Beyond Revealed Preference Choice Theoretic Foundations for Behavioral Welfare Economics
AbstractThis paper proposes a choice-theoretic framework for evaluating economic welfare with the following features. (1) It is applicable irrespective of the positive model used to describe behavior. (2) It subsumes standard welfare economics both as a special case (when standard choice axioms are satisfied) and as a limiting case (when behavioral anomalies are small). (3) It requires only data on choices. (4) It is easily applied in the context of specific behavioral theories, such as the ß, d model of time inconsistency, for which it has novel normative implications. (5) It generates natural counterparts for the standard tools of applied welfare analysis, including compensating and equivalent variation, consumer surplus, Pareto optimality, and the contract curve, and permits a broad generalization of the first welfare theorem. (6) Though not universally discerning, it lends itself to principled refinements.
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Bibliographic InfoPaper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 07-031.
Date of creation: Dec 2007
Date of revision:
Economic Welware; behavior economics; welfare analysis; consumer surplus; Pareto optimality;
Other versions of this item:
- B. Douglas Bernheim & Antonio Rangel, 2008. "Beyond Revealed Preference: Choice Theoretic Foundations for Behavioral Welfare Economics," NBER Working Papers 13737, National Bureau of Economic Research, Inc.
- I30 - Health, Education, and Welfare - - Welfare and Poverty - - - General
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