Accounting for Heterogeneity, Diversity and General Equilibrium in Evaluating Social Programmes

This paper considers the merits and limitations of alternative criteria proposed to evaluate social programmes in the modern welfare state and the information required to implement them when individual responses to programmes are heterogeneous. Participation in programmes is based, in part, on this heterogeneity and the programmes have general equilibrium impacts on the economy. Particular attention is devoted to the voting criterion used in modern positive political economy and the ranking of alternative social states based on anonymity postulates. Evidence on heterogeneity is presented. Conflicts among the criteria are revealed in two empirical studies. Partial equilibrium approaches are shown to be misleading.