Welfare economics in large worlds: welfare and public policies in an uncertain environment

The aim of this chapter is first to review the different approaches to the problem of reconciling normative economics with the empirical findings of behavioural economics. I distinguish between welfarist, behaviourist, constitutional, and procedural approaches, depending on whether we endorse or reject preference satisfaction as a valid descriptive or normative statement. I then argue that Savage's distinction between small and large worlds offers the adequate framework to conceptualise the problem of inferring a notion of welfare from possibly incoherent choices. I show that the four types of approaches offer complementary solutions to the reconciliation problem, depending on the nature of the uncertainty of the choice problem, and on the epistemic position of the theoretician relative to that of the agent we intend to model.