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From welfare to preferences, do decision flaws matter? The case of tuition fees

Listed author(s):
  • Guilhem Lecouteux

    (Department of Economics, Ecole Polytechnique - Polytechnique - X - CNRS - Centre National de la Recherche Scientifique)

  • Léonard Moulin

    (Université Paris 13)

We investigate the relation between welfare and preference satisfaction in economics, and show that the extension of the scope of economic analysis through the 20th century forces economists to question the validity of the preference satisfaction criterion as a normative criterion for evaluating public policies. We then argue that welfare economists should clarify the normative content of this criterion in order to properly design public policies. We illustrate our point with the case of the selection at the entry of university, and show that, according to the normative criterion used by the social planner, the optimal policy radically changes. In particular, we argue that -- if we adopt a paternalistic conception of welfare -- it becomes necessary to establish a clear distinction between preference and welfare, and to integrate the different social and psychological biases that can influence the decision of the individuals in the design of public policies.

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Paper provided by HAL in its series Working Papers with number hal-00807687.

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Date of creation: 04 Apr 2013
Handle: RePEc:hal:wpaper:hal-00807687
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  1. Robert Sugden, 2004. "The Opportunity Criterion: Consumer Sovereignty Without the Assumption of Coherent Preferences," American Economic Review, American Economic Association, vol. 94(4), pages 1014-1033, September.
  2. Raquel Fernandez, 1998. "Education and Borrowing Constraints: Tests vs. Prices," NBER Working Papers 6588, National Bureau of Economic Research, Inc.
  3. Sen, Amartya K, 1973. "Behaviour and the Concept of Preference," Economica, London School of Economics and Political Science, vol. 40(159), pages 241-259, August.
  4. Cass R. Sunstein & Richard H. Thaler, 2003. "Libertarian paternalism is not an oxymoron," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 48(Jun).
  5. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
  6. Robert Gary-Bobo & Alain Trannoy, 2005. "Faut-il augmenter les droits d'inscription à l'université ?," Revue Française d'Économie, Programme National Persée, vol. 19(3), pages 189-237.
  7. Betts, Julian R, 1998. "The Impact of Educational Standards on the Level and Distribution of Earnings," American Economic Review, American Economic Association, vol. 88(1), pages 266-275, March.
  8. Robert J. Gary-Bobo & Alain Trannoy, 2008. "Efficient Tuition Fees and Examinations," Journal of the European Economic Association, MIT Press, vol. 6(6), pages 1211-1243, December.
  9. del Rey, Elena & Romero, Laura, 2004. "Prices versus Exams as Strategic Instruments for Competing Universities," Working Papers of the Department of Economics, University of Girona 12, Department of Economics, University of Girona.
  10. 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.
  11. Becker, Gary S, 1993. "Nobel Lecture: The Economic Way of Looking at Behavior," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 385-409, June.
  12. David Flacher & Hugo Harari-Kermadec & Léonard Moulin, 2012. "Faut-il (vraiment) augmenter les frais d'inscription à l'université ?," Revue française d'économie, Presses de Sciences-Po, vol. 0(3), pages 145-183.
  13. Luigino Bruni & Robert Sugden, 2007. "The road not taken: how psychology was removed from economics, and how it might be brought back," Economic Journal, Royal Economic Society, vol. 117(516), pages 146-173, 01.
  14. repec:hal:cepnwp:hal-00749625 is not listed on IDEAS
  15. Hausman,Daniel M., 2012. "Preference, Value, Choice, and Welfare," Cambridge Books, Cambridge University Press, number 9781107695122, September.
  16. Ben McQuillin & Robert Sugden, 2012. "Reconciling normative and behavioural economics: the problems to be solved," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 38(4), pages 553-567, April.
  17. Jevons, William Stanley, 1871. "The Theory of Political Economy," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number jevons1871.
  18. Robert Haveman & Barbara Wolfe, 1995. "The Determinants of Children's Attainments: A Review of Methods and Findings," Journal of Economic Literature, American Economic Association, vol. 33(4), pages 1829-1878, December.
  19. Lionel Page, 2005. "Des inégalités sociales aux inégalités scolaires. Choix éducatifs et Prospect Theory," Revue économique, Presses de Sciences-Po, vol. 56(3), pages 615-623.
  20. Hausman,Daniel M., 2012. "Preference, Value, Choice, and Welfare," Cambridge Books, Cambridge University Press, number 9781107015432, September.
  21. Robert Sugden, 2007. "The value of opportunities over time when preferences are unstable," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 29(4), pages 665-682, December.
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