Public Choice III

The Bergson-Samuelson SWF has been constructed analogously to the individual's utility function. Just as the individual chooses bundles of commodities to maximize his utility, society must choose an allocation of commodities across individuals to maximize its welfare. That consumers make choices to maximize their utility follows almost tautologically from the definition of rationality. In extending the idea of maximizing an objective function to the level of society, however, more is involved than just rationality. Embedded in the characteristics of the welfare function and the nature of the data fed into it are the value judgments that give the SWF its normative content, as the discussions of Bergson (1938) and Samuelson (1947, ch. 8) make clear.

An alternative way of analyzing individual behavior from assuming that individuals maximize their utility is to assume various postulates about individual rationality that suffice to define a preference ordering, and allow one to predict which bundle an individual will choose from any environment. Again by analogy, one can make various postulates about social decision making and analyze society's decisions in terms of social preference orderings.