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Policy Evaluation, welfare weights and value judgements: a Reminder

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  • John Creedy

    () (The University of Melbourne)

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.

Suggested Citation

  • John Creedy, 2007. "Policy Evaluation, welfare weights and value judgements: a Reminder," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 10(1), pages 1-15, March.
  • Handle: RePEc:ozl:journl:v:10:y:2007:i:1:p:1-15
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    Cited by:

    1. John Creedy & Hemant Passi, 2017. "Public Sector Discount Rates: A Comparison of Alternative Approaches," Treasury Working Paper Series 17/02, New Zealand Treasury.

    More about this item

    Keywords

    General Welfare Allocative Efficiency; Cost-Benefit Analysis; Equity; Justice; Inequality; and Other Normative Criteria and Measurement;

    JEL classification:

    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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