The Incentive Costs of Welfare Judgments

Thomas Daske
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Thomas Daske: Technical University of Munich, TUM School of Management

Munich Papers in Political Economy from Munich School of Politics and Public Policy and the School of Management at the Technical University of Munich

Abstract: We ask which welfare judgments can be institutionalized without incentive costs when agents' material and distributive preferences are private information. A policy rule is de_nitely implementable if it is implementable under arbitrary variation in the distribution of types: the normative end remains _xed, while the institutional means|the transfer scheme|may adjust to the distribution. We interpret an ex post budget imbalance, if required for de_nite implementation, as an incentive cost: it entails external subsidies or resource destruction. We _nd that a policy rule is costless only if it locally admits a welfare representation as aggregate material surplus plus a relational component. Every such relational component must obey a common normative grammar. A substantive subclass satisfying this grammar is globally attainable. Costlessness thus disciplines welfare evaluation without eliminating normative choice. We illustrate this normative freedom through three relational welfare judgments in public-good provision: political restraint, subsidiarity, and minority protection.

Keywords: implementation theory; definite implementation; ex post budget balance; interpersonal preferences; material utilitarianism; relational welfare judgments (search for similar items in EconPapers)
JEL-codes: D61 D63 D64 D82 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2026-06
New Economics Papers: this item is included in nep-des
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Persistent link: https://EconPapers.repec.org/RePEc:aiw:wpaper:51

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