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A Reformulation of Normative Economics for Models with Endogenous Preferences

Author

Listed:
  • Vipul Bhatt

    (Assistant Professor, Department of Economics, James Madison University (E-mail: bhattvx@jmu.edu))

  • Masao Ogaki

    (Professor, Department of Economics, Keio University (E-mail: mogaki@econ.keio.ac.jp))

  • Yuichi Yaguchi

    (Graduate Student, Graduate School of Economics, Chuo University, Tokyo, Japan)

Abstract

This paper proposes to balance considerations from welfarism and virtue ethics for normative analysis of economic models with endogenous preferences. Our framework introduces two concepts that are useful in evaluating alternative social states. First, we introduce the moral evaluation function (MEF), which is used to evaluate alternatives based on virtue ethics. Second, we introduce the social objective function (SOF), which gives weights to both the standard social welfare function (SWF) and the MEF. We illustrate our evaluation approach in the context of a model of intergenerational altruism with endogenous time preferences.

Suggested Citation

  • Vipul Bhatt & Masao Ogaki & Yuichi Yaguchi, 2014. "A Reformulation of Normative Economics for Models with Endogenous Preferences," IMES Discussion Paper Series 14-E-02, Institute for Monetary and Economic Studies, Bank of Japan.
    • Handle: RePEc:ime:imedps:14-e-02
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    File URL: http://www.imes.boj.or.jp/research/papers/english/14-E-02.pdf
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    References listed on IDEAS

    as
    1. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    2. Botond Kőszegi & Matthew Rabin, 2006. "A Model of Reference-Dependent Preferences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(4), pages 1133-1165.
    3. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2005. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 1-45, February.
    4. Vipul Bhatt & Masao Ogaki & Yuichi Yaguchi, 2015. "Normative Behavioural Economics Based on Unconditional Love and Moral Virtue," The Japanese Economic Review, Japanese Economic Association, vol. 66(2), pages 226-246, June.
    5. K. Ali Akkemik & Mehmet Bulut & Marcus Dittrich & Koray Göksal & Kristina Leipold & Masao Ogaki, 2017. "Worldviews and Intergenerational Altruism: A Comparison of Turkish People Living in Turkey and Germany," CESifo Working Paper Series 6404, CESifo.
    6. Constantinides, George M, 1990. "Habit Formation: A Resolution of the Equity Premium Puzzle," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 519-543, June.
    7. Michael J. Sandel, 2013. "Market Reasoning as Moral Reasoning: Why Economists Should Re-engage with Political Philosophy," Journal of Economic Perspectives, American Economic Association, vol. 27(4), pages 121-140, Fall.
    8. Pollak, Robert A, 1978. "Endogenous Tastes in Demand and Welfare Analysis," American Economic Review, American Economic Association, vol. 68(2), pages 374-379, May.
    9. Bruno S. Frey, 2008. "Happiness: A Revolution in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262062771, December.
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    Citations

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    Cited by:

    1. Hideo Akabayashi & Akiko Kamesaka & Ryosuke Nakamura & Masao Ogaki & Teruyuki Tamura, 2014. "An Experimental Study of Intergenerational Altruism with Parent-Child Pairs," Keio-IES Discussion Paper Series 2014-005, Institute for Economics Studies, Keio University.
    2. Vipul Bhatt & Masao Ogaki & Yuichi Yaguchi, 2015. "Normative Behavioural Economics Based on Unconditional Love and Moral Virtue," The Japanese Economic Review, Japanese Economic Association, vol. 66(2), pages 226-246, June.

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    More about this item

    Keywords

    Moral virtue ethics; Welfarism; Cultural transmission of preferences; Tough love;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • Z18 - Other Special Topics - - Cultural Economics - - - Public Policy

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