A Choice Modelling Approach
13 • Satisfy welfarism, which means that social welfare depends only on the utility of individuals. • Be increasing with each individual’s utility level and therefore satisfy the Pareto criterion. • Display an intensity of trade-off between individuals’ utilities that depends on the degree of inequality in society. • Be indifferent about who enjoys a high or low level of utility. This principle is known as anonymity. Rawls (1971) developed an argument as to why society can agree in principle on a priori rules through the use of a hypothetical ‘veil of ignorance’. It infers that individuals, from behind a veil of ignorance that screens knowledge of their future positions, unanimously agree on a redistribution formula (Johansson 1993).5 The most common form of the SWF is the utilitarian, where the utilities of individuals, i… n, are summed and the aim is to maximize the sum of the utilities, that is: W(U1 … Un) = ΣU n i =1 1 (2.3) This is known as the classical utilitarian or Benthamite welfare function, developed by Bentham (1789) and championed by economists such as Mill (1863), Edgeworth (1881), Marshall (1890) and Pigou (1920). Utilitarianism has been, in many ways, the ‘official’ theory of traditional welfare economics (Sen 2000). There are, however, two particular limitations of utilitarianism as a theory of social welfare which are relevant. First, the process of aggregation can lead to an inability to distinguish between any two distributions that yield the same total utility. Hence, it can answer the efficiency question but not the...
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