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Fair management of social risk

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We provide a general method for extending fair social preferences defined for riskless economic environments to the context of risk and uncertainty. We apply the méthod to the problems of managing unemployment allowances (in the context of macroeconomic fluctuations) and catastrophic risks (in the context of climate change). It requires paying attention to individuals' risk attitudes and rationality properties of social preferences, revisiting basic ideas from Harsanyi's seminal work (Harsanyi, 1995). The social preferences that we obtain do not in general take the form of an expected utility criterion, but they always satisfy statewise dominance. We also show how non-expected utility individual preferences can be accommodated in the approach

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Paper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number 14016.

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Date of creation: Mar 2014
Handle: RePEc:mse:cesdoc:14016
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  20. Antony Millner, 2013. "On Welfare Frameworks and Catastrophic Climate Risks," CESifo Working Paper Series 4442, CESifo Group Munich.
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  26. Treibich, Rafael, 2014. "Welfare Egalitarianism with Other-Regarding Preferences," Discussion Papers of Business and Economics 22/2014, Department of Business and Economics, University of Southern Denmark.
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  33. Al-Najjar, Nabil I. & Weinstein, Jonathan, 2009. "Rejoinder: The “Ambiguity Aversion Literature: A Critical Assessment”," Economics and Philosophy, Cambridge University Press, vol. 25(03), pages 357-369, November.
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  36. Chambers, Christopher P. & Hayashi, Takashi, 2006. "Preference aggregation under uncertainty: Savage vs. Pareto," Games and Economic Behavior, Elsevier, vol. 54(2), pages 430-440, February.
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  43. repec:spo:wpecon:info:hdl:2441/eu4vqp9ompqllr09iepso50rh is not listed on IDEAS
  44. Benoit Decerf & Martin Linden, 2016. "Fair social orderings with other-regarding preferences," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 46(3), pages 655-694, March.
  45. Walter Nicholson & Karen Needels, 2006. "Unemployment Insurance: Strengthening the Relationship between Theory and Policy," Journal of Economic Perspectives, American Economic Association, vol. 20(3), pages 47-70, Summer.
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  47. Geoffrey Heal & Antony Millner, 2015. "Should climate policy account for ambiguity?," GRI Working Papers 202, Grantham Research Institute on Climate Change and the Environment.
  48. Al-Najjar, Nabil I. & Weinstein, Jonathan, 2009. "The Ambiguity Aversion Literature: A Critical Assessment," Economics and Philosophy, Cambridge University Press, vol. 25(03), pages 249-284, November.
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