Fair social orderings

In a model of private good allocation, we construct social orderings which depend only on ordinal non-comparable information about individual preferences. In order to avoid Arrovian-type impossibilities, we let those social preferences take account of the shape of individual indifference curves. This allows us to introduce equity and cross-economy robustness properties, inspired by the theory of fair allocation. Combining such properties, we characterize two families of fair social orderings. We thank E. Maskin, A. Sen, W. Thomson, B. Tungodden and an anonymous referee for comments, and seminar participants at the Indian Statistical Institute-Delhi, the Norwegian School of Economics (Bergen), the University of Caen, the University of Rochester, and the University of Cergy-Pontoise. Financial Support from European TMR Network Living Standards, Inequality and Taxation Contract ERBFMXCT 980248 is gratefully acknowledged.     

Preference densities and social choices

We discuss a ranking method that allows social pairwise rankings of alternatives to depend on more than just individuals’ pairwise rankings. This violates Arrow’s Independence of Irrelevant Alternatives, but allows Borda’s rank-order counting, which provides a limited accounting for individual preference intensities. We capture Arrow’s rules (i.e., with IIA) and Borda’s method as two polar cases, and allow cases in between. Our main result provides the critical line dividing those degrees of intensity, or preference density, that yield positive results from those that yield negative results. We thank two referees for helpful comments.     

Preference shocks from aggregation: time series data evidence

Abstract.  We investigate the impact of preference shocks on the aggregate dynamics of the U.S. economy in the context of a neoclassical growth model derived from aggregation. The aggregation result we use is as follows: if markets are complete and if agents have identical preferences of the addilog type, then the heterogeneous‐agent economy where agents are subject to idiosyncratic productivity shocks behaves as if there was a representative consumer who faces shocks to preferences and technology. We estimate the parameters in the aggregation‐based model from the aggregate time‐series data and compute the numerical solution. We find that the preference shocks play an important role in the aggregate labour‐market fluctuations. JEL classification: C73, D90, E21     

Preference aggregation under uncertainty: Savage vs. Pareto

Following Mongin [J. Econ. Theory 66 (1995) 313; J. Math. Econ. 29 (1998) 331], we study social aggregation of subjective expected utility preferences in a Savage framework. We argue that each of Savage's P3 and P4 are incompatible with the strong Pareto property. A representation theorem for social preferences satisfying Pareto indifference and conforming to the state-dependent expected utility model is provided.     

Social welfare orderings for ratio-scale measurable utilities

Summary. This article characterizes all of the continuous social welfare orderings which satisfy the Weak (resp. Strong) Pareto principle when utilities are ratio-scale measurable. With Weak Pareto, on both the nonnegative and positive orthants the social welfare ordering must be representable by a weakly increasing Cobb-Douglas social welfare function while on the whole Euclidean space the social welfare ordering must be strongly dictatorial. With Strong Pareto, on the positive orthant the social welfare ordering must be representable by a strictly increasing Cobb-Douglas social welfare function but on the other two domains an impossibility theorem is obtained. Received: July 31, 1995; revised version August 7, 1996     

Design of randomized experiments to measure social interaction effects

We consider randomized experiments with two levels of randomization for measuring social interaction effects. We examine how the randomization should be carried out to estimate the coefficients of interest most precisely.     

Preference Anomalies,Preference Elicitation and the Discovered Preference Hypothesis

There is wide-ranging evidence, much of it deriving from economics experiments, of ‘anomalies’ in behaviour that challenge standard preference theories. This paper explores the implications of these anomalies for preference elicitation methods. Because methods that are used to inform public policy, such as contingent valuation, are based on standard preference theories, their validity may be called into question by the anomaly data. However, on a new interpretation, these anomalies do not contradict standard theory but are errors in stated preference that can be expected to disappear as people become more experienced in relevant decision environments. We explore the evidence for this interpretation and what implications follow for preference elicitation methodology. JEL classifications: C91, D01, D60, D81, D83, H40     

Combining Revealed Preference Data with Stated Preference Data: A Latent Class Approach

A substantial literature exists combining data from revealed preference (RP) and stated preference (SP) sources, aimed either at testing for the convergent validity of the two approaches used in nonmarket valuation or as a means of drawing on their relative strengths to improve the ultimate estimates of value. In doing so, it is assumed that convergence of the two elicitation approaches is an “all or nothing” proposition; i.e., the RP and SP data are either consistent with each other or they are not. The purpose of this paper is to propose an alternative framework that allows for possible divergence among individuals in terms the consistency between their RP and SP responses. In particular, we suggest the use of a latent class approach to segment the population into two groups. The first group has RP and SP responses that are internally consistent, while the remaining group exhibits some form of inconsistent preferences. An EM algorithm is employed in an empirical application that draws on the Alberta and Saskatchewan moose hunting data sets used in earlier combined RP and SP exercises. The empirical results suggest that somewhere between one-third and one-half the sample exhibits consistent preferences. We also examine differences in welfare estimates drawn from the two classes.     

Social orderings for the assignment of indivisible objects

In the assignment problem of indivisible objects with money, we study social ordering functions which satisfy the requirement that social orderings should be independent of changes in preferences over infeasible bundles. We combine this axiom with efficiency, consistency and equity axioms. Our result is that the only social ordering function satisfying those axioms is the leximin function in money utility.     

Optimal Fiscal Policy with Endogenous Time Preference

This paper studies the role of Ramsey taxation under the assumption that the individual rate of time preference is determined by the publicly provided social level of education. We show how intertemporal complementarities of aggregate human capital can generate multiple equilibria and we examine the role of endogenous fiscal policies in equilibrium selection. Our analysis implies a lower optimal government size due to the effect of human capital on time preference.     

Approximating unanimity orderings: An application to Lorenz dominance

Stochastic dominance and Lorenz dominance are examples of orderings which require unanimous agreement among an infinite set of indices. This paper considers various subsets of inequality measures that respect Lorenz dominance, and assesses the extent to which a small number of indices can reproduce the Lorenz ordering. Using income data for 80 countries, our results suggest that Lorenz dominance can be predicted with 99% accuracy using just 3 or 4 inequality measures, as long as two of them focus on the extreme upper and lower tails of the distribution. In contrast, confining attention to the index families and parameter ranges normally considered may fail to detect the majority of occasions when Lorenz curves intersect. These results lead us to question the faith placed in procedures based on a finite set of inequality indices, and to suggest that similar lessons will apply to other types of unanimity orderings.     

Dynamic Patterns of Trade Imbalances with Recursive Preference

Based on the recursive preference approach, the dynamic and global properties of the two‐country open economy are examined with one good and inputs of labor and capital, with capital being freely traded internationally. First, by showing that the world's consumption increases (decreases) with an increase (decrease) in the world's capital, the global stability of the economy is obtained. Secondly, the nonmonotonicity of consumption between impatient country 1 and patient country 2 is established. Thirdly, with the Cobb–Douglas‐type production function and country 1's technological superiority, the dynamic trade patterns and the asset–debt position are derived.     

Family networks and school enrolment: Evidence from a randomized social experiment

We present evidence on whether and how a household's behavior is influenced by the presence and characteristics of its extended family. Using data from the PROGRESA program in Mexico, we exploit information on the paternal and maternal surnames of heads and spouses in conjunction with the Spanish naming convention to identify the inter- and intra-generational family links of each household to others in the same village. We then exploit the randomized research design of the PROGRESA evaluation data to identify whether the treatment effects of PROGRESA transfers on secondary school enrolment vary according to the characteristics of extended family. We find PROGRESA only raises secondary enrolment among households that are embedded in a family network. Eligible but isolated households do not respond. The mechanism through which the extended family influences household schooling choices is the redistribution of resources within the family network from eligibles that receive de facto unconditional cash transfers from PROGRESA, towards eligibles on the margin of enrolling children into secondary school.     

Preference revelation with a limited number of indifference classes

Suppose that g is a strategy-proof social choice rule on the domain of all profiles of complete and transitive binary relations that have exactly m indifference classes. If and the range of g has three or more members, then g is dictatorial. If m = 2, then for any set X of feasible alternatives, there exist non-dictatorial and strategy-proof rules that are sensitive to the preferences of every individual and which have X as range.     

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.     

资产管理中客户偏好的研究——兼论考虑偏好条件下基金的评估

本文探讨了资产管理中确定客户偏好和根据客户偏好选择最适合客户的资产配置方案的方法 ;并给出一个资产管理中关于波动风险偏好的随机动态模型 ,推广了R .C .Merton( 1 970 )的模型。原模型是关于消费和投资组合的动态经济模型。笔者修改了效用函数和约束方程 ,去掉消费变量并加入波动风险偏好因素 ,得到风险资产的比例和客户波动风险偏好的关系 ,以及和时间偏好之间的关系。最后论述了在考虑投资者偏好条件下 ,证券投资基金的评估方法 ,以及实际案例。     

Linear aggregation with common trends and cycles

We propose a general framework to study whether and how common trends and common cycles are still present when the original variables are linearly aggregated or only a subset of them is analysed. This is particularly important because of the adoption in empirical analysis of aggregated data on a limited number of variables.     

Preference revelation and monopsony

(1) Johnson demonstrated the formal equivalence between the free-rider problem and monopsony. (2) Vickrey's method for eliminating the inefficiencies resulting from monopsony (monopoly) works by converting simple monopsonists (monopolists) into perfectly discriminating monopsonists (monopolists). (3) We show that three recently proposed solutions to the free-rider problem have the same rationale, i.e. they use ‘Clarke taxes’ to convert Johnson's simple monopsonists into perfectly discriminating monopsonists. The three mechanisms are those of: (i) Clarke and Groves; (ii) Groves and Ledyard; and (iii) Arrow. The relationships between these mechanisms, and between each of them and monopsony, are analyzed diagrammatically.