Hostname: page-component-766f47fc8c-njngn Total loading time: 0 Render date: 2025-03-03T09:13:48.811Z Has data issue: false hasContentIssue false
  • English
  • Français

PREFERENCE SATISFACTION AND WELFARE ECONOMICS

Published online by Cambridge University Press:  01 March 2009

Daniel M. Hausman  and
Michael S. McPherson
Daniel M. Hausman
Affiliation:
University of Wisconsin-Madison
Michael S. McPherson
Affiliation:
Spencer Foundation
Get access Rights & Permissions [Opens in a new window]

Abstract

The tenuous claims of cost-benefit analysis to guide policy so as to promote welfare turn on measuring welfare by preference satisfaction and taking willingness-to-pay to indicate preferences. Yet it is obvious that people's preferences are not always self-interested and that false beliefs may lead people to prefer what is worse for them even when people are self-interested. So welfare is not preference satisfaction, and hence it appears that cost-benefit analysis and welfare economics in general rely on a mistaken theory of well-being. This essay explores the difficulties, criticizes standard defences of welfare economics, and then offers a new partial defence that maintains that welfare economics is independent of any philosophical theory of well-being. Welfare economics requires nothing more than an evidential connection between preference and welfare: in circumstances in which people are concerned with their own interests and reasonably good judges of what will serve their interests, their preferences will be reliable indicators of what is good for them.

Type
Essay
Information
Economics & Philosophy , Volume 25 , Issue 1 , March 2009 , pp. 1 - 25
Copyright
Copyright © Cambridge University Press 2009

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Adler, M. and Posner, E.. 2006. New foundations of cost-benefit analysis. Cambridge, MA: Harvard University Press.CrossRefGoogle Scholar
Arneson, R. 1990. Liberalism, distributive subjectivism, and equal opportunity for welfare. Philosophy and Public Affairs 19: 158–94.Google Scholar
Arrow, K. 1973. Some ordinalist-utilitarian notes on Rawls' theory of justice. Journal of Philosophy 70: 246–63.Google Scholar
Bentham, J. 1789. An introduction to the principles of morals and legislation, ed. Harrison, W., 1967. Oxford: Basil Blackwell.CrossRefGoogle Scholar
Binmore, K. 1994. Playing fair: Game theory and the social contract. Cambridge, MA: MIT Press.Google Scholar
Brandt, R. 1979. A theory of the right and the good. Oxford: Oxford University Press.Google Scholar
Broome, J. 1991. Weighing goods. Oxford: Basil Blackwell.Google Scholar
Cooter, R. and Rappoport, P.. 1984. Were the ordinalists wrong about welfare economics? Journal of Economic Literature 22: 507–30.Google Scholar
Debreu, G. 1959. Theory of value. New York: Wiley.Google Scholar
Deck, L. 1997. Visibility at the Grand Canyon and the Navajo generating station. In Economic analyses at EPA: Assessing regulatory impact, ed. Morgenstern, R., 267–302. Washington, DC: Resources for the Future.Google Scholar
Department of Agriculture. 1991. Nutrition labeling of meat and poultry products. 56 Federal Registry 60, 023 (November 27).Google Scholar
Dworkin, G. 1971. Paternalism. In Morality and the Law, ed. Wasserstrom, R., 107–36. Belmont, CA: Wadsworth Publishing Company.Google Scholar
Dworkin, R. 1981. What is equality? Part 1: equality of welfare. Philosophy and Public Affairs 10: 185–246.Google Scholar
Elster, J. 1983. Sour grapes: Studies in the subversion of rationality. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Elster, J. and Hylland, A., eds. 1986. Foundations of social choice theory. New York: Cambridge University Press.Google Scholar
Frankfurt, H. 1971. Freedom of the will and the concept of a person. Journal of Philosophy 68: 5–10.Google Scholar
Gauthier, D. 1986. Morals by agreement. Oxford: Oxford University Press.Google Scholar
Gibbard, A. 1986. Interpersonal comparisons: preference, good, and the intrinsic reward of a life. In Foundations of social choice theory, ed. Elster, J. and Hylland, A., 165–94. New York: Cambridge University Press.Google Scholar
Goodin, R. 1985. Laundering preferences. In Foundations of social choice theory, ed. Elster, J. and Hylland, A., 75–101. New York: Cambridge University Press.Google Scholar
Griffin, J. 1986. Well-being: Its meaning, measurement and moral importance. Oxford: Clarendon Press.Google Scholar
Griffin, J. 1996. Value judgment: Improving our ethical beliefs. Oxford: Oxford University Press.Google Scholar
Hammond, P. 1983. Ex-post optimality as a dynamically consistent objective for collective choice under uncertainty. In Social choice and welfare, ed. Pattanaik, P. and Salles, M.. Amsterdam: North-Holland.Google Scholar
Harris, R. and Olewiler, N.. 1979. The welfare economics of ex post optimality. Economica 46: 137–47.CrossRefGoogle Scholar
Harsanyi, J. 1982. Morality and the theory of rational behavior. Social Research 44 (1977): 623–56. Republished in Utilitarianism and Beyond, ed. Sen, A. and Williams, B., 1982, 39–62. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Hausman, D. 1995. The impossibility of interpersonal utility comparisons. Mind 104: 473–90.CrossRefGoogle Scholar
Hausman, D. 2000. Revealed preference, belief, and game theory. Economics and Philosophy 16: 99–115.CrossRefGoogle Scholar
Hausman, D. 2005. Sympathy, commitment and preference. Economics and Philosophy 21: 33–50.Google Scholar
Hausman, D. and McPherson, M.. 1994. Preference, belief, and welfare. American Economic Review Papers and Proceedings 84: 396–400.Google Scholar
Hausman, D. and McPherson, M.. 2006. Economic Analysis, Moral Philosophy, and Public Policy. Cambridge: Cambridge University Press.Google Scholar
Heathwood, C. 2005. The problem of defective desires. Australasian Journal of Philosophy 83: 487–504.Google Scholar
Hicks, J. 1939. The foundations of welfare economics. Economic Journal 49: 696–712.Google Scholar
Kahneman, D. 2000. Experienced utility and objective happiness: a moment-based approach. In Choices, values and frames, ed. Kahneman, D. and Tversky, A., 673–92. New York: Cambridge University Press and the Russell Sage Foundation.Google Scholar
Kahneman, D. 2006. New challenges to the rationality assumption. In The construction of preference, ed. Lichtenstein, S. and Slovic, P., 487–503. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Kahneman, D. and Krueger, A.. 2006. Developments in the measurement of subjective well-being. Journal of Economic Perspectives 20: 3–24.CrossRefGoogle Scholar
Kaldor, N. 1939. Welfare propositions of economics and interpersonal comparisons of utility. Economic Journal 49: 549–52.Google Scholar
Kraut, R. 2007. What is good and why. Cambridge, MA: Harvard University Press.Google Scholar
Layard, R. 2005. Happiness: Lessons from a new science. London: Penguin.Google Scholar
Layard, R. and Glaister, S., ed. 1994. Cost-benefit analysis, 2nd edn. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Mill, J. S. 1859. On Liberty. Republished, ed. Shields, C. V.., 1985. New York: Macmillan.Google Scholar
Mill, J. S. 1863. Utilitarianism. Republished in The Philosophy of John Stuart Mill, ed. Cohen, M., 1961, 321–98. New York: Modern Library.Google Scholar
Mishan, E. 1971. Cost benefit analysis: An introduction. New York: Praeger.Google Scholar
Mishan, E. 1981. An introduction to normative economics. Oxford: Oxford University Press.Google Scholar
Nagel, T. 1986. The view from nowhere. Oxford: Oxford University Press.Google Scholar
Overvold, M. 1984. Morality, self-interest, and reasons for being moral. Philosophy and Phenomenological Research 44: 493–507.CrossRefGoogle Scholar
Parfit, D. 1984. Reasons and persons. Oxford: Oxford University Press.Google Scholar
Railton, P. 1986. Facts and values. Philosophical Topics 24: 5–31.Google Scholar
Raz, J. 1984. The morality of freedom. Oxford: Oxford University Press.Google Scholar
Sagoff, M. 2004. Price, principle, and the environment. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Samuelson, P. 1947. Foundations of economic analysis. Cambridge, MA: Harvard University Press.Google Scholar
Scanlon, T. 1998. What we owe to each other. Cambridge, MA: Harvard University Press.Google Scholar
Schelling, T. 2006. Strategies of commitment and other essays. Cambridge, MA: Harvard University Press.Google Scholar
Sen, A. 1971. Choice functions and revealed preference. Review of Economic Studies 38: 307–17.CrossRefGoogle Scholar
Sen, A. 1973. Behaviour and the concept of preference. Economica 40: 241–59. Republished and cited in Choice, welfare and measurement, 1982, 54–73. Oxford: Blackwells.Google Scholar
Sen, A. 1977. Rational fools. Philosophy and Public Affairs 6: 317–44.Google Scholar
Sen, A. 1982. Choice, welfare and measurement. Oxford: Blackwells.Google Scholar
Sen, A. 1987. The standard of living: Lecture I, concepts and critiques. In The standard of living, ed. Hawthorn, G.., 1–19. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Sen, A. 1990. Gender and cooperative conflicts. In Persistent inequalities, ed. Tinker, I., 123–49. London: Oxford University Press.Google Scholar
Sen, A. and Williams, B, ed. 1982. Utilitarianism and beyond. Cambridge: Cambridge University Press.Google Scholar
Sen, A., Muellbauer, J., Kanbur, R., Hart, K. and Williams, B.. 1987. The standard of living, ed. Hawthorn, G.. Cambridge: Cambridge University Press.Google Scholar
Sidgwick, H. 1901. The methods of ethics, 6th edn. London: Macmillan.Google Scholar
Sobel, D. 1998. Well-being as the object of moral consideration. Economics and Philosophy 14: 249–81.CrossRefGoogle Scholar
Sugden, R. and Williams, A.. 1978. The principles of practical cost-benefit analysis. New York: Oxford University Press.Google Scholar
Sumner, L. W. 1996. Welfare, happiness, and ethics. Oxford: Clarendon Press.Google Scholar