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Assessing risky social situations

  • Marc Fleurbaey

This paper re-examines the welfare economics of risk. It singles out a class of criteria, the “expected equally-distributed equivalent”, as the unique class which avoids serious drawbacks of existing approaches. Such criteria behave like ex-post criteria when the final statistical distribution of wellbeing is known ex ante, and like ex-ante criteria when risk generates no inequality. The paper also provides a new result on the tension between inequality aversion and respect of individual ex ante preferences, in the vein of Harsanyi’s aggregation theorem.

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Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 27006.

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Length: 36 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:ehl:lserod:27006
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  1. Hammond, Peter J, 1989. "Consistent Plans, Consequentialism, and Expected Utility," Econometrica, Econometric Society, vol. 57(6), pages 1445-49, November.
  2. John Leach, 2010. "Ex Post Welfare under Alternative Health Care Systems," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(6), pages 1027-1057, December.
  3. Chambers, Christopher & Takashi Hayashi, 2003. "Preference Aggregation under Uncertainty: Savage vs. Pareto," Working Papers 1184, California Institute of Technology, Division of the Humanities and Social Sciences.
  4. Hammond, P.J. & , ., 1987. "Consequentialist foundations for expected utility," CORE Discussion Papers 1987016, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Hammond, Peter J, 1976. "Equity, Arrow's Conditions, and Rawls' Difference Principle," Econometrica, Econometric Society, vol. 44(4), pages 793-804, July.
  6. Alon Harel, 2005. "Ex-Post Egalitarianism and Legal Justice," Journal of Law, Economics and Organization, Oxford University Press, vol. 21(1), pages 57-75, April.
  7. Charles Blackorby & David Donaldson & Philippe Mongin, 2004. "Social Aggregation Without the Expected Utility Hypothesis," Working Papers hal-00242932, HAL.
  8. Mark J Machina, 1982. ""Expected Utility" Analysis without the Independence Axiom," Levine's Working Paper Archive 7650, David K. Levine.
  9. Broome, John, 2004. "Weighing Lives," OUP Catalogue, Oxford University Press, number 9780199243761.
  10. Thibault Gajdos & Eric Maurin, 2004. "Unequal Uncertainties and Uncertain Inequalities: An Axiomatic Approach," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00085940, HAL.
  11. Broome, John, 1984. "Uncertainty and Fairness," Economic Journal, Royal Economic Society, vol. 94(375), pages 624-32, September.
  12. Epstein, Larry G & Segal, Uzi, 1992. "Quadratic Social Welfare Functions," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 691-712, August.
  13. Hammond, Peter J, 1979. "Equity in Two Person Situations: Some Consequences," Econometrica, Econometric Society, vol. 47(5), pages 1127-35, September.
  14. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
  15. Antoine Bommier & Stéphane Zuber, 2008. "Can preferences for catastrophe avoidance reconcile social discounting with intergenerational equity?," Social Choice and Welfare, Springer, vol. 31(3), pages 415-434, October.
  16. Kolm, Serge-Christophe, 1998. "Chance and justice: Social policies and the Harsanyi-Vickrey-Rawls problem," European Economic Review, Elsevier, vol. 42(8), pages 1393-1416, September.
  17. Hammond, Peter J, 1981. "Ex-ante and Ex-post Welfare Optimality under Uncertainty," Economica, London School of Economics and Political Science, vol. 48(191), pages 235-50, August.
  18. Pratt, John W & Zeckhauser, Richard J, 1996. "Willingness to Pay and the Distribution of Risk and Wealth," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 747-63, August.
  19. John Roemer, 2006. "The Global Welfare Economics of Immigration," Social Choice and Welfare, Springer, vol. 27(2), pages 311-325, October.
  20. B. Dahlby, 1981. "Adverse selection and Pareto improvements through compulsory insurance," Public Choice, Springer, vol. 37(3), pages 547-558, January.
  21. Myerson, Roger B, 1981. "Utilitarianism, Egalitarianism, and the Timing Effect in Social Choice Problems," Econometrica, Econometric Society, vol. 49(4), pages 883-97, June.
  22. Ralph L. Keeney, 1980. "Utility Functions for Equity and Public Risk," Management Science, INFORMS, vol. 26(4), pages 345-353, April.
  23. repec:cup:cbooks:9780521642750 is not listed on IDEAS
  24. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
  25. repec:cup:cbooks:9780521644914 is not listed on IDEAS
  26. Ben-Porath, Elchanan & Gilboa, Itzhak & Schmeidler, David, 1997. "On the Measurement of Inequality under Uncertainty," Journal of Economic Theory, Elsevier, vol. 75(1), pages 194-204, July.
  27. Grant, Simon, 1995. "Subjective Probability without Monotonicity: Or How Machina's Mom May Also Be Probabilistically Sophisticated," Econometrica, Econometric Society, vol. 63(1), pages 159-89, January.
  28. Machina, Mark J, 1989. "Dynamic Consistency and Non-expected Utility Models of Choice under Uncertainty," Journal of Economic Literature, American Economic Association, vol. 27(4), pages 1622-68, December.
  29. Cook, Philip J & Graham, Daniel A, 1977. "The Demand for Insurance and Protection: The Case of Irreplaceable Commodities," The Quarterly Journal of Economics, MIT Press, vol. 91(1), pages 143-56, February.
  30. Wakker, Peter, 1993. "Savage's Axioms Usually Imply Violation of Strict Stochastic Dominance," Review of Economic Studies, Wiley Blackwell, vol. 60(2), pages 487-93, April.
  31. Meyer, Margaret A & Mookherjee, Dilip, 1987. "Incentives, Compensation, and Social Welfare," Review of Economic Studies, Wiley Blackwell, vol. 54(2), pages 209-26, April.
  32. John C. Harsanyi, 1955. "Cardinal Welfare, Individualistic Ethics, and Interpersonal Comparisons of Utility," Journal of Political Economy, University of Chicago Press, vol. 63, pages 309.
  33. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 630-49, November.
  34. Alon Harel & Zvi Safra & Uzi Segal, 2003. "Ex-Post Egalitarianism," Boston College Working Papers in Economics 563, Boston College Department of Economics.
  35. Mongin Philippe, 1995. "Consistent Bayesian Aggregation," Journal of Economic Theory, Elsevier, vol. 66(2), pages 313-351, August.
  36. Fleurbaey, Marc, 2009. "Two variants of Harsanyi's aggregation theorem," Economics Letters, Elsevier, vol. 105(3), pages 300-302, December.
  37. repec:hal:journl:halshs-00085940 is not listed on IDEAS
  38. Tversky, Amos & Kahneman, Daniel, 1992. " Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
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