Arrovian aggregation in economic environments: how much should we know about indifference surfaces?

Arrow's celebrated theorem of social choice shows that the aggregation of individual preferences into a social ordering cannot make the ranking of any pair of alternatives depend only on individual preferences over that pair, unless the fundamental weak Pareto and non-dictatorship principles are violated. In the standard model of division of commodities, we investigate how much information about indifference surfaces is needed to construct social ordering functions satisfying the weak Pareto principle and anonymity. We show that local information such as marginal rates of substitution or the shapes “within the Edgeworth box” is not enough, and knowledge of substantially non-local information is necessary.     

Beyond Income and Wealth

This paper proposes four criteria for the selection of a better measure of living standards: it should be comprehensive, correlation sensitive, preference based, and fairness based. These criteria are applied to the following measures: income, equivalent income, capabilities, and satisfaction. The paper then explores the relationship between the space of goods and services, the space of budgets, and the more fundamental space of the aspects of life that people really care about. The importance of the fairness principles guiding interpersonal comparisons is highlighted.     

Inequality‐averse well‐being measurement

We construct individual well‐being measures that respect individual preferences and depend on the bundles of goods consumed by the individual. Building on previous work in which general families of well‐being measures are identified, we introduce basic transfer principles that apply either to bundles or directly to indifference sets, and we characterize specific well‐being measures that involve either the ray utility or the money‐metric utility.     

FAIR RETIREMENT UNDER RISKY LIFETIME*

A premature death unexpectedly brings a life and a career to their end, leading to substantial welfare losses. We study the retirement decision in an economy with risky lifetime and compare the laissez‐faire with egalitarian social optima. We consider two social objectives: (1) the maximin on expected lifetime welfare, allowing for a compensation for unequal life expectancies, and (2) the maximin on realized lifetime welfare, allowing for a compensation for unequal lifetimes. The latter optimum involves, in general, decreasing lifetime consumption profiles as well as raising the retirement age. This result is robust to the introduction of unequal life expectancies and unequal productivities.     

International Comparisons of Living Standards by Equivalent Incomes*

We propose a measure of living standards for international comparisons. Based on GDP per capita, the measure incorporates corrections for international flows of income, labor, risk of unemployment, healthy life expectancy, household demography and inequalities. The method for comparing populations that differ in some non‐income dimension consists of computing the equivalent variation of income that would make each population indifferent between its current situation and a reference situation with respect to the non‐income dimension. This is applied to 24 OECD countries. The obtained ranking of countries differs substantially from the GDP ranking.     

The tyranny of non-aggregation versus the tyranny of aggregation in social choices: a real dilemma

Can a tiny gain to sufficiently many well-off justify imposing a much larger sacrifice on the worst-off? We show that if one answers negatively to such a question and endorses replication invariance, one is forced to accept the maximin principle and give full priority to the worst-off even when a tiny gain to the worst-off imposes a substantial sacrifice on arbitrarily many well-off. If one dislikes this consequence, one faces a real dilemma in choosing between the tyranny of aggregation and the tyranny of non-aggregation.     

Responsibility, talent, and compensation: A second-best analysis

This paper examines how the first-best models of compensation based on the agents' talents and responsibilities analyzed in some recent contributions can be extended to a second-best context. A few social criteria are proposed and compared to alternative approaches by Roemer and Van de gaer. Received: 5 March 1997 / Accepted: 19 August 1998     

Cooperative Production: A Comparison of Welfare Bounds

In the production model with a one-input–one-output technology, we study welfare lower bounds that give a guarantee of welfare to each agent independent of the others' preferences. We obtain characterizations of egalitarian-equivalent allocation rules on the basis of two weak lower bounds, in striking contrast with Moulin's characterization of the equal budget Walrasian solution on a slightly smaller domain with a more demanding lower bound.Journal of Economic LiteratureClassification Numbers: C71, D63.     

Critical levels and the (reverse) repugnant conclusion

It is well-known that there is a trade-off among the properties of population principles that are used to make social evaluations when the number of people in the society under consideration may vary. The commonly used principles either lead to the repugnant conclusion (which is the case for classical utilitarianism), or they violate the Pareto-plus principle and related properties (average utilitarianism is an example of such a principle). This paper examines the nature of this trade-off and shows that the incompatibility between avoiding the repugnant conclusion and the Pareto-plus principle is fundamental and not restricted to the commonly used population principles.     

When redistribution makes personalized pricing of externalities useless

We consider a standard optimal taxation framework in which consumers' preferences are separable in consumption and labor and identical over consumption, but are affected by consumption externalities. For every nonlinear, income-dependent pricing of goods there is a linear pricing scheme, combined with an adjusted income tax schedule, that leaves all consumers equally well-off and weakly increases the government's budget. The result depends on whether a linear pricing scheme exists that keeps the aggregate amount of consumption at its initial level observed under nonlinear pricing. We provide sufficient conditions for the assumption to hold. If adjusting the income tax rate is not available, personalized prices for an externality can enhance social welfare if they are redistributive, that is, favor consumers with a larger marginal social value of income.