth rates against the various quantiles of the initial distribution. Dominance criteria that generalize those available for standard growth incidence curves are derived, which account for the inequality of individual income changes, conditional on initial income. An application to the cross-country distributional feature of global growth illustrates the analysis.     

Utility-gap Dominances and Inequality Orderings

The justification for using Lorenz dominance as an inequality ranking condition has been based on the aggregate social welfare comparison and the Pigou–Dalton principle of transfers. Since both the aggregating aspect of the social welfare function and certain implications of the principle of transfers are debatable, ordering conditions stronger than Lorenz dominance are worth exploring. A particularly interesting direction to pursue is to follow the frequently invoked notion that inequality is the “gap” between the rich and the poor. This paper follows this notion to formally propose a unified utility-gap concept and characterizes several utility-gap based conditions as general stronger-than-Lorenz-dominance ranking criteria. Specifically, we propose utility-gap dominance which requires all pair-wise utility-gaps in one distribution to be uniformly smaller than those of the other distribution. We then explore a conceptually weaker dominance concept – quasi dominance – which imposes conditions only on the gap between each person’s utility and some reference utility point of the distribution. I am grateful to two anonymous referees and Peter Lambert for their very constructive comments and suggestions on an earlier version of the paper. The usual caveat applies.     

The specific value of freedom

This article examines the question of how to assess our overall freedom in terms of its so-called specific value, i.e., the part of its value that can be reduced to the value of the various specific things we are free to do or be. It is argued that existing preference-based freedom rankings may fail to capture this value adequately and, drawing on earlier work by Puppe (J Econ Theory 68:174–199, 1996; in: Laslier et al. (eds.) Freedom in economics. New perspectives in normative analysis, 1998) and Puppe and Xu (Soc Choice Welf, this issue, 2010), an alternative, more general framework is proposed. Two rankings of freedom’s specific value are axiomatically characterized. The article concludes with a discussion of possible extensions of the framework.     

Informed desire and the ambitions of libertarian paternalism

Sunstein and Thaler’s ‘libertarian paternalism’ (LP) is inspired by the findings of behavioural economics. Its ambitious policy agenda promotes interference which does not block free choice when agents fall short of fully informed and rational choice. Their implicit version of the informed desire view of welfare either provides no, or potentially erroneous, guidance to planners. LP thus faces significant implementation problems. To address these LP might adopt a weaker version of the information requirement on desires or an alternative view of welfare. Nonetheless, informational and bounded rationality considerations suggest that LP should be rethought and its level of ambition reduced.     

At the Eve of Convergence? Transformations of Social Service Provision in Denmark, Germany, and the United States

Increasing societal heterogeneity, changing demographics, and increasing public debt and fiscal constraints have recently challenged traditional “regime” approaches to welfare state development. Some scholars argue, against this background, that welfare states might plausibly move out of their “regime container” by opting in favor of similar solutions and responses. This potential trend toward “convergence” might, furthermore, be facilitated by the widespread use of new public management ideas and techniques for “reinventing government” by adopting market solutions to public problems. This article investigates whether such trends of convergence can be identified by comparing three different countries each traditionally looked upon as belonging to different welfare state regimes: Denmark, Germany, and the United States. More specifically the article looks at one important segment of welfare state activity, namely social services and related health care. To further focus the analysis, special attention is devoted to the changing role played by the third sector in delivering services. The research design, thus, differs from most comparative welfare state research. Instead of analyzing a broad set of quantitative indicators in a large number of countries, it is scrutinized how some of the same problem pressures and policy ideas are being interpreted and implemented in a small number of countries within one policy area. The analysis reveals that trends of convergence—conceptualized along four dimensions: ideas, regulation, mix of providers, and revenue mix—can be identified across the three cases, though this does not mean that the market share of nonprofit providers becomes the same. The study also reveals that fundamental aspects of state–nonprofit relations persist despite trends of convergence.     

Two main problems in the sociology of morality

Sociologists often ask why particular groups of people have the moral views that they do. I argue that sociology’s empirical research on morality relies, implicitly or explicitly, on unsophisticated and even obsolete ethical theories, and thus is based on inadequate conceptions of the ontology, epistemology, and semantics of morality. In this article I address the two main problems in the sociology of morality: (1) the problem of moral truth, and (2) the problem of value freedom. I identify two ideal–typical approaches. While the Weberian paradigm rejects the concept of moral truth, the Durkheimian paradigm accepts it. By contrast, I argue that sociology should be metaphysically agnostic, yet in practice it should proceed as though there were no moral truths. The Weberians claim that the sociology of morality can and should be value free; the Durkheimians claim that it cannot and it should not. My argument is that, while it is true that factual statements presuppose value judgments, it does not follow that sociologists are moral philosophers in disguise. Finally, I contend that in order for sociology to improve its understanding of morality, better conceptual, epistemological, and methodological foundations are needed.

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Divergent Validity of Measures of Cognitive Distortions, Impulsivity, and Time Perspective in Pathological Gambling

The present study assessed the divergent validity of several self-report and objective behavioral measures for assessing pathological gambling using three samples divided by South Oaks Gambling Scale score [Lesieur, & Blume (1987). American Journal of Psychiatry, 144, 1184–1188]: pathological gamblers, potential pathological gamblers, and non-pathological gamblers. Self-report measures included the Gamblers’ Beliefs Questionnaire [GBQ; Steenbergh, Meyers, May, & Whelan (2002). Psychology of Addictive Behaviors, 16, 143–149], the Gambling Passion Scale [GPS; Rousseau, Vallerand, Ratelle, Mageau, & Provencher, (2002). Journal of Gambling Studies, 18, 45–66], the Eysenck Impulsivity Questionnaire [EIQ; Eysenck, & Eysenck (1978). Psychological Reports, 43, 1247–1255], and the Stanford Time Perspective Inventory [STPI; Zimbardo, & Boyd (1999). Journal of Personality and Social Psychology, 77, 1271–1288]. Behavioral tasks included the delay discounting task [Madden, Petry, Badger, & Bickel (1997). Experimental & Clinical Psychopharmacology, 5, 256–263] and the Future Time Perspectives [FTP; Wallace (1956). Journal of Abnormal Psychology, 52, 240–245]. The GBQ, GPS, Impulsivity subscale of the EIQ, and DDT all exhibited robust divergent validity, however, neither measure of time perspective discriminated between groups. Applications of these findings to etiological research and clinical contexts are discussed.This work was originally presented in November, 2003 at the 37th annual convention of the Association for the Advancement of Behavior Therapy in Boston, MA.     

An alternative proof of Gibbard's random dictatorship result

By using a line of reasoning similar to the one used by Gibbard (Gibbard A (1973) Econometrica 41: 587–601) in the deterministic framework, we provide a more transparent and intuitive proof of the following random dictatorship result in the probabilistic framework, which is a corollary credited to H.␣Sonnenschein of the more general result of Gibbard (Gibbard A (1977) Econometrica 45: 665–681): A decision scheme is Pareto optimific ex post and strategy proof if and only if it is a random dictatorship. Received: 13 February 1996 / Accepted: 14 April 1997