# Tag Info

17

What you describe has not much to do with Arrow's impossibility theorem. This is called the Condorcet paradox. The preference profile you gave is used to demonstrate that even if all individual preferences are transitive group judgement may not be. Using majority voting y beats z, z beats x and x beats y. Arrow's impossibility theorem is a more nuanced ...

16

I see the important lesson of the impossibility theorem as establishing that it is not generally speaking possible to have nicely behaved preferences of groups, even if individuals have nicely behaved preferences. Therefore a social welfare function may not exist . Attempts to improve aggregate welfare by maximizing the outcome of a preference aggregation ...

13

There is a temptation for economists to be utilitarians - to go around trying to maximise some measure (total, average, minimax as in Rawls ...) of utility. I think this happens even to economists who've never studied any moral or political philosophy because we often end up using welfare tests. It seems to me that Arrow is very useful (more useful than ...

8

I will not discuss fairness (for example employers gains versus employees gains and bargaining power) principles as you did not ask about those. Is "crowding out" the right phrase here? Even if inflation lessens the effect of a minimal income there may still be an effect. Imagine that there are two people, $A$ with an income of 0 $B$ with an income ...

7

tl;dr: In the hypothetical you set in the body of your question redistribution cannot help the poor. However, this is not because redistribution could not significantly raise the welfare of the poor but rather because in your question 'the rich' actually don't have any resources to share with the rest. In fact, in your hypothetical example's set up, what you ...

6

This looks like a simple first order condition from constrained optimization. If the maximum is interior, i.e. if $t_i>0$, then the first derivative must be zero. If the maximum is on the boundary, i.e. if $t_i=0$, then the first derivative must be $\leq 0$. If it were $>0$, then we can't have an optimum, because then the value of $U$ could be raised ...

6

Here is an answer based on the following interpretation of the SWF : there is no "true" SWF, but SWFs are observable in principle, they simply represent the preferences of the policy decision maker. Under this interpretation, the policy recommendation are relevant despite depending on the specification of the SWF, precisely because different decision makers ...

5

You say that losses are reduced by investment, so we can write the (private) loss as a function of own investment and others' investment: $l^i(c^i,\mathbf{c}^{-i})$ with $l^i_1(c_i,,\mathbf{c}^{-i})<0$. Player $i$'s utility is $U^i(c^i,\mathbf{c}^{-i})=-f(l^i(c^i,\mathbf{c}^{-i}))-c^i$ and he invests until the first-order condition is satisfied: $$-f'[l^... 5 John Rawls, in his book, A Theory of Justice, discusses the Maxi Min Principle, where he essentially says that societies can be compared based on how well they maximize the welfare of those with the lowest welfare (subject to caveats about certain basic human rights). If the typical welfare function is a weighted average of individual welfare U_i like:$$\...

5

There are at least two other examples of SWFs that satisfy these conditions. The first is a positional dictatorship. Let N be the number of individuals (assume it is fixed). For any k between 1 and N, the kth positional dictatorship SWF orders social alternatives in terms of the preferences of the "kth best off" agent. Formally, given any social ...

5

In its most general formulation, a social welfare function is just a utility function representing the preferences of "society as a whole" (or the preferences of a hypothetical "benevolent social planner" who makes decisions for the society). Let $X$ be some space of "social outcomes". (Social outcomes could be anything. But ...

4

An arbitrarily large ratio should occur with demand curve $P=\begin{cases} \frac{1}{Q} & \text{if } Q>1 \\ 2-Q & \text{if } Q\leq 1 \\ \end{cases}$. The monopolist prices at $P=1$, but the consumers' surplus if $P=0$ is infinite, because the area under the demand curve contains $\int_1^\infty \frac{1}{Q}dQ=\infty$.

4

When you say that a policy's objective is to "maximize well-being", presumably you mean "maximize collective well-being". And presumably, by "collective" well-being, you mean some sort of aggregate or average of the individual well-beings of all members of society. So your question breaks into two parts: What is the right measure of individual well-being? ...

4

Independence of irrelevant alternatives prevents you from using the information needed to implement a Rawlsian SWF; the information who is society's worst-off cannot be used. Indeed, the relevant information is not even specified in a profile of preferences.

3

Anonymous/impartial SWFs focus only on the pattern of well-being, and not the identities of the people who end up at particular well-being levels. Identities here simply means names. When applying an impartial SWF, one only looks at the profile of utilities, not who those utilities are associated with. Consider the following two cases: \begin{array}{ccc} ...

3

One can model anything, that's why it is a model. The real question is what the value of such a model would be. More to the point, I think this would be a very hard thing to do sensibly because how are we going to measure well-being? It encompasses way more factors than our economic models typically capture, such as social relations, health and mental state....

3

Consumer surplus is their willingness to pay minus the price they pay, and producer surplus is the price they receive minus their willingness to receive. So if you are assuming that consumers are forced to buy at a price of 100, yes the consumer surplus is negative. and according to your example, the producer surplus will be zero. You are right it does not ...

3

This is a very broad question and no one except the respondents in question know exactly what they believe and why. However, I suspect one important result in this context is the Second Welfare Theorem. In simple language and subject to some assumptions: The First Welfare Theorem tells us that any competitive equilibrium leads to a Pareto efficient ...

3

Let's say there are individuals 1 and 2, and alternatives A, B, C, and D. Society uses the Rawlsian SWF and thus ranks alternatives according to their maximal rank within individuals' rankings. Denote society's preferences by $\succ^*$. If the individual rankings are: 1: A $\succ$ B $\succ$ C $\succ$ D 2: B $\succ$ D $\succ$ A $\succ$ C, then B $\succ^*$ A. ...

3

Usually one tries to construct a Social Welfare Function (SWF), i.e. a general rule how to aggregate individual preferences to a social preference relation. Then various axioms are formulated that a useful SWF should obey, and some such SWF is selected. A social welfare maximizing alternative would then be one which is weakly preferred to all other ...

3

The problem as you have described it is somewhat underspecified. At least three pieces of information are required to make further progress: Do you want a social welfare function (SWF), or just a social welfare order (SWO)? Any SWF determines an SWO, but in general an SWO requires less information. (Many SWFs correspond to the same SWO, and some SWOs ...

3

Your question is a bit confused, because it mixes together several different things. For example, in the title, you mention Sen's Minimal Liberalism, but in the actual question, you don't mention Sen at all --- instead you talk in more general terms about "rights that cannot be taken ... in any situation". You mention "Harsanyi's axioms"...

2

Pretty much by definition, "necessary" jobs have to be filled. Wages would have to be bid up so that the positions get filled. This implies some form of relative price shock, or inflation. If robots can do those taks, great, but the plausibility of that outcome is left as an exercise to the reader. The Universal Basic Income can be viewed as a rebranding of ...

2

What's going on when a for-profit company makes a threat? The same thing that is happening when does anything. It is trying to increase its profits, relative to what would happen if it didn't do the thing. In this case, it's trying to influence policy to protect its profits. It has decided that issuing the threat gives their profits a better chance than ...

2

If I understand you correctly, monopolistic deadweight loss persists without gov intervention because of the following: Economies of Scale: if monoplist is able to produce at below the market prices due to the presence of economies of scale, then the monoplist is effectively able to retain its dominance in the market as new firms entering the market cannot ...

2

The official rate is about 10, but the black market rate is about 1000. Also, yes, apparently the real exchange rate at the 1000 rate is pretty low, in the sense that one dollar buys a lot of local goods, (like boarding). Indeed, that's what it means, 10,000 dollars buys you 1,000,000 VB's, which pays for years and years of rent. The ratio in your numbers ...

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