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Evaluating Policy: Welfare Weights And Value Judgements

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  • John Creedy

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, 2006. "Evaluating Policy: Welfare Weights And Value Judgements," Department of Economics - Working Papers Series 971, The University of Melbourne.
  • Handle: RePEc:mlb:wpaper:971
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    File URL: http://www.economics.unimelb.edu.au/downloads/wpapers-06/971.pdf
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    References listed on IDEAS

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    1. Pasquale Scaramozzino & Giancarlo Marini, 2000. "Social time preference," Journal of Population Economics, Springer;European Society for Population Economics, vol. 13(4), pages 639-645.
    2. Christiansen, Vidar & Jansen, Eilev S., 1978. "Implicit social preferences in the Norwegian system of indirect taxation," Journal of Public Economics, Elsevier, vol. 10(2), pages 217-245, October.
    3. Richter, Wolfram F., 1983. "From ability to pay to concepts of equal sacrifice," Journal of Public Economics, Elsevier, pages 211-229.
    4. Cowell, Frank, 2006. "Inequality: measurement," LSE Research Online Documents on Economics 2686, London School of Economics and Political Science, LSE Library.
    5. Young, H. P., 1987. "Progressive taxation and the equal sacrifice principle," Journal of Public Economics, Elsevier, vol. 32(2), pages 203-214, March.
    6. David J. Evans, 2005. "The elasticity of marginal utility of consumption: estimates for 20 OECD countries," Fiscal Studies, Institute for Fiscal Studies, vol. 26(2), pages 197-224, June.
    7. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
    8. Koichi Mera, 1969. "Experimental Determination of Relative Marginal Utilities," The Quarterly Journal of Economics, Oxford University Press, vol. 83(3), pages 464-477.
    9. Gevers, Louis & Glejser, Herbert & Rouyer, Jean, 1979. " Professed Inequality Aversion and Its Error Component," Scandinavian Journal of Economics, Wiley Blackwell, vol. 81(2), pages 238-243.
    10. Creedy, J. & van de Ven, J., 2001. "Taxation, Reranking and Equivalence Scales," Department of Economics - Working Papers Series 782, The University of Melbourne.
    11. Amiel, Yoram & Creedy, John & Hurn, Stan, 1999. " Measuring Attitudes towards Inequality," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(1), pages 83-96, March.
    12. Robert J. Brent, 1984. "Use of Distributional Weights in Cost-Benefit Analysis: a Survey of Schools," Public Finance Review, , vol. 12(2), pages 213-230, April.
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    Citations

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    Cited by:

    1. John Creedy & Ross Guest, 2007. "Discounting and the Time Preference Rate: An Introduction," Department of Economics - Working Papers Series 993, The University of Melbourne.
    2. Creedy, John & Guest, Ross, 2008. "Population ageing and intertemporal consumption: Representative agent versus social planner," Economic Modelling, Elsevier, vol. 25(3), pages 485-498, May.
    3. Buchholz, Wolfgang & Schumacher, Jan, 2010. "Discounting and welfare analysis over time: Choosing the [eta]," European Journal of Political Economy, Elsevier, vol. 26(3), pages 372-385, September.
    4. Matthew D. Adler, 2016. "Editor's Choice Benefit–Cost Analysis and Distributional Weights: An Overview," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 10(2), pages 264-285.
    5. Jan Schumacher & Wolfgang Buchholz, 2008. "Discounting and Welfare Analysis Over Time: Choosing the ç," CESifo Working Paper Series 2230, CESifo Group Munich.

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    Keywords

    Evaluating Policy; Welfare Weights;

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