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Fair management of social risk

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  • Marc Fleurbaey

    ()
    (Woodrow Wilson School and Center for Human Values - Princeton University)

  • Stéphane Zuber

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

Abstract

We provide a general method for extending fair social preferences defined for riskless economic environments to the context of risk and uncertainty. We apply the méthod to the problems of managing unemployment allowances (in the context of macroeconomic fluctuations) and catastrophic risks (in the context of climate change). It requires paying attention to individuals' risk attitudes and rationality properties of social preferences, revisiting basic ideas from Harsanyi's seminal work (Harsanyi, 1995). The social preferences that we obtain do not in general take the form of an expected utility criterion, but they always satisfy statewise dominance. We also show how non-expected utility individual preferences can be accommodated in the approach.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00973480.

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Date of creation: Mar 2014
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Handle: RePEc:hal:cesptp:halshs-00973480

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Keywords: Social choice; uncertainty; economic environment; social risk;

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