From preference to happiness: Towards a more complete welfare economics

Welfare economics is incomplete as it analyzes preference without going on to analyze welfare (or happiness) which is the ultimate objective. Preference and welfare may differ due to imperfect knowledge, imperfect rationality, and/or a concern for the welfare of others (non-affective altruism). Imperfection in knowledge and rationality has a biological basis and the resulting accumulation instinct amplifies with advertising-fostered consumerism to result in a systematic materialistic bias, as supported by recent evidence on happiness and quality of life. Such a bias, in combination with relative-income effects, environmental disruption effects, and over-estimation of the excess burden of taxation, results in the over-spending on private consumption and under-provision of public goods, and may make economic growth welfare-reducing. A cost-benefit analysis aiming even just at preference maximization should offset the excess burden of financing for public projects by the indirect effect through the relative-income effect and by the environmental disruption effect. A cost-benefit analysis aiming at welfare maximization should, in addition, adjust the marginal consumption benefits of public projects upward by a proportion determined by the proportionate excess of marginal utility over marginal welfare of consumption. The environmental disruption effects have also to be similarly adjusted upward. However, the productive contributions of public projects should not be so adjusted.  Welfare economics has achieved much, though still with long-standing weaknesses (e.g., the inability to make non-Pareto comparisons due to the unwillingness or difficulties in making interpersonal comparisons of cardinal utilities). It is not the intention of this paper either to survey the achievements or to remedy the weaknesses. Rather, it is argued that welfare economics is too narrow in focus and should be expanded in a number of aspects to make the analysis more complete and hence more useful. Some of the aspects discussed below have long been known but largely ignored in welfare economic analysis. Some are less well known and controversial points which are nevertheless important for welfare. Received: 22 January 2001/Accepted: 3 April 2002 This paper is revised from the keynote paper of the same title at the Conference on `Economics and the Pursuit of Happiness', Nuffield College, Oxford 2000, and combined with the paper `Towards a welfarist cost-benefit analysis' presented at American Economic Association Meeting, New Orleans, 2001. The paper was revised during my visit to the Division of Applied Economics, Nanyang University, Singapore. I am also grateful to Maurice Salles and two anonymous referees of this journal for helpful comments.     

Abuse and Disabled People: Vulnerability or social indifference?

This paper analyses current literature surrounding issues of abuse and disability, and discusses whether the forms of abuse experienced by disabled people results from an individual vulnerability, or as a consequence of social attitudes towards disabled people. Three case studies form supportive evidence, and have been compiled from personal research, they represent a combination of abusive features, rather than any one individuals situation. The study hopes not to suggest that all disabled people are especially vulnerable to abuse, but asks if society and existing welfare services acknowledge and respond to allegations of abuse without prejudice to disability. This study formed my dissertation paper as a student on the BA (Hons) Social Work and Welfare Studies at the University of Central Lancashire, and I would like to thank my dissertation tutor, Bob Sapey, for his guidance and support throughout the study.     

Price reform and welfare: a transition model with queuing

We develop a general equilibrium model of an exchange economy with relative price distortions, where markets for consumption goods are cleared by resource-wasting queues. In general, greater distortions in relative prices lead to lower social welfare. We show, however, that in some cases a free market equilibrium may not exist if subsistence needs for commodities such as food are sufficiently high. In such an instance, removing price distortions will actually lower aggregate welfare.This paper is a revision of an essay from my dissertation at the University of Virginia. Primary thanks go to my advisors, Gerhard Glomm, Gertrude Schroeder, and Roger Sherman. Other helpful comments were made by Charles Engel, Gisela Meyer Escoe, and Chris Swann.     

On the welfare loss caused by inequality of opportunity

Based on the ethical principle of equality of opportunity, this paper presents a measure of the welfare loss that is caused by an unfair distribution of a particular outcome (income, health, education, etc). The key idea is that a fair society should produce outcomes that depend on individuals’ effort and not on their external circumstances such as gender, socioeconomic background, etc. We propose measuring inequality of opportunity as the welfare loss attributed to the outcome differences among individuals who exert a similar level of effort. Our results are in line with those aspects of fairness literature that give priority to the ex post compensation approach to equality of opportunity. Finally, we present an empirical application for the measurement of the welfare loss in the income distribution in Europe. We have observed a high degree of heterogeneity among European countries. The welfare loss due to inequality of opportunity ranges in those, from basically zero to almost one fifth of their potential welfare.     

The implementation of social choice functions via social choice correspondences: A general formulation and a limit result

A corollary of Maskin's characterization theorem for Nash implementable social choice correspondences is that only trivial social choice functions can be implemented. This paper explores the consequences of implementing non-trivial social choice functions by extending them minimally to social choice correspondences which are implementable. The concept of asymptotic monotonicity is introduced. The main result states that it is not possible to find social choice rules satisfying a mild condition on its range, which is asymptotically monotonic. The implication of this result is that the multiplicity of equilibria problem which is at the heart of Nash implementation theory persists even in the limit as the number of individuals in society tends to infinity. This is true even though the opportunities for an individual to manipulate the outcome disappears in the limit.This paper is an extensively revised version of a chapter of my Ph.D. dissertation submitted to Princeton University in June 1987. I wish to thank my advisor Hugo Sonnenschein for his valuable advice and constant encouragement. I am also grateful to Andrew Caplin, Vijay Krishna, William Thomson, Jean-Luc Vila and two anonymous referees of this journal for their numerous suggestions. All remaining errors are my own responsibility.     

Acts of Violence and their Reverberations

The author deals with a very challenging subject: the mental state of a couple compelled to confess under torture during the last Uruguayan dictatorship (1973–1985). This case is presented from the point of view of the therapist—a viewpoint which is informed by second order cybernetics. I describe the way I as therapist resonated with the problems of this couple, my way of intervening, and the way in which my intervention resonated in the patients, allowing a shift in perceptions. Finally, I identify some difficulties in repairing the social network destroyed by the dictatorship.     

Should we be very cautious or extremely cautious on measures that may involve our destruction?

For decisions (e.g. nuclear power development, environmental protection, genetic engineering) that may affect the probabilities of the continued survival of the human race, whether we should be very cautious or extremely cautious (defined as refusing to undertake anything that may reduce our survival probabilities) depends on whether our expected welfare is finite or infinite. If it is infinite, a paradox arises in the trade-off between our own expected welfare and that of future generations, since a small fraction (probability change) of infinity is still infinite. However, limitations on population size and average welfare suggest a finite expected welfare but the possibility of transforming our own selves perhaps by genetic engineering increases our expected welfare tremendously but still finite.The author acknowledges the helpful comments of John Broome and Maurice Salles.     

Liberal approaches to ranking infinite utility streams: when can we avoid interference?

In this work we analyse social welfare relations on sets of finite and infinite utility streams that satisfy various types of liberal non-interference principles. Earlier contributions have established that (finitely) anonymous and strongly Paretian quasiorderings exist that verify non-interference axioms together with weak preference continuity and further consistency. Nevertheless Mariotti and Veneziani (2011) prove that a fully liberal non-interfering view of a finite society leads to dictatorship if the weak Pareto principle is imposed. We first prove that this impossibility result vanishes when we extend the horizon to infinity. Then we investigate a related problem: namely, the possibility of combining “standard” semicontinuity with efficiency in the presence of non-interference. We provide several impossibility results that prove that there is a generalised incompatibility between relaxed forms of continuity and non-interference principles, both under ordinal and cardinal views of the problem.     

Multi-profile intergenerational social choice

In an infinite-horizon setting, Ferejohn and Page showed that any social welfare function satisfying Arrow’s axioms and stationarity must be a dictatorship of the first generation. Packel strengthened this result by proving that no collective choice rule generating complete social preferences can satisfy unlimited domain, weak Pareto and stationarity. We prove that this impossibility survives under a domain restriction and without completeness. We propose an alternative stationarity axiom and show that a social welfare function on a specific domain satisfies this modified version and some standard social choice axioms if and only if it is a chronological dictatorship.     

Constrained allocation problems with single-peaked preferences: An axiomatic analysis

We introduce a new class of problems that contains two existing classes: allocation problems with single-peaked preferences and bankruptcy problems. On this class, we analyze the implications of well-known properties such as Pareto optimality, strategy-proofness, resource-monotonicity, no-envy, equal treatment of equals, and two new properties we introduce, hierarchical no-envy and independence of nonbinding constraints. Unlike earlier literature, we consider rules that allow free-disposability. We present characterizations of a rule we introduce on this domain. We relate this rule to well-known rules on the aforementioned subdomains. Based on this relation, we present a characterization of a well-known bankruptcy rule called the constrained equal awards rule. Received: 22 June 2000/Accepted: 21 March 2002 This paper is based on the first chapter of my Ph.D. thesis submitted to the University of Rochester. I wish to thank my advisor, William Thomson, for helpful comments and suggestions.     

Strategy-proof Cardinal Decision Schemes

This paper analyses strategy-proof mechanisms or decision schemes which map profiles of cardinal utility functions to lotteries over a finite set of outcomes. We provide a new proof of Hylland’s theorem which shows that the only strategy-proof cardinal decision scheme satisfying a weak unanimity property is the random dictatorship. Our proof technique assumes a framework where individuals can discern utility differences only if the difference is at least some fixed number which we call the grid size. We also prove a limit random dictatorship result which shows that any sequence of strategy-proof and unanimous decision schemes defined on a sequence of decreasing grid sizes approaching zero must converge to a random dictatorship. We are most grateful to an Associate Editor and two referees for very helpful comments on an earlier version of the paper. An erratum to this article can be found at     

A Comparative Study on the Cultures of the Dungan and the Hui Peoples

The Dungan people derive from China's Hui people, and now live mainly in Kyrgyzstan, Kazakhstan and Uzbekistan. Their population is over 110,000. This people has now developed a separate ethnicity outside China, yet they have close relations with the Hui people in culture, ethnic characteristics and ethnic identity. This paper aims to compare the cultures of the two peoples in terms of ethnic identity, religion and lifestyle so as to show the influence of region, political context and ethnic background on the two peoples.     

Libertarian collective decision-making: A new framework

A model of collective decision-making is presented which enables us to analyze the allocation of individual rights and liberties. The model broadens the traditional social choice framework. In social choice theory it is usually assumed that individuals have preferences over a set of feasible alternatives and that society reaches a decision on the basis of those preferences only. In the model presented in this paper, decision procedures do not only take information about individual preferences as input, but also information about individual freedom. The specific decision procedures we present and analyze can be characterized as libertarian.This paper was written while I was a visitor at the University of California, Riverside. The visit was made possible by financial support of the Netherlands Organization of Scientific Research (NWO). I am extremely grateful to Prasanta Pattanaik for many stimulating discussions on the subject. For helpful comments I also thank Ad van Deemen, Grahame Lock, Huib Pellikaan and Marcel Wissenburg. Finally, I express my thanks to Wulf Gaertner and two anonymous referees.     

Voluntary welfare associations in Germany and the United States: these on the historical development of intermediary systems

This research note presents several comparative theses on the historical development of voluntary and non-profit welfare associations in Germany and the United States. The major argument is that voluntary and non-profit associations in both countries share one common root: the secularisation and socio-political consequences of the enlightenment. However, voluntary welfare associations in Germany and the United States have developed along radically different lines, due to their distinct political embeddedness in society. Following periods of divergence in which the German voluntary action emphasised state orientation, and its American counterpart market orientation, the two countries have entered a new period of convergence.This paper emanates from an ongoing project at the University of Bremen, which analyses the history of social welfare in the city of Bremen. In 1989, as senior fellow in philanthropy at the Institute for Policy Studies of the Johns Hopkins University in Baltimore, Maryland, I explored the private social welfare system in the United States, in particular comparing the results of former research on Germany with my studies in the United States. I am indebted to Kathleen D. McCarthy (New York), Helmut K. Anheier (Vienna/New Brunswick), Juergen Blandow (Bremen), Lester M. Salamon (Baltimore), Jon Van Til (Camden), Stanley Wenocur (Baltimore), and Manfred M. Wambach (Bremen) for their advice and encouragement. Grants from the Research Commission of the University of Bremen, the Fellowship in Philanthropy Programme of the Institute for Policy Studies, and the German Marshall Fund of the United States are gratefully acknowledged.     

Struggling to do the right thing: stories from people living with Alzheimer's disease

The information presented in this article is meant not to provide answers, but rather to provoke thought about questions related to ethical decision making in people with Alzheimer's disease. Post (1995) suggested that: among the several most urgent questions of our time is whether human beings have in place the moral and ethical signposts that can point toward a future in which those who are so forgetful will be treated with dignity. (p. 1) Because American society places a high value on rationality and productivity, the life of people with Alzheimer's disease may be equated with hopelessness and uselessness. Thus, health care professionals have a moral obligation to rethink the assumptions that underlie their definitions of quality of life. We cannot know what should be done unless we learn to listen to the life stories of our patients and their families. Perhaps Sherry's comment best reflects how, even with devastating changes in a loved one's sense of identity, one can find ways to respect a new level of relationship: I still feel that he's [Sherry's husband] a human being, and I've tried to ensure that he has a quality of life. When I go visit him, sometimes he slips in and out of being normal. I would always hope that he's still treated with the dignity that he should have as a human being.... I guess what I'm saying is that, even though it seems weird,...there's still a human being in there sometimes, I guess there really is, and it's important to remember that. I can enjoy my husband a lot more now [that he's being cared for in a facility] than I could when I had him 24 hours a day. That was a nerve-wracking experience, especially when there were behavior problems.... He's still the love of my life.     

Welfare, freedom of choice and composite utility in the logit model

Discrete choice models characterize the alternatives in the choice set by utilities/attributes. The decision making is described by a probability distribution over the choice set. In this paper we introduce a welfare measure based on expected payoff and expected freedom of choice for the simple one parameter logit model. In this case the welfare measure turns out to be the so called composite utility. This means that the composite utility can be interpreted as the combined benefit of expected payoff and expected freedom of choice. The proposed welfare measure can be extended to the linear-in-parameters logit model and nested logit models and others. The proposed welfare measure is formulated in terms of the choice probability distribution. It depends on the form of the probabilities, but not on any particular derivation of the distribution.     

Strategy-proofness of social welfare functions: The use of the Kemeny distance between preference orderings

The Kemeny distance for preference orderings is used to determine individual rankings of social preferences. Based on this distance function, the strategy-proofness of social welfare functions is examined. Our main result is an impossibility theorem stating that no social welfare function can be strategy-proof, if some additional properties are required.The work on this paper initiated while Walter Bossert was a visitor at the CentER for Economic Research at Tilburg University. The hospitality and the support of CentER and its members are gratefully acknowledged. Ton Storcken's research was supported by a grant from the Cooperation Centre Tilburg and Eindhoven University. An earlier version of the paper was presented at the 1991 Canadian Economic Theory Meeting in Toronto. We thank the participants and especially Ingrid Peters-Fransen for comments. Substantial improvements are due to the suggestions of Bernard Monjardet and two referees.     

The social model of disability: thirty years on

This year marks exactly 30 years since I published a book introducing the social model of disability onto an unsuspecting world and yet, despite the impact this model has had, all we now seem to do is talk about it. While all this chatter did not matter too much when the economy was booming, now it no longer booms it is proving disastrous for many disabled people whose benefits and services are being severely cut back or removed altogether. In the article I restate my view of what the social model was and what I see as its potential for improving the lives of disabled people. Finally I focus on the unfortunate criticisms of it and the disastrous implications these have had for disabled people.     

Post-Welfare Reform, Low-Income Families and the Dissolution of the Safety Net

There has been a great deal of discussion around the fact that lifting individuals and families out of poverty was not a goal of the 1996 welfare reform legislation. The implementation of welfare reform since 1996 has demonstrated the consequences of caseload reduction as a primary goal. This paper addresses the hardships that can result when lifting people out of poverty is not addressed.     

Decision under psychological pressure: The shooter's anxiety at the penalty kick

The paper analyses sequences of penalty kicks during football shoot-outs in French cup competitions. We consider in detail the psychological effects to which the kicker is subject: the fear of winning, the fear of losing, the expected outcomes and how much is at stake. Our main conclusion is that the performance (the probability of scoring) is negatively affected by both what is at stake (the impact of my scoring on the expected probability that my team will eventually win) and the difficulty of the situation (the ex ante probability of my team eventually losing). We find no advantage for the team that takes the first kick.