17 votes

Why teach Arrow's impossibility theorem?

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 ...
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  • 26k
16 votes
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Why teach Arrow's impossibility theorem?

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 ...
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  • 15.9k
13 votes

Why teach Arrow's impossibility theorem?

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'...
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8 votes
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Will a Guaranteed minimum income not eventually just be crowded out by inflation?

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 ...
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7 votes
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Would a fair distribution of wealth from the super rich increase the purchasing power/life quality of the average person?

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 ...
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  • 41.4k
6 votes

Why is the derivative of this SWF non-positive?

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, ...
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  • 551
6 votes

Policy relevance of the optimal taxation given uncertainty about social welfare specification

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. ...
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5 votes
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Mechanisms to incentivise social welfare

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})&...
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5 votes
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The median as a welfare function

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 ...
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5 votes
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Do any social welfare functionals, other than maximin, meet all of Arrow's conditions plus invariance regarding ordinal level comparability?

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 ...
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5 votes

Question about Social Welfare Function and Social Profile

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 "...
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4 votes
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For what demand function is a monopoly most harmful?

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 ...
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4 votes

Non-axiomatic definition of well-being

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 ...
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4 votes

Rawlsian SWF and Arrow Impossibilty Theorem

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 ...
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3 votes
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Anonymity in social welfare function

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 ...
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3 votes
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Can we add well-being into macro model as an endogenous variable?

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 ...
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  • 2,330
3 votes
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Can consumer surplus be negative if a consumer is forced to make a purchase?

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 ...
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  • 4,138
3 votes
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Theory of and studies on the long-term effect of governmental redistribution

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 ...
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  • 5,394
3 votes
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Rawlsian SWF and Arrow Impossibilty Theorem

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 ...
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  • 4,502
3 votes

Social welfare in terms of preferences

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 ...
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  • 4,502
3 votes
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Social welfare in terms of preferences

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 ...
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3 votes

Axiom of Minimal Liberalism & Sen's Theorem of Paretial Liberal

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 ...
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2 votes

Universal Basic Income - Menial Tasks

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 ...
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2 votes

:History: Industry threatening to leave if social change takes effect

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 ...
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  • 7,992
2 votes

Can monopolistic dead weight loss persist without government intervention? If so how?

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 ...
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  • 1,950
2 votes
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Venezuelan black market exchange

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 ...
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