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Evaluating Policy: Welfare Weights And Value Judgements

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  • John Creedy

Abstract

This paper is concerned with the use of social welfare functions in evaluating changes. In particular, it considers suggestions that welfare weights to be used in comparing the gains and losses of different individuals (or other appropriate units of analysis), and a social time preference rate for use in cost benefit evaluation, can be estimated either from consumers’ behaviour or from the judgements implicit in tax policy. It is suggested that results are highly sensitive to the context and model specification assumed. More importantly, the argument that an estimated elasticity of marginal utility or time preference rate should be used in policy evaluations fails to recognise that fundamental value judgements are involved. Various estimates may be of interest, but they cannot be used by economists to impose value judgements. The main contribution economists can make is to examine the implications of adopting a range of alternative value judgements.

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Bibliographic Info

Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 971.

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Length: 25 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:mlb:wpaper:971

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Keywords: Evaluating Policy; Welfare Weights;

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References

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  1. Creedy, J. & van de Ven, J., 2001. "Taxation, Reranking and Equivalence Scales," Department of Economics - Working Papers Series 782, The University of Melbourne.
  2. David J. Evans, 2005. "The elasticity of marginal utility of consumption: estimates for 20 OECD countries," Fiscal Studies, Institute for Fiscal Studies, vol. 26(2), pages 197-224, June.
  3. Richter, Wolfram F., 1983. "From ability to pay to concepts of equal sacrifice," Journal of Public Economics, Elsevier, vol. 20(2), pages 211-229, March.
  4. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
  5. Amiel, Yoram & Creedy, John & Hurn, Stan, 1999. " Measuring Attitudes towards Inequality," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(1), pages 83-96, March.
  6. Young, H. P., 1987. "Progressive taxation and the equal sacrifice principle," Journal of Public Economics, Elsevier, vol. 32(2), pages 203-214, March.
  7. Robert J. Brent, 1984. "Use of Distributional Weights in Cost-Benefit Analysis: a Survey of Schools," Public Finance Review, , vol. 12(2), pages 213-230, April.
  8. Mera, Koichi, 1969. "Experimental Determination of Relative Marginal Utilities," The Quarterly Journal of Economics, MIT Press, vol. 83(3), pages 464-77, August.
  9. Frank A Cowell, 2006. "Inequality: Measurement," STICERD - Distributional Analysis Research Programme Papers 86, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  10. Pasquale Scaramozzino & Giancarlo Marini, 2000. "Social time preference," Journal of Population Economics, Springer, vol. 13(4), pages 639-645.
  11. Christiansen, Vidar & Jansen, Eilev S., 1978. "Implicit social preferences in the Norwegian system of indirect taxation," Journal of Public Economics, Elsevier, vol. 10(2), pages 217-245, October.
  12. Gevers, Louis & Glejser, Herbert & Rouyer, Jean, 1979. " Professed Inequality Aversion and Its Error Component," Scandinavian Journal of Economics, Wiley Blackwell, vol. 81(2), pages 238-43.
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Citations

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Cited by:
  1. John Creedy & Ross Guest, 2007. "Discounting and the Time Preference Rate: An Introduction," Department of Economics - Working Papers Series 993, The University of Melbourne.
  2. Creedy, John & Guest, Ross, 2008. "Population ageing and intertemporal consumption: Representative agent versus social planner," Economic Modelling, Elsevier, vol. 25(3), pages 485-498, May.
  3. Jan Schumacher & Wolfgang Buchholz, 2008. "Discounting and Welfare Analysis Over Time: Choosing the ç," CESifo Working Paper Series 2230, CESifo Group Munich.

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