Social preference under twofold uncertainty

Mongin, Philippe and Pivato, Marcus (2016): Social preference under twofold uncertainty.

Abstract

We investigate the conflict between the ex ante and ex post criteria of social welfare in a novel axiomatic framework of individual and social decisions, which distinguishes between a subjective and an objective source of uncertainty. This framework permits us to endow the individuals and society not only with ex ante and ex post preferences, as is classically done, but also with interim preferences of two kinds, and correspondingly, to introduce interim forms of the Pareto principle. After characterizing the ex ante and ex post criteria, we present a first solution to their conflict that amounts to extending the former as much possible in the direction of the latter. Then, we present a second solution, which goes in the opposite direction, and is our preferred one. This solution combines the ex post criterion with an objective interim Pareto principle, which avoids the pitfalls of the ex ante Pareto principle, and especially the problem of "spurious unanimity" discussed in the literature. Both solutions translate the assumed Pareto conditions into weighted additive utility representations, and both attribute common individual probability values only to the objective source of uncertainty.

• Item Type: MPRA Paper
• Language: English
• Keywords: Ex ante social welfare; ex post social welfare; objective versus subjective uncertainty; Pareto principle; separability; Harsanyi social aggregation theorem; spurious unanimity.
• Subjects: D - Microeconomics > D7 - Analysis of Collective Decision-Making > D70 - General; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty

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