The Hidden Objectivism of Revealed-Preference Welfare Economics

Martin Kolmar

No 12519, CESifo Working Paper Series from CESifo

Abstract: Revealed preference theory (RPT) and its behavioral extension (BRPT) underpin an important strand of welfare economics. Their normative appeal rests on the claim that welfare can be inferred from observed behavior without substantive assumptions about what agents should value - a property I call value neutrality. This paper argues that such neutrality is structurally impossible. I develop a framework - the triangulation problem - identifying five dimensions along which inference from behavior to welfare is underdetermined: the partitioning of the alternative space, the preference domain, the choice rule, the social technology, and the phenomenological mapping from preferences to experience. A sixth problem - the agent's lack of experiential acquaintance with novel alternatives - compounds the underdeterminacy. Resolving these dimensions requires substantive commitments about value rationality - about what agents ought to care about and what counts for welfare. No specification of (B)RPT is both determinate enough to yield welfare rankings and neutral with respect to value rationality. I show that this impossibility entails a collapse thesis: (B)RPT understands itself as a subjectivist theory of well-being, but every operational specification embeds objectivist commitments - attitude-independent claims about what is basically good for the agent - in its auxiliary assumptions. In normative use, (B)RPT is a de-facto objectivist theory that presents itself in subjectivist form, concealing commitments that require philosophical justification behind an appearance of empirical neutrality.

Keywords: revealed preference theory; (behavioral) welfare economics; value rationality; underdeterminacy; normative economics; subjectivism; objectivism; well-being (search for similar items in EconPapers)
JEL-codes: B41 D01 D60 D63 I31 (search for similar items in EconPapers)
Date: 2026
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